PRUDENT BEAR FUNDS Inc c/o US Bancorp Fund Services, LLC – ‘N-30D’ for 9/30/02

On:  Friday, 12/6/02, at 6:49pm ET   ·   As of:  12/9/02   ·   Effective:  12/9/02   ·   For:  9/30/02   ·   Accession #:  898531-2-464   ·   File #:  811-09120

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Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual or Semi-Annual Report Mailed to                72±   286K 
                          Shareholders                                           


PRUDENT BEAR FUNDS, INC.           ANNUAL REPORT             SEPTEMBER 30, 2002 

PRUDENT BEAR FUND 
NO LOAD SHARES
CLASS C SHARES

PRUDENT SAFE HARBOR FUND

PRUDENT BEAR
FUNDS, INC. 

PRUDENT BEAR FUND                                                             

    Date    Prudent Bear Fund - No Load Shares   S&P 500      NASDAQ Composite
    ----    ----------------------------------   -------      ----------------
12/28/95               $10,000                 $10,000           $10,000  
3/31/96                $9,520                 $10,568           $10,479 
9/30/96                $8,880                 $11,384           $11,694 
3/31/97                $9,018                 $12,663           $11,663 
9/30/97                $7,420                 $15,988           $16,181 
3/31/98                $6,822                 $18,741           $17,570 
9/30/98                $7,692                 $17,435           $16,231 
3/31/99                $4,866                 $22,201           $23,609 
9/30/99                $4,910                 $22,282           $26,359 
3/31/00                $4,136                 $26,184           $43,937 
9/30/00                $4,441                 $25,242           $35,469 
3/31/01                $6,284                 $20,508           $17,829 
9/30/01                $7,495                 $18,522           $14,545 
3/31/02                $6,391                 $20,558           $17,938 
9/30/02               $10,154                 $14,728           $11,414 

For the period ended September 30, 2002 

                          Annualized
                           -----------------------------------------
                         One              Five             Since
                           Year             Year           Inception
                           ----             ----           ---------
Prudent Bear Fund -                                                   
No Load Shares           35.47%            6.48%            0.23% 
S&P 500                   (20.49)%          (1.63)%           5.90%   
NASDAQ Composite          (21.80)%          (7.01)%           1.98%   

    Date    Prudent Bear Fund - Class C Shares    S&P 500     NASDAQ Composite
    ----    ----------------------------------    -------     ----------------
2/8/99               $10,000                  $10,000          $10,000
3/31/99                $9,331                  $10,363          $10,376 
6/30/99                $8,075                  $11,093          $11,327 
9/30/99                $9,393                  $10,401          $11,585 
12/31/99                $7,945                  $11,948          $11,175  
3/31/00                $7,858                  $12,222          $19,310 
6/30/00                $8,184                  $11,898          $16,829 
9/30/00                $8,423                  $11,782          $15,589 
12/31/00               $10,298                  $10,860          $10,505  
3/31/01               $11,883                   $9,573           $7,836 
6/30/01                $9,981                  $10,133           $9,211 
9/30/01               $14,101                   $8,646           $6,392 
12/31/01               $10,948                   $9,570           $8,325  
3/31/02               $11,947                   $9,596           $7,884 
6/30/02               $16,131                   $8,310           $6,256 
9/30/02               $18,920                   $6,875           $5,016 

For the period ended September 30, 2002 

                                        Annualized
                                       Since
                    One Year           Inception
                    --------           ---------
Prudent Bear Fund -                                               
Class C Shares              34.18%              19.14%        
S&P 500                      (20.49)%             (9.78)%         
NASDAQ Composite             (21.80)%            (17.26)%         

The Standard & Poor's 500 Index (S&P 500) is a capital-weighted index,          
representing the aggregate market value of the common equity of 500 stocks      
primarily traded on the New York Stock Exchange. The NASDAQ Composite Index is a
broad-based capitalization-weighted index of all NASDAQ stocks. These charts    
assume an initial gross investment of $10,000 made on 12/28/95 and 2/08/99      
(commencement of operations) for the No Load Shares and Class C Shares,         
respectively. Returns shown include the reinvestment of all dividends. Past     
performance is not predictive of future performance. The graph and the table do 
not reflect the deduction of taxes that a shareholder would pay on fund         
distributions or the redemption of fund shares. Investment return and principal 
value will fluctuate, so that your shares, when redeemed, may be worth more or  
less than the original cost.                                                    

PRUDENT SAFE HARBOR FUND                                                        

                                Salomon Smith Barney       Merrill Lynch
            Prudent Safe       European World Govt.         Pan-Europe
Date         Harbor Fund             Bond Index             Govt. Index 
----         -----------        --------------------        ----------- 
2/2/00         $10,000                 $10,000                $10,000   
3/31/00          $9,878                 $10,035                $10,074    
6/30/00          $9,709                 $10,057                $10,124    
9/30/00          $9,340                  $9,435                $10,248    
12/31/00          $9,398                 $10,308                $10,489     
3/31/01          $9,016                  $9,890                $10,659    
6/30/01          $9,026                  $9,464                $10,752    
9/30/01          $9,578                 $10,473                $11,019    
12/31/01          $9,663                 $10,355                $11,104     
3/31/02         $10,354                 $10,089                $11,116    
6/30/02         $11,518                 $11,696                $11,315    
9/30/02         $11,736                 $12,323                $11,604    

For the period ended September 30, 2002 

                                                            Annualized
                                                           Since
                                        One Year           Inception
                                        --------           ---------
Prudent Safe Harbor Fund                  22.54%              6.20%   
Salomon Smith Barney European                                         
World Government Bond Index (WGBI)      17.65%              8.16% 
Merrill Lynch Pan Europe                                              
Government Index, 1-3 years              5.31%              5.74% 

The Salomon Smith Barney European World Government Bond Index (WGBI) consists of
those fifteen sectors of the Salomon Smith Barney WGBI that are geographically  
located in Europe, namely Austria, Belgium, Denmark, Finland, France, Greece,   
Germany, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden, Switzerland  
and the United Kingdom.  The Pan-Europe Government Index tracks the total return
performance of the outstanding debt of European sovereign issuers.  It is a     
market capitalization-weighted basket comprising Euro participant, Denmark,     
Sweden, Switzerland, and U.K. sovereign bonds issued in their respective        
domestic markets and denominated in their local currency.  This index is further
segmented by debt issues maturing from 1-3 years.  These charts assume an       
initial gross investment of $10,000 made on 2/02/00 (commencement of            
operations). Returns shown include the reinvestment of all dividends. Past      
performance is not predictive of future performance. The graph and the table do 
not reflect the deduction of taxes that a shareholder would pay on fund         
distributions or the redemption of fund shares. Investment return and principal 
value will fluctuate, so that your shares, when redeemed, may be worth more or  
less than the original cost.                                                    

PRUDENT BEAR FUNDS, INC.                                                        

                                                              September 30, 2002

Dear Shareholder,                                                               

The Prudent Bear Fund No-Load shares returned 17.54% in the third quarter while 
the S&P 500 lost 17.28% and the NASDAQ lost 19.90%. For the six months ended    
September 30, 2002, the fund returned 58.89% while the S&P 500 lost 28.36% and  
the NASDAQ lost 36.49%. For the 12 months, the fund returned 35.47% compared to 
a loss of 20.49% for the S&P 500 and a loss of 21.80% for the NASDAQ. Consistent
with our investment philosophy, the fund held more short than long equity       
positions throughout the period. Gains from short positions in individual       
stocks, indexes, and futures positions, along with gains from put options, and  
to a lesser extent, profitable long investments (primarily gold stocks), were   
responsible for the fund's performance. As a result, the Prudent Bear Fund      
continued to help protect investors during a particularly severe downward leg of
the secular bear market. Selling was so intense late in the third quarter that  
the market appeared technically poised to rally, so the fund ended the period   
with less short exposure than usual. The fund has maintained this more          
conservative posture as we approach calendar year-end. However, the fund remains
far more short than long as we are convinced that this bear market has further  
to run. We will increase exposure once we believe the risk of continued sharp   
rallies has been reduced. The Prudent Safe Harbor Fund returned 13.35% for the  
six months and 22.54% for the 12 months ended September 30, 2002. The fund      
benefited from a strong rally in gold stocks in the first six months of the     
period. In the last six months of the period, the fund benefited from a         
weakening dollar, a rally in gold and gold stocks, and falling short-term       
interest rates (higher bond prices).                                            

The question seemingly on every investor's mind is, "Shouldn't the pain be about
overo" This bear market to date has been more severe than any bear market since 
the 1930s, so the consensus expectation is that it should be about complete.    
After growing accustomed to an 18-year bull market, investors feel entitled to  
rising prices, and the pundits continue to tell them that they lay right around 
the corner.  I will attempt to make a strong case in this letter that this      
indeed is not the case, and that unfortunately we are still relatively early in 
this secular bear market.                                                       

There is a certain symmetry in financial markets, just as there is in life.  The
larger the excesses, the more extreme will be the adjustments back to fair      
value.  This secular bull market, which culminated during the first quarter of  
2000, was the greatest in a century.  Understanding symmetry, is there any      
reason to expect that the secular bear market that corrects that bull market's  
excesses won't also be the greatest in the last 100 yearso  We don't think so.  

Several facts lead us to believe that we are not yet close to a new bull cycle, 
with two important ones being: 1.) The stock market is NOT cheap, and 2.) There 
has not been REAL investor capitulation. To us, it appears that anybody looking 
objectively at the U.S. market today would conclude that it remains hopelessly  
overvalued on a host of measures: the ratio of the market cap to GDP, Tobin's Q,
and price/earnings ratios.  Stocks are trading at 40-50 times Standard & Poor's 
trailing "Core Earnings." This new measure strips away much of a company's      
ability to put the best face possible on operating results. According to S&P,   
"_Core Earnings focuses on the results of a company's core business. It excludes
items, such as litigation costs, that are outside the core business, and        
includes items, such as employee stock option grants, that are part of the core 
business." S&P has calculated two versions of Core Earnings and stocks trade    
around 40 times the more liberal measure (which ignores certain pension costs). 
Stocks also remain expensive based on dividend yields.                          

In addition, we are only now beginning to see widespread household liquidation  
of mutual fund holdings. This persistent pattern of liquidation began only after
the bear market was two years old and the decline in the major indices exceeded 
30%.  One of our data samples indicates light inflows may have resumed in early 
November.  However, these are weak indicated flows despite an 18% prior rally,  
and are more consistent with an overall tendency toward redemptions than        
anything else.  History tells us that once these outflows start in earnest, they
can last for a long time.  The cumulative outflows so far have been very brief, 
and are only a very small fraction of the prior inflows.                        

So those are good reasons as to why a bull market is not about to begin, but    
then investors always ask us "how low could this market goo"  According to Dr.  
Peter Bernstein, the average bear market in the last century has given back from
its high 20.5 quarters of previous gains, or a little more than five years of   
previous gains. Therefore, if the present bear market is an average bear market,
the indices will decline to around their 1995 level - in the case of the Dow,   
about 4000. The problem however, is that this bear market is not shaping up as  
an "average bear market" but something far more serious. First of all, we must  
understand the 1982-2000 bull market wasn't an average bull market, but the     
longest bull market in the history of the United States.                        

Following the 1929 peak, when valuations were far lower and the nation's debt   
status much less severe, the market gave back 7.5 years of previous gains. The  
brief 1970 bear market and the sharp 1973-1974 bear markets gave back,          
respectively, seven and eight years of previous gains. Therefore, one could     
expect this bear market to give back a very minimum of eight years of previous  
gains taking us to about 3200 on the Dow. But we are convinced that this bear   
market will correct for previous gains going back to around 1990 or about ten   
years, which would take the index down to about 2500.  We also thank Dr. Mark   
Faber for this prescient analysis.                                              

Now let's look at the economic landscape for a while which also confirms our    
thinking that we indeed have significant trouble ahead.  To begin with, we're   
still in a jobless recovery. New claims for unemployment insurance remain around
the 400,000 mark, while layoffs and "cost cutting" remain the order of the day  
among corporations. The employment picture seems to get uglier by the day and   
nothing instills a greater sense of restraint in consumers than fear of losing  
their jobs.  The unbelievable resilience of an overextended American consumer   
could well be drawing to a close and let there be no doubt that the U.S.        
consumer has kept the economy growing over the last two years.                  

Companies are still retrenching as corporate profits continue to decline and we 
expect that the pace of the job cutbacks will likely accelerate. This raises a  
huge question mark over the sustainability of consumer spending.  All of this is
ominous for the U.S. economy and for a U.S.-centric global economy. For too long
the American consumer has been the bedrock of support on both counts.           
Overextended households have done their best to ignore the devastating loss of  
equity wealth. Yet behavioral finance tells us it's only a matter of time before
the denial cracks and consumers feel the full force of a possible asymmetrical  
wealth effect. At the same time, the life-cycle savings hypothesis argues that  
the saving-short consumers ultimately have no choice but to shift away from     
spending and toward saving. The recent data flow hints that such impacts may not
be idle conjecture. Consumer spending declined by 0.4% in September - while the 
savings rate rose to 4.2% versus 3.4% in August.                                

We have experienced an interest rate collapse, a historic refinancing boom, and 
the "easiest" money imaginable in the consumer finance arena.  Yet, continued   
booming consumer borrowing and spending is barely keeping the maladjusted       
economy afloat. Today the consumer is waterlogged and exhausted.  The           
consumption-based economy looks weathered and frail.                            

OVERALL ECONOMY                                                                 

GDP rose strongly in the third quarter, but that paints a misleading picture of 
the economy's underlying trend. It is our sense that economists' focus on GDP   
growth is missing important nuances of contemporary "output." Should we give the
same weight to the "output" of lawyers, insurance salesmen, and mortgage brokers
as we do to the output of manufacturerso                                        

From the Bureau of Economic Analysis: "The 2001 economic slowdown was mild by   
historical standards because of strong growth in real GDP for private services- 
producing industries that helped to offset sharp declines in real GDP for       
private goods-producing industries_ In 2001, real GDP for private services-     
producing industries increased 1.7 percent, while private goods-producing       
industries dropped 4.2 percent, primarily reflecting a 6.0 percent drop in      
manufacturing_ Growth was led by such large private services-producing          
industries as communications (12.3 percent); retail trade (4.6 percent);        
finance, insurance, and real estate (FIRE) (2.8 percent); and services (0.9     
percent). Declines, particularly in the manufacturing industries, were steep.   
Durable-goods manufacturing decreased 5.2 percent, and non-durable-goods        
manufacturing decreased 7.1 percent."                                           

Yet the constant refrain of Wall Street economists and strategists is of a      
fundamentally sound economy and "If only we had more lending, we could stimulate
more consumption to keep the economy thriving." In our view, it will simply be  
impossible for the impaired U.S. credit system to generate sufficient monetary  
stimulus to sustain the maladjusted economy. It is both wrong and simplistic to 
characterize our current problems as a simple case of insufficient money and    
credit.  It is more a symptom of TOO MUCH wasted finance that should have never 
been created in the first place.  It is not so much "debt deflation" per se that
we are on the threshold of experiencing, as it is a NECESSARY REVALUATION AND A 
CORRECTION OF PRIOR CREDIT EXCESSES.                                            

The current period is eerily reminiscent of the late 1920s and early 1930s.     
Regrettably, the debates that took place relating to prices, markets, and       
monetary management were anything but satisfactorily resolved in the economic   
history books.  In the end, the Monetarists "won" the debate and historical     
accounts of the period were revised to blame the Depression on a shortage of    
money and liquidity.                                                            

In our view, they got it absolutely wrong and we are paying the price for this  
mistake today.  Amazingly, virtually no one today is willing to admit that      
Federal Reserve policy has been an unmitigated disaster, just like it was in the
late 1920s, as the problem was too much credit, which caused inflation in asset 
prices, which caused massive imbalances and a maladjusted economy.  What we have
today is so far removed from sound money, with the lunatics directing the       
governors of the asylum to pump in only stronger laughing gas, or more money, or
better yet said, "more debt." My associate Doug Noland has written about these  
credit excesses for years in his widely acclaimed Credit Bubble Bulletin on our 
website, which largely serves as the basis for this shareholders' letter.       

Most economists today recommend more accommodative monetary policy as the price-
level, profit, financial market, and economic elixir. That the recent massive   
increase of easy money has failed to work its magic only emboldens the          
inflationists to cheer for ever-heavier doses of credit.  Thus continues the    
slippery slope to absolute monetary recklessness.                               

Meanwhile, the financial sphere enjoys tremendous "profits" from the unrelenting
credit expansion, although the bounty looks increasingly in jeopardy.  So the   
specter of deflation is today's evil villain to be eliminated with virtually    
free money (and greater financial windfalls for the financiers).  If we can only
elevate earnings and stock prices, the boom can run indefinitely, they say.  The
Monetarists, "Keynesians," and "Kudlowians" clamor for more "liquidity" and     
"high powered money" in the face of an over-liquefied credit market and endless 
non-bank credit creation.                                                       

This type of thinking is absolutely flawed and dangerous.  We doubt history     
provides a more ironclad case against discretionary monetary management, but    
unfortunately, today's economists haven't understood the great lessons taught   
50-60 years ago.  For too long, the day of reckoning for past credit and        
speculative excess has been postponed by nurturing only greater financial and   
economic imbalances.  How the Fed has grossly mismanaged this unfolding fiasco  
goes directly back to historical revisionism of the overriding causes of the    
Great Depression.  We have never doubted that the answer to financial and       
economic ills would not be found with more credit. This was explained by some   
legendary economists from decades ago. This key issue goes all the way back to  
John Law's great fallacy:  that economic wealth can be created simply by        
providing additional money ("finance").  It is also interesting to note that    
much of today's spurious analysis prefers the "Keynesian" label when it would be
more aptly termed "John Lawsian Inflationism," after the infamous financier of  
Mississippi Bubble fame.  We also should have learned from the economic woes of 
South America that printing more money does not create more wealth.             

However, the reality is that credit and speculative excess only begets          
additional excess and unpredictable (in the current case, elongated) boom and   
bust cycles.  Over time, the financial system has become hopelessly             
dysfunctional, as unlimited finance has been directed to sectors providing      
greater financial gains rather than economic returns.  Financial "profits," as  
opposed to true economic profits, govern the economy like never before. Faulty  
monetary processes - where money and credit are created and directed into the   
economy - only become more indelible.  This ensures that finance is created in  
excess and misallocated, with the quality of new debt poor and worsening.       

We have recently experienced an unprecedented ballooning in non-productive debt 
throughout the system.  Since the beginning of 1996 (26 quarters), total credit 
market debt has increased by $12 trillion, or 65%.  Of this total, financial    
sector debt has jumped by 130% to $9.8 trillion.  Non-financial credit market   
borrowings rose 46%.  To make matters worse, this credit explosion has run      
concomitant with a shrinking manufacturing base.  Sure, a community with an     
over-active credit mechanism does afford the seductive opportunity to "profit"  
from increased leisure "services" (such as providing back rubs and preparing    
each other meals while importing goods from elsewhere).  And the resulting      
financial "wealth" creation is likely then transmitted to rising home prices and
a self-reinforcing but unsustainable and precarious boom.  But make no mistake; 
this mirage of prosperity only survives as long as additional money and credit  
are forthcoming.  At the end of the day, the "services" providers (back-rubbers 
and cooks) are left with a lot of financial claims but not much in the way of   
economic value supporting them. As an economy, we will have no choice but to cut
way back on "services" and consumption and focus our energies on producing      
things that we and our trading partners would like to consume.                  

We've witnessed incredible reckless credit and speculative excess over the      
years.  Over time, only more dangerous excesses have been perpetrated in an     
effort to avoid the necessary pain of working off the previous financial        
follies.  The Fed and financial sector continue to work diligently to avoid     
(postpone) learning lessons as they fight credit problems with more credit,     
compensating for bursting bubbles by creating even larger bubbles. Yet, if the  
Fed saw no alternative than to collapse interest rates in response to the       
collapsing NASDAQ Bubble, shouldn't they at least have moved to restrain the    
over-aggressive mortgage finance sectoro  After all, it doesn't take rocket     
science to recognize that speculative impulses had become imbedded in the       
marketplace, that the speculating "infrastructure" was firmly in place on Wall  
Street, and that the methods of creating unlimited finance for the purpose of   
leveraged speculation had been mastered throughout the financial system.  To    
protect financial stability, the Fed should have warded off mounting lending and
speculative excesses. This indeed should be the mission of the Federal Reserve, 
"to protect financial stability." Instead they nurtured and supported these     
dangerous speculative impulses.                                                 

Still apparently unrecognized by most, the 1990s boom was fueled largely by non-
bank credit creation, much of it marketable securities, outside of the control  
of the Federal Reserve.  The government-sponsored enterprises and the           
asset/mortgage-backed securities markets have been conspicuous in this regard.  
And while total credit market debt expanded $12 trillion over the past 26       
quarters, Federal Reserve assets increased by only about $240 billion.  There is
today resolute confidence that the Fed can easily expand its securities holdings
if it desires to combat economic weakness or, worse yet, deflation.  But with a 
credit bubble of this magnitude, it would take trillions of new credit created  
in the markets to sustain the bubble, rather than billions of Fed balance sheet 
expansion.  The longer the bubble is allowed to run, the more it becomes outside
of the Fed's control.                                                           

There is today a populas opinion that there are no costs associated with Fed    
rate cuts, thus every reason to aggressively cut first and ask questions later. 
While our central bankers were determined to avoid learning lessons from the    
Japanese bubble experience and from the 1920s, they do appreciate that it is    
expedient to "learn" from dismal post-Bubble struggles - the key is to move     
early and move aggressively.  But such policies are throwing gas on a fire of   
gross excess throughout the financial sphere.                                   

Our analysis convinces us that this is precisely the recipe that led to a       
hopelessly deranged financial sphere that was resolved with the 1930s financial 
collapse and the Great Depression. It is our view that the post 9/11 aggressive 
rate cuts (and consequent blow-off excesses throughout mortgage finance and     
credit market speculation) were an even greater mistake than the post-          
Russia/LTCM cuts and "reliquification" that fueled the fateful technology/stock 
market speculative blow-off.  Consider the massive costs of that policy error.  
Incredibly, no one will step up and admit we have set course for financial      
disaster.  Sure, ultra-easy money has stimulated unprecedented household        
borrowings.  These spikes in demand for homes and autos have kept GDP advancing 
for a few additional quarters.  But this will ensure a huge future price to pay 
for artificially inflating sales.  It was absolutely irresponsible monetary     
policy to actively stimulate consumer over-borrowing and spending in this manner
- in a desperate attempt to sustain unsustainable boom-time demand.  History    
will show this to have been a disastrous mistake.                               

