<PAGE>
August 15, 1996
Fellow Shareowners:
It is a pleasure to submit this Annual Report and to welcome our many new
shareowners who have joined us since our last Report by opening regular,
Gifts/Transfers to Minors, and qualified retirement plan accounts, plus Bull &
Bear Securities discount brokerage customers whose cash balances have been
automatically swept into the Fund. Interestingly, Bull & Bear IRA, SEP-IRA,
Profit Sharing/Money Purchase, 403(b) and Keogh accounts represent more than 23%
of the Fund's net assets.
We believe the Fund's approach of investing exclusively in short term U.S.
Government securities, the income from which is generally free from all state
income and personal property taxes, make it a sound choice for safety-conscious
investors seeking a combination of high quality, low risk, tax advantages, daily
income paid monthly, and the extra convenience of free, unlimited check writing.
The Fund's 12-month return was 4.81% and its compound 7-day yield at June 30,
1996 was 4.87%.
The first half of the year saw an accelerated pace of job creation and
economic activity on the one hand, and persistence of low levels of inflation on
the other. Over 1.6 million new jobs were created, and the unemployment rate
fell to 5.3%. Other measures of employment, such as average work week length,
overtime hours and average hourly earnings confirm increased demands for labor.
Concern that increased levels of employment would lead to an overheated economy
and a resurgence of inflation caused short term interest rates to increase by
one quarter to one half a percent from late 1995. At this time, however, few
signs of overheating have emerged despite the fact that more Americans are
working and are earning more. A variety of factors help explain the lack of
inflationary price pressures, including gains in productivity, consumer
resistance to price increases, and the competitive nature of an increasingly
global economy. We anticipate that interest rates will continue to rise until
the pace of growth in the economy slows. At this time, it appears that modest
increases in interest rates are the most probable outcome, which should result
in an increase in the Fund's yield.
The ongoing strategy for Dollar Reserves will be to continue to invest for
consistent returns in short term U.S. Government instruments which have a high
degree of safety and liquidity, with the goal of optimizing shareowner results
by investing in those securities which offer the highest level of relative value
at time of purchase. To take advantage of this, we recommend building your
account on a regular basis, which can be done safely, automatically and
conveniently through the Bull & Bear Bank Transfer Plan, the Bull & Bear Salary
Investing Plan, and the Bull & Bear Government Direct Deposit Plan. For
information on these free services, simply give us a call and we will help get
you started.
If you have any questions or would like information on any of the Bull & Bear
Funds, the Bull & Bear No-Fee IRA/(R)/ or opening a discount brokerage account
at Bull & Bear Securities, where you can earn American Airlines/(R)
/AAdvantage/(R)/ miles on every trade, we would be pleased to hear from you.
Just call 1-800-847-4200, and an Investor Service Representative will be glad to
assist you, as always, without any obligation on your part.
Sincerely,
[SIGNATURE OF ROBERT D. ANDERSON] [SIGNATURE OF STEVEN A. LANDIS]
Robert D. Anderson Steven A. Landis
Vice Chairman Senior Vice President
Portfolio Manager
<PAGE>
[LOGO OF BULL & BEAR APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------
INCOME FUNDS-- MONEY . BULL & BEAR A high quality money
MARKET, DOLLAR RESERVES market fund investing in
U.S. GOVERNMENT, U.S. Government
MUNICIPAL AND securities. Income is
GLOBAL generally free from
state income and
. Monthly Dividends intangible personal
property taxes. (For
. Free, Unlimited Bull & Bear Performance
Check Writing Plus/(R)/ discount
($250 minimum ----
per check) brokerage accounts,
there is no check
writing minimum.)
. BULL & BEAR Investing for a high
U.S. GOVERNMENT level of current income,
SECURITIES FUND liquidity and safety of
principal.
. BULL & BEAR Investing for the
MUNICIPAL INCOME FUND highest possible income
exempt from Federal
income tax that is
consistent with
preservation of
principal.
. BULL & BEAR Investing for a high
GLOBAL INCOME FUND level of income from a
global portfolio of
primarily investment
grade fixed income
securities.
- -------------------------------------------------------------------------------
GROWTH FUNDS-- . BULL & BEAR Invests worldwide for
U.S., GLOBAL U.S. AND OVERSEAS FUND the highest possible
AND PRECIOUS total return.
METALS
. BULL & BEAR Invests aggressively for
SPECIAL EQUITIES FUND maximum capital
appreciation.
. BULL & BEAR Seeks long term capital
GOLD INVESTORS appreciation in
investments with the
potential to provide a
hedge against inflation
and preserve the
purchasing power of the
dollar.
Call our toll-free number for a prospectus
containing more complete information, including
charges and expenses. Please read it carefully
before you invest.
- -------------------------------------------------------------------------------
DISCOUNT . BULL & BEAR Receive the investment
BROKERAGE SECURITIES, INC. information you need and
SERVICES the low commissions you
expect. Plus you can
CALL TOLL FREE earn American
1-800-VIP-4200 Airlines/(R)/
AAdvantage/(R)/ miles
every time you trade.
