<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.
Interestingly, shareholder investments through Bull & Bear IRA, SEP-IRA, Profit
Sharing/Money Purchase, 403(b) and Keogh accounts represent more than 33% of the
Fund's total net assets. We believe the Fund's approach of investing for a high
level of income from a professionally managed, well-diversified global portfolio
of primarily investment grade fixed income securities, make it attractive for
conservative investors seeking monthly income with the added convenience of
unlimited, free check writing against their account in amounts of $250 or more.
The twelve months ending June 30, 1996 has reaffirmed the Fund's strategy of
investing in both domestic and international fixed income markets to reduce the
volatility associated with concentration in a single country or region. Because
the economies, interest rates and currency exchange rates of foreign countries
have followed different cycles, the resulting variation of performance by the
world's fixed income markets resulted in a well-balanced Fund portfolio. While
the Fund's total return in the period was a solid 6.26%, the different fixed
income markets around the world showed wide variations. For example, while the
U.S. Treasury market index was up 4.5% last year, German deutschemark returns of
9.4% locally were reduced to -0.5% when converted into U.S. dollars. Similarly,
the Japanese government securities market, which returned only 2% in yen terms
last year, actually lost 21% in U.S. dollar terms. Denmark and Australia, two
countries in which the Fund invests, returned 9.9% and 15.2% last year in local
currency terms, and 6.1% and 22% in U.S. dollar terms. The Fund also was
invested in Italy during the year, which returned 16.5% and 31% in local and
U.S. dollar terms. In general, we expect further performance gains from higher
yielding countries over the next year.
The Fund continues to invest up to 35% of its portfolio in domestic high yield
securities which offer attractive returns at appropriate levels of risk.
Emerging market securities, which are predominantly rated lower than investment
grade also contributed to the Fund's performance last year. The Fund continues
to regard Latin America, Asia, and Eastern Europe as attractive regions for
investment.
Over the balance of the year and into 1997, we believe that the U.S. economy
will be characterized by moderate growth, low levels of inflation, a stable to
improving dollar and less volatility than experienced over the past 12 months.
The Fund's investment strategy will continue to emphasize asset allocation with
a goal of maximizing shareholder returns through issue and sector selection, by
investing in a diversified portfolio of securities that offer attractive
relative values, and lengthening or shortening the Fund's average maturity
depending on our view of interest rate trends. 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, Bull
& Bear Salary Investing Plan and/or Bull & Bear Government Direct Deposit Plan.
For information on these free services, simply give us a call and we will help
you get started.
<PAGE>
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
_______________________________________________________________________________
TOTAL RETURN PERFORMANCE GRAPHS
- -------------------------------
Bull & Bear Global Income Fund ("Fund")
Lehman Aggregate Bond Index ("LABI")
The graph shows results of investing $10,000 in Bull & Bear Global Income Fund
and Lehman Aggregate Bond Index for the 10 years ended June 30, 1996 with
dividends reinvested. The Fund invests for a high level of income in a
diversified worldwide portfolio of primarily investment grade fixed income
corporate and government securities and may invest in money market instruments
for defensive purposes. The Index is fully invested and represents an aggregate
of the Lehman Government/Corporate, Mortgage-Backed and Asset-Backed Indexes.
Total returns for the Fund reflect its policy during the 1996 fiscal year to
maintain monthly distributions of $.05 per share through December 31, 1995 and
$.045 through June 30, 1996, and its investment strategies of investing in a
global portfolio of higher quality fixed income securities and utilized currency
hedging techniques, producing income levels and currency gains which led to
distributions from paid-in capital during the fiscal year of $.31 per share.
_______________________________________________________________________________
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
AVERAGE
FINAL TOTAL ANNUAL
VALUE RETURN RETURN
----- ------ -------
<S> <C> <C> <C>
Fund $14,335 43.5 % 3.67%
LABI 22,714 127.14 8.55
</TABLE>
_______________________________________________________________________________
2
<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
U.S. GOVERNMENT, in 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
SECURITIES FUND income, 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
SPECIAL EQUITIES FUND for 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
SERVICES and the low commissions
you expect. Plus you
can earn American
Call Toll Free Airlines/(R)/
1-800-VIP-4200 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 Global Income Fund's total
return for one year was 6.26%, average
annual total return for the past five
years was 8.06%, for the past ten years
was 3.67%, and since inception, September
1, 1983, was 5.90%. Past performance does
not guarantee future results. Investment
return will fluctuate, so shares when
redeemed may be worth more or less than
their cost. Dollar cost averaging does not
assure a profit or protect against loss in
a declining market, and investors should
consider their ability to make purchases
when prices are low.