If, like the early 1990s, we were suffering merely from a credit crunch, Fed    
"reliquification" could reinvigorate the impaired credit system.  But today,    
additional credit creation only feeds an out-of-control financial sphere and    
further distorts the structure of the real economy.  Neither credit crunch nor  
deflation is the issue today.  The issue is that we have no alternative but to  
deal with faltering credit, speculative, and economic bubbles of historic       
proportions. We believe we have created a dangerous monetary gamble with great  
risk and NO possibility for success.  There is no changing the harsh reality of 
the historic credit bubble that has resulted in a fragile financial sector and  
horribly maladjusted economy.  Unfortunately, no amount of "money" can "right"  
the system, only extend the wrong and create even greater imbalances.           

The collapsing stock market bubble is not the central issue for today, but it   
should be recognized as crucial evidence of much greater systemic ills inflicted
by "contemporary finance" and excessive stimuli.  Similar speculative and       
inflationary dynamics that fostered stock market booms and busts have also      
dominated the expansive global "risk" markets (predominantly credit market      
related), and that much of contemporary "structured finance" is more aptly named
"speculative finance." The residual is an unfathomable and increasingly onerous 
mountain of global financial claims (mostly debt).                              

HOUSING BUBBLE                                                                  

It truly has been the mortgage finance bubble keeping the consumer spending and 
the U.S. economy "resilient." As much as Chairman Alan Greenspan would like to  
deny it, we have been in a housing bubble for some time.  Furthermore, we are   
likely in the late stages of a classic blow-off market top.  Greenspan's        
assertion that there is no housing bubble is analogous to an investment banker  
stating in 1999 that there was no telecom debt bubble because few companies were
defaulting.  Just give it time_  The key to identifying bubbles, of course, is  
in protracted credit excess.  Distress arrives when credit excess inevitably    
subsides.  Asset inflation then reverses course, credit availability disappears,
and credit losses quickly emerge. This year's record pace and September's 13.3% 
spectacular rise of new home sales smack strongly of a top. New homes have been 
selling at an unprecedented one million unit pace.  September's average price of
$218,100 was up another 7.3% year-over-year, on top of years of steady price    
inflation.  New home sales are on pace to surpass last year's record 908,000 new
homes sold by about 5%.  It is worth noting that new homes sold at an annualized
rate of about 600,000 units during the first five years of the 1990s, surpassing
700,000 units for the first time during 1997, 800,000 during 1998, and 900,000  
for the first time last year.  Existing home sales are also on pace for another 
record year.                                                                    

In California, year-over-year price gains of 17.3% through September, to        
$323,310, remain phenomenal.  But sharp sales declines are a troubling sign.    
Statewide single-family sales were down 12.3% from August.  In fact, single-    
family sales were only 3.9% above depressed levels from September 2001.         
Interestingly, sales were down 25% from August and more in key upper-end markets
in Monterey County, Santa Cruz County, Santa Barbara and Ventura County.        
Anecdotal accounts have sales slowing and inventory building in many key housing
markets.                                                                        

It is unbelievable, but it appears that we will see total mortgage credit GROWTH
surpass $800 billion this year, with a growth rate in the neighborhood of 12%.  
This  $800 billion will put five-year total mortgage debt growth at almost $2.5 
trillion, or about 48%. Even during the late 1980s real estate lending excess,  
total annual mortgage credit growth averaged only about $300 billion (1987 to   
1989).  It is an amazing phenomenon of protracted bull markets (especially      
contemporary ones buttressed by uncontrolled fiat money, runaway Credit systems 
and endemic speculation) that they invariably end with a wild terminal phase of 
gross speculative excess.  After witnessing a "once in a lifetime" spectacular  
NASDAQ/stock market blow-off, we are now afforded the unfortunate opportunity of
viewing a development of similar historic proportions today throughout mortgage 
finance.  To make matters worse, it is our fear that unprecedented mortgage debt
is being acquired by highly leveraged interest rate speculators.  That this has 
become the "hot" financial speculation at this stage of the credit and economic 
cycles should be recognized as a debacle in the making.                         

Only time will tell as to the level of leveraged speculation and to what extent 
troubled borrowers are extracting every penny of equity in a desperate attempt  
to stay afloat.  But there is absolutely no doubt that tens of billions of      
problematic credit card debt is being transformed into mortgage balances.  There
is no doubt that equity extraction has financed unprecedented consumption.  And 
it is inarguable that leveraged speculation has played an instrumental role as  
"financier."                                                                    

Recently, bankers have begun selectively tightening underwriting standards and  
building loan-loss reserves against increases in real estate loan delinquencies 
and defaults.  We strongly believe that this growing concern among lenders      
represents a turning point in the real estate debate. As we witnessed with the  
telecom debt bubble, it is amazing how fast perceptions can change. And bubbles 
do not respond well to any tempering of credit availability.  Yet such a        
troublesome circumstance is inevitable, as all great bubbles must come to an    
end.                                                                            

Considering the fact that we are in the midst of unprecedented mortgage credit  
creation, one would surely not expect credit problems to be a significant issue.
But at mortgage insurers such as MGIC and Radian, delinquencies and losses have 
increased significantly.  This does not bode well for the time when mortgage    
lending inevitably slows.                                                       

We are highly confident that the models employed by the likes of the REITS,     
Fannie and Freddie, the mortgage insurers, banks and S&Ls, are underestimating  
future credit losses. Yet based on these models, the vice chairman of Fannie Mae
was recently quoted as follows when she spoke of the rosy outlook for housing   
for the rest of the decade: "We can deliver the best decade for housing we've   
ever seen_ There are some misconceptions about what it takes to buy a home...   
Too many Americans still think it's necessary to put 20 percent down on a house 
or have perfect credit and don't realize underwriting innovations have allowed  
homebuyers to put down 1 percent - or even nothing - and still purchase a home."
And this is no bubble being caused by dysfunctional credit excess?              

We can only hope that the damage caused by this year's speculative "blow-off"   
within the great mortgage finance bubble is not the unmitigated disaster for the
consumer sector that the 1999 telecom debt "blow-off" has proved to be for the  
corporate sector.  It is a central facet of Credit Bubble analysis (as we       
learned from the Austrian school of economics) that the resulting damage during 
the bust will be proportional to the nature and degree of excess during the     
boom.  As we have witnessed, risk grows exponentially through the life of the   
boom.  Not only does the quality of individual credits deteriorate over time,   
but also the quantity of new (weak) credits grows at a compounding rate.        
Moreover, the structural impact to the real economy becomes more extreme at the 
late stages of the speculative credit cycle (distortions, both financial and    
economic, accumulate on top of distortions).  The telecom credit bubble provides
an historic example of these dynamics, as extreme lending excess created an     
industry devoid of economic profits and lacking the necessary cash flow to      
service mushroomed debt levels.  The industry has been irreparably decimated,   
while lenders are facing years of impairment.                                   

The Fed's response has been to make "loose money" history's most accommodative  
("loosest").  The economic community is now fixated on the benefits a consumer  
receives from refinancing at a lower interest rate, while extracting equity to  
support spending.  But what are the systemic consequences if the entire country 
does it, and are they permanent or transitory, stabilizing or destabilizingo    
Well, we have witnessed how the mortgage finance bubble has both supported boom-
time over-consumption and augmented financial sector liquidity.  But the        
economic consensus is again seriously erring in its analysis. They are once more
extrapolating absolutely unsustainable excesses from the "terminal stage" of the
bubble.  Moreover, the consensus does not appreciate the transitory nature of   
the monetary affects of this bubble or the heightened financial fragility that  
will be the legacy of this ill-advised mortgage finance free-for-all.  The      
telecom/IT sector provided a seemingly wonderful mechanism for monetary         
stimulation (with few visible problematic inflationary manifestations); that is 
until its increasingly voracious appetite for new credits could not be satisfied
and the bubble began to implode.                                                

Nor will the simple elixir of cutting rates restore the boom times quickly:     
Excess capacity and inventory of servers, storage, PCs, network equipment, fiber
optic lines, semiconductors and software are the legacy of the multi-year buying
binge that occurred in the 1990s, aided and abetted by the largesse of the      
Federal Reserve and overheated financial sector.  Lower interest rates and more 
Fed credit are not the answer to the tech industry's problems. The industry     
requires a period of sustained contraction and consolidation to become          
healthier.  Based upon the excesses still in the system, this process still has 
much longer to run and no amount of loose money will change that fact.          

Consider the example of Intel, long one of Wall Street's "growth stocks." Based 
on the company's most recent forecasts, analysts are now expecting 2003         
quarterly revenues to come in around $6.5 billion, essentially the same level   
that Intel reported in the first quarter of 1997, SIX FULL YEARS AGO.  The      
company has built more capacity than it can use and the corresponding rise in   
costs is continuing to pressure gross margins.  Meanwhile, consumers are        
demanding $300 PCs. Intel's current cost structure cannot be sustained with this
reality, which means more likely disappointment ahead.                          

Nor is there any evidence of recovery in the telecom and network equipment      
business.  Lucent has just announced a further 10,000 job cuts in an attempt to 
outrace "the precipitous decline in spending, particularly in North America."   
Motorola has slashed its Q4 and 2003 forecasts. In addition to the fall-off in  
wireless handset orders, wireless equipment orders plunged 44% year-over-year   
and broadband communications orders plummeted by 48%.  JDS Uniphase has sharply 
lowered Q4 revenue forecasts and projected further job cuts.  Corning has       
recently announced the closure of three more optical fiber plants and laid off a
further 2,200 employees.  Cisco Systems announced lower revenue forecasts for   
the fourth quarter; its book-to-bill ratio fell below 1.0 for the first time in 
years, rendering even these more cautious forecasts somewhat suspect. The list  
goes on.                                                                        

SPECULATIVE CAPITAL FLOWS                                                       

Reportedly, the amount invested with the hedge fund community is approaching    
$800 billion.  Throw in their leveraged positions, along with those operating   
like hedge funds, the Wall Street proprietary trading desks and other           
speculators, and performance chasing retail mutual fund "investors," and you    
have truly unfathomable speculative flows that have come to dominate the        
marketplace.  More and more hedge fund managers are reporting that they cannot  
generate positive returns because the market is losing liquidity and they have  
so many competitors.  Fund-of-fund managers report that such complaints from    
hedge fund managers are legion. Proprietary traders at investment banks are     
having a similar experience.                                                    

On the recent violent rally off the early October low, hedge funds, which were  
in aggregate very short at the bottom, reportedly have been covering.  At the   
same time the public has redeemed equity mutual funds into the rally.  This is  
in contrast to their more positive household behavior on prior rallies since the
top in 2000.  It appears that the public is leaving the market, forcing hedge   
funds to trade more and more with themselves.                                   

This may be forcing hedge funds to take directional bets to generate returns.   
In recent years, the total volume of funds that have gone into long/short equity
hedge funds may have risen to many hundreds of billions of dollars on a global  
basis.  Many of these funds employ leverage; as a consequence their aggregate   
positions may be two or more times their net asset value, and they are now a    
major class of stock market participant.  Most of these funds try to trade      
actively from both the short and long side of the stock market.  Their very     
active trading strategies imply that their role in daily market activity greatly
exceeds their share of the aggregate equity market portfolio.                   

Today, hedge funds and other speculators are often seeking to profit from the   
selling of stocks and corporate bonds, as opposed to purchasing them.  We also  
have some of the leading financial institutions with leveraged exposure to both 
the financial assets they hold and the derivative protection they have written. 
This exposure (and the systemic ramifications) leads to aggressive trend-       
following selling from the risk averse, as well as the gains-seeking            
speculators.  This process engenders additional hedging-related selling from the
derivative traders in a self-reinforcing spiral that holds the potential to lead
to financial collapse.  That key derivative players such as JP Morgan Chase and 
the European financial institutions are facing mounting difficulties is         
increasingly looking like a decisive blow to "structured finance." The risk     
averse may now gravitate away from the securities these institutions either     
directly or indirectly support.  The above-mentioned institutions have been     
instrumental players in providing credit availability throughout the U.S.       
system.  These institutions are at the very epicenter of "structured finance,"  
and any loss in confidence in a major player is a blow to the entire system.    

This "New Age" system of structured finance has created greater credit          
availability during the boom.  What then, are the consequences to the financial 
system and the economy if this untested system - that has come to absolutely    
dominate credit creation - falterso  If it becomes more enticing for the        
speculators to sell securities, while the dynamic "delta" hedgers are forced to 
short securities to hedge their exposure, who will be the buyerso What if a     
preponderance of performance-chasing speculators and dynamic hedgers turn into  
sellers instead of buyerso  Will the economy not be strangled from a systemic   
credit cruncho Doesn't it become one chaotic and unstable bet on system         
stability - a battle between those speculators betting the system holds and     
financial asset prices recover, matched against those speculating that          
individual companies and the general economy will face mounting troubleso  At   
the minimum, isn't this a complete breakdown of the capital allocation process? 

PROBLEMS IN ASSET BACKED SECURITIES MARKETS                                     

With the confluence of over-leverage, fraud, the collapse of the                
technology/telecom bubble, and a deteriorating general business environment, the
corporate bond market has gone through a punishing dislocation.  The risk-averse
marketplace has been closed to the vast majority of American corporations, many 
desperately in need of additional borrowings.  The capacity for Wall Street to  
create palatable top-rated securities in this environment has played a critical 
role supporting the business sector and general economy.  The booming asset-    
backed securities marketplace has played an instrumental role.  But this sector 
is now under heightened stress.  There were an unprecedented 280 downgrades of  
U.S. asset-backed securities in the third quarter - more than double the 132 of 
the second quarter.  In all of 2001, there were only 245.                       

We have seen mounting problems in sub-prime credit cards and a virtual collapse 
in the market for securities backed by manufactured housing.  Recently, spreads 
have widened significantly in the home equity-backed area, in what appears to be
a "natural" progression of credit problems associated with the bursting of the  
consumer bubble.  Any waning of credit availability in the home equity area     
would be a major development.  And with heightened stress for key financial     
players such as Capital One, Ford and Sears, there is a distinct possibility    
that general consumer credit availability could become a significant issue going
forward.  A faltering consumer sector would have dire ramifications for the     
entire ABS marketplace as well as the vulnerable mortgage arena.                

Despite troubling signs, asset-backed security issuance remains extraordinary.  
Year-to-date, total issuance of $299 billion is running 22.5% above year ago    
levels.  Remarkably, home equity issuance of $122 billion is up 73% from last   
year's record level.  Auto-backed issuance is booming as well.  New auto loan   
data is indicative of ultra-easy credit availability.  For the third quarter,   
the average interest rate was 2.72% for a 58.4-month loan at 96% loan-to-value. 
This compares to the first quarter's 5.32% for 53.9 months at 90% loan to value.

The asset-backed issuance boom is being supported by aggressive insurance       
underwriting.  MBIA (along with Ambac) has become an aggressive insurer of      
asset-backed vehicles and collateralized debt obligation (CDO) structures.      
Year-to-date, MBIA has written insurance on $28.9 billion of CDO exposure.  This
compares to $13.6 billion last year, almost doubling total CDO exposure to $65.9
billion.  MBIA ended 1999 with total CDO exposure of $2.3 billion.  MBIA        
concluded the quarter with a "Global Structured Finance" "Insured Portfolio" of 
$167 billion.  In addition to the CDOs, the company has insured about $35       
billion of asset-backs, $21 billion of home equity loans, about $20 billion of  
other mortgage-backed, almost $20 billion Pooled Corp. Obligations & Other, and 
$5 billion of other "financial risk." Over at Ambac, "adjusted gross premiums   
written" during the quarter of $305.6 million advanced 69% from last year's     
third quarter.                                                                  

THE RETURN OF THE "TWIN DEFICITS"                                               

The White House Office of Management and Budget has recently reported a fiscal  
year deficit of $159 billion, a swing of $286 billion from last year's surplus. 
This was the first deficit since 1997 and the largest since 1995.  Year-over    
year, spending jumped 7.9% to $2.012 trillion, while revenue dropped 6.9% to    
$1.853 trillion (reportedly the steepest revenue drop since 1946).  Individual  
tax receipts declined 13.7% to $994.3 billion.  Corporate tax receipts declined 
2% to $148 billion.  Interestingly, the four consecutive years of surplus (1998-
2001) were reported by Bloomberg News as "the longest since 1927-1930." It will 
be quite some time before we see another surplus, with the question being how   
large and how quickly the deficits balloon.                                     

As far as the external imbalances go, the U.S. trade deficit dipped slightly in 
September to $38.0 billion, but was still the second highest level on record.   
The trade gap shrank just 0.7% from the record of $38.3 billion set in August,  
as both imports and exports fell slightly but remained near the highest levels  
of the year.  The September figures pushed the total trade deficit for the first
nine months of 2002 to a record $317.3 billion, an increase of 17.4% from $270.3
billion in 2001.                                                                

It has been widely believed that as economic growth rates abroad (notably Asia) 
picked up and the U.S. economy slowed, the U.S. current account would decline   
significantly and there would be no further external balance problems.          

There are two problems with this line of thought. First, we are now being told  
by the Treasury Secretary and various members of the Federal Reserve Board that 
the U.S. economy is on the threshold of recovery. Since there is nothing in the 
trade statistics to suggest an incipient recovery on the back of increased      
export growth, this implies a widening, rather than narrowing, current account  
deficit, since the domestic demand of many of America's leading trading partners
(notably Europe, Japan and Latin America) remains sluggish. Second, even if one 
disputes this bullish assessment on the economy (which we do), we believe that  
the U.S. current account deficit will remain stubbornly high as a consequence of
the lags in trade stemming from a multi-year overvaluation of the dollar, and a 
corresponding resistance to deterioration in their trade balances by other G-7  
and emerging economies with high un-utilized resources.  In addition, as the net
external liabilities of the U.S. continue to mount, interest on this growing    
debt will cause the current account deficit to accelerate more than the trade   
deficit, thereby accelerating U.S. external debt growth.                        

The U.S. economy now likely has a trend rate of growth between 2.2 to 3.0%.     
That is below the average real interest rate on its debt. This in turn inclines 
the country toward debt trap dynamics as external debt is high and the current  
account deficit is significant. In fact, we see the recent limited decline of   
the greenback as yet another stage in the long-term de-rating process of        
American assets. The dollar's weakness will ultimately accelerate as it comes to
be recognized as the reflection of a bubble prosperity built on excess, fraud,  
and policy errors encouraged by a decade of cheerleading for the New Economy.   
This year's dollar decline suggests that the financial markets are losing their 
respect for U.S. policy. A loss of financial confidence is a problem that       
America simply cannot afford.  The U.S. trade deficit is running at an annual   
rate of more than $400 billion and is expected to expand in the next few years  
to between $500 billion and $600 billion. To finance these deficits, America    
will have to borrow money from foreign governments and investors on an          
unprecedented scale, even in wartime.                                           

Coincidentally, this was also a time when gold was rising relative to the       
greenback.  Rarely have we seen a confluence of factors so bearish for the      
dollar and bullish for gold, which is why we have also established our Prudent  
Safe Harbor Fund.                                                               

SUMMARY                                                                         

The financial system has again come under heightened stress, and it appears     
perched precariously near the precipice.  The marketplace may begin to "connect 
the dots" as investors come to appreciate the deepening stress afflicting the   
credit system, as well as the enormous ramifications if it stumbles.  Increased 
attention to the vulnerabilities of GE, Fannie Mae, Freddie Mac, the Wall Street
firms, credit insurers and the credit bubble evoke nervousness for any company  
relying on the securitization market to garner additional finance.              

