N-30D: Initial annual and semi-annual reports mailed to investment company shareholders pursuant to Rule 30e-1 (other than those required to be submitted as part of Form NCSR.)
Published on September 29, 1997
GLOBAL INCOME FUND American Stock Exchange Symbol: BBZ
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11 Hanover Square, New York, NY 10005
August 15, 1997
Dear Shareholder:
It is a pleasure to submit this Annual Report and to note that the Fund's
June 30, 1997 fiscal year-end closing price per share on the American Stock
Exchange of $8.50 represented a premium over the Fund's $8.43 net asset value
per share. In addition, for the year the Fund achieved a total return of +14.71%
on a net asset value basis.
We are also pleased to report that beginning in June 1997 the Fund's
monthly dividend was increased to $.07 per share from $.05 previously as a
result of the Fund's recently adopted managed 10% distribution policy. The
policy is intended to provide shareholders with a stable cash flow and reduce or
eliminate any market price discount to net asset value. Monthly distributions
of 0.83% of the Fund's net asset value (10% on an annual basis) will be paid
primarily from ordinary income and any capital gains with the balance coming
from return of capital. We believe shares of the Fund are a sound value and an
attractive investment for income oriented portfolios.
REVIEW AND OUTLOOK
While the first half of the year ending June 30, 1997 was characterized by
consistently low levels of unemployment and inflation against a background of
moderate economic growth, the second half will be remembered for continuing low
unemployment and very low inflation, but rapid economic growth.
Interest rates generally have risen over the last six months, reflecting
concern about the inflationary impact of strong economic growth and tight labor
markets. The first quarter's 5.9% increase in economic activity was the fastest
rate of expansion since 1983. The unemployment rate fell to 4.8%, a level not
seen since 1973. Prior to increasing short term rates by 0.25% in March, ending
one of the longest periods of unchanged rates in recent history, Federal Reserve
Chairman Alan Greenspan expressed his concern regarding potentially inflationary
economic scenarios in his semi-annual "Humphrey-Hawkins" testimony to Congress.
Yields on 30 year Treasury securities rose to over 7 1/8% by early April, having
started the year at 6 5/8%. By the end of the first quarter, holders of U.S.
Treasury ten year notes had a negative 1.98% total return.
Interestingly, "real" interest rates, the difference between rates of
interest and the rate of inflation, rose even more because the rate of inflation
declined steadily throughout the first half of the year. The annual rate of
Total and Core Producer Price increases fell from 2.8% and 0.6% in December to
- -0.1% and 0.2% by June. Consumer Prices, which ended 1996 at a 3.3% growth rate,
declined to 2.3% by June of 1997. In addition, labor markets did not display
signs of price pressure throughout the first half. At the end of June, the
annual growth rate of average hourly earnings was 3.5%, down from 3.9% at the
end of 1996.
During the second quarter of 1997 interest rates declined, with yields on
30 year U.S. Treasuries falling to as low as 6 1/2%. Various factors contributed
to the second quarter's reversal of the rise in rates earlier in the year, and
we believe that several of these factors will continue to have critical
significance over the balance of the year.
First, the torrid pace of economic growth declined somewhat during the
second quarter. The annual growth rate of retail sales declined from over 6.3%
in January to 2.5% in May, still a healthy level. The recent slowdown in
consumption is probably best explained by demographic shifts to higher savings
rates, and the opportunity cost of not owning financial assets, because personal
income and confidence are each at relatively high levels. While we were relieved
to see some moderation in the rate of growth to more sustainable levels, our
interest rate forecast continues to be less dependent on monthly data releases
which describe current economic conditions. Instead, we believe the economy
will continue to be generally characterized by moderate levels of growth,
although different economic sectors or geographic regions may experience
oscillating periods of strength or weakness.