</TABLE>
3
<PAGE>
BULL & BEAR GLOBAL INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--JUNE 30, 1996
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- -------------- ------------
<C> <S> <C>
BONDS (92.1%)
AUSTRALIA (3.3%)
$A1,500,000 New South Wales Treasury Corp., 6.3% Guaranteed
Eurobonds, due 4/1/04 (1) . . . . . . . . . . 1,052,928
---------
BRAZIL (1.6%)
$500,000 Metalurgica Gerdau S.A., 11.125% Company
Guaranteed,
due 5/24/ 04 . . . . . . . . . . . . . . . . 497,500
---------
COLOMBIA (16.0%)
2,000,000 Comp De Desarollo Aeropu, 10.19% Senior Notes,
due 5/31/11 . . . . . . . . . . . . . . . . . 2,033,500
3,000,000 Financiera Ener Nacional, 9.375% Bonds,
due 6/15/06 . . . . . . . . . . . . . . . . . 3,035,580
---------
5,069,080
---------
DENMARK (5.6%)
Kr.10,000,000 Kingdom of Denmark, 8% Bonds, due 3/15/06
(1) . . . . . . . . . . . . . . . . . . . . . 1,773,140
---------
INDONESIA (3.3%)
$1,000,000 Indah Kiat International Finance Company,
11.875% Bonds due 6/15/ 02 . . . . . . . . 1,055,000
---------
ITALY (4.3%)
L2,000,000,000 Buoni Poliennali Del Tes Italian Government,
9.50% Bonds, due 2/1/01 (1) . . . . . . . . . 1,344,000
---------
KOREA (3.1%)
$1,000,000 LG-Caltex Oil Corporation, 7.875% Notes, due
7/01/06 . . . . . . . . . . . . . . . . . . 996,850
---------
PHILIPPINES (3.2%)
1,000,000 Philippine Long Distance Telephone, 9.25%
Notes, due 6/30/06 . . . . . . . . . . . . . 1,001,250
---------
SOUTH AFRICA (1.6%)
R2,500,000 Republic of South Africa, 12% Bonds, due
2/28/05 (1) . . . . . . . . . . . . . . . . . 501,850
---------
SPAIN (2.9%)
$1,000,000 BCH Cayman Islands Ltd., 6.5% Bank Guaranteed,
due 2/15/06 . . . . . . . . . . . . . . . . . 928,365
THAILAND (3.1%)
1,000,000 Siam Commercial Bank, 7.50% Subordinated Notes,
due 3/15/06 . . . . . . . . . . . . . . . . 972,100
---------
UNITED STATES (41.9%)
1,000,000 Airborne Freight Corporation, 7.35% Notes, due
9/15/05 . . . . . . . . . . . . . . . . . . 977,168
250,000 American Skiing Corporation, 12% Senior
Subordinated Notes, due 7/ 15/06 . . . . . . 245,000
1,500,000 Conseco Inc., 10.5% Senior Notes, due 12/15/04 1,717,689
1,000,000 Delta Air Lines Inc., 10.375% Debentures, due
2/1/11. . . . . . . . . . . . . . . . . . . . 1,212,299
1,500,000 Farmers Insurance Exchange, 8.5% Notes, due
8/1/04. . . . . . . . . . . . . . . . . . . . 1,517,234
500,000 Hollywood Casino Corporation, 12.75% Senior
Secured Notes, due 11/ 1/03 . . . . . . . . . 495,000
500,000 IXC Communications Inc., 12.5% Senior Notes,
due 10/1/05 . . . . . . . . . . . . . . . . . 525,000
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
- ------------ ------------
<C> <S> <C>
$ 250,000 JCAC Inc., 10.125% Senior Subordinated Notes,
due 6/15/06 . . . . . . . . . . . . . . . . . . $ 249,375
500,000 Mosler Inc., 11% Senior Notes, due 4/15/03 (2) . 422,500
500,000 PRT Funding Corp., 11.625% Senior Notes, due
4/15/04 . . . . . . . . . . . . . . . . . . . . 462,500
500,000 People's Choice TV Corp., 13.125% Units, due
6/1/04. . . . . . . . . . . . . . . . . . . . . 287,500
1,500,000 RHG Finance Corp., 8.875% Company Guaranteed, due
10/1/05 . . . . . . . . . . . . . . . . . . . . 1,543,125
500,000 SFX Broadcasting, 10.75% Senior Subordinated
Notes, due 5/15/06 . . . . . . . . . . . . . . 500,000
1,000,000 TCI Communications Inc., 6.875% Senior Notes, due
2/15/06 . . . . . . . . . . . . . . . . . . . . 906,561
500,000 360 Communications Co., 7.125% Senior Notes, due
3/1/03. . . . . . . . . . . . . . . . . . . . . 480,225
1,000,000 Time Warner Inc. 7.75% Notes, due 6/15/05 . . . 976,319
750,000 Unisys Corp., 12% Senior Notes, due 4/15/03 . . 770,625
-----------
13,288,120
-----------
VENEZUELA (2.2%)
1,000,000 Republic of Venezuela, Debentures, due 12/18/07 707,500
-----------
Total Bonds (cost: $29,555,843) . . . . . . . 29,187,683
-----------
U.S. GOVERNMENT SECURITIES (3.2%)
1,000,000 U.S. Treasury Notes, 6.875%, due 5/15/06 . . . . 1,011,250
-----------
Total U.S. Government Securities (cost: 1,011,250
$998,281). . . . . . . . . . . . . . . . . . -----------
CONTRACTS
- ------------ OPTIONS (.1%)
50 90 Day Euro Dollar . . . . . . . . . . . . . . . 17,500
-----------
Total Options (cost: $22,850) . . . . . . . . 17,500
-----------
SHARES
- ------------ PREFERRED STOCK (4.6%)