We have reached a point where there is clearly a systemic problem, and the      
marketplace now has great hope that the Fed is in the process of resolving the  
problem.  Perhaps the great credit bubble has rebounded from the brink once     
more.                                                                           

But our credit system has bubble-binge consumption and massive current account  
deficits to sustain.  Its work is never done.  The credit system has inflated   
(in many cases, especially California, grossly inflated) real estate prices that
it must keep levitated. The credit system has unfathomable quantities of non-   
productive debt whose value rests on the continued issuance of massive          
quantities of non-productive debt.                                              

The bottom line is that the economy is today weakening in the midst of record   
low interest rates and unprecedented credit availability throughout the consumer
sector. This could not be more ominous for a consumer/consumption-based economy,
yet most are determined to ignore the dire implications.  Credit conditions     
could not be more accommodative throughout the expansive mortgage-finance super-
industry, yet housing is softening in many key markets.  Spending is barely     
sustaining the massive retail/consumption sector that has ballooned over the    
protracted boom.  Auto finance could not be more freely available, yet auto     
sales are weakening and U.S. manufacturers (and their behemoth finance          
subsidiaries) are in fights for their lives.  And except for the fringes of sub-
prime, credit card finance could today not be more readily available.  Yet      
spending is stagnating.                                                         

At the same time, the financial system remains generally flush with liquidity   
and the dollar is holding its own, as mortgage and auto credits are being       
created in record volumes.  Yet the U.S. and global financial systems at times  
appear to be coming apart at the seams. Large quantities of increasingly weak   
U.S. credits are barely sustaining an unruly consumption beast with a voracious 
and insatiable appetite.  But feeding this uncontrollable animal has been a     
serious mistake.  He's grown big and mean.  The situation is only today being   
recognized as unacceptably burdensome.                                          

With the financial system under stress, it is time to prepare for what appears  
to be an inevitable deep and protracted recession.  The policy to create a      
mortgage finance borrowing binge until the capital spending boom could return   
has failed. The credit system is too impaired, chastened investors and          
speculators too risk-averse, and the bubble economy too maladjusted.  And, the  
old hero, "structured finance," is indeed today's villain.  Paraphrasing the    
great Joseph Schumpeter, people have been determined to dig in their heels and  
hold their ground; but the ground is about to give way.  We shall continue to do
our best to provide our investors a reasonable safety-net to cope with the      
difficult period ahead.                                                         

Sincerely,                                                                      

/s/David W. Tice                                                                

David W. Tice                                                                   

STATEMENT OF ASSETS AND LIABILITIES                                             
SEPTEMBER 30, 2002                                                              

                                                        [Enlarge/Download Table]
                                                                                       PRUDENT BEAR    PRUDENT SAFE 
                                                                                           FUND         HARBOR FUND 
                                                                                       ------------    ------------ 
                                                                                                                    
ASSETS:                                                                                                             
   Investments, at value (cost $456,516,971 and $119,901,140, respectively)             $472,359,298    $125,348,668
   Cash                                                                                    1,731,784              --
   Deposit at brokers for short sales                                                      5,794,548              --
   Receivable from broker for proceeds on securities sold short                          238,700,949              --
   Receivable for investments sold                                                         9,492,042              --
   Receivable for futures contracts                                                          610,875              --
   Capital shares sold                                                                    18,190,910       2,938,792
   Dividends receivable                                                                      109,671              --
   Interest receivable                                                                     1,994,566       2,786,436
   Other assets                                                                               25,548          11,094
                                                                                        ------------    ------------
   Total Assets                                                                          749,010,191     131,084,990
                                                                                        ------------    ------------

LIABILITIES:                                                                                                        
   Securities sold short, at value (Proceeds of $229,695,124 and $0, respectively)       195,611,566              --
   Payable for securities purchased                                                       17,253,216       1,115,480
   Capital shares redeemed                                                                 6,018,327       3,555,547
   Payable to Adviser                                                                        473,120          51,159
   Dividends payable on short positions                                                      187,818              --
   Income distribution payable                                                                    --             209
   Accrued expenses and other liabilities                                                    594,433         171,376
                                                                                        ------------    ------------
   Total Liabilities                                                                     220,138,480       4,893,771
                                                                                        ------------    ------------
NET ASSETS                                                                              $528,871,711    $126,191,219
                                                                                        ------------    ------------
                                                                                        ------------    ------------
NET ASSETS CONSIST OF:                                                                                              
   Capital stock                                                                        $470,316,707    $118,180,596
   Accumulated undistributed net investment income                                         5,532,116         382,114
   Accumulated undistributed net realized gain (loss) on investments sold,                                          
     securities sold short, option contracts expired or closed and foreign currencies       (364,144)      2,094,686
   Net unrealized appreciation on:                                                                                  
       Investments                                                                        15,842,327       5,447,528
       Foreign currencies                                                                      2,647          86,295
       Short positions                                                                    34,083,558              --
       Futures contracts                                                                   3,458,500              --
                                                                                        ------------    ------------
TOTAL NET ASSETS                                                                        $528,871,711    $126,191,219
                                                                                        ------------    ------------
                                                                                        ------------    ------------
NO LOAD SHARES:                                                                                                     
   Net Assets                                                                           $521,029,983    $126,191,219
   Shares outstanding (250,000,000 shares of $.0001 par value authorized)                 62,710,598      11,315,064
   Net Asset Value, Redemption Price and Offering Price Per Share                       $      8.31     $      11.15
                                                                                        ------------    ------------
                                                                                        ------------    ------------
CLASS C SHARES:                                                                                                     
   Net Assets                                                                           $  7,841,728                
   Shares outstanding (250,000,000 shares of $.0001 par value authorized)                    962,921                
   Net Asset Value, Redemption Price and Offering Price Per Share                       $       8.14                
                                                                                        ------------                
                                                                                        ------------                

See notes to the financial statements.

STATEMENT OF OPERATIONS                                                         
YEAR ENDED SEPTEMBER 30, 2002                                                   

                                                        [Enlarge/Download Table]
                                                                         PRUDENT BEAR   PRUDENT SAFE 
                                                                             FUND       HARBOR FUND  
                                                                         ------------   ------------ 
                                                                                                     
INVESTMENT INCOME:                                                                                   
   Interest income                                                       $  7,253,399     $1,414,902 
   Dividend income on long positions                                                                 
     (net of foreign taxes withheld of $76,292 and $7,055, respectively)      671,835        183,357 
                                                                         ------------     ---------- 
   Total investment income                                                  7,925,234      1,598,259 
                                                                         ------------     ---------- 

EXPENSES:                                                                                            
   Investment advisory fee                                                  3,120,967        422,675 
   Administration fee                                                         225,511         55,666 
   Shareholder servicing and accounting costs                                 387,152        116,404 
   Custody fees                                                               135,555         29,180 
   Federal and state registration                                              54,892         36,681 
   Professional fees                                                           84,716         59,870 
   Distribution expense - No Load shares                                      615,832        140,892 
   Distribution expense - Class C shares                                       33,416             -- 
   Reports to shareholders                                                     41,857         11,845 
   Directors' fees and expenses                                                 4,030          2,014 
   Insurance expense                                                           39,318            982 
                                                                         ------------     ---------- 
   Total operating expenses before expense reductions, expense                                       
     reimbursements and dividends on short positions                        4,743,246        876,209 
   Expense reductions (See Note 5)                                           (114,013)        (1,572)
   Expense reimbursement from Adviser                                              --        (30,867)
   Dividends on short positions (net of foreign taxes withheld                                       
     of $5,387 and $0, respectively)                                          996,399             -- 
                                                                         ------------     ---------- 
   Net expenses                                                             5,625,632        843,770 
                                                                         ------------     ---------- 
NET INVESTMENT INCOME                                                       2,299,602        754,489 
                                                                         ------------     ---------- 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                                  
   Realized gain (loss) on:                                                                          
       Long transactions                                                    8,005,306      3,543,962 
       Short transactions                                                  26,079,387             -- 
       Option contracts expired or closed                                  16,921,641             -- 
       Futures contracts closed                                            10,806,269             -- 
       Foreign currency translation                                            (1,304)        54,738 
                                                                         ------------     ---------- 
       Net realized gain                                                   61,811,299      3,598,700 
                                                                         ------------     ---------- 
   Change in unrealized appreciation/depreciation on:                                                
       Investments                                                         23,382,873      4,964,260 
       Short positions                                                     12,662,853             -- 
       Futures contracts                                                    3,495,500             -- 
       Foreign currency                                                         1,757         74,643 
                                                                         ------------     ---------- 
       Net unrealized gain                                                 39,542,983      5,038,903 
                                                                         ------------     ---------- 
   Net realized and unrealized gain on investments                        101,354,282      8,637,603 
                                                                         ------------     ---------- 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                     $103,653,884     $9,392,092 
                                                                         ------------     ---------- 
                                                                         ------------     ---------- 

See notes to the financial statements.

STATEMENT OF CHANGES IN NET ASSETS                                              

                                                        [Enlarge/Download Table]
                                                          PRUDENT BEAR FUND                    PRUDENT SAFE HARBOR FUND       
                                                --------------------------------------  --------------------------------------
                                                    YEAR ENDED          YEAR ENDED          YEAR ENDED          YEAR ENDED    
                                                SEPTEMBER 30, 2002  SEPTEMBER 30, 2001  SEPTEMBER 30, 2002  SEPTEMBER 30, 2001
                                                ------------------  ------------------  ------------------  ------------------
                                                                                                                              
OPERATIONS:                                                                                                                   
   Net investment income                           $  2,299,602        $  5,617,319        $    754,489         $   247,331   
   Net realized gain (loss) on:                                                                                               
       Long transactions                              8,005,306           2,521,861           3,543,962             (64,065)  
       Short transactions                            26,079,387          29,542,860                  --                  --   
       Option contracts expired or closed            16,921,641          30,234,796                  --                  --   
       Futures contracts closed                      10,806,269          14,142,649                  --                  --   
       Foreign currency translation                      (1,304)               (593)             54,738              (6,131)  
   Change in unrealized appreciation/                                                                                         
     depreciation on:                                                                                                         
       Investments                                   23,382,873          (9,710,424)          4,964,260             539,694   
       Short positions                               12,662,853          14,850,790                  --                  --   
       Futures contracts                              3,495,500          (1,811,495)                 --                  --   
       Foreign currency                                   1,757               1,570              74,643              12,336   
                                                   ------------        ------------        ------------         -----------   
   Net increase in net assets                                                                                                 
     resulting from operations                      103,653,884          85,389,333           9,392,092             729,165   
                                                   ------------        ------------        ------------         -----------   
DISTRIBUTIONS TO                                                                                                              
  NO LOAD SHAREHOLDERS                                                                                                        
   FROM NET INVESTMENT INCOME                        (4,724,707)         (7,711,412)         (1,849,472)           (190,263)  
   FROM NET REALIZED GAINS                                   --                  --             (12,167)                 --   
                                                   ------------        ------------        ------------         -----------   
   TOTAL DISTRIBUTIONS                               (4,724,707)         (7,711,412)         (1,861,639)           (190,263)  
                                                   ------------        ------------        ------------         -----------   
DISTRIBUTIONS TO                                                                                                              
  CLASS C SHAREHOLDERS                                                                                                        
  FROM NET INVESTMENT INCOME                            (64,110)            (30,803)                 --                  --   
                                                   ------------        ------------        ------------         -----------   
CAPITAL SHARE TRANSACTIONS:                                                                                                   
   Proceeds from shares sold                        877,245,442         337,595,735         226,790,135          43,865,227   
   Shares issued to holders in                                                                                                
     reinvestment of dividends                        4,142,068           6,937,599           1,673,306             171,437   
   Cost of shares redeemed                         (636,587,023)       (391,177,876)       (134,136,115)        (21,663,753)  
                                                   ------------        ------------        ------------         -----------   
   Net increase (decrease) in net assets                                                                                      
     resulting from capital share transactions      244,800,487         (46,644,542)         94,327,326          22,372,911   
                                                   ------------        ------------        ------------         -----------   
TOTAL INCREASE IN NET ASSETS                        343,665,554          31,002,576         101,857,779          22,911,813   
NET ASSETS:                                                                                                                   
   Beginning of period                              185,206,157         154,203,581          24,333,440           1,421,627   
                                                   ------------        ------------        ------------         -----------   
   End of period (including undistributed                                                                                     
     net investment income (loss) of                                                                                          
     $5,532,116, $3,603,277, $382,114,                                                                                        
     and $(9), respectively)                       $528,871,711        $185,206,157        $126,191,219         $24,333,440   
                                                   ------------        ------------        ------------         -----------   
                                                   ------------        ------------        ------------         -----------   

See notes to the financial statements.

PRUDENT BEAR FUND                                                               
FINANCIAL HIGHLIGHTS                                                            

Selected per share data is based on a share of beneficial interest outstanding  
throughout each period.                                                         

                                                        [Enlarge/Download Table]
                                                NO LOAD        NO LOAD    NO LOAD        NO LOAD            
                                                 SHARES         SHARES     SHARES         SHARES            
                                                  YEAR           YEAR       YEAR           YEAR       YEAR  
                                                 ENDED          ENDED      ENDED          ENDED      ENDED  
                                               SEPT. 30,      SEPT. 30,  SEPT. 30,      SEPT. 30,  SEPT. 30,
                                                  2002           2001       2000           1999       1998  
                                                  ----           ----       ----           ----       ----  
                                                                                                            
Per Share Data:                                                                                             

     Net asset value, beginning of period         $6.31          $3.93      $4.51          $7.34      $7.29 
                                                  -----          -----      -----          -----      ----- 

Income from investment operations:                                                                          
     Net investment income(1)<F1>(2)<F2>           0.06           0.17       0.18           0.19       0.29 
     Net realized and unrealized                                                                            
       gains (losses) on investments               2.08           2.44      (0.62)         (2.82)     (0.01)
                                                  -----          -----      -----          -----      ----- 
     Total from investment operations              2.14           2.61      (0.44)         (2.63)      0.28 
                                                  -----          -----      -----          -----      ----- 

Less distributions from net investment income     (0.14)         (0.23)     (0.14)         (0.20)     (0.23)
                                                  -----          -----      -----          -----      ----- 

Net asset value, end of period                    $8.31          $6.31      $3.93          $4.51      $7.34 
                                                  -----          -----      -----          -----      ----- 
                                                  -----          -----      -----          -----      ----- 

Total return                                      35.47%         68.78%     -9.55%        -36.17%      3.66%

Supplemental data and ratios:                                                                               
     Net assets, end of period (000's)         $521,030       $183,797   $153,336       $220,462   $173,691 

     Ratio of net operating expenses                                                                        
       to average net assets(3)<F3>                1.84%(4)<F4>   1.97%      1.83%(4)<F4>   1.97%      2.08%

     Ratio of dividends on short positions                                                                  
       to average net assets                       0.40%          0.33%      0.28%          0.28%      0.28%

     Ratio of net investment income                                                                         
       to average net assets                       0.93%          3.68%      4.48%          4.09%      4.34%

     Portfolio turnover rate(5)<F5>              266.15%        386.40%    417.53%        536.56%    480.25%

(1)<F1>   Net investment income per share before dividends on short positions   
    for the No Load Shares for the periods ended September 30, 2002,
  September 30, 2001, September 30, 2000, September 30, 1999 and
September 30, 1998 was $0.08, $0.19, $0.19, $0.21 and $0.30,
respectively.                                               
(2)<F2>   Net investment income per share represents net investment income      
    divided by the average shares outstanding throughout the period.
(3)<F3>   The net operating expense ratio excludes dividends on short positions.
    The ratio including dividends on short positions for the No Load
        Shares for the periods ended September 30, 2002, September 30, 2001,
      September 30, 2000, September 30, 1999 and September 30, 1998  was
2.24%, 2.30%, 2.11%, 2.25% and 2.36%, respectively.         
(4)<F4>   The net operating expense ratio includes expense reductions for soft  
      dollar credits.  The ratio excluding expense reductions for the No
          Load Shares for the periods ended September 30, 2002 and September 30,
2000 were 1.89% and 1.93%, respectively.                    
(5)<F5>   Portfolio turnover is calculated on the basis of the Fund as a whole  
without distinguishing between the classes of shares issued.

See notes to the financial statements.

PRUDENT BEAR FUND                                                               
FINANCIAL HIGHLIGHTS                                                            

Selected per share data is based on a share of beneficial interest outstanding  
throughout each period.                                                         

                                                        [Enlarge/Download Table]
                                                                                                       CLASS C SHARES     
                                               CLASS C SHARES      CLASS C SHARES  CLASS C SHARES   FEB. 8, 1999(1)<F6>   
                                                 YEAR ENDED          YEAR ENDED      YEAR ENDED           THROUGH         
                                               SEPT. 30, 2002      SEPT. 30, 2001  SEPT. 30, 2000      SEPT. 30, 1999     
                                               --------------      --------------  --------------      --------------     
                                                                                                                          
Per Share Data:                                                                                                           

     Net asset value, beginning of period           $6.23               $3.88           $4.49               $4.78         
                                                    -----               -----           -----               -----         

Income from investment operations:                                                                                        
     Net investment income(2)<F7>(3)<F8>             0.01                0.14            0.15                0.09         
     Net realized and unrealized                                                                                          
       gains (losses) on investments                 2.03                2.40           (0.62)              (0.38)        
                                                    -----               -----           -----               -----         

     Total from investment operations                2.04                2.54           (0.47)              (0.29)        
                                                    -----               -----           -----               -----         

Less distributions from net investment income       (0.13)              (0.19)          (0.14)                 --         
                                                    -----               -----           -----               -----         

Net asset value, end of period                      $8.14               $6.23           $3.88               $4.49         
                                                    -----               -----           -----               -----         
                                                    -----               -----           -----               -----         

Total return                                        34.18%              67.41%         -10.33%              -6.07%(4)<F9> 

Supplemental data and ratios:                                                                                             
     Net assets, end of period (000's)             $7,842              $1,409            $868                $207         

     Ratio of net operating expenses                                                                                      
       to average net assets(5)<F10>                 2.59%(6)<F11>       2.72%           2.58%(6)<F11>       2.74%(7)<F12>

     Ratio of dividends on short positions                                                                                
       to average net assets                         0.40%               0.33%           0.28%               0.32%(7)<F12>

     Ratio of net investment income                                                                                       
       to average net assets                         0.18%               2.93%           3.73%               3.25%(7)<F12>

     Portfolio turnover rate(8)<F13>               266.15%             386.40%         417.53%             536.56%        

(1)<F6>   Commencement of operations.                                           
(2)<F7>   Net investment income per share before dividends on short positions   
    for the Class C Shares for the periods ended September 30, 2002,
     September 30, 2001, September 30, 2000 and September 30, 1999 was
$0.04, $0.16, $0.15 and $0.09, respectively.                
(3)<F8>   Net investment income per share represents net investment income      
    divided by the average shares outstanding throughout the period.
(4)<F9>   Not annualized.                                                       
(5)<F10>  The net operating expense ratio excludes dividends on short positions.
    The ratio including dividends on short positions for the Class C
        Shares for the periods ended September 30, 2002, September 30, 2001,
         September 30, 2000 and September 30, 1999 was 2.99%, 3.05%, 2.86% and
3.06%, respectively.                                        
(6)<F11>  The net operating expense ratio includes expense reductions for soft  
         dollar credits.  The ratio excluding expense reductions for the Class
       C Shares for the periods ended September 30, 2002 and September 30,
2000 were 2.64% and 2.68%, respectively.                    
(7)<F12>  Annualized.                                                           
(8)<F13>  Portfolio turnover is calculated on the basis of the Fund as a whole  
without distinguishing between the classes of shares issued.

See notes to the financial statements.

PRUDENT SAFE HARBOR FUND                                                        
FINANCIAL HIGHLIGHTS                                                            

Selected per share data is based on a share of beneficial interest outstanding  
throughout each period.                                                         

                                                        [Enlarge/Download Table]
                                                                                    FEBRUARY 2, 2000(1)<F14>
                                                YEAR ENDED           YEAR ENDED              THROUGH        
                                            SEPTEMBER 30, 2002   SEPTEMBER 30, 2001    SEPTEMBER 30, 2000   
                                            ------------------   ------------------    ------------------   
                                                                                                            
Per Share Data:                                                                                             

     Net asset value, beginning of period         $ 9.31                $9.19                $10.00         
                                                  ------                -----                ------         

Income from investment operations:                                                                          
     Net investment income                          0.14(2)<F15>         0.20(3)<F16>          0.24(3)<F16> 
     Net realized and unrealized                                                                            
       gains (losses) on investments                1.94                 0.03                 (0.90)        
                                                  ------                -----                ------         
     Total from investment operations               2.08                 0.23                 (0.66)        
                                                  ------                -----                ------         

Less distributions:                                                                                         
     Dividends from net investment income          (0.23)               (0.11)                (0.15)        
     Distributions from net realized gains         (0.01)                  --                    --         
                                                  ------                -----                ------         
     Total distributions                           (0.24)               (0.11)                (0.15)        
                                                  ------                -----                ------         

Net asset value, end of period                    $11.15                $9.31                $ 9.19         
                                                  ------                -----                ------         
                                                  ------                -----                ------         

Total return                                       22.54%                2.54%                -6.60%(4)<F17>

Supplemental data and ratios:                                                                               
     Net assets, end of period (000's)          $126,191              $24,333                $1,422         

     Ratio of net operating expenses                                                                        
       to average net assets(6)<F19>                1.50%(7)<F20>        1.50%                 1.80%(5)<F18>

     Ratio of net investment income                                                                         
       to average net assets                        1.34%                2.26%                 3.77%(5)<F18>

     Portfolio turnover rate                       81.58%              133.50%               180.29%        

(1)<F14>  Commencement of operations.                                           
(2)<F15>  Net investment income per share is calculated using ending balances   
    prior to consideration of adjustments for permanent book and tax
differences.                                                
(3)<F16>  Net investment income per share represents net investment income      
    divided by the average shares outstanding throughout the period.
(4)<F17>  Not annualized.                                                       
(5)<F18>  Annualized.                                                           
(6)<F19>  Without expense reimbursements of $30,867, $150,320 and $116,925 for  
 the periods ended September 30, 2002, September 30, 2001, and
      September 30, 2000, the ratio of operating expenses to average net
  assets would have been 1.55%, 2.87%, and 25.91%, respectively.
(7)<F20>  The net operating expense ratio includes expense reductions for soft  
          dollar credits.  The ratio excluding expense reductions for the period
ended September 30, 2002 was 1.50%.                         

See notes to the financial statements.