And you can save an
additional 10% off our
already low commission
rates when you use Bull
& Bear PC OnLine
Investment Center/SM/
and/or Bull & Bear
TeleQuote/
TeleTrade/SM/. (There is
no check writing minimum
for Bull & Bear
Performance Plus/(R)/
-----
accounts.)
Total Return Performance. For the periods ended June
30, 1996, Bull & Bear Dollar Reserves' 7-day
compound yield was 4.87% on a current yield of
4.76%; total return for one year was 4.81%; average
annual return for five years was 3.76%; for 10 years
was 5.33%; and since inception, June 26, 1980,
7.39%. Past performance does not guarantee future
results. Investment return will fluctuate, and there
can be no assurance a net asset value of $1.00 per
share will be able to be maintained.
</TABLE>
2
<PAGE>
BULL & BEAR DOLLAR RESERVES
SCHEDULE OF PORTFOLIO INVESTMENTS--JUNE 30, 1996
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PRINCIPAL DATE OF
AMOUNT PURCHASE VALUE*
- ----------- ---------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (100.0%)
$ 3,000,000 Federal Farm Credit, due 7/25/96 . . . 5.24% $ 2,989,600
5,190,000 Federal Home Loans Banks, due 7/25/96 5.58 5,378,921
6,750,000 Federal Home Loan Banks, due 8/05/96 . 5.35 6,753,405
2,550,000 Federal Home Loan Banks, due 8/07/96 . 5.31 2,536,210
5,500,000 Federal Home Loan Banks, due 8/12/96 . 5.33 5,500,868
7,075,000 Federal Home Loan Banks, due 8/14/96 . 5.27 7,030,034
10,300,000 Federal Home Loan Banks, due 9/11/96 . 5.41 10,188,892
9,600,000 Federal Home Loan Banks, due 9/18/96 . 5.40 9,487,715
1,000,000 Federal Home Loan Banks, due 2/03/97 . 6.03 1,011,796
10,000,000 Student Loan Marketing Assn., due
8/9/96. . . . . . . . . . . . . . . . 5.46 10,076,628
1,410,000 Student Loan Marketing Assn., due 1,425,779
1/23/97 . . . . . . . . . . . . . . . 5.45 ------------
TOTAL INVESTMENTS (100.0%) . . . . . $62,379,848
============
</TABLE>
- ---------
* Cost of investments for financial reporting and for Federal income tax
purposes is the same as value.
See accompanying notes to financial statements.
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value which equals
amortized cost (note 1) . . . . . . . . $62,379,848
Cash . . . . . . . . . . . . . . . . . . 213,784
Receivables:
Interest . . . . . . . . . . . . . . . . 5,811
Fund shares sold . . . . . . . . . . . . 1,914
-----------
Total assets . . . . . . . . . . . . . 62,601,357
-----------
LIABILITIES:
Payable for distributions to shareholders 3,044
Accrued expenses . . . . . . . . . . . . 131,032
-----------
Total liabilities . . . . . . . . . . . 134,076
-----------
NET ASSETS: (applicable to 62,398,353
outstanding shares: 500,000,000 shares of
$.01 par value authorized) . . . . . . . $62,467,281
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($62,467,281 / 62,398,353)
. . . . . . . . . . . . . . . . . . . . $1.00
=====
At June 30, 1996, net assets consisted of:
Paid-in capital . . . . . . . . . . . . . 62,476,133
Accumulated net realized loss on
investments. . . . . . . . . . . . . . . (8,852)
-----------
$62,467,281
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . $3,420,410
----------
EXPENSES:
Investment management (note 3) . . . . . 305,752
Distribution (note 3) . . . . . . . . . . 152,876
Transfer agent . . . . . . . . . . . . . 111,963
Professional (note 3) . . . . . . . . . . 71,032
Custodian . . . . . . . . . . . . . . . . 52,604
Registration (note 3) . . . . . . . . . . 43,311
Shareholder administration (note 3) . . . 38,280
Printing . . . . . . . . . . . . . . . . 31,528
Directors . . . . . . . . . . . . . . . . 10,429
Miscellaneous . . . . . . . . . . . . . . 37,818
----------
Total expenses . . . . . . . . . . . . 855,593
Investment management fees and
distribution plan expenses waived (note
3) . . . . . . . . . . . . . . . . . . (305,752)
----------
Net expenses . . . . . . . . . . . . . 549,841
----------
Net investment income . . . . . . . . . 2,870,569
----------
NET REALIZED LOSS FROM SECURITY
TRANSACTIONS: . . . . . . . . . . . . . . (108)
----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . $2,870,461
==========
</TABLE>
-----------------
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30,
<TABLE>
<CAPTION>
1996 1995
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . $ 2,870,569 $ 2,987,825
Net realized gain (loss) from security
transactions. . . . . . . . . . . . . . . . . (108) 33,028
----------- ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . 2,870,461 3,020,853
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions ($.047 and $.044 per share,
respectively) . . . . . . . . . . . . . . . . (2,871,484) (2,987,825)
CAPITAL SHARE TRANSACTIONS:
Change in net assets resulting from capital
share transactions (a) . . . . . . . . . . . (2,809,991) (11,105,880)
----------- ------------
Total decrease in net assets . . . . . . . . (2,811,014) (11,072,852)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . 65,278,295 76,351,147
----------- ------------
End of period . . . . . . . . . . . . . . . . $62,467,281 $ 65,278,295
=========== ============
</TABLE>
- ---------
(a) Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- ---------------
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . $ 122,565,315 $ 526,864,067
Shares issued in reinvestment of
distributions. . . . . . . . . . . . . . . 2,786,829 2,711,471
Shares redeemed . . . . . . . . . . . . . (128,162,135) (540,681,418)
------------- -------------
Net decrease . . . . . . . . . . . . . . . $ (2,809,991) $ (11,105,880)