Second, interest rates fell as market participants in increasing numbers
changed the way they think about the dynamics of inflation. During the first
half, the monthly data releases regarding inflation were exceptionally good, as
discussed earlier. The inconsistency between economic strength and declining
inflation required a re-evaluation of the "Phillips curve" model. Our research
included a study of economic conditions between 1960-1966, a period of healthy
economic growth, low levels of unemployment and lower interest rates and rates
of inflation than we see today. We believe that period establishes a precedent
that is relevant today. Also, the "globalization" of the economy has a
significant deflationary impact. We continue to believe both that inflation
will not be problematic, and that the "inflation premiums" which bond yields now
offer are too high and will decline. Additionally, technical factors affecting
supply and demand are positive for fixed income investors. As the Treasury
reduces the deficit, it is easy to appreciate how the decline in the supply of
bonds will lead to a decline in rates. What is more significant is that the
national debt continues to generate around $300 billion in interest payments to
investors annually, much of which is reinvested in additional debt. This
"structural demand" for debt in the face of a declining supply is positive for
interest rates.
Internationally, a variety of factors support our outlook for lower
interest rates domestically, and continued strength in the U.S. dollar. Core
European economies continue to be characterized by high unemployment, weak
growth, and labor markets which are structurally unresponsive to increased
global competition. We do not feel that the European Monetary Union will
enhance this situation, and in fact will probably contribute to weaker European
currencies. Eastern Europe, however, and countries in the former Soviet bloc,
still appear attractive to us. In Asia, a significant recovery in the Japanese
economy continues to be an elusive goal. Japanese fiscal policy remains
counterproductive, and the recent strength in the Japanese Yen seems due more to
aggressive currency intervention by the Ministry of Finance than the result of a
change in underlying fundamentals. Furthermore, the decline in growth rates in
several Asian economies should increase competition for export growth, which may
impede the Japanese recovery. In particular, Chinese exports have increased
dramatically, and China still has substantial excess capacity already in place.
We continue to view increases in global trade by low cost producers as
deflationary in nature. We remain concerned about the reliance on offshore
funding in the region, particularly in dollars and other non-local currencies,
and the extent of speculation and inflation in real estate. Potential weakness
in Asian financial systems is most likely both dollar and interest rate
positive. On the other hand, several Latin American countries have been
successful in initiating fiscal and political reform, reducing inflation, and
maintaining attractive growth rates. We continue to view this region as
offering substantial value.
In sum, we continue to believe that a variety of structural, demographic,
political, and historical factors will continue to reward investors in fixed
income assets for the remainder of the year and into 1998.
RETIREMENT PLAN OFFERS IMPORTANT ADVANTAGE
The Bull & Bear Global Income Fund Dividend Reinvestment Plan is
particularly attractive because monthly dividend distributions are reinvested
without charge at the lower of net asset value per share or market price, which
can contribute significantly to growing your investment over time.
We appreciate your support and look forward to continuing to serve your
investment needs.
Sincerely,
/s/ Thomas B. Winmill /s/ Steven A. Landis
Thomas B. Winmill Steven A. Landis
President Senior Vice President
Portfolio Manager
2
BULL & BEAR GLOBAL INCOME FUND, INC.
Schedule of Portfolio Investments - June 30, 1997
See accompanying notes to financial statements.
3
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(1) Par value of foreign denominated obligations stated in local currency
unless otherwise indicated; market value stated in U.S. dollars.
(2) Purchased pursuant to Rule 144A exemption from Federal registration
requirements.
(3) Non-income producing security.
See accompanying notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS:
Investments at market value
(cost: $32,156,665) (note 1)........... $32,329,978
Cash..................................... 479,316
Receivables:
Investment securities sold............. 4,949,375
Interest and dividends................. 492,449
Other assets........................... 3,069
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Total assets......................... 38,254,187
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LIABILITIES:
Payables:
Investment securities purchased........ 5,232,500
Open forward currency contracts
(note 6)............................... 1,189
Reverse repurchase agreement........... 7,534,439
Interest............................... 8,706
Accrued management and distribution fees. 14,427
Accrued expenses......................... 75,820
Other liabilities........................ 26,186
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Total liabilities.................... 12,893,267
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NET ASSETS: (applicable to 3,007,647
outstanding shares: 20,000,000 shares
of $.01 par value authorized)............ $25,360,920
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NET ASSET VALUE PER SHARE
($25,360,920 divided by 3,007,647)....... $8.43
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At June 30, 1997, net assets consisted of:
Paid-in capital.......................... $59,285,267
Accumulated deficit in investment
income................................. (15,401)
Accumulated net realized loss on
investments, foreign currencies
and futures............................ (34,080,467)
Net unrealized appreciation on
investments and foreign currencies
and futures............................ 171,521
-----------
$25,360,920
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STATEMENT OF OPERATIONS
Year Ended June 30, 1997
INVESTMENT INCOME:
Interest................................ $2,524,310
Dividends............................... 55,664
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Total investment income............... 2,579,974
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EXPENSES:
Interest (note 5)...................... 199,770
Investment management (note 3)......... 197,279
Distribution (note 3).................. 92,155
Transfer agent......................... 90,287
Custodian.............................. 67,041
Professional (note 3).................. 42,706
Registration (note 3).................. 16,521
Shareholder administration (note 3).... 15,687
Directors.............................. 10,437
Other.................................. 33,055
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Total expenses....................... 764,938
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Net investment income.............. 1,815,036
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REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS, FOREIGN
CURRENCIES AND FUTURES:
Net realized gain from security
transactions.......................... 1,448,885
Net realized loss from foreign currency
and futures transactions.............. (114,619)
Unrealized appreciation of investments,
foreign currencies and futures during
the period............................ 814,544
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Net realized and unrealized gain on
investments, foreign currencies
and futures........................... 2,148,810
----------
Net increase in net assets resulting
from operations....................... $3,963,846
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See accompanying notes to financial statements.