PRUDENT BEAR FUND                                                               
SCHEDULE OF INVESTMENTS                                                         
SEPTEMBER 30, 2002                                                              

SHARES                                                              VALUE   
------                                                              -----   
COMMON STOCKS -- 16.0%*<F21>                      

AEROSPACE -- 0.2%*<F21>                           
   20,000    Lockheed Martin Corporation                        $  1,293,400
                                                                ------------

AGRICULTURAL -- 0.0%*<F21>                        
   20,000    United Grain Growers Ltd.(3)<F26>                        77,166
                                                                ------------

BASIC MATERIALS -- 11.9%*<F21>                    
1,333,334    Alamos Minerals Ltd.                                           
(Acquired 7/11/2002,                          
Cost $113,167)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     300,088
700,000    Alamos Minerals Ltd.                                         
(Acquired 7/19/2002,                          
Cost $116,270)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     157,546
500,000    Alamos Minerals Ltd.                                         
(Acquired 7/22/2002,                          
Cost $122,146)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     112,533
230,000    Almaden Minerals Ltd.                                        
(Acquired 4/02/2002,                              
Cost $61,350)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> r<F23>                               80,113
  800,000    Altius Minerals Corporation**<F22>(3)<F26>(7)<F30>      716,177
   55,000    ASA Ltd.(3)<F26>                                      1,774,850
130,000    Ashanti Goldfields Company                                   
               Ltd. - ADR**<F22>(3)<F26>                             738,400
222,225    Atacama Minerals Corp.                                       
(Acquired 5/22/2002,                          
Cost $128,889)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                               65,496
  780,000    Aurizon Mines Ltd.**<F22>(3)<F26>                       590,090
100,000    Aurora Platinum Corp.                                        
(Acquired 9/03/2002,                          
Cost $234,484)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              182,196
  663,600    Banro Corporation**<F22>(3)<F26> (7)<F30>             1,673,433
140,000    Banro Corporation                                            
(Acquired 3/18/2002,                          
Cost $114,465)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     300,088
80,000    Banro Corporation                                           
(Acquired 5/10/2002,                          
Cost $185,822)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     171,479
  500,000    Birch Mountain Resources Ltd.**<F22>(3)<F26>             66,196
  884,874    Black Hawk Mining Inc.**<F22>(3)<F26>                    66,943
   97,740    Campbell Resources Inc.**<F22>(3)<F26>                   32,254
5,362,000    Canarc Resource Corp.**<F22>(3)<F26> (7)<F30>         1,605,693
765,700    Candente Resource Corp.                                      
(Acquired 5/14/2001,                          
Cost $96,172)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     183,436
1,570,000    Candente Resource Corp.                                        
(Acquired 1/30/2002,                          
Cost $134,300)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     376,119
270,000    Candente Resource Corp.                                      
(Acquired 5/16/2002,                          
Cost $58,950)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> (7)<F30> r<F23>                      57,874
1,060,976    Canyon Resources Corporation**<F22>(7)<F30>           2,121,952
1,502,200    Chesapeake Gold Corp.**<F22>(3)<F26> (7)<F30>         1,846,734
30,000    Crystallex International                                    
               Corporation**<F22>(3)<F26>                             68,700
  180,300    Cumberland Resources Ltd.**<F22>(3)<F26>                407,478
  310,000    Donner Minerals Ltd.**<F22>(3)<F26>                      19,544
73,700    Dundee Precious                                             
               Metals, Inc. - Class A**<F22>(3)<F26>                 792,198
317,500    Durban Roodepoort Deep                                       
               Limited - ADR**<F22>(3)<F26>                        1,320,800
8,378,800    Dynatec Corporation**<F22>(3)<F26> (7)<F30>           4,014,556
6,415,060    ECU Silver Mining Inc.**<F22>(3)<F26>                          
               (4)<F27> (7)<F30>                                     242,658
500,000    East West Resource Corporation                               
(Acquired 5/13/2002,                          
Cost $27,250)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> r<F23>                               34,832
1,631,000    Eldorado Gold Corporation**<F22>(3)<F26>              1,501,236
2,000,000    Excellon Resources, Inc.                                       
(Acquired 5/15/2002,                          
Cost $165,776)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              139,327
33    Exploration Capital Partners, LP                        
(Acquired 10/14/1998,                         
               Cost $660,000)(4)<F27> r<F23>                       1,454,272
15    Exploration Capital Partners, LP                        
(Acquired 12/20/2000,                         
               Cost $300,020)(4)<F27> r<F23>                         541,269
670,000    Farallon Resources Ltd.                                      
(Acquired 4/12/2002,                          
Cost $119,715)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              114,891
150,000    Foxpoint Resources Ltd.                                      
(Acquired 12/14/2001,                         
Cost $124,050)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              164,781
  367,040    Glamis Gold Ltd.**<F22>(3)<F26>                       3,408,460
236,800    Glamis Gold Stock Purchase Rights                            
(Acquired 7/17/2002,                          
               Cost $0)**<F22>(3)<F26> (4)<F27>                            0
  322,000    Glencairn Explorations Ltd.**<F22>(3)<F26>              101,500
  225,000    Goldcorp Inc.(3)<F26>                                 2,481,750
800,000    Golden Goliath Resources Ltd.                                
(Acquired 10/06/2000,                         
Cost $260,777)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              102,887
1,600,000    Golden Phoenix Minerals, Inc.                                  
(Acquired 3/01/2002,                          
               Cost $144,000)**<F22>(2)<F25> (4)<F27> r<F23>         421,600
   33,500    Golden Queen Mining Co. Ltd.**<F22>(3)<F26>              14,784
1,512,500    Golden Star Resources Ltd.**<F22>(3)<F26>             1,890,625
500,000    Golden Star Resources Ltd.                                   
(Acquired 12/19/2001,                         
Cost $242,500)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              531,250
110,000    Harmony Gold Mining                                          
               Company Limited - ADR(3)<F26>                       1,721,500
1,000,000    IMA Exploration Inc.                                           
(Acquired 12/18/2001,                         
Cost $236,000)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     267,936
637,000    IMA Exploration Inc.                                         
(Acquired 1/29/2002,                          
Cost $148,815)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     170,675
222,222    IMA Exploration Inc.                                         
(Acquired 5/23/2002,                          
Cost $61,473)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> (7)<F30> r<F23>                      59,541
531,915    IMA Exploration Inc.                                         
(Acquired 9/23/2002,                          
Cost $156,030)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     142,519
3,315,000    International                                                  
               Uranium Corporation**<F22>(3)<F26>                    710,566
2,525,000    Kenor ASA**<F22>(3)<F26>                              1,028,971
3,500,000    Madison Enterprises Corp.                                      
(Acquired 3/21/2002,                          
Cost $204,500)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     300,088
  990,738    Maxam Gold Corporation**<F22>(4)<F27> (6)<F29>           19,815
  130,000    Meridian Gold Inc.**<F22>(3)<F26> (5)<F28>            2,379,000
  350,000    Metalline Mining Co. Inc.**<F22>(7)<F30>                455,000
100,000    Metalline Mining Co. Inc.                                    
(Acquired 6/28/2000,                          
Cost $325,000)**<F22>(2)<F25>                 
               (4)<F27> (7)<F30> r<F23>                              117,000
250,000    Metalline Mining Co. Inc.                                    
(Acquired 6/29/2001,                          
Cost $498,750)**<F22>(2)<F25>                 
               (4)<F27> (7)<F30> r<F23>                              276,250
150,000    Minefinders Corporation Ltd.                                 
(Acquired 3/21/2002,                          
Cost $217,665)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     458,170
833,333    Minera Andes Inc.                                            
(Acquired 6/21/2002,                          
Cost $78,209)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> r<F23>                              178,624
  946,300    Miramar Mining Corporation**<F22>(3)<F26>               889,522
  501,000    Nevada Pacific Gold Ltd.**<F22>(3)<F26> (7)<F30>        142,132
1,000,000    Nevada Pacific Gold Ltd.                                       
(Acquired 12/04/2001,                         
Cost $154,600)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     251,860
500,000    Nevada Pacific Gold Ltd.                                     
(Acquired 5/23/2002,                          
Cost $175,500)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     125,930
1,007,500    Nevsun Resources Ltd.**<F22>(3)<F26>                    762,199
   41,400    Newmont Mining Corporation                            1,138,914
1,919,450    Orezone Resources Inc.                                         
(Acquired 7/19/2002,                          
Cost $245,353)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     339,431
3,750,000    Orezone Resources Inc.                                         
(Acquired 7/19/2002,                          
Cost $490,500)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     663,141
  201,399    Pan American Silver Corporation**<F22>(3)<F26>        1,238,402
  542,500    Pelangio Mines Inc.**<F22>(3)<F26> (7)<F30>              44,462
3,000,000    Pelangio Mines Inc.                                            
(Acquired 2/08/2002,                          
Cost $253,100)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     176,838
1,500,000    Pelangio Mines Inc.                                            
(Acquired 5/15/2002,                          
Cost $193,635)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                      88,419
1,514,500    Platinum Group Metals Ltd.**<F22>(3)<F26> (7)<F30>      572,879
40,000    Randgold & Exploration                                      
               Company Limited**<F22>(3)<F26>                        215,520
17,500    Randgold Resources                                          
               Limited - ADR**<F22>(3)<F26>                          316,558
1,000,000    Redstar Gold Corp.                                             
(Acquired 5/31/2002,                          
Cost $77,550)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> (7)<F30> r<F23>                      96,457
  368,800    Repadre Capital Corporation**<F22>(3)<F26>            1,964,670
3,400,000    Riddarhyttan Resources AB**<F22>(3)<F26>              1,118,361
  220,000    Rimfire Minerals Corporation**<F22>(3)<F26> (7)<F30>     58,252
1,000,000    Rimfire Minerals Corporation                                   
(Acquired 4/15/2002,                          
Cost $244,120)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     225,066
2,970,000    Rio Narcea Gold Mines Ltd.**<F22>(3)<F26>             2,808,599
625,000    Ross River Minerals Inc.                                     
(Acquired 5/21/2002,                          
Cost $93,750)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> (7)<F30> r<F23>                      33,492
   70,000    SAMEX Mining Corp.**<F22>(3)<F26>                        11,474
2,000,000    SAMEX Mining Corp.                                             
(Acquired 3/05/2002,                          
Cost $170,000)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              278,653
75,000    Silver Standard Resources Inc.                              
(Acquired 5/10/2002,                          
Cost $187,500)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              260,032
1,000,000    Silverado Gold Mines Ltd.                                      
(Acquired 5/06/2002,                          
Cost $90,000)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> r<F23>                              408,000
6,000,000    South American Gold and                                        
Copper Company Limited                        
(Acquired 6/15/2001 & 7/12/2002,              
Cost $293,974)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> r<F23>                              144,875
3,500,000    South American Gold and                                        
Copper Company Limited                        
(Acquired 3/28/2002,                          
Cost $115,875)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27>  r<F23>                              84,510
  238,600    Southwestern Resources Corp.**<F22>(3)<F26>             421,183
  906,263    Starfield Resources Inc.**<F22>(3)<F26> (7)<F30>        194,256
762,025    Starfield Resources Inc.                                     
(Acquired 6/22/2001,                          
Cost $296,190)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     138,838
1,001,000    Starfield Resources Inc.                                       
(Acquired 10/10/2001,                         
Cost $314,995)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     182,379
1,333,333    Sultan Minerals Inc.                                           
(Acquired 8/13/2001,                          
Cost $128,333)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     150,044
1,000,000    Sultan Minerals Inc.                                           
(Acquired 1/18/2002,                          
Cost $174,500)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     112,533
   58,048    TVX Gold Inc.**<F22>(3)                                 823,121
650,000    Tyhee Development Corp.                                      
(Acquired 5/01/2002,                          
Cost $106,000)**<F22>(2)<F25>                 
               (3)<F26> (4)<F27> (7)<F30> r<F23>                     146,293
  749,500    Virginia Gold Mines, Inc.**<F22>(3)<F26>                529,214
2,432,800    Western Copper Holdings                                        
               Limited**<F22>(3)<F26> (7)<F30>                     4,306,056
125,000    Wheaton River Minerals Ltd.                                  
(Acquired 5/30/2002,                          
Cost $93,163)**<F22>(2)<F25>                  
               (3)<F26> (4)<F27> r<F23>                               75,692
  300,000    X-Cal Resources Ltd.**<F22>(3)<F26>                     111,587
  835,000    Xenolix Technologies, Inc.**<F22>                         8,350
1,000,000    Xenolix Technologies, Inc.                                     
(Acquired 3/07/2000,                          
               Cost $749,600)**<F22>(2)<F25> (4)<F27> r<F23>           9,500
1,000,000    Xenolix Technologies, Inc.                                     
(Acquired 3/30/2001,                          
               Cost $499,200)**<F22>(2)<F25> (4)<F27> r<F23>           8,500
400,000    Xenolix Technologies, Inc.                                   
(Acquired 2/04/2002,                          
               Cost $98,000)**<F22>(2)<F25> (4)<F27> r<F23>            3,400
                                                                ------------
                                                                  62,954,337
                                                                ------------

CHEMICALS -- 0.1%*<F21>                           
   65,000    Methanex Corporation(3)<F26>                            557,050
   89,250    Pioneer Companies, Inc.**<F22>                                9
                                                                ------------
                                                                     557,059
                                                                ------------

CONSUMER -- 0.0%*<F21>                            
    7,500    Enesco Group, Inc.**<F22>(1)<F24> (5)<F28>               52,575
                                                                ------------

HEALTH CARE -- 1.8%*<F21>                         
    5,300    Amylin Pharmaceuticals, Inc.**<F22>(1)<F24> (5)<F28>     88,086
  212,500    AP Pharma, Inc.**<F22>                                  289,425
  193,727    Avigen, Inc.**<F22>(1)<F24> (5)<F28>                  1,536,255
   10,200    Bentley Pharmaceuticals, Inc.**<F22>                     86,700
1,390,966    Cardima, Inc.**<F22>(7)<F30>                          1,168,411
2,187,931    Cardima, Inc.                                                  
(Acquired 5/02/2001,                          
Cost $1,159,603)**<F22>(2)<F25>               
               (4)<F27> (7)<F30> r<F23>                            1,562,183
393,701    Cardima, Inc.                                                
(Acquired 8/09/2001,                          
Cost $480,315)**<F22>(2)<F25>                 
               (4)<F27> (7)<F30> r<F23>                              281,103
1,041,666    Cardima, Inc.                                                  
(Acquired 8/05/2002,                          
Cost $746,875)**<F22>(2)<F25>                 
               (4)<F27> (7)<F30> r<F23>                              743,750
369,000    Generex Biotechnology                                        
               Corporation**<F22>(3)<F26>                            398,520
  290,780    InSite Vision Incorporated**<F22>                       360,567
143,712    InSite Vision Incorporated                                   
(Acquired 4/28/2000,                          
Cost $599,947)**<F22>(2)<F25>                 
               (4)<F27> r<F23>                                       157,005
   10,000    InterMune Inc.**<F22>(1)<F24> (5)<F28>                  328,200
  389,741    IRIDEX Corporation**<F22>(7)<F30>                     1,286,145
  206,500    Neurobiological Technologies, Inc.**<F22>               605,045
  289,299    NexMed, Inc.**<F22>                                     532,310
    6,000    Penwest Pharmaceuticals Co.**<F22>                       49,980
   50,000    TriPath Imaging, Inc.**<F22>                            112,500
                                                                ------------
                                                                   9,586,185
                                                                ------------

MACHINERY -- 0.3%*<F21>                           
  260,900    Lancer Corporation**<F22>                             1,643,670
                                                                ------------

OIL AND GAS -- 0.3%*<F21>                         
   50,000    BP Prudhoe Bay Royalty Trust                            724,500
    8,000    Imperial Oil Ltd.(3)<F26>                               232,000
    8,361    KCS Energy, Inc.**<F22>(5)<F28>                          12,542
  100,000    KeyWest Energy Corporation**<F22>(3)<F26>               173,370
  100,000    The Meridian Resource Corporation**<F22>                211,000
24,000    Williams Coal Seam                                          
               Gas Royalty Trust                                     202,560
                                                                ------------
                                                                   1,555,972
                                                                ------------

POLLUTION CONTROL -- 0.3%*<F21>                   
  686,500    KleenAir Systems, Inc.**<F22>(7)<F30>                   514,875
1,000,000    KleenAir Systems, Inc.                                         
(Acquired 1/25/2002 & 2/12/2002,              
Cost $900,000)**<F22>(2)<F25>                 
               (4)<F27> (7)<F30> r<F23>                              637,500
1,000,000    KleenAir Systems, Inc.                                         
(Acquired 7/19/2002,                          
Cost $500,000)**<F22>(2)<F25>                 
               (4)<F27> (7)<F30> r<F23>                              637,500
                                                                ------------
                                                                   1,789,875
                                                                ------------

TECHNOLOGY -- 0.5%*<F21>                          
9,604,200    Aura Systems, Inc.**<F22>(7)<F30>                       739,523
500,000    Aura Systems, Inc.                                           
(Acquired 12/08/1999,                         
Cost $135,000) )**<F22>(2)<F25>               
               (4)<F27> (7)<F30> r<F23>                               36,600
12,500,000    Aura Systems, Inc.                                              
(Acquired 5/02/2002,                          
Cost $2,500,000)**<F22>(2)<F25>               
               (4)<F27> (7)<F30> r<F23>                              818,750
1,000    Broadcom Corporation -                                     
               Class A**<F22>(1)<F24> (5)<F28>                        10,680
   85,000    ESS Technology, Inc.**<F22>(1)<F24> (5)<F28>            522,750
300    Junum Inc.                                               
(Acquired 2/19/1998,                          
Cost $87,000)**<F22>(2)<F25>                  
               (4)<F27> r<F23>                                             2
   14,000    RF Micro Devices, Inc.**<F22>(1)<F24> (5)<F28>           84,000
  100,000    SoftNet Systems, Inc.**<F22>                            230,000
    3,000    VeriSign, Inc.**<F22>(1)<F24> (5)<F28>                   15,150
                                                                ------------
                                                                   2,457,455
                                                                ------------

TELECOMMUNICATIONS -- 0.0%*<F21>                  
24,000    LightPath Technologies, Inc. -                              
               Class A**<F22>(1)<F24> (5)<F28>                         9,360
   75,000    WorldQuest Networks, Inc.**<F22>                        139,500
                                                                ------------
                                                                     148,860
                                                                ------------

TEXTILE -- 0.4%*<F21>                             
  742,600    Cone Mills Corporation**<F22>                         1,834,222
                                                                ------------

TRANSPORTATION -- 0.1%*<F21>                      
      250    Crowley Maritime Corporation**<F22>(4)<F27>             312,500
                                                                ------------

UTILITIES -- 0.1%*<F21>                           
   15,000    California Water Service Group                          382,950
   25,000    NewPower Holdings, Inc.**<F22>                              938
                                                                ------------
                                                                     383,888
                                                                ------------

TOTAL COMMON STOCKS                               
               (Cost $88,704,565)                                 84,647,164
                                                                ------------

CONTRACTS (100 SHARES PER CONTRACT)                                             
-----------------------------------                                             
CALL OPTIONS                                      
PURCHASED -- 0.2%*<F21>                       
AngloGold Limited - ADR:                          
250      Expiration October 2002                                
               Exercise Price $30.00                                  12,500
ASA Ltd.:                                         
250      Expiration November 2002                               
               Exercise Price $35.00                                  40,625
Goldcorp Inc.:                                    
800      Expiration October 2002                                
               Exercise Price $10.00                                 106,000
500      Expiration November 2002                               
               Exercise Price $12.50                                  32,500
500      Expiration January 2003                                
               Exercise Price $11.25                                  87,500
The Goldman Sachs Group, Inc.:                    
300      Expiration October 2002                                
               Exercise Price $70.00                                  33,000
Harmony Gold Mining                               
Company Limited - ADR:                        
300      Expiration November 2002                               
               Exercise Price $15.00                                  63,750
Household International, Inc.:                    
200      Expiration October 2002                                
               Exercise Price $30.00                                  24,500
iShares Dow Jones U.S.                            
Financial Sector Index Fund:                  
200      Expiration November 2002                               
               Exercise Price $65.00                                  70,000
Lehman Brothers Holdings Inc.:                    
300      Expiration October 2002                                
               Exercise Price $50.00                                  52,500
Morgan Stanley:                                   
300      Expiration October 2002                                
               Exercise Price $35.00                                  40,500
Nasdaq-100 Index Tracking Stock:                  
3,000      Expiration October 2002                                  
               Exercise Price $20.00                                 420,000
Newmont Mining Corporation:                       
400      Expiration December 2002                               
               Exercise Price $27.50                                 108,000
Placer Dome Inc.:                                 
1,500      Expiration December 2002                                 
               Exercise Price $10.00                                 101,250
500      Expiration December 2002                               
               Exercise Price $12.50                                  11,250
                                                                ------------
TOTAL CALL OPTIONS                                
               (Cost $1,830,709)                                   1,203,875
                                                                ------------