============= =============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) The Fund is a diversified series of common stock of Bull & Bear Funds II,
Inc. (the "Company") which is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Bull & Bear
Global Income Fund and Bull & Bear U.S. Government Securities Fund are the other
two series of the Company. The Fund's investment objective is to provide its
shareholders maximum current income consistent with preservation of capital and
maintenance of liquidity. The Fund invests exclusively in obligations of the
U.S. Government, its agencies and instrumentalities.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The market
value of the Fund's portfolio securities is cost adjusted for amortization of
premiums and accretion of discounts. Dividends from net investment income
(investment income less expenses plus or minus all realized gains or losses on
the Fund's portfolio securities) are declared daily and reinvested or paid
monthly. Security transactions are accounted for on the trade date (the date the
order to buy or sell is executed). Interest income is recorded on the accrual
basis. In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At June 30, 1996, the
Fund had an unused capital loss carryforward of approximately $8,900 of which
$8,600 expires in 2003 and $300 in 2004.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average daily net
assets of the Fund, at the annual rate of .50 of 1% of the first $250 million,
.45 of 1% from $250 million to $500 million, and .40 of 1% over $500 million.
The Investment Manager has undertaken that the operating expenses of the Fund
for each fiscal year (including management fees but excluding taxes, interest,
brokerage commissions and distribution plan expenses), expressed as a percentage
of average daily net assets, will not exceed the lowest rate prescribed by any
state in which shares of the Fund are qualified for sale. Currently, such
limitation is 2 1/2% of the first $30 million of such assets, 2% of the next $70
million and 1 1/2% of any net assets in excess of $100 million. If the Fund's
expenses exceed such rates, the Investment Manager will reimburse the Fund for
any excess. Although not required by the expense limitation, the Investment
Manager voluntarily waived $152,876 of its management fee for the year ended
June 30, 1996. Certain officers and directors of the Fund are officers and
directors of the Investment Manager and Investor Service Center, Inc., the
Fund's distributor. The Fund reimbursed the Investment Manager $24,625 for
providing certain administrative and accounting services at cost for the year
ended June 30, 1996.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"). Pursuant to the Plan, the Fund may
pay the Distributor a fee in an amount of one quarter of one percent per annum
of the Fund's average daily net assets as compensation for
5
<PAGE>
distribution and service activities. The fee is intended to cover personal
services provided to shareholders in the Fund and the maintenance of shareholder
accounts and all other activities and expenses primarily intended to result in
the sale of the Fund's shares. The distribution fees were waived by Investor
Service Center for the year ended June 30, 1996. Investor Service Center also
received $38,280 for shareholder administration services it provided to the Fund
at cost for the year ended June 30, 1996.
(5) The Fund had an uncommitted bank line of credit for temporary or emergency
purposes which expired. For the year ended June 30, 1996 the weighted average
interest rate was 8.7% based on the balances outstanding during the year and the
weighted average amount outstanding was $5,071.
-----------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at
beginning of period . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income. . .047 .044 .026 .026 .042
Less distributions:
Distributions from net
investment income . . (.047) (.044) (.026) (.026) (0.42)
------- ------- ------- ------- -------
Net asset value at end of
period. . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
TOTAL RETURN . . . . . . . 4.81% 4.53% 2.59% 2.63% 4.28%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period
(000's omitted) . . . . . $62,467 $65,278 $76,351 $64,673 $63,832
======= ======= ======= ======= =======
Ratio of expenses to
average net assets (a) . .90% .89% .89% .75% .80%
======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets (b) . . . . . . . 4.70% 4.41% 2.56% 2.59% 4.24%
======= ======= ======= ======= =======
</TABLE>
- ---------
(a) Ratio prior to waiver by the Investment Manager and Distributor was 1.40%,
1.39%, 1.39%, 1.25% and 1.22% for the years ended June 30, 1996, 1995, 1994,
1993 and 1992, respectively.
(b) Ratio prior to waiver by the Investment Manager and Distributor was 4.20%,
3.91%, 2.06%, 2.09% and 3.82% for the years ended June 30, 1996, 1995, 1994,
1993 and 1992, respectively.
6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bull & Bear Dollar Reserves,
a series of Bull & Bear Funds II, Inc.:
We have audited the accompanying statement of assets and liabilities of Bull &
Bear Dollar Reserves, a series of Bull & Bear Funds II, Inc., including the
schedule of portfolio investments as of June 30, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Bull &
Bear Dollar Reserves as of June 30, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
July 12, 1996
7