5
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30,
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(a) Transactions in capital shares were as follows:
See accompanying notes to financial statements.
6
Notes to Financial Statements
(1) The Fund is a Maryland corporation registered under the Investment Company
Act of 1940, as amended, as a diversified, closed-end management investment
company, whose shares are listed on the American Stock Exchange. The primary
objective of the Fund is a high level of income and secondarily, capital
appreciation. The Fund seeks to achieve its investment objectives by investing
primarily in foreign and domestic fixed income securities, depending on the
Investment Manager's evaluation of current and anticipated market conditions, as
set forth in its prospectus. The Fund is subject to the risk of price
fluctuations of the securities held in its portfolio which is generally a
function of the underlying credit ratings of an issuer, the duration and yield
of its securities, and general economic and interest rate conditions. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. With respect to
security valuation, securities traded on a national securities exchange or the
Nasdaq National Market System ("NMS") are valued at the last reported sales
price on the day the valuations are made. Such securities that are not traded
on a particular day and securities traded in the over-the-counter market that
are not on NMS are valued at the mean between the current bid and asked prices.
Certain of the securities in which the Fund invests are priced through pricing
services which may utilize a matrix pricing system which takes into
consideration factors such as yields, prices, maturities, call features and
ratings on comparable securities. Bonds may be valued according to prices
quoted by a dealer in bonds which offers pricing services. Debt obligations
with remaining maturities of 60 days or less are valued at cost adjusted for
amortization of premiums and accretion of discounts. Securities of foreign
issuers denominated in foreign currencies are translated into U.S. dollars at
prevailing exchange rates. Forward currency contracts are undertaken to hedge
certain assets denominated in foreign currencies. Forward contracts are marked
to market daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. When a contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if the counterparties are unable to meet the terms of the
contracts or if the value of the currency changes unfavorably. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Interest income is recorded on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions to shareholders are recorded
on the ex-dividend date. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At June 30, 1997, the
Fund had an unused capital loss carryforward of approximately $34,080,000 of
which, $17,712,000 expires in 1998, $8,549,000 in 1999, $1,656,000 in 2000,
$4,110,000 in 2001, $173,000 in 2003 and $1,880,000 in 2004. Based on Federal
income tax cost of $32,156,665, gross unrealized appreciation and gross
unrealized depreciation were $617,420 and $444,107, respectively, at June 30,
1997. Distributions paid to shareholders during the year ended June 30, 1997
differ from net investment income and net gains (losses) from security, foreign
currency and futures transactions as determined for financial reporting purposes
principally as a result of the characterization of realized foreign currency
gains (losses) for tax/book purposes, the taxability of unreal-
7
ized appreciation (depreciation) on certain forward currency contracts and the
utilization of capital loss carryforwards. These distributions are classified
as "distributions from paid-in capital" in the Statements of Changes in Net
Assets.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager.
Under the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average weekly net
assets of the Fund, at the annual rate of 7/10 of 1% of the first $250 million,
5/8 of 1% from $250 million to $500 million, and 1/2 of 1% over $500 million.