PUT OPTIONS                                       
PURCHASED -- 6.9%*<F21>                       
Adolph Coors Company - Class B:                   
100      Expiration October 2002                                
               Exercise Price $65.00                                  88,500
100      Expiration January 2003                                
               Exercise Price $55.00                                  40,000
Affiliated Computer                               
Services, Inc. - Class A:                     
550      Expiration January 2003                                
               Exercise Price $35.00                                 121,000
Alliance Data Systems Corporation:                
30      Expiration December 2002                              
               Exercise Price $17.50                                   9,000
Allied Capital Corporation:                       
150      Expiration November 2002                               
               Exercise Price $22.50                                  33,750
Ambac Financial Group, Inc.:                      
200      Expiration November 2002                               
               Exercise Price $45.00                                  23,500
700      Expiration November 2002                               
               Exercise Price $50.00                                 164,500
410      Expiration November 2002                               
               Exercise Price $55.00                                 166,050
American Express Company:                         
400      Expiration October 2002                                
               Exercise Price $30.00                                  43,000
400      Expiration October 2002                                
               Exercise Price $35.00                                 166,000
200      Expiration January 2003                                
               Exercise Price $30.00                                  58,000
American International Group, Inc.:               
500      Expiration October 2002                                
               Exercise Price $50.00                                  53,750
300      Expiration November 2002                               
               Exercise Price $45.00                                  33,000
100      Expiration November 2002                               
               Exercise Price $50.00                                  22,000
500      Expiration November 2002                               
               Exercise Price $55.00                                 195,000
American Standard Companies Inc.:                 
100      Expiration October 2002                                
               Exercise Price $70.00                                  72,500
Anheuser-Busch Companies, Inc.:                   
600      Expiration December 2002                               
               Exercise Price $50.00                                 169,500
AutoNation, Inc.:                                 
200      Expiration October 2002                                
               Exercise Price $15.00                                  70,000
Bank of America Corporation:                      
500      Expiration October 2002                                
               Exercise Price $60.00                                  65,000
400      Expiration November 2002                               
               Exercise Price $50.00                                  25,000
300      Expiration November 2002                               
               Exercise Price $60.00                                  70,500
200      Expiration November 2002                               
               Exercise Price $65.00                                  85,000
The Bank of New York Company, Inc.:               
300      Expiration November 2002                               
               Exercise Price $27.50                                  50,250
BB&T Corporation:                                 
300      Expiration December 2002                               
               Exercise Price $35.00                                  64,500
BellSouth Corporation:                            
250      Expiration October 2002                                
               Exercise Price $20.00                                  54,375
Biogen, Inc.:                                     
150      Expiration October 2002                                
               Exercise Price $35.00                                  90,750
The Black & Decker Corporation:                   
60      Expiration November 2002                              
               Exercise Price $40.00                                  11,400
100      Expiration November 2002                               
               Exercise Price $45.00                                  43,000
The Boeing Company:                               
400      Expiration October 2002                                
               Exercise Price $35.00                                  75,000
Boyd Gaming Corporation:                          
600      Expiration December 2002                               
               Exercise Price $17.50                                  94,500
Brunswick Corporation:                            
70      Expiration December 2002                              
               Exercise Price $20.00                                  12,775
100      Expiration December 2002                               
               Exercise Price $22.50                                  32,000
570      Expiration December 2002                               
               Exercise Price $25.00                                 283,750
Business Objects S.A. - ADR:                      
200      Expiration October 2002                                
               Exercise Price $25.00                                 287,000
Cabot Microelectronics Corporation:               
300      Expiration October 2002                                
               Exercise Price $30.00                                  20,250
250      Expiration January 2003                                
               Exercise Price $35.00                                 136,250
Carnival Corporation:                             
250      Expiration October 2002                                
               Exercise Price $25.00                                  26,875
CDW Computer Centers, Inc.:                       
400      Expiration October 2002                                
               Exercise Price $40.00                                  61,000
300      Expiration November 2002                               
               Exercise Price $40.00                                  85,500
200      Expiration January 2003                                
               Exercise Price $45.00                                 139,000
Centex Corporation:                               
150      Expiration October 2002                                
               Exercise Price $50.00                                  92,250
200      Expiration January 2003                                
               Exercise Price $45.00                                 115,000
CenturyTel, Inc.:                                 
600      Expiration January 2003                                
               Exercise Price $25.00                                 246,000
Cisco Systems, Inc.:                              
1,500      Expiration October 2002                                  
               Exercise Price $12.50                                 318,750
350      Expiration October 2002                                
               Exercise Price $15.00                                 157,500
300      Expiration January 2003                                
               Exercise Price $12.50                                  84,000
Citigroup Inc.:                                   
300      Expiration December 2002                               
               Exercise Price $27.50                                  63,000
Clayton Homes, Inc.:                              
100      Expiration November 2002                               
               Exercise Price $15.00                                  40,000
320      Expiration February 2003                               
               Exercise Price $12.50                                  76,800
Computer Sciences Corporation:                    
250      Expiration December 2002                               
               Exercise Price $25.00                                  49,375
Countrywide Credit Industries, Inc.:              
400      Expiration October 2002                                
               Exercise Price $35.00                                  16,000
500      Expiration October 2002                                
               Exercise Price $40.00                                  41,250
200      Expiration October 2002                                
               Exercise Price $50.00                                  82,000
200      Expiration January 2003                                
               Exercise Price $45.00                                  90,000
Cox Communications, Inc. - Class A:               
300      Expiration December 2002                               
               Exercise Price $25.00                                  97,500
DIANON Systems, Inc.:                             
200      Expiration November 2002                               
               Exercise Price $35.00                                  12,000
Dillard's, Inc. - Class A:                        
100      Expiration November 2002                               
               Exercise Price $20.00                                  18,250
200      Expiration November 2002                               
               Exercise Price $22.50                                  65,000
300      Expiration November 2002                               
               Exercise Price $25.00                                 157,500
Dominion Resources, Inc.:                         
200      Expiration January 2003                                
               Exercise Price $55.00                                 143,000
Doral Financial Corp.:                            
45      Expiration November 2002                              
               Exercise Price $20.00                                   4,219
200      Expiration November 2002                               
               Exercise Price $23.38                                  45,750
100      Expiration November 2002                               
               Exercise Price $25.00                                  23,000
85      Expiration November 2002                              
               Exercise Price $26.63                                  42,075
100      Expiration February 2003                               
               Exercise Price $26.63                                  63,750
Eastman Kodak Company:                            
200      Expiration October 2002                                
               Exercise Price $30.00                                  57,500
eBay Inc.:                                        
150      Expiration October 2002                                
               Exercise Price $45.00                                  10,875
Eli Lilly and Company:                            
200      Expiration October 2002                                
               Exercise Price $45.00                                   7,000
200      Expiration November 2002                               
               Exercise Price $50.00                                  37,500
100      Expiration January 2003                                
               Exercise Price $50.00                                  33,500
ESS Technology, Inc.:                             
300      Expiration October 2002                                
               Exercise Price $15.00                                 265,500
250      Expiration October 2002                                
               Exercise Price $17.50                                 283,750
Ethan Allen Interiors Inc.:                       
100      Expiration November 2002                               
               Exercise Price $30.00                                  13,250
375      Expiration November 2002                               
               Exercise Price $35.00                                 138,750
200      Expiration February 2003                               
               Exercise Price $30.00                                  49,000
Fannie Mae:                                       
300      Expiration November 2002                               
               Exercise Price $55.00                                  97,500
400      Expiration December 2002                               
               Exercise Price $60.00                                 244,000
250      Expiration December 2002                               
               Exercise Price $70.00                                 300,000
Federated Department Stores, Inc.:                
100      Expiration November 2002                               
               Exercise Price $37.50                                  81,500
100      Expiration November 2002                               
               Exercise Price $40.00                                 106,500
300      Expiration January 2003                                
               Exercise Price $32.50                                 148,500
Financial Select Sector SPDR Fund:                
500      Expiration December 2002                               
               Exercise Price $23.00                                 136,250
Freddie Mac:                                      
500      Expiration October 2002                                
               Exercise Price $50.00                                  41,250
1,300      Expiration October 2002                                  
               Exercise Price $55.00                                 266,500
400      Expiration October 2002                                
               Exercise Price $60.00                                 188,000
300      Expiration November 2002                               
               Exercise Price $50.00                                  50,250
100      Expiration January 2003                                
               Exercise Price $60.00                                  70,000
GATX Corporation:                                 
220      Expiration December 2002                               
               Exercise Price $20.00                                  56,100
200      Expiration December 2002                               
               Exercise Price $25.00                                 121,000
200      Expiration December 2002                               
               Exercise Price $30.00                                 212,000
General Electric Company:                         
1,000      Expiration December 2002                                 
               Exercise Price $27.50                                 400,000
General Motors Corporation:                       
200      Expiration December 2002                               
               Exercise Price $45.00                                 160,000
100      Expiration December 2002                               
               Exercise Price $60.00                                 215,500
Gentex Corporation:                               
200      Expiration December 2002                               
               Exercise Price $30.00                                  76,000
Golden West Financial Corporation:                
100      Expiration November 2002                               
               Exercise Price $55.00                                   9,250
100      Expiration November 2002                               
               Exercise Price $60.00                                  20,750
The Goldman Sachs Group, Inc.:                    
400      Expiration October 2002                                
               Exercise Price $70.00                                 200,000
The Goodyear Tire &                               
Rubber Company:                               
200      Expiration October 2002                                
               Exercise Price $22.50                                 273,000
GreenPoint Financial Corp.:                       
70      Expiration October 2002                               
               Exercise Price $35.00                                   1,575
100      Expiration October 2002                                
               Exercise Price $40.00                                  12,250
100      Expiration October 2002                                
               Exercise Price $45.00                                  41,000
Harley-Davidson, Inc.:                            
130      Expiration November 2002                               
               Exercise Price $40.00                                  16,575
300      Expiration November 2002                               
               Exercise Price $45.00                                  73,500
200      Expiration November 2002                               
               Exercise Price $50.00                                  96,000
Harman International                              
Industries, Incorporated:                     
40      Expiration October 2002                               
               Exercise Price $45.00                                     900
Household International, Inc.:                    
200      Expiration October 2002                                
               Exercise Price $40.00                                 234,000
H&R Block, Inc.:                                  
200      Expiration January 2003                                
               Exercise Price $45.00                                 142,000
Ingersoll-Rand Company - Class A:                 
150      Expiration December 2002                               
               Exercise Price $42.50                                 128,250
InterMune Inc.:                                   
500      Expiration January 2003                                
               Exercise Price $17.50                                  20,000
International Business                            
Machines Corporation:                         
250      Expiration October 2002                                
               Exercise Price $60.00                                 101,250
800      Expiration October 2002                                
               Exercise Price $65.00                                 604,000
Iron Mountain Incorporated:                       
20      Expiration October 2002                               
               Exercise Price $25.00                                   2,350
400      Expiration October 2002                                
               Exercise Price $30.00                                 204,000
570      Expiration January 2003                                
               Exercise Price $25.00                                 141,075
350      Expiration January 2003                                
               Exercise Price $30.00                                 190,750
iShares Dow Jones U.S.                            
Financial Sector Index Fund:                  
600      Expiration November 2002                               
               Exercise Price $60.00                                 121,500
400      Expiration November 2002                               
               Exercise Price $65.00                                 156,000
400      Expiration November 2002                               
               Exercise Price $70.00                                 270,000
800      Expiration November 2002                               
               Exercise Price $75.00                                 856,000
KB HOME:                                          
100      Expiration October 2002                                
               Exercise Price $35.00                                   3,000
175      Expiration October 2002                                
               Exercise Price $45.00                                  24,500
Kinder Morgan, Inc.:                              
200      Expiration January 2003                                
               Exercise Price $35.00                                  80,000
Kohl's Corporation:                               
100      Expiration October 2002                                
               Exercise Price $60.00                                  27,000
900      Expiration October 2002                                
               Exercise Price $65.00                                 481,500
50      Expiration October 2002                               
               Exercise Price $70.00                                  46,750
200      Expiration November 2002                               
               Exercise Price $60.00                                  82,000
500      Expiration January 2003                                
               Exercise Price $60.00                                 287,500
100      Expiration January 2003                                
               Exercise Price $65.00                                  81,500
L-3 Communications Holdings, Inc.:                
250      Expiration October 2002                                
               Exercise Price $47.50                                  19,375
Lamar Advertising Company:                        
400      Expiration October 2002                                
               Exercise Price $40.00                                 388,000
100      Expiration January 2003                                
               Exercise Price $30.00                                  35,000
Lehman Brothers Holdings Inc.:                    
600      Expiration October 2002                                
               Exercise Price $50.00                                 160,500
Lowe's Companies, Inc.:                           
250      Expiration October 2002                                
               Exercise Price $37.50                                  19,375
250      Expiration November 2002                               
               Exercise Price $40.00                                  56,875
Mandalay Resort Group:                            
240      Expiration December 2002                               
               Exercise Price $27.50                                  18,600
Marriott International, Inc. - Class A:           
200      Expiration October 2002                                
               Exercise Price $30.00                                  46,500
300      Expiration October 2002                                
               Exercise Price $40.00                                 330,000
MBIA Inc.:                                        
200      Expiration November 2002                               
               Exercise Price $45.00                                 117,000
350      Expiration November 2002                               
               Exercise Price $50.00                                 351,750
MBNA Corporation:                                 
300      Expiration December 2002                               
               Exercise Price $17.50                                  54,000
McKesson Corporation:                             
150      Expiration November 2002                               
               Exercise Price $30.00                                  41,250
150      Expiration January 2003                                
               Exercise Price $32.50                                  75,000
Mentor Corporation:                               
400      Expiration January 2003                                
               Exercise Price $30.00                                 120,000
Merrill Lynch & Co., Inc.:                        
700      Expiration October 2002                                
               Exercise Price $35.00                                 199,500
300      Expiration October 2002                                
               Exercise Price $40.00                                 214,500
MGIC Investment Corporation:                      
200      Expiration December 2002                               
               Exercise Price $50.00                                 203,000
200      Expiration December 2002                               
               Exercise Price $55.00                                 290,000
70      Expiration January 2003                               
               Exercise Price $45.00                                  49,350
MGM MIRAGE:                                       
200      Expiration December 2002                               
               Exercise Price $35.00                                  36,500
320      Expiration March 2003                                  
               Exercise Price $30.00                                  44,000
Moody's Corporation:                              
180      Expiration November 2002                               
               Exercise Price $40.00                                   9,450
300      Expiration November 2002                               
               Exercise Price $45.00                                  38,250
Neurocrine Biosciences, Inc.:                     
170      Expiration November 2002                               
               Exercise Price $30.00                                  15,725
Newell Rubbermaid Inc.:                           
300      Expiration November 2002                               
               Exercise Price $30.00                                  47,250
500      Expiration December 2002                               
               Exercise Price $32.50                                 160,000
100      Expiration December 2002                               
               Exercise Price $35.00                                  48,000
300      Expiration March 2003                                  
               Exercise Price $32.50                                 117,000
NIKE, Inc. - Class B:                             
300      Expiration November 2002                               
               Exercise Price $42.50                                  66,750
Pixelworks, Inc.:                                 
300      Expiration October 2002                                
               Exercise Price $10.00                                 145,500
PNC Financial Services Group:                     
300      Expiration November 2002                               
               Exercise Price $37.50                                  41,250
Polaris Industries Inc.:                          
170      Expiration December 2002                               
               Exercise Price $60.00                                  79,900
200      Expiration December 2002                               
               Exercise Price $65.00                                 140,000
Precision Castparts Corp.:                        
300      Expiration October 2002                                
               Exercise Price $22.50                                  44,250
QLogic Corporation:                               
50      Expiration October 2002                               
               Exercise Price $40.00                                  69,000
QUALCOMM Inc:                                     
300      Expiration October 2002                                
               Exercise Price $22.50                                  10,500
400      Expiration October 2002                                
               Exercise Price $25.00                                  30,000
300      Expiration January 2003                                
               Exercise Price $25.00                                  84,750
Radian Group Inc.:                                
195      Expiration November 2002                               
               Exercise Price $30.00                                  28,763
250      Expiration November 2002                               
               Exercise Price $40.00                                 193,750
Reebok International Ltd.                         
20      Expiration October 2002                               
               Exercise Price $25.00                                   2,250
200      Expiration January 2003                                
               Exercise Price $25.00                                  48,000
150      Expiration January 2003                                
               Exercise Price $27.50                                  57,000
Rent-A-Center, Inc.:                              
160      Expiration November 2002                               
               Exercise Price $50.00                                  52,800
100      Expiration December 2002                               
               Exercise Price $50.00                                  38,000
Rohm and Haas Company:                            
150      Expiration October 2002                                
               Exercise Price $35.00                                  58,500
Ruby Tuesday, Inc.:                               
350      Expiration October 2002                                
               Exercise Price $17.50                                  19,250
400      Expiration October 2002                                
               Exercise Price $20.00                                  66,000
200      Expiration October 2002                                
               Exercise Price $22.50                                  75,000
150      Expiration January 2003                                
               Exercise Price $17.50                                  21,000
Sabre Holdings Corporation:                       
70      Expiration November 2002                              
               Exercise Price $30.00                                  74,550
100      Expiration November 2002                               
               Exercise Price $35.00                                 157,000
SBC Communications Inc.:                          
300      Expiration October 2002                                
               Exercise Price $20.00                                  38,250
300      Expiration October 2002                                
               Exercise Price $25.00                                 160,500
200      Expiration January 2003                                
               Exercise Price $22.50                                  84,000
Sears, Roebuck and Co.:                           
100      Expiration October 2002                                
               Exercise Price $45.00                                  64,500
300      Expiration October 2002                                
               Exercise Price $50.00                                 333,000
200      Expiration January 2003                                
               Exercise Price $45.00                                 161,000
100      Expiration January 2003                                
               Exercise Price $50.00                                 118,500
Semiconductor HOLDRs Trust:                       
300      Expiration November 2002                               
               Exercise Price $27.50                                 249,000
150      Expiration November 2002                               
               Exercise Price $30.00                                 162,000
The Sherwin-Williams Company:                     
500      Expiration December 2002                               
               Exercise Price $25.00                                 156,250
Silicon Valley Bancshares:                        
400      Expiration November 2002                               
               Exercise Price $20.00                                 140,000
Software HOLDRs Trust:                            
400      Expiration November 2002                               
               Exercise Price $22.50                                 100,000
Sonic Automotive, Inc.:                           
150      Expiration November 2002                               
               Exercise Price $30.00                                 184,500
Stage Stores, Inc.:                               
70      Expiration October 2002                               
               Exercise Price $30.00                                  58,100
The Standard & Poor's 100 Index:                  
1,500      Expiration October 2002                                  
               Exercise Price $385.00                              1,072,500
1,150      Expiration October 2002                                  
               Exercise Price $400.00                              1,334,000
250      Expiration October 2002                                
               Exercise Price $440.00                                898,750
150      Expiration November 2002                               
               Exercise Price $410.00                                363,750
400      Expiration December 2002                               
               Exercise Price $420.00                              1,412,000
550      Expiration December 2002                               
               Exercise Price $440.00                              2,607,000
400      Expiration December 2002                               
               Exercise Price $460.00                              2,468,000
Starbucks Corporation:                            
200      Expiration October 2002                                
               Exercise Price $20.00                                  13,500
Starwood Hotels &                                 
Resorts Worldwide, Inc.:                      
100      Expiration November 2002                               
               Exercise Price $25.00                                  36,500
200      Expiration November 2002                               
               Exercise Price $30.00                                 156,000
200      Expiration November 2002                               
               Exercise Price $35.00                                 253,000
300      Expiration February 2003                               
               Exercise Price $25.00                                 157,500
SunGard Data Systems Inc.:                        
50      Expiration January 2003                               
               Exercise Price $20.00                                  14,500
SunTrust Banks, Inc.:                             
200      Expiration January 2003                                
               Exercise Price $60.00                                  78,000
TECO Energy, Inc.:                                
300      Expiration November 2002                               
               Exercise Price $22.50                                 207,000
Teradyne, Inc.:                                   
400      Expiration October 2002                                
               Exercise Price $17.50                                 318,000
Terex Corporation:                                
200      Expiration October 2002                                
               Exercise Price $20.00                                  64,000
400      Expiration October 2002                                
               Exercise Price $22.50                                 226,000
300      Expiration January 2003                                
               Exercise Price $20.00                                 117,000
Texas Instruments Incorporated:                   
200      Expiration October 2002                                
               Exercise Price $20.00                                 106,000
3M Co.:                                           
500      Expiration October 2002                                
               Exercise Price $115.00                                355,000
400      Expiration November 2002                               
               Exercise Price $105.00                                192,000
200      Expiration January 2003                                
               Exercise Price $100.00                                122,000
Tiffany & Co.:                                    
200      Expiration November 2002                               
               Exercise Price $35.00                                 274,000
Toll Brothers, Inc.:                              
200      Expiration December 2002                               
               Exercise Price $25.00                                  88,000
200      Expiration January 2003                                
               Exercise Price $25.00                                  92,000
Trimeris, Inc.:                                   
150      Expiration October 2002                                
               Exercise Price $45.00                                  36,375
200      Expiration January 2003                                
               Exercise Price $40.00                                  77,000
Union Pacific Corporation:                        
250      Expiration November 2002                               
               Exercise Price $60.00                                  95,000
United Parcel Service, Inc. - Class B:            
400      Expiration October 2002                                
               Exercise Price $60.00                                  26,000
500      Expiration January 2003                                
               Exercise Price $60.00                                 112,500
Varian Semiconductor                              
Equipment Associates, Inc.:                   
150      Expiration November 2002                               
               Exercise Price $30.00                                 204,000
Verizon Communications Inc.:                      
200      Expiration October 2002                                
               Exercise Price $25.00                                  15,000
500      Expiration October 2002                                
               Exercise Price $30.00                                 165,000
Wal-Mart Stores, Inc.:                            
300      Expiration October 2002                                
               Exercise Price $50.00                                  67,500
600      Expiration November 2002                               
               Exercise Price $50.00                                 219,000
Washington Mutual, Inc.:                          
200      Expiration October 2002                                
               Exercise Price $37.50                                 120,000
Wells Fargo & Company:                            
300      Expiration October 2002                                
               Exercise Price $40.00                                   3,750
300      Expiration October 2002                                
               Exercise Price $45.00                                  18,750
Whirlpool Corporation:                            
200      Expiration November 2002                               
               Exercise Price $45.00                                  58,000
200      Expiration December 2002                               
               Exercise Price $50.00                                 129,000
Xilinx, Inc.:                                     
200      Expiration December 2002                               
               Exercise Price $15.00                                  42,000
The Yankee Candle Company, Inc.:                  
228      Expiration October 2002                                
               Exercise Price $20.00                                  67,260
York International Corporation:                   
200      Expiration November 2002                               
               Exercise Price $30.00                                  58,000
200      Expiration November 2002                               
               Exercise Price $35.00                                 139,000
20      Expiration February 2003                              
               Exercise Price $30.00                                   7,200
Yum! Brands, Inc.:                                
200      Expiration October 2002                                
               Exercise Price $30.00                                  53,000
Zions Bancorporation:                             
650      Expiration October 2002                                
               Exercise Price $50.00                                 425,750
                                                                ------------
TOTAL PUT OPTIONS                                 
               (Cost $21,086,492)                                 36,468,092
                                                                ------------

SHARES                                                                      
------                                                                      
PREFERRED STOCK -- 0.6%*<F21>                     
28,200    Freeport-McMoRan Copper &                                   
               Gold, Inc. - Series Gold**<F22>                       798,060
109,900    Freeport-McMoRan Copper &                                    
               Gold, Inc. - Series Silver**<F22>                     890,190
57,000    Freeport-McMoRan Copper &                                   
               Gold, Inc. - Series II**<F22>                       1,419,300
200    KCS Energy, Inc.                                         
(Acquired 2/20/2001,                          
               Cost $200,000)**<F22>(4)<F27> r<F23>                  200,000
                                                                ------------
TOTAL PREFERRED STOCK                             
               (Cost $3,202,486)                                   3,307,550
                                                                ------------

WARRANTS -- 0.8%*<F21>                            
1,333,334    Alamos Minerals Ltd.                                           
Expiration April 2003                         
Exercise Price $0.20 CN                       
(Acquired 7/11/2002,                          
               Cost $13,333)(4)<F27> r<F23>                          131,972
500,000    Alamos Minerals Ltd.                                         
Expiration July 2003                          
Exercise Price $0.45 CN                       
(Acquired 7/22/2002,                          
               Cost $5,000)(4)<F27> r<F23>                             3,152
700,000    Alamos Minerals Ltd.                                         
Expiration July 2004                          
Exercise Price $0.28 CN                       
(Acquired 7/19/2002,                          
               Cost $7,000)(4)<F27> r<F23>                            33,981
165,000    Almaden Minerals Ltd.                                        
Expiration April 2004                         
Exercise Price $0.51 CN                       
(Acquired 4/02/2002,                          
               Cost $1,650)(4)<F27> r<F23>                             4,421
12,500    Apex Silver Mines Limited                                   
Expiration February 2004                      
Exercise Price $18.00                         
(Acquired 11/03/1999,                         
               Cost $13)(4)<F27> r<F23>                                   13
93,750    Apollo Gold Corporation                                     
Expiration March 2004                         
Exercise Price $1.60                          
(Acquired 7/12/2002,                          
               Cost $938)(4)<F27> r<F23>                                 938
66,666    Ashanti Goldfields                                          
Company Ltd. - ADR                            
Expiration April 2004                         
Exercise Price $3.00                          
(Acquired 4/29/2002,                          
               Cost $147,332)(4)<F27> r<F23>                         121,865
66,667    Ashanti Goldfields                                          
Company Ltd. - ADR                            
Expiration October 2004                       
Exercise Price $3.00                          
(Acquired 4/29/2002,                          
               Cost $147,334)(4)<F27> r<F23>                         121,867
66,667    Ashanti Goldfields                                          
Company Ltd. - ADR                            
Expiration April 2005                         
Exercise Price $3.00                          
(Acquired 4/29/2002,                          
               Cost $147,334)(4)<F27> r<F23>                         121,867
111,112    Atacama Minerals Corp.                                       
Expiration May 2003                           
Exercise Price $1.10 CN                       
(Acquired 5/22/2002,                          
               Cost $1,111)(4)<F27> r<F23>                               700
100,000    Aurora Platinum Corp.                                        
Expiration September 2003                     
Exercise Price $4.75 CN                       
(Acquired 9/03/2002,                          
               Cost $1,000) (4)<F27> r<F23>                              630
1,785    Avigen, Inc.                                               
Expiration November 2004                      
Exercise Price $28.00                         
(Acquired 11/11/1999,                         
               Cost $223)(4)<F27> r<F23>                                   2
135,000    Candente Resource Corp.                                      
Expiration May 2003                           
Exercise Price $0.44 CN                       
(Acquired 5/16/2002,                          
               Cost $1,350)(4)<F27> r<F23>                               851
1,570,000    Candente Resource Corp.                                        
Expiration January 2004                       
Exercise Price $0.20 CN                       
(Acquired 1/30/2002,                          
               Cost $15,700)(4)<F27> r<F23>                          197,957
196,850    Cardima, Inc.                                                
Expiration August 2005                        
Exercise Price $1.91                          
(Acquired 8/09/2001,                          
               Cost $19,685)(4)<F27> r<F23>                           19,685
312,499    Cardima, Inc.                                                
Expiration August 2006                        
Exercise Price $0.90                          
(Acquired 8/05/2002,                          
               Cost $3,125)(4)<F27> r<F23>                             3,125
1,000,000    Desert Sun Mining Corp.                                        
Expiration August 2004                        
Exercise Price $0.50 CN                       
(Acquired 8/26/2002,                          
               Cost $257,500)(4)<F27> r<F23>                         305,825
500,000    East West Resource Corporation                               
Expiration May 2004                           
Exercise Price $0.13 CN                       
(Acquired 5/13/2002,                          
               Cost $5,000)(4)<F27> r<F23>                             3,152
670,000    Farallon Resources Ltd.                                      
Expiration April 2004                         
Exercise Price $0.40 CN                       
(Acquired 4/12/2002,                          
               Cost $6,700)(4)<F27> r<F23>                             4,224
75,000    Foxpoint Resources Ltd.                                     
Expiration December 2003                      
Exercise Price $1.30 CN                       
(Acquired 12/14/2001,                         
               Cost $750)(4)<F27> r<F23>                              35,462
800,000    Golden Goliath Resources Ltd.                                
Expiration October 2002                       
Exercise Price $0.75 CN                       
(Acquired 10/06/2000,                         
               Cost $5,322)(4)<F27> r<F23>                                 0
1,600,000    Golden Phoenix Minerals, Inc.                                  
Expiration March 2004                         
Exercise Price $0.10                          
(Acquired 3/01/2002,                          
               Cost $16,000)(4)<F27> r<F23>                          285,600
250,000    Golden Star Resources Ltd.                                   
Expiration December 2003                      
Exercise Price $0.70                          
(Acquired 12/19/2001,                         
               Cost $2,500)(4)<F27> r<F23>                           116,875
500,000    IMA Exploration Inc.                                         
Expiration December 2002                      
Exercise Price $0.45 CN                       
(Acquired 12/18/2001,                         
               Cost $5,000)(4)<F27> r<F23>                            15,761
318,500    IMA Exploration Inc.                                         
Expiration January 2003                       
Exercise Price $0.45 CN                       
(Acquired 1/29/2002,                          
               Cost $3,185)(4)<F27> r<F23>                            10,040
222,222    IMA Exploration Inc.                                         
Expiration May 2004                           
Exercise Price $0.53 CN                       
(Acquired 5/23/2002,                          
               Cost $2,222)(4)<F27> r<F23>                             1,401
265,958    IMA Exploration Inc.                                         
Expiration September 2004                     
Exercise Price $0.55 CN                       
(Acquired 9/23/2002,                          
               Cost $2,660)(4)<F27> r<F23>                             1,677
50,299    InSite Vision Incorporated                                  
Expiration April 2004                         
Exercise Price $5.64                          
               (Acquired 4/28/2000, Cost $50)(4)<F27> r<F23>              50
1,750,000    Madison Enterprises Corp.                                      
Expiration September 2003                     
Exercise Price $0.12 CN                       
(Acquired 3/21/2002,                          
               Cost $17,500)(4)<F27> r<F23>                           17,652
125,000    Metalline Mining Co. Inc.                                    
Expiration June 2006                          
Exercise Price $5.00                          
(Acquired 6/29/2001,                          
               Cost $1,250)(4)<F27> r<F23>                             1,250
202,909    Minefinders Corporation Ltd.                                 
Expiration September 2002                     
Exercise Price $1.35 CN                       
(Acquired 9/27/2000,                          
               Cost $20,291)(4)<F27> r<F23>                          472,990
335,755    Minefinders Corporation Ltd.                                 
Expiration December 2002                      
Exercise Price $1.00 CN                       
(Acquired 1/05/2001,                          
               Cost $33,576)(4)<F27> r<F23>                          845,632
133,896    Minefinders Corporation Ltd.                                 
Expiration July 2003                          
Exercise Price $1.40 CN                       
(Acquired 6/22/2001,                          
               Cost $1,339)(4)<F27> r<F23>                           308,530
110,514    Minefinders Corporation Ltd.                                 
Expiration September 2003                     
Exercise Price $1.40 CN                       
(Acquired 9/26/2001,                          
               Cost $1,105)(4)<F27> r<F23>                           254,652
416,666    Minera Andes Inc.                                            
Expiration June 2003                          
Exercise Price $0.25 CN                       
(Acquired 6/21/2002,                          
               Cost $4,167)(4)<F27> r<F23>                            23,641
87,500    Neurobiological Technologies, Inc.                          
Expiration February 2004                      
Exercise Price $1.38                          
(Acquired 11/05/1999,                         
               Cost $88)(4)<F27> r<F23>                              103,250
500,000    Nevada Pacific Gold Ltd.                                     
Expiration December 2002                      
Exercise Price $0.30 CN                       
(Acquired 12/04/2001,                         
               Cost $5,000)(4)<F27> r<F23>                            53,587
250,000    Nevada Pacific Gold Ltd.                                     
Expiration May 2003                           
Exercise Price $0.70 CN                       
(Acquired 5/23/2002,                          
               Cost $2,500)(4)<F27> r<F23>                             1,576
464,699    Orezone Resources Inc.                                       
Expiration July 2004                          
Exercise Price $0.30 CN                       
(Acquired 7/19/2002,                          
               Cost $4,647)(4)<F27> r<F23>                             2,930
3,000,000    Pelangio Mines Inc.                                            
Expiration February 2003                      
Exercise Price $0.20 CN                       
(Acquired 2/08/2002,                          
               Cost $30,000)(4)<F27> r<F23>                           18,913
1,000,000    Redstar Gold Corp.                                             
Expiration May 2004                           
Exercise Price $0.15 CN                       
(Acquired 5/31/2002,                          
               Cost $10,000)(4)<F27> r<F23>                            6,304
1,000,000    Rimfire Minerals Corporation                                   
Expiration April 2004                         
Exercise Price $0.45 CN                       
(Acquired 4/15/2002,                          
               Cost $10,000)(4)<F27> r<F23>                            6,304
625,000    Ross River Minerals Inc.                                     
Expiration November 2003                      
Exercise Price $0.35 CN                       
(Acquired 5/21/2002,                          
               Cost $6,250)(4)<F27> r<F23>                             3,940
2,000,000    SAMEX Mining Corp.                                             
Expiration March 2004                         
Exercise Price $0.20 CN                       
(Acquired 3/05/2002,                          
               Cost $20,000)(4)<F27> r<F23>                           75,653
125,000    Silver Standard Resources Inc.                               
Expiration October 2003                       
Exercise Price $3.00 CN                       
(Acquired 10/29/2001,                         
               Cost $1,250)(4)<F27> r<F23>                           273,452
75,000    Silver Standard Resources Inc.                              
Expiration May 2004                           
Exercise Price $4.80 CN                       
(Acquired 5/10/2002,                          
               Cost $750)(4)<F27> r<F23>                              33,074
1,000,000    Silverado Gold Mines Ltd.                                      
Expiration May 2003                           
Exercise Price $0.20                          
(Acquired 5/06/2002,                          
               Cost $10,000)(4)<F27> r<F23>                          238,000
1,750,000    South American Gold and                                        
Copper Company Limited                        
Expiration March 2004                         
Exercise Price $0.08 CN                       
(Acquired 3/28/2002,                          
               Cost $17,500)(4)<F27> r<F23>                           11,033
500,500    Starfield Resources Inc.                                     
Expiration October 2003                       
Exercise Price $0.55 CN                       
(Acquired 10/10/2001,                         
               Cost $5,005)(4)<F27> r<F23>                             3,155
500,000    Sultan Minerals Inc.                                         
Expiration January 2003                       
Exercise Price $0.32 CN                       
(Acquired 1/18/2002,                          
               Cost $5,000)(4)<F27> r<F23>                             3,152
666,667    Sultan Minerals Inc.                                         
Expiration August 2003                        
Exercise Price $0.25 CN                       
(Acquired 8/13/2001,                          
               Cost $6,667)(4)<F27> r<F23>                             4,203
650,000    Tyhee Development Corp.                                      
Expiration May 2003                           
Exercise Price $0.30 CN                       
(Acquired 5/01/2002,                          
               Cost $6,500)(4)<F27> r<F23>                            23,358
62,500    Wheaton River Minerals Ltd.                                 
Expiration May 2007                           
Exercise Price $1.65 CN                       
(Acquired 5/30/2002,                          
               Cost $625)(4)<F27> r<F23>                                 394
800,000    Xenolix Technologies, Inc.                                   
Expiration March 2003                         
Exercise Price $2.00                          
(Acquired 3/30/2001,                          
               Cost $800)(4)<F27> r<F23>                                 800
200,000    Xenolix Technologies, Inc.                                   
Expiration February 2004                      
Exercise Price $2.00                          
(Acquired 2/04/2002,                          
               Cost $2,000)(4)<F27> r<F23>                               200
                                                                ------------
TOTAL WARRANTS                                    
               (Cost $1,042,827)                                   4,330,718
                                                                ------------

PRINCIPAL                                                                     
AMOUNT                                                                      
---------                                                                     
CONVERTIBLE DEBENTURES -- 0.1%*<F21>              
$   300,000    Golden Phoenix Minerals, Inc.                                    
(Acquired 1/14/2000,                          
               Cost $300,000)(4)<F27> r<F23>                         439,820
                                                                ------------

CORPORATE NOTES -- 0.3%*<F21>                     
Globalstar LP/Capital                             
4,500,000      11.375%, 2/15/2004(8)<F31>                            135,000
11,750,000      11.250%, 6/15/2004(8)<F31>                            352,500 
10,150,000      11.500%, 6/01/2005(8)<F31>                            304,500 
Itronics Inc.                                     
250,000      12.000%, 5/14/2004                                         
(Acquired 5/14/2001,                          
               Cost $250,000)(4)<F27> r<F23>                         250,000
380,000      12.000%, 10/24/2004                                        
(Acquired 10/24/2001,                         
               Cost $380,000)(4)<F27> r<F23>                         380,000
100,000      12.000%, 3/15/2005                                         
(Acquired 3/15/2002,                          
               Cost $100,000)(4)<F27> r<F23>                         100,000
                                                                ------------
TOTAL CORPORATE NOTES:                            
               (Cost $3,408,660)                                   1,522,000
                                                                ------------

U.S. TREASURY                                     
OBLIGATIONS -- 54.3%*<F21>                    
U.S. Treasury Notes:                              
26,314,000    4.625%, 2/28/2003(5)<F28>                            26,663,476 
12,200,000    4.250%, 3/31/2003(5)<F28>                            12,373,948 
12,300,000    4.250%, 5/31/2003(5)<F28>                            12,527,747 
13,600,000    3.875%, 6/30/2003(5)<F28>                            13,845,970 
4,800,000    3.875%, 7/31/2003(5)<F28>                             4,896,562
4,200,000    3.625%, 8/31/2003(5)<F28>                             4,282,522
7,560,000    3.625%, 3/31/2004(5)<F28>                             7,786,505
33,700,000    3.375%, 4/30/2004(5)<F28>                            34,624,121 
21,900,000    3.250%, 5/31/2004(5)<F28>                            22,476,583 
32,000,000    2.875%, 6/30/2004(5)<F28>                            32,668,736 
35,700,000    2.250%, 7/31/2004(5)<F28>                            36,073,743 
1,400,000    6.000%, 8/15/2004(5)<F28>                             1,511,782
72,000,000    2.125%, 8/31/2004(5)<F28>                            72,596,232 
4,900,000    1.875%, 9/30/2004                                     4,916,459
                                                                ------------
TOTAL U.S. TREASURY                               
               NOTES (Cost $283,745,373)                         287,244,386
                                                                ------------

SHORT TERM INVESTMENTS -- 10.1%*                  
SHARES                                                                      
------                                                                      
MUTUAL FUNDS -- 0.8%*<F21>                        
4,182,528    First American Treasury                                        
               Obligations Fund                                    4,182,528
                                                                ------------

PRINCIPAL                                                                     
AMOUNT                                                                      
---------                                                                     
U.S. TREASURY                                     
OBLIGATIONS -- 9.3%*<F21>                     
U.S. Treasury Bills:                              
$11,013,000    1.53%, 10/03/2002                                    11,012,064  
18,513,000    1.58%, 10/10/2002                                    18,505,705 
16,019,000    1.51%, 10/17/2002                                    16,008,272 
3,500,000    1.54%, 12/26/2002                                     3,487,124
                                                                ------------
                                                                  49,013,165
                                                                ------------
TOTAL SHORT-TERM                                  
INVESTMENTS                                   
               (Cost $53,195,859)                                 53,195,693
                                                                ------------
TOTAL INVESTMENTS                                 
(Cost $456,516,971)                           
               (see note 1)                                     $472,359,298
                                                                ------------
                                                                ------------

NOTES TO SCHEDULE OF INVESTMENTS                                                
CN - Canadian Dollars                                                   
ADR - American Depository Receipt                                         
*<F21>  Calculated as a percentage of net assets.                           
**<F22>  Non-income producing security.                                       
R<F23>  Restricted security.                                                
(1)<F24>  Shares are held to cover all or a portion of a corresponding short    
position.                                                   
(2)<F25>  Private placement issue (trades at a discount to market value).       
(3)<F26>  Foreign security.                                                     
(4)<F27>  Fair valued security.                                                 
(5)<F28>  All or a portion of the securities have been committed as collateral  
for open short positions.                                   
(6)<F29>  Holding entitles Fund to 525,738 voting rights for Maxam Gold         
         Corporation Preferred and 52,574 voting rights for MCM Custom Milling
Corporation.                                                
(7)<F30>  Affiliated company.  See Note 8 in Notes to the Financial Statements. 
(8)<F31>  Security in default.                                                  

See notes to the financial statements.

PRUDENT BEAR FUND                                                               
SCHEDULE OF SECURITIES SOLD SHORT                                               
SEPTEMBER 30, 2002                                                              

SHARES                                                               VALUE    
------                                                               -----    
147,000    ADTRAN, Inc.                                          $  2,293,200 
120,000    Advanced Fibre                                                     
            Communications, Inc.                                   1,592,400
130,000    Advanced Micro Devices, Inc.                               694,200 
165,000    Advanced Energy Industries, Inc.                         1,468,500 
10,000    The AES Corporation                                         25,100
10,000    Affiliated Computer                                               
            Services, Inc. - Class A                                 425,500
21,000    Affymetrix, Inc.                                           436,800
40,000    Alcatel SA - ADR                                            93,200
 5,000    Altera Corporation                                          43,350
48,000    Amazon.com, Inc.                                           764,640
54,000    Ambac Financial Group, Inc.                              2,910,060
15,000    American Capital Strategies, Ltd.                          282,600
54,000    American Express Company                                 1,683,720
21,000    American International Group, Inc.                       1,148,700
36,000    AmeriCredit Corp.                                          290,520
90,000    Amylin Pharmaceuticals, Inc.                             1,495,800
20,000    Analog Devices, Inc.                                       394,000
260,000    Andrew Corporation                                       1,703,000 
25,000    Applied Materials, Inc.                                    288,750
60,000    AutoNation, Inc.                                           691,200
41,002    Avigen, Inc.                                               325,146
115,000    BEA Systems, Inc.                                          595,700 
16,000    Beazer Homes USA, Inc.                                     976,800
50,000    Belden Inc.                                                671,000
12,000    Black Box Corporation                                      398,400
20,000    Boyd Gaming Corporation                                    373,400
61,000    Broadcom Corporation - Class A                             651,480
145,000    Brocade Communications                                             
            Systems, Inc.                                          1,091,850
79,000    Brunswick Corporation                                    1,662,160
40,000    Cablevision Systems                                               
            New York Group - Class A                                 362,400
23,000    Cabot Microelectronics Corporation                         856,520
70,000    Capital One Financial Corporation                        2,444,400
37,000    CDW Computer Centers, Inc.                               1,567,320
10,000    CEC Entertainment Inc.                                     341,100
45,000    CenturyTel, Inc.                                         1,009,350
31,000    Cerus Corporation                                          516,770
70,000    Cisco Systems, Inc.                                        733,600
50,000    Citigroup Inc.                                           1,482,500
200,000    Clayton Homes, Inc.                                      2,196,000 
35,000    Clear Channel Communications, Inc.                       1,216,250
15,000    Computer Sciences Corporation                              416,850
82,000    Convergys Corporation                                    1,232,460
35,000    Cox Communications, Inc. - Class A                         860,650
15,000    Credence Systems Corporation                               129,900
 3,000    Credit Acceptance Corporation                               24,600
60,000    Cree, Inc.                                                 750,000
50,000    CSG Systems International, Inc.                            545,000
57,000    CV Therapeutics, Inc.                                    1,191,870
92,000    Cymer, Inc.                                              1,714,880
190,000    DIAMONDS Trust, Series I                                14,440,000 
60,000    Dillard's, Inc. - Class A                                1,210,800
50,000    D.R. Horton, Inc.                                          931,000
58,000    Eastman Kodak Company                                    1,579,920
 7,000    eBay Inc.                                                  369,670
40,000    Eli Lilly and Company                                    2,213,600
115,000    El Paso Corporation                                        951,050 
 7,500    Enesco Group, Inc.                                          52,575
 9,000    Equity Office Properties Trust                             232,380
85,000    ESS Technology, Inc.                                       522,750
40,000    Ethan Allen Interiors Inc.                               1,294,400
32,000    Exar Corporation                                           369,600
   180    Extreme Networks, Inc.                                         758
35,000    Fannie Mae                                               2,083,900
30,000    Federated Department Stores, Inc.                          883,200
10,000    Fifth Third Bancorp                                        612,300
12,000    Financial Select Sector SPDR Fund                          248,040
10,000    FleetBoston Financial Corporation                          203,300
110,000    Foundry Networks, Inc.                                     602,800 
 8,000    Freddie Mac                                                447,200
100,000    GATX Corporation                                         1,980,000 
25,000    General Electric Company                                   616,250
50,000    General Motors Corporation                               1,945,000
52,000    The Goldman Sachs Group, Inc.                            3,433,560
72,500    The Goodyear Tire &                                               
            Rubber Company                                           644,525
38,000    GreenPoint Financial Corp.                               1,586,120
35,000    Harley-Davidson, Inc.                                    1,625,750
66,000    Household International, Inc.                            1,868,460
15,000    Integrated Circuit Systems, Inc.                           235,500
41,700    InterMune Inc.                                           1,368,594
55,000    Internet Security Systems, Inc.                            677,600
148,000    Intersil Corporation - Class A                           1,918,080 
70,000    Iron Mountain Incorporated                               1,749,300
131,100    Irwin Financial Corporation                              2,228,700 
177,000    Isis Pharmaceuticals, Inc.                               1,745,220 
80,000    J.C. Penney Company, Inc.                                1,273,600
121,000    J.P. Morgan Chase & Co.                                  2,297,790 
100,000    Juniper Networks, Inc.                                     480,000 
20,000    KB HOME                                                    976,800
 5,700    KCS Energy, Inc.                                             8,550
20,000    Kinder Morgan, Inc.                                        709,000
37,000    KLA-Tencor Corporation                                   1,033,780
38,000    Kohl's Corporation                                       2,310,780
50,000    Lamar Advertising Company                                1,517,500
65,000    Lehman Brothers Holdings Inc.                            3,188,250
 5,000    Lennar Corporation                                         278,900
24,000    LightPath Technologies, Inc. - Class A                       9,360
27,000    Linear Technology Corporation                              559,440
13,000    Lowe's Companies, Inc.                                     538,200
10,000    Mandalay Resort Group                                      335,500
83,000    Manhattan Associates, Inc.                               1,122,160
 1,000    Maxim Integrated Products, Inc.                             24,760
93,000    MBIA Inc.                                                3,715,350
187,000    MBNA Corporation                                         3,437,060 
50,000    McKesson Corporation                                     1,416,500
22,000    Mediacom Communications Corporation                        118,140
   504    The Medicines Company                                        5,533
45,000    MedImmune, Inc.                                            941,400
20,000    Meridian Gold Inc.                                         366,000
74,000    Merrill Lynch & Co., Inc.                                2,438,300
59,000    Metris Companies Inc.                                      136,290
55,000    MGIC Investment Corporation                              2,245,650
15,000    MGM MIRAGE                                                 559,500
102,500    Micrel, Incorporated                                       631,400 
40,000    Microchip Technology Incorporated                          818,000
38,000    Moody's Corporation                                      1,843,000
123,000    Morgan Stanley                                           4,167,240 
10,000    National City Corporation                                  285,300
30,000    Network Appliance, Inc.                                    219,900
10,000    Neurocrine Biosciences, Inc.                               410,000
30,000    Newell Rubbermaid Inc.                                     926,100
40,000    Newport Corporation                                        451,200
18,000    NIKE, Inc. - Class B                                       777,240
95,000    Nokia Oyj - ADR                                          1,258,750
55,000    NorthWestern Corporation                                   536,800
63,000    OmniVision Technologies, Inc.                              415,170
130,000    ON Semiconductor Corporation                               162,500 
60,000    Overture Services, Inc.                                  1,414,200
 5,636    Photon Dynamics, Inc.                                      104,998
140,000    Pixelworks, Inc.                                           721,000 
30,000    The PMI Group, Inc.                                        816,300
22,000    Polaris Industries Inc.                                  1,364,000
24,000    QLogic Corporation                                         624,960
29,000    QUALCOMM Inc                                               800,980
40,000    Quantum Fuel Systems                                              
            Technologies Worldwide, Inc.                              85,600
72,000    Radian Group Inc.                                        2,351,520
14,700    Regions Financial Corporation                              480,249
 7,000    Rent-A-Center, Inc.                                        363,650
25,000    Research In Motion Limited                                 235,500
124,000    RF Micro Devices, Inc.                                     744,000 
44,000    Ruby Tuesday, Inc.                                         826,320
25,000    The Ryland Group, Inc.                                     929,250
30,000    SanDisk Corporation                                        393,300
30,000    ScanSoft, Inc.                                              99,000
142,000    Scientific-Atlanta, Inc.                                 1,776,420 
25,000    Sealed Air Corporation                                     422,250
42,000    Sears, Roebuck and Co.                                   1,638,000
105,000    Semtech Corporation                                      1,018,500 
195,000    The Shaw Group Inc.                                      2,769,000 
55,000    Silicon Image, Inc.                                        224,950
155,300    Silicon Valley Bancshares                                2,629,229 
45,000    Sola International Inc.                                    452,250
65,000    SPDR Trust Series 1                                      5,316,350
100,000    Specialty Laboratories, Inc.                               919,000 
190,000    Sprint Corporation                                       1,732,800 
18,000    Stage Stores, Inc.                                         390,420
45,000    Starwood Hotels &                                                 
            Resorts Worldwide, Inc.                                1,003,500
 1,000    Symantec Corporation                                        33,630
10,000    TCF Financial Corporation                                  423,300
130,000    TECO Energy, Inc.                                        2,064,400 
12,300    Terex Corporation                                          207,870
25,000    Time Warner Telecom Inc. - Class A                          20,250
40,000    Toll Brothers, Inc.                                        869,600
15,000    The Toronto-Dominion Bank                                  264,150
30,000    Trammell Crow Company                                      295,800
1,771    Travelers Property Casualty                                      
            Corp. - Class A                                           23,382
3,639    Travelers Property Casualty                                      
            Corp. - Class B                                           49,241
47,000    Trimeris, Inc.                                           2,098,550
85,000    Tyco International Ltd.                                  1,198,500
90,000    United Online, Inc.                                        863,100
52,000    United States Cellular Corporation                       1,538,160
20,000    Univision Communications                                          
            Inc. - Class A                                           456,000
102,000    UTStarcom, Inc.                                          1,557,540 
16,000    Varian Semiconductor                                              
            Equipment Associates, Inc.                               263,040
 3,000    VeriSign, Inc.                                              15,150
15,000    VERITAS Software Corporation                               220,050
35,000    Verizon Communications Inc.                                960,400
25,000    Vishay Intertechnology, Inc.                               220,000
40,000    Washington Mutual, Inc.                                  1,258,800
45,000    Wells Fargo & Company                                    2,167,200
18,000    Whirlpool Corporation                                      825,480
65,000    Winstar Communications, Inc.                                    98
76,000    Xilinx, Inc.                                             1,203,688
89,500    Zoran Corporation                                          984,500
                                                                ------------
TOTAL SECURITIES                                        
SOLD SHORT                                          
            (Proceeds $229,695,124)                             $195,611,566
                                                                ------------
                                                                ------------