The Investment Manager has agreed to waive all or part of its fee or reimburse
the Fund monthly if and to the extent the aggregate operating expenses of the
Fund exceed the most restrictive limit imposed by any state in which shares of
the Fund are qualified for sale, although currently the Fund is not subject to
any such limits. Certain officers and directors of the Fund are officers and
directors of the Investment Manager and Investor Service Center, Inc., the
Fund's former Distributor. During the year ended June 30, 1997, the Fund paid
$625 to Bull & Bear Securities, Inc., an affiliate of the Investment Manager, as
commissions for brokerage services. The Fund reimbursed the Investment Manager
$10,585 for providing certain administrative and accounting services at cost for
the year ended June 30, 1997.
The Fund had a plan of distribution pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "12b-1 Plan"). Pursuant to the 12b-1 Plan, the Fund
paid the Distributor a fee in an amount of one-quarter of one percent per annum
of the Fund's average daily net assets as compensation for service activities
and a fee in an amount of one-quarter of one percent per annum of the Fund's
average daily net assets as compensation for distribution activities. The fee
for service activities was intended to cover personal services provided to
shareholders in the Fund and the maintenance of shareholder accounts. The fee
for distribution activities was to cover all other activities and expenses
primarily intended to result in the sale of the Fund's shares. Effective with
the conversion of the Fund to a closed-end management investment company (see
note 7), the 12b-1 Plan was terminated. Investor Service Center received
$15,687 for shareholder administration services which it provided to the Fund at
cost for the period from July 1, 1996 to February 7, 1997.
(4) Purchases and sales of securities other than short term notes aggregated
$145,402,050 and $146,671,517, respectively, for the year ended June 30, 1997.
(5) The Fund has a committed bank line of credit. At June 30, 1997, there was
no balance outstanding and the interest rate was equal to the Federal Reserve
Funds Rate plus 1.75 percentage points. For the year ended June 30, 1997, the
weighted average interest rate was 5.98% based on the balances outstanding from
the line of credit and the reverse repurchase agreement during the year and the
weighted average amount outstanding was $3,332,773.
(6) At June 30, 1997, open forward currency contracts outstanding consisted of:
8
(7) Effective February 7, 1997, the Fund converted from an open-end management
investment company to a closed-end management investment company. In connection
with the conversion, costs of approximately $63,200 have been charged against
paid-in capital. In addition, the Fund has adopted a Dividend Reinvestment Plan
(the "Plan"). Under the Plan, each dividend and capital gain distribution, if
any, declared by the Fund on outstanding shares will, unless elected otherwise
by each shareholder by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution, be paid on the payment
date fixed by the Directors in additional shares in accordance with the
following: whenever the Market Price (as defined below) per share is equal to or
exceeds the net asset value per share at the time shares are valued for the
purpose of determining the number of shares equivalent to the cash dividend or
capital gain distribution (the "Valuation Date"), participants will be issued
additional shares equal to the amount of such dividend divided by the Fund's net
asset value per share. Whenever the Market Price per share is less than such
net asset value on the Valuation Date, participants will be issued additional
shares equal to the amount of such dividend divided by the Market Price. The
Valuation Date is the dividend or distribution payment date or, if that date is
not an American Stock Exchange trading day, the next trading day. For all
purposes of the Plan: (a) the Market Price of the shares on a particular date
shall be the average closing market price on the five trading days the shares
traded ex-dividend on the Exchange prior to such date or, if no sale occurred on
the Exchange prior to such date, then the mean between the closing bid and asked
quotations for the shares on the Exchange on such date, and (b) net asset value
per share on a particular date shall be as determined by or on behalf of the
Fund.
FINANCIAL HIGHLIGHTS
- ---------
* Per share income and operating expenses and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bull & Bear Global Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Bull & Bear Global Income Fund, Inc., including the schedule of portfolio
investments as of June 30, 1997, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securites owned as of June
30, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bull & Bear Global Income Fund, Inc. as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
July 11, 1997
10
GLOBAL
INCOME
FUND
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11 Hanover Square
New York, NY 10005
1-888-847-4200
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Tait, Weller & Baker
Independent Accountants
Printed on recycled paper [recycled paper logo]
GIF-121-6/7
GLOBAL
INCOME
FUND
- -----------------------------------------------
American Stock
Exchange Symbol:
BBZ
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Annual Report
June 30, 1997
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