See notes to the financial statements.

PRUDENT SAFE HARBOR FUND                                                        
SCHEDULE OF INVESTMENTS                                                         
SEPTEMBER 30, 2002                                                              

SHARES                                                             VALUE  
------                                                             -----  
COMMON STOCKS -- 12.4%                          

CANADA -- 4.8%                                  
    90,000    Barrick Gold Corporation                          $  1,399,500
98,000    Central Fund of Canada                                    
                Limited - Class A                                    430,220
   542,800    Chesapeake Gold Corp.(2)<F33>                          667,293
   100,000    Goldcorp Inc.                                        1,103,000
   274,000    Placer Dome Inc.                                     2,501,620
                                                                ------------
                                                                   6,101,633
                                                                ------------

CHANNEL ISLANDS -- 0.3%                         
17,500    Randgold Resources                                        
                Limited - ADR(2)<F33>                                316,558
                                                                ------------

SOUTH AFRICA -- 5.8%                            
    65,000    AngloGold Limited - ADR                              1,732,250
    55,500    ASA Ltd.                                             1,790,985
224,000    Durban Roodepoort Deep                                     
                Limited - ADR(2)<F33>                                931,840
    84,000    Gold Fields Limited - ADR                            1,075,200
114,000    Harmony Gold Mining Company                                
                Limited - ADR                                      1,784,100
                                                                ------------
                                                                   7,314,375
                                                                ------------

UNITED STATES -- 1.5%                           
    68,000    Newmont Mining Corporation                           1,870,680
                                                                ------------
TOTAL COMMON STOCK                              
                (Cost $14,248,472)                                15,603,246
                                                                ------------

OUNCES                                                                    
------                                                                    
COMMODITIES -- 1.4%                                                             
     5,663    Gold Bullion(1)<F32> (2)<F33>                        1,813,897
                                                                ------------
TOTAL COMMODITIES                               
                (Cost $1,671,273)                                  1,813,897
                                                                ------------

PRINCIPAL                                                                     
AMOUNT                                                                    
---------                                                                     
U.S. TREASURY                                   
OBLIGATIONS -- 23.9%                        
U.S. Treasury Notes:                            
$ 1,500,000    3.88%, 7/31/2003                                     1,530,176 
 5,000,000    3.25%, 5/31/2004                                     5,131,640
 4,000,000    2.25%, 7/31/2004                                     4,041,876
19,277,000    2.13%, 8/31/2004                                    19,436,633
                                                                ------------
                                                                  30,140,325
                                                                ------------
TOTAL U.S. TREASURIES                           
                (Cost $29,890,230)                                30,140,325
                                                                ------------

FOREIGN TREASURY                                
OBLIGATIONS -- 57.9%                        

CANADA -- 3.4%                                  
Canadian Government Bonds:                      
 2,290,000    5.00%, 12/01/2003                                    1,478,380
 4,180,000    6.50%, 6/01/2004                                     2,783,065
                                                                ------------
                                                                   4,261,445
                                                                ------------

DENMARK -- 4.7%                                 
Kingdom of Denmark Bonds:                       
 4,600,000    6.00%, 11/15/2002                                      613,997
 7,250,000    5.00%, 11/15/2003                                      983,134
31,900,000    4.00%, 11/15/2004                                    4,289,072
                                                                ------------
                                                                   5,886,203
                                                                ------------

FINLAND -- 1.7%                                 
Finnish Government Bond:                        
 1,970,000    9.50%, 3/15/2004                                     2,115,920
                                                                ------------

FRANCE -- 12.6%                                 
French Treasury Notes:                          
   290,000    5.00%, 1/12/2003                                       287,905
 1,825,000    4.50%, 7/12/2003                                     1,821,831
 2,110,000    4.00%, 1/12/2004                                     2,110,548
10,465,000    3.50%, 7/12/2004                                    10,421,063
 1,200,000    6.75%, 10/25/2004                                    1,282,546
                                                                ------------
                                                                  15,923,893
                                                                ------------

GERMANY -- 6.1%                                 
Bundesschatzanweisungen:                        
 3,830,000    4.25%, 3/12/2004                                     3,849,195
Bundesrepub.Deutschland:                        
 3,600,000    7.50%, 11/11/2004                                    3,866,499
                                                                ------------
                                                                   7,715,694
                                                                ------------

NORWAY -- 2.1%                                  
Norwegian Government Bonds:                     
 5,250,000    9.50%, 10/31/2002                                      709,417
14,540,000    5.75%, 11/30/2004                                    1,944,932
                                                                ------------
                                                                   2,654,349
                                                                ------------

SWEDEN -- 1.8%                                  
Swedish Government Bonds:                       
15,950,000    10.25%, 5/05/2003                                    1,777,858
 5,000,000    5.00%, 1/15/2004                                       544,203
                                                                ------------
                                                                   2,322,061
                                                                ------------

SWITZERLAND -- 25.5%                            
Swiss Government Bonds:                         
 1,005,000    6.25%, 1/07/2003                                       692,148
 9,485,000    6.50%, 4/10/2004                                     6,992,065
26,230,000    4.50%, 10/07/2004                                   18,969,211
 7,400,000    5.50%, 1/06/2005                                     5,498,262
                                                                ------------
                                                                  32,151,686
                                                                ------------
TOTAL FOREIGN                                   
TREASURY OBLIGATIONS                        
                (Cost $69,330,710)                                73,031,251
                                                                ------------

SHORT-TERM INVESTMENTS -- 3.7%                  
U.S. TREASURIES -- 3.1%                         
U.S. Treasury Bill:                             
$ 4,000,000    1.51%, 1/30/2003                                     3,979,700 
                                                                ------------

SHARES                                                                    
------                                                                    
MUTUAL FUNDS -- 0.6%                            
780,249    First American Treasury                                    
                Obligations Fund                                     780,249
                                                                ------------
TOTAL SHORT-TERM                                
INVESTMENTS                                 
                (Cost $4,760,455)                                  4,759,949
                                                                ------------
TOTAL INVESTMENTS                               
                (Cost $119,901,140) -- 99.3%                     125,348,668
                                                                ------------
              Other Assets less Liabilities -- 0.7%                  842,551
                                                                ------------
              Total Net Assets -- 100.0%                        $126,191,219
                                                                ------------
                                                                ------------

ADR - American Depository Receipt                                               
(1)<F32>  Fair valued investment.                                               
(2)<F33>  Non-income producing security.                                        

See notes to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS                                               
SEPTEMBER 30, 2002                                                              

1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES                           

  Prudent Bear Funds, Inc. (the "Company") was incorporated on October 25,
     1995, as a Maryland Corporation and is registered as a diversified open-end
management investment company under the Investment Company Act of 1940
  ("1940 Act"). The Company currently consists of three series: thePrudent
     Bear Fund, the Prudent Safe Harbor Fund and the Prudent Bear Large Cap Fund
     (each a "Fund" and collectively the "Funds"). As of September 30, 2002, the
  Prudent Bear Large Cap Fund had not commenced operations. The investment
objectives of the Funds are set forth below.                          

    The investment objective of the Prudent Bear Fund is capital appreciation,
     which it seeks to obtain primarily through short sales of equity securities
when overall market valuations are high, and through long positions in
  value-oriented equity securities when overall market valuations are low.
The Prudent Bear Fund commenced operations on December 28, 1995.      

     The Prudent Bear Fund has issued two classes of shares: No Load and Class C
shares. The No Load shares are subject to a 0.25% 12b-1 fee, while the
     Class C shares are subject to a 1.00% 12b-1 fee, as described in accordance
     with the Fund's prospectuses. Each class of shares has identical rights and
   privileges except with respect to 12b-1 fees and voting rights on matters
affecting a single class of shares.                                   

    The investment objective of the Prudent Safe Harbor Fund is current income
     and capital appreciation through investments primarily in liquid securities
    issued by major industrialized nations, and equity securities of companies
 that mine gold and gold bullion. The Prudent Safe Harbor Fund commenced
operations on February 2, 2000.                                       

The investment objective of the Prudent Bear Large Cap Fund is capital
appreciation in declining equity markets, which it seeks to obtain    
primarily through short sales of equity securities as well as selling 
     futures contracts and purchasing put options on stock indices.  The Prudent
    Bear Large Cap Fund had not commenced operations as of September 30, 2002.

    The following is a summary of significant accounting policies consistently
followed by the Funds.                                                

    a)   Investment Valuation - Common stocks, preferred stocks and securities
        sold short that are listed on a securities exchange or quoted on the
        NASDAQ Stock Market are valued at the last quoted sales price on the
          day the valuation is made. Price information on listed stocks is taken
    from the exchange where the security is primarily traded. Common
       stocks and securities sold short which are listed on an exchange or
          the NASDAQ Stock Market but which are not traded on the valuation date
          are valued at the average of the current bid and asked price. Unlisted
       equity securities for which market quotations are readily available
         are valued at the latest quoted bid price. Debt securities are valued
          at the latest bid price. Mutual fund investments are valued at the net
  asset value on the day the valuation is made. Other assets and
          securities for which no quotations are readily available are valued at
      fair value as determined in good faith by management in accordance
        with procedures approved by the Board of Directors. At September 30,
    2002, such investments represent 4.3% and 1.4% of net assets, at
     value, in the Prudent Bear Fund and the Prudent Safe Harbor Fund,
   respectively. Short-term debt instruments (those with remaining
      maturities of 60 days or less) are valued at amortized cost, which
approximates market value.                                  

     b)   Short Positions - The Funds may engage in short sale transactions. For
          financial statement purposes, an amount equal to the settlement amount
          is included in the Statement of Assets and Liabilities as an asset and
        an equivalent liability. The amount of the liability is subsequently
        marked-to-market to reflect the current value of the short position.
        Subsequent fluctuations in the market prices of securities sold, but
      not yet purchased, may require purchasing the securities at prices
        which may differ from the market value reflected on the Statement of
          Assets and Liabilities. The Funds are liable for any dividends paid on
   securities sold short. The Prudent Bear Fund's receivables from
    brokers for proceeds on securities sold short are with two major
      security dealers. The Funds do not require the brokers to maintain
collateral in support of these receivables.                 

c)   Written Option Accounting - The Funds write (sell) put and call  
          options. When the Funds write (sell) an option, an amount equal to the
        premium received by the Funds is included in the Statement of Assets
          and Liabilities as an asset and an equivalent liability. The amount of
         the liability is subsequently marked-to-market to reflect the current
    value of the option written. By writing an option, the Funds may
   become obligated during the term of the option to deliver (with
        respect to a call option) or purchase (with respect to a put option)
     the securities underlying the option at the exercise price if the
          option is exercised. Option contracts are valued at the average of the
         current bid and asked price reported on the day of valuation. When an
        option expires on its stipulated expiration date the Funds realize a
       gain. When the Funds enter into a closing purchase transaction, the
    Funds realize a gain or loss if the cost of the closing purchase
          transaction differs from the premium received when the option was sold
   without regard to any unrealized gain or loss on the underlying
          security, and the liability related to such option is eliminated. If a
        call option written by a Fund is exercised, the proceeds of the sale
          of the underlying security will be increased by the premium originally
        received and the Fund will realize a gain or loss on the sale of the
        security. If a put option written by a Fund is exercised, the Fund's
   basis in the underlying security will be reduced by the premium
originally received.                                        

    d)   Collateral on Short Sales, Written Options and Futures Contracts - As
          collateral for short positions, written options and futures contracts,
the Funds are required under the 1940 Act to maintain assets
      consisting of cash or liquid securities. For short positions, this
        collateral must equal the market value of the securities sold short.
       For written options, this collateral must equal the market value of
      the purchase obligation for put options or the market value of the
    instrument underlying the contract for call options. For futures
          contracts, this collateral must equal the market value of the purchase
    obligation for long futures contracts or the market value of the
       instrument underlying the contract for short futures contracts. All
collateral is required to be adjusted daily.                

    e)   Federal Income Taxes - No provision for federal income taxes has been
    made since the Funds intend to comply with the provisions of the
          Internal Revenue Code applicable to regulated investment companies and
       to distribute investment company net taxable income and net capital
     gains to shareholders. Additionally, the Funds intend to make all
          required distributions to avoid being liable for federal excise taxes.

f)   Purchased Option Accounting - Premiums paid for option contracts 
        purchased are included in the Statement of Assets and Liabilities as
       an asset. Option contracts are valued at the average of the current
     bid and asked price reported on the day of valuation. When option
contracts expire or are closed, realized gains or losses are
      recognized without regard to any unrealized gains or losses on the
         underlying securities. Put option contracts are held by the Funds for
        trading purposes and call option contracts are held by the Funds for
trading and hedging purposes.                               

   g)   Distributions to Shareholders - Dividends from net investment income
          are declared and paid annually for the Prudent Bear Fund and quarterly
   for the Prudent Safe Harbor Fund. Distributions of net realized
          capital gains, if any, will be declared and paid at least annually for
both Funds.                                                 

h)   Use of Estimates - The preparation of financial statements in    
          conformity with accounting principles generally accepted in the United
          States of America require management to make estimates and assumptions
  that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
          financial statements and the reported amounts of revenues and expenses
       during the reporting period. Actual results could differ from those
estimates.                                                  

    i)   Other - Investment and shareholder transactions are recorded on trade
       date. The Funds determine the gain or loss realized from investment
        transactions by comparing the original cost of the security lot sold
         with the net sales proceeds. Dividend income is recognized on the ex-
         dividend date or as soon as information is available to the Fund, and
        interest income is recognized on an accrual basis. Investment income
       for the Prudent Bear Fund includes $1,739,053 of interest earned on
         receivables from brokers for proceeds on securities sold short. There
      was no interest earned on receivables from brokers for proceeds on
      securities sold short for the Prudent Safe Harbor Fund. Accounting
         principles generally accepted in the United States of America require
          that permanent financial reporting and tax differences be reclassified
in the capital accounts.                                    

    j)   Futures Contracts and Options on Futures Contracts - The Prudent Bear
        Fund may purchase and sell stock index futures contracts and options
     on such futures contracts, while the Prudent Safe Harbor Fund may
        purchase and sell debt futures contracts and options on such futures
   contracts. Upon entering into a contract, the Funds deposit and
          maintain as collateral such initial margin as required by the exchange
       on which the transaction is effected. Pursuant to the contract, the
         Funds agree to receive from or pay to the futures commission merchant
        an amount of cash equal to the daily fluctuation in the value of the
         contract. Such receipts or payments are known as variation margin and
      are recorded by the Funds as unrealized gains and losses. When the
         contract is closed, the Funds record 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.             

    k)   Risks of Options, Futures Contracts and Options onFutures Contracts -
    The risks inherent in the use of options, futures contracts, and
         options on futures contracts include: 1) adverse changes in the value
      of such instruments; 2) imperfect correlation between the price of
          options and futures contracts and options thereon and movements in the
          price of the underlying securities, index or futures contracts; 3) the
    possible absence of a liquid secondary market for any particular
     instrument at any time; 4) the possible need to defer closing out
   certain positions to avoid adverse tax consequences; and 5) the
      possible nonperformance by the counterparty under the terms of the
contract.                                                   

l)   Restricted Securities - The Prudent Bear Fund owns investment    
       securities which are unregistered and thus restricted as to resale.
          These securities are valued by the Fund after giving due consideration
          to pertinent factors including recent private sales, market conditions
       and the issuer's financial performance. Where future disposition of
      these securities requires registration under the Securities Act of
    1933, the Fund has the right to include these securities in such
     registration, generally without cost to the Fund. The Fund has no
          right to require registration of unregistered securities. At September
         30, 2002, the Fund had restricted securities with an        aggregate
          market value of $22,041,694 representing 4.2% of the net assets of the
Fund.                                                       

    m)   Foreign Securities - Investing in securities of foreign companies and
    foreign governments involves special risks and consideration not
      typically associated with investing in U.S. companies and the U.S.
        government. These risks include revaluation of currencies and future
        adverse political and economic developments. Moreover, securities of
        many foreign companies and foreign governments and their markets may
          be less liquid and their prices more volatile than those of securities
of comparable U.S. companies and the U.S. government.       

     n)   Foreign Currency Translations - The books and records of the Funds are
 maintained in U.S. dollars. Foreign currency transactions are
         translated into U.S. dollars on the following basis: (i) market value
          of investment securities, assets and liabilities at the daily rates of
    exchange, and (ii) purchases and sales of investment securities,
     dividend and interest income and certain expenses at the rates of
         exchange prevailing on the respective dates of such transactions. For
         financial reporting purposes, the Funds do not isolate changes in the
        exchange rate of investment securities from the fluctuations arising
     from changes in the market price of such securities. However, for
          federal income tax purposes the Funds do isolate and treat as ordinary
      income the effect of changes in foreign exchange rates on realized
  gain or loss from the sale of debt securities and payables and
        receivables arising from trade date and settlement date differences.

2.   CAPITAL SHARE TRANSACTIONS                                                 

Transactions in shares of the Funds were as follows:                  

Prudent Bear Fund                                                               

                                                  Year Ended
No Load Shares:                                         September 30, 2002      
                                                 ---------------------------
                                                     $            Shares
                                                 ------------    -----------
   Shares sold                                   $868,787,535    129,021,398
Shares issued to holders in                                           
     reinvestment of dividends                      4,078,790        853,303
    Shares redeemed                               (632,946,808)   (96,269,651)
                                                 ------------    -----------
   Net increase                                  $239,919,517     33,605,050
                                  ------------
                                  ------------
Shares Outstanding:                                                   
      Beginning of period                                         29,105,548
                                                                 -----------
      End of period                                               62,710,598
                                                                 -----------
                                                                 -----------

                                                  Year Ended
Class C Shares:                                         September 30, 2002      
                                                 ---------------------------
                                                     $            Shares
                                                 ------------    -----------
   Shares sold                                   $  8,457,907      1,333,601
Shares issued to holders in                                           
     reinvestment of dividends                         63,278         13,435
    Shares redeemed                                 (3,640,215)      (610,467)
                                                 ------------    -----------
   Net increase                                  $  4,880,970        736,569
                                  ------------
                                  ------------
Shares Outstanding:                                                   
      Beginning of period                                            226,352
                                                                 -----------
      End of period                                                  962,921
                                                                 -----------
                                                                 -----------

                                                  Year Ended
No Load Shares:                                         September 30, 2001      
                                                 ---------------------------
                                                     $            Shares
                                                 ------------    -----------
   Shares sold                                   $335,284,627     70,493,807
Shares issued to holders in                                           
     reinvestment of dividends                      6,926,690      1,512,378
    Shares redeemed                               (388,901,322)   (81,923,404)
                                                 ------------    -----------
    Net decrease                                  $(46,690,005)    (9,917,219)
                                  ------------
                                  ------------
Shares Outstanding:                                                   
      Beginning of period                                         39,022,767
                                                                 -----------
      End of period                                               29,105,548
                                                                 -----------
                                                                 -----------

                                                  Year Ended
Class C Shares:                                         September 30, 2001      
                                                 ---------------------------
                                                     $            Shares
                                                 ------------    -----------
   Shares sold                                   $  2,311,108        484,427
Shares issued to holders in                                           
     reinvestment of dividends                         10,909          2,398
    Shares redeemed                                 (2,276,554)      (484,190)
                                                 ------------    -----------
   Net increase                                  $     45,463          2,635
                                  ------------
                                  ------------
Shares Outstanding:                                                   
      Beginning of period                                            223,717
                                                                 -----------
      End of period                                                  226,352
                                                                 -----------
                                                                 -----------

Prudent Safe Harbor Fund                                                        
                                                  Year Ended
                                                  September 30, 2002
                                                 ---------------------------
                                                     $            Shares
                                                 ------------    -----------
   Shares sold                                   $226,790,135     20,888,291
Shares issued to holders in                                           
     reinvestment of dividends                      1,673,306        156,127
    Shares redeemed                               (134,136,115)   (12,341,915)
                                                 ------------    -----------
   Net increase                                  $ 94,327,326      8,702,503
                                  ------------
                                  ------------
Shares Outstanding:                                                   
      Beginning of period                                          2,612,561
                                                                 -----------
      End of period                                               11,315,064
                                                                 -----------

                                                  Year Ended
                                                  September 30, 2001
                                                 ---------------------------
                                                     $            Shares
                                                 ------------    -----------
   Shares sold                                   $ 43,865,227      4,816,706
Shares issued to holders in                                           
     reinvestment of dividends                        171,437         18,848
    Shares redeemed                                (21,663,753)    (2,377,681)
                                                 ------------    -----------
   Net increase                                  $ 22,372,911      2,457,873
                                  ------------
                                  ------------
Shares Outstanding:                                                   
      Beginning of period                                            154,688
                                                                 -----------
      End of period                                                2,612,561
                                                                 -----------
                                                                 -----------

3.   INVESTMENT TRANSACTIONS                                                    

The aggregate purchases and sales of investments, excluding short-term
investments, options and short positions, by the Funds for the periods
ended September 30, 2002, were as follows:                            

                          Prudent Bear Fund     Prudent Safe Harbor Fund
                          -----------------     ------------------------
Purchases                   $455,910,277             $132,800,337     
Sales                       $228,942,774             $ 41,023,955     

Included in these amounts were purchases and sales of long-term U.S.  
government securities, for the periods ended September 30, 2002, as   
follows:                                                              

                          Prudent Bear Fund     Prudent Safe Harbor Fund
                          -----------------     ------------------------
Purchases                   $372,285,232             $52,315,887      
Sales                       $177,141,279             $24,808,805      

  At September 30, 2002, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:                         

Prudent Bear Fund                                                     
Appreciation                                              $ 34,124,656
 (Depreciation)                                             (28,972,473)
                                                          ------------
Net appreciation on investments                           $  5,152,183
                                                          ------------
                                                          ------------

Prudent Safe Harbor Fund                                              
Appreciation                                              $  6,171,292
 (Depreciation)                                              (1,112,119)
                                                          ------------
Net appreciation on investments                           $  5,059,173
                                                          ------------
                                                          ------------

At September 30, 2002, the cost of investments for federal income tax 
  purposes for the Prudent Bear Fund and the Prudent Safe Harbor Fund were
$467,207,115 and $120,289,495, respectively.                          

The tax character of distributions paid during 2002 and 2001 was as   
follows:                                                              

Prudent Bear Fund                     2002                2001        
                              ----                ----

Ordinary income                    $4,788,817          $7,742,215     
Long-term capital gain                      0                   0     
                              ----------          ----------
                              $4,788,817          $7,742,215
                              ----------          ----------
                              ----------          ----------

Prudent Safe Harbor Fund              2002                2001        
                              ----                ----
Ordinary income                    $1,861,639            $190,263     
Long-term capital gain                      0                   0     
                              ----------            --------
                              $1,861,639            $190,263
                              ----------            --------
                              ----------            --------

     As of September 30, 2002, the components of distributable earnings on a tax
basis were as follows:                                                

                            Prudent Bear Fund     Prudent Safe Harbor Fund
                            -----------------     ------------------------
Undistributed                                                         
ordinary income            $14,391,140               $1,300,642   
Undistributed                                                         
long-term gain             $12,688,038               $1,564,513   

     The Prudent Bear Fund realized, on a tax basis, post October losses through
September 30, 2002 of $2,251 which are not recognized for tax purposes
until the first day of the following fiscal year.                     

4.   INVESTMENT ADVISORY AND OTHER AGREEMENTS                                   

  The Funds have entered into Investment Advisory Agreements with David W.
     Tice & Associates, Inc. Pursuant to its advisory agreements with the Funds,
   the Investment Adviser is entitled to receive a fee, calculated daily and
     payable monthly, at the annual rate of 1.25% and 0.75% for the Prudent Bear
Fund and the Prudent Safe Harbor Fund, respectively, as applied to the
    Funds' daily net assets. Certain officers of the Adviser are also officers
   of the Funds. For the period ended September 30, 2002, the Adviser agreed
    to waive its investment advisory fee and/or reimburse the Fund's operating
expenses (exclusive of brokerage, interest, taxes, short dividends and
    extraordinary expenses) to the extent necessary to ensure that the Prudent
 Safe Harbor Fund's total operating expenses did not exceed 1.50% of the
     average net assets. During the period ended September 30, 2002, the Adviser
reimbursed the Prudent Safe Harbor Fund $30,867.                      

   U.S. BancorpFund Services, LLC ("U.S. Bancorp") serves as transfer agent,
    administrator and accounting services agent for the Funds. U.S. Bank, N.A.
serves as custodian for the Funds.                                    

5.   EXPENSE REDUCTIONS                                                         

    The Adviser had directed certain of the Funds' portfolio trades to brokers
     at best price and execution and has generated directed brokerage credits to
 reduce certain U.S. Bancorp service provider fees. Shareholders benefit
     under this arrangement as the net expenses of the Funds do not include such
     service provider fees. For the period ended September 30, 2002, the Prudent
Bear Fund and the Prudent Safe Harbor Fund's expenses were reduced by 
    $114,013 and $1,572, respectively, by utilizing directed brokerage credits
   resulting in an expense ratio of 1.84%, 2.59%, and 1.50% being charged to
   Prudent Bear Fund No Load shareholders, Class C shareholders, and Prudent
    Safe Harbor Fund shareholders, respectively. In accordance with Securities
and Exchange Commission requirements, such amount, when incurred, is  
     required to be shown as an expense and will be included in each of the U.S.
Bancorp fees in the Statement of Operations.                          

6.   FUTURES CONTRACTS                                                          

   At September 30, 2002, the Prudent Bear Fund had entered into stock index
futures contracts. The net unrealized appreciation of $3,458,500 is   
 included in the net unrealized appreciation section of the accompanying
financial statements. The terms of the open contracts are as follows: 

   Number of       Underlying             MarketValue of          Unrealized
    Contracts       Instrument         Underlying Instrument      Appreciation
    ---------       ----------         ---------------------      ------------
(285)       S&P 500 Index                                         
Futures                                   
                 December 2002            $(58,068,750)           $3,458,500

7.   OPTION CONTRACTS WRITTEN                                                   

The premium amount and the number of option contracts written for the 
Prudent Bear Fund during the period ended September 30, 2002, were as 
follows:                                                              

                                   Premium Amount      Number of Contracts
                                   --------------      -------------------
Options outstanding at                                                
September 30, 2001              $      --                    --   
Options written                     870,544                 1,400     
Options closed                     (854,164)               (1,200)    
Options exercised                        --                    --     
Options expired                     (16,380)                 (200)    
                             ---------                ------
Options outstanding at                                                
September 30, 2002              $      --                    --   
                             ---------                ------
                             ---------                ------

8.   TRANSACTIONS WITH AFFILIATES                                               

     The following companies are affiliated with the Prudent Bear Fund; that is,
  the Fund held 5% or more of the outstanding voting securities during the
     period from October 1, 2001 through September 30, 2002.  Such companies are
defined in Section (2)(a)(3) of the Investment Company Act of 1940:   

                                                        [Enlarge/Download Table]
                                                                                                                   REALIZED 
                               SHARE BALANCE                                      SHARE BALANCE                      GAINS  
SECURITY NAME               AT OCTOBER 1, 2001  PURCHASES            SALES    AT SEPTEMBER 30, 2002  DIVIDENDS     (LOSSES) 
-------------               ------------------  ---------            -----    ---------------------  ---------      ------- 
                                                                                                                            
Alamos Minerals Ltd.                    --       2,533,334                --         2,533,334           --              -- 
Altius Minerals Corporation             --         800,000                --           800,000           --              -- 
Aura Systems, Inc.               4,814,200      17,790,000                --        22,604,200           --              -- 
Banro Corporation                       --         883,600                --           883,600           --              -- 
Canarc Resource Corp.            4,375,500         986,500                --         5,362,000           --              -- 
Candente Resource Corp.            765,700       1,840,000                --         2,605,700           --              -- 
Canyon Resources Corporation       658,677         402,299                --         1,060,976           --              -- 
Cardima, Inc.                    2,187,931       2,826,333                --         5,014,264           --              -- 
Chesapeake Gold Corp.                   --       1,502,200(1)<F34>        --         1,502,200           --              -- 
Dynatec Corporation              8,678,800              --           300,000         8,378,800           --     $   (12,729)
ECU Silver Mining Inc.           6,415,060       6,415,060         6,415,060         6,415,060           --      (1,008,027)
Excellon Resources, Inc.                --       2,000,000                --         2,000,000           --              -- 
IMA Exploration Inc.                    --       2,391,137                --         2,391,137           --              -- 
IRIDEX Corporation                      --         389,741                --           389,741           --              -- 
KleenAir Systems, Inc.                  --       2,686,500                --         2,686,500           --              -- 
Madison Enterprises Corp.               --       3,500,000                --         3,500,000           --              -- 
Metaline Mining Co. Inc.           700,000              --                --           700,000           --              -- 
Minefinders Corporation Ltd.     1,009,364         371,028         1,230,392           150,000           --       3,385,108 
Nevada Pacific Gold Ltd.                --       2,001,000                --         2,001,000           --              -- 
Orezone Resources Inc.                  --       5,669,450                --         5,669,450           --              -- 
Pelangio Mines Inc.                     --       5,042,500                --         5,042,500           --              -- 
Platinum Group Metals Ltd.              --       1,514,500                --         1,514,500           --              -- 
Redstar Gold Corp.                      --       1,000,000                --         1,000,000           --              -- 
Rimfire Minerals Corporation            --       1,220,000                --         1,220,000           --              -- 
Ross River Minerals Inc.                --         625,000                --           625,000           --              -- 
Starfield Resources Inc.           762,025       1,907,263                --         2,669,288           --              -- 
Sultan Minerals Inc.             1,333,333       1,000,000                --         2,333,333           --              -- 
Tyhee Development Corp.                 --         650,000                --           650,000           --              -- 
Western Copper Holdings Limited         --       2,432,800                --         2,432,800           --              -- 
                                                                                                       ----      ---------- 
                                                                                                         --      $2,364,352 
                                                                                                       ----      ---------- 
                                                                                                       ----      ---------- 

(1)<F34>  236,800 shares received from holdings of Francisco Gold Corporation on
7/17/2002.                                                  

9.   SERVICE AND DISTRIBUTION PLAN                                              

The Funds have adopted Service and Distribution Plans (the "Plans")   
    pursuant to Rule 12b-1 under the 1940 Act. The Plans authorize payments by
    the Funds in connection with the distribution of their shares at an annual
   rate, as determined from time to time by the Board of Directors, of up to
   0.25% of the Funds' average daily net assets for the Prudent Bear No Load
  shares and Prudent Safe Harbor Fund and up to 1.00% for the Prudent Bear
  Class C shares. The currently approved rate for the Prudent Bear No Load
shares and the Prudent Safe Harbor Fund is 0.25% of average daily net 
    assets. The currently approved rate for the Prudent Bear Class C shares is
    1.00% of average daily net assets. Payments made pursuant to the Plans may
 only be used to pay distribution expenses in the year incurred. Amounts
paid under the Plans by the Funds may be spent by the Funds on any    
   activities or expenses primarily intended to result in the sale of shares
   of the Funds, including but not limited to, advertising, compensation for
     sales and marketing activities of financial institutions and others such as
   dealers and distributors, shareholder account servicing, the printing and
     mailing of prospectuses to other than current shareholders and the printing
  and mailing of sales literature. The Prudent Bear Fund incurred $615,832
   for the No Load Shares and $33,416 for the Class C Shares pursuant to the
     Plans for the period ended September 30, 2002. The Prudent Safe Harbor Fund
   incurred $140,892 pursuant to the Plan for the period ended September 30,
2002.                                                                 

10.  RESULTS OF PROXY (UNAUDITED)                                               

    Following are the results from the shareholder vote taken on September 23,
    2002 to elect directors to serve on the Board of Directors for the Prudent
Bear Funds, Inc.:                                                     

                                                        [Enlarge/Download Table]
Prudent Bear Fund - No Load Shares                                                            
                                        SHARES       % OF TOTAL SHARES      % OF VOTED SHARES 
NOMINEE                SHARES FOR      AGAINST      FOR         AGAINST    FOR         AGAINST
-------                ----------      -------      ---         -------    ---         -------
                                                                                              
David W. Tice        25,734,852.731  342,118.296  63.118%        0.839%  98.688%        1.312%
Gregg Jahnke         25,667,083.725  409,887.302  62.951%        1.006%  98.428%        1.572%
David Eric Luck      25,796,822.025  280,149.002  63.269%        0.688%  98.926%        1.074%
Kim Evans            25,808,348.803  268,622.224  63.298%        0.659%  98.970%        1.030%
Edmund M. McCarthy   25,807,431.395  269,539.632  63.296%        0.661%  98.966%        1.034%

                                                        [Enlarge/Download Table]
Prudent Bear Fund - Class C Shares                                                         
                                      SHARES      % OF TOTAL SHARES      % OF VOTED SHARES 
NOMINEE                SHARES FOR    AGAINST     FOR         AGAINST    FOR         AGAINST
-------                ----------    -------     ---         -------    ---         -------
                                                                                           
David W. Tice          703,956.402  1,925.926  85.822%        0.234%  99.727%        0.273%
Gregg Jahnke           703,956.402  1,925.926  85.822%        0.234%  99.727%        0.273%
David Eric Luck        703,956.402  1,925.926  85.822%        0.234%  99.727%        0.273%
Kim Evans              703,956.402  1,925.926  85.822%        0.234%  99.727%        0.273%
Edmund M. McCarthy     703,956.402  1,925.926  85.822%        0.234%  99.727%        0.273%

                                                        [Enlarge/Download Table]
Prudent Safe Harbor Fund                                                                      
                                        SHARES       % OF TOTAL SHARES      % OF VOTED SHARES 
NOMINEE                SHARES FOR      AGAINST      FOR         AGAINST    FOR         AGAINST
-------                ----------      -------      ---         -------    ---         -------
                                                                                              
David W. Tice         6,362,919.030   38,359.495  71.127%        0.428%  99.401%        0.599%
Gregg Jahnke          6,287,428.389  113,850.136  70.283%        1.272%  98.221%        1.779%
David Eric Luck       6,363,647.122   37,631.403  71.135%        0.420%  99.412%        0.588%
Kim Evans             6,363,915.304   37,363.221  71.138%        0.417%  99.416%        0.584%
Edmund M. McCarthy    6,364,141.122   37,137.403  71.140%        0.415%  99.420%        0.580%

REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors and Shareholders of                                   
Prudent Bear Funds, Inc.                                                    

In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments and securities sold short, and the related         
statements of operations and of changes in net assets and the financial         
highlights present fairly, in all material respects, the financial position of  
Prudent Bear Funds, Inc. (the "Funds") at September 30, 2002, the results of    
their operations, the changes in their net assets and their financial highlights
for each of the periods indicated, in conformity with accounting principles     
generally accepted in the United States of America.  These financial statements 
and financial highlights (hereafter referred to as "financial statements") are  
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits.  We conducted our    
audits of these financial statements in accordance with auditing standards      
generally accepted in the United States of America, which require that we plan  
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial    
statements, assessing the accounting principles used and significant estimates  
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at        
September 30, 2002 by correspondence with the custodian and brokers, provide a  
reasonable basis for our opinion.                                               

/s/PricewaterhouseCoopers LLP                                                   

Milwaukee, Wisconsin                                                            
November 22, 2002                                                               

INFORMATION ABOUT DIRECTORS AND OFFICERS                                        

The business and affairs of the Funds are managed under the direction of the    
Funds' Board of Directors. Information pertaining to the Directors and Officers 
of the Funds are set forth below.  The SAI includes additional information about
the Funds' Directors and Officers and is available, without charge, upon request
by calling 1-800-711-1848.                                                      

                                                        [Enlarge/Download Table]
                                     TERM OF                                                  # OF PORTFOLIOS     OTHER           
                       POSITIONS(S)  OFFICE AND                                               IN FUND COMPLEX     DIRECTORSHIPS   
                       HELD WITH     LENGTH OF                  PRINCIPAL OCCUPATION          OVERSEEN BY         HELD BY DIRECTOR
NAME, ADDRESS AND AGE  THE FUND      TIME SERVED                DURING PAST FIVE YEARS        DIRECTOR OR OFFICER OR OFFICER      
---------------------  ------------  -----------                ----------------------        ------------------- ----------------
                                                                                                                                  
David W. Tice*<F35>    Director,     Director - Indefinite,     President of David W. Tice            2           None            
8140 Walnut Hill Lane  President     since 1995; President -    & Associates, Inc., the adviser                                   
Suite 300              and           1 yr term, since 1995;     of the Funds since 1993;                                          
Dallas, TX  75231      Treasurer     Treasurer - 1 yr term,     President of BTN Research,                                        
Age: 47                              since 1995                 Inc.                                                              

David Eric Luck        Independent   Indefinite,                President of Redstone Oil &           2           None            
9223 Club Glen Drive   Director      since 1995                 Gas Company since 1988                                            
Dallas, TX  75243                                                                                                                 
Age: 47                                                                                                                           

Kim Evans              Independent   Indefinite,                Private investor                      2           None            
1829 Claridge Court    Director      since 2000                                                                                   
Maitland, FL  32789                                                                                                               
Age: 56                                                                                                                           

Gregg Jahnke*<F35>     Director,     Director - Indefinite,     Analyst and senior strategist         2           None            
8140 Walnut Hill Lane  Vice          since 1995 (resigned       for David W. Tice &                                               
Suite 300              President,    May 29, 2002 and           Associates, Inc.                                                  
Dallas, TX  75231      Secretary     reinstated September                                                                         
Age: 44                              23, 2002); Vice President                                                                    
                                     - 1 yr term, since 1995;                                                                     
                                     Secretary - 1 yr term,                                                                       
                                     since 1995                                                                                   

Edmund M. McCarthy     Director      Indefinite,                Principal, President and CEO          2           None            
6060 SW 85th Street                  since 2002                 of Financial Risk Management                                      
Miami, FL 33143                                                 Advisors Co.                                                      
Age: 67                                                                                                                           

*<F35>  Denotes a director who is an "interested person" as that term is        
      defined in Section 2 (a)(19) of the Investment Company Act of 1940, as
amended (the "1940 Act").                                       

INVESTMENT ADVISER                                                              
DAVID W. TICE & ASSOCIATES, INC.                                          
8140 WALNUT HILL LANE, SUITE 300                                          
DALLAS, TEXAS  75231                                                      
HTTP://WWW.PRUDENTBEAR.COM                                                

ADMINISTRATOR, TRANSFER AGENT,                                                  
DIVIDEND PAYING AGENT &                                                         
SHAREHOLDER SERVICING AGENT                                                     
U.S. BANCORP FUND SERVICES, LLC                                           
615 EAST MICHIGAN STREET                                                  
P.O. BOX 701                                                              
MILWAUKEE, WISCONSIN  53201                                               
1-800-711-1848                                                            

CUSTODIAN                                                                       
U.S. BANK, N.A.                                                           
P.O. BOX 701                                                              
MILWAUKEE, WISCONSIN  53201                                               

INDEPENDENT ACCOUNTANTS                                                         
PRICEWATERHOUSECOOPERS LLP                                                
MILWAUKEE, WISCONSIN                                                      

LEGAL COUNSEL                                                                   
FOLEY & LARDNER                                                           
MILWAUKEE, WISCONSIN                                                      

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-30D’ Filing		Date		Other Filings
Filed as of / Effective on:		12/9/02
Filed on:		12/6/02
		11/22/02
For Period End:		9/30/02		24F-2NT,  NSAR-B
		9/23/02		DEF 14A
		5/29/02
		10/1/01
		9/30/01		24F-2NT,  N-30D,  NSAR-B
		9/30/00		24F-2NT,  N-30D,  NSAR-B
		2/2/00
		9/30/99		24F-2NT,  N-30D,  NSAR-B
		2/8/99
		9/30/98		24F-2NT,  N-30D,  NSAR-B
		12/28/95
		10/25/95
				List all Filings