10,000 Bear Stearns Finance LLC, 8% Series A Pfd. . . . 237,500
1,000 Consolidated Hydro Inc., 13.5% Pfd. Units (3) . 300,000
25,000 MEPC International, 9.125% Pfd. . . . . . . . . 628,125
12,000 TCI Communications Financing II, 10% Pfd. . . . 298,500
-----------
Total Preferred Stock (cost: $1,698,945) . . . 1,464,125
-----------
TOTAL INVESTMENTS (COST: $32,275,919)
(100.0%) . . . . . . . . . . . . . . . . . $31,680,558
===========
</TABLE>
- ---------
(1) Par value of foreign denominated obligations stated in local currency unless
otherwise indicated, market value stated in U.S. dollars.
(2) Private placement.
(3) Non-income producing security.
See accompanying notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment at market value (cost:
$32,275,919) (note 1) . . . . . . . . . $31,680,558
Cash . . . . . . . . . . . . . . . . . . 195,620
Receivables:
Investment securities sold . . . . . . . 1,000,314
Interest and dividends . . . . . . . . . 555,832
Fund shares sold . . . . . . . . . . . . 102,666
-----------
Total assets . . . . . . . . . . . . . . 33,534,990
-----------
LIABILITIES:
Payables:
Investment securities purchased . . . . 2,519,704
Open forward currency contracts
(note 6) . . . . . . . . . . . . . . . 25,892
Options written, at value, premiums
received $17,150 (note 7) . . . . . . . 11,250
Fund shares redeemed . . . . . . . . . . 709
Accrued management and distribution fees 19,732
Accrued expenses . . . . . . . . . . . . 92,541
-----------
Total liabilities . . . . . . . . . . . 2,669,828
-----------
NET ASSETS: (applicable to 3,895,331
outstanding shares: 250,000,000 shares of
$.01 par value authorized) . . . . . . . $30,865,162
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($30,865,162 / 3,895,331) $7.92
=====
At June 30, 1996, net assets consisted of:
Paid-in capital . . . . . . . . . . . . . $83,541,837
Undistributed net investment income . . . 8,108
Accumulated net realized loss on
investments. . . . . . . . . . . . . . . (52,041,759)
Net unrealized depreciation on
investments, foreign currencies and
futures. . . . . . . . . . . . . . . . . (643,024)
-----------
$30,865,162
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . $ 2,678,565
Dividends . . . . . . . . . . . . . . . 449,010
-----------
Total investment income . . . . . . . 3,127,575
-----------
EXPENSES:
Investment management (note 3) . . . . 251,003
Distribution (note 3) . . . . . . . . . 179,288
Transfer agent . . . . . . . . . . . . 98,294
Custodian . . . . . . . . . . . . . . . 80,456
Professional (note 3) . . . . . . . . . 72,492
Shareholder administration (note 3) . . 39,484
Registration (note 3) . . . . . . . . . 31,111
Directors . . . . . . . . . . . . . . . 10,404
Interest (note 5) . . . . . . . . . . . 587
Other . . . . . . . . . . . . . . . . . 19,349
-----------
Total expenses . . . . . . . . . . . . 782,468
-----------
Net investment income . . . . . . . . 2,345,107
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCIES AND
FUTURES:
Net realized gain from security
transactions . . . . . . . . . . . . . 1,087,615
Net realized gain from foreign currency
and futures transactions . . . . . . . 201,820
Unrealized depreciation of investments,
foreign currencies and futures during
the period . . . . . . . . . . . . . . (1,399,539)
-----------
Net realized and unrealized loss on
investments, foreign currencies and
futures . . . . . . . . . . . . . . . (110,104)
-----------
Net increase in net assets resulting
from operations . . . . . . . . . . . $ 2,235,003
===========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30,
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . $ 2,345,107 $ 2,554,107
Net realized gain (loss) from security, foreign
currency and futures transactions . . . . . . 1,289,435 (5,652,998)
Unrealized appreciation (depreciation) of
investments, foreign currencies and futures
during the period . . . . . . . . . . . . . . (1,399,539) 4,799,978
----------- -----------
Net change in net assets resulting from
operations. . . . . . . . . . . . . . . . . 2,235,003 1,701,087
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($.26
and $.17 per share, respectively) . . . . . (1,147,357) (862,298)
Distributions from paid-in capital ($.31 and
$.43 per share, respectively) . . . . . . . (1,375,770) (2,201,712)
CAPITAL SHARE TRANSACTIONS:
Change in net assets resulting from capital
share transactions (a) . . . . . . . . . . . . (8,026,345) (3,812,731)
----------- -----------
Total change in net assets . . . . . . . . . . (8,314,469) (5,175,654)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . 39,179,631 44,355,285
----------- -----------
End of period (including accumulated
undistributed net investment income (deficit)
of $8,108 and $(1,419,941), respectively) . . $30,865,162 $39,179,631
=========== ===========
</TABLE>
- ---------
(a) Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- --------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Shares sold . . . . 357,017 $ 2,875,512 1,520,831 $ 12,155,579
Shares issued in
reinvestment of
distributions . . 221,556 1,774,518 260,866 2,082,054
Shares redeemed . . (1,579,473) (12,676,375) (2,260,096) (18,050,364)
---------- ------------ ---------- ------------
Net decrease . . . (1,000,900) $ (8,026,345) (478,399) $ (3,812,731)
========== ============ ========== ============
</TABLE>
See accompanying notes to financial statements.
7
<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
Dollar Reserves and Bull & Bear U.S. Government Securities Fund are the other
series of the Company. The primary objective of the Fund is a high level of
income and secondarily, capital appreciation. The Fund seeks to achieve its
investment objective by investing primarily in foreign and domestic fixed income
securities and other securities, depending on the Investment Manager's
evaluation of current and anticipated market conditions. The Fund is subject to
the risk of price fluctuations of the securities held in its portfolio which is
generally a function of the underlying credit ratings of an issuer, the maturity
length of its securities, the securities' yield, the general economic and
interest rate conditions. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. With respect to security valuation, securities traded on a national
securities exchange or the Nasdaq National Market System ("NMS") are valued at
the last reported sales price on the day the valuations are made. Such
securities that are not traded on a particular day and securities traded in the
over-the-counter market that are not on NMS are valued at the mean between the
current bid and asked prices. Certain of the securities in which the Fund
invests are priced through pricing services which may utilize a matrix pricing
system which takes into consideration factors such as yields, prices,
maturities, call features and ratings on comparable securities. Bonds may be
valued according to prices quoted by a dealer in bonds which offers pricing
services. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Securities of foreign issuers denominated in foreign currencies are translated
into U.S. dollars at prevailing exchange rates. Forward currency contracts are
undertaken to hedge certain assets denominated in foreign currencies. Forward
contracts are marked to market daily and the change in market value is recorded
by the Fund as an unrealized gain or loss. When a contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed. The
Fund could be exposed to risk if the counterparties are unable to meet the terms
of the contracts or if the value of the currency changes unfavorably. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Interest income is recorded on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions to shareholders are recorded
on the ex-dividend date. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At June 30, 1996, the
Company had an unused capital loss carryforward of approximately $52,067,000 of
which $17,987,000 expires in 1997, $17,712,000 in 1998, $8,549,000 in 1999,
$1,656,000 in 2000, $4,110,000 in 2001, $173,000 in 2003 and $1,880,000 in 2004.
Based on Federal income tax cost of $32,275,919, gross unrealized appreciation
and gross unrealized depreciation were $213,293 and $808,654, respectively, at
June 30, 1996. Distributions paid to shareholders during the years ended June
30, 1996 and 1995 differ from net
8
<PAGE>
investment income and net gains (losses) from security, foreign currency and
futures transactions as determined for financial reporting purposes principally
as a result of the characterization of realized foreign currency gains (losses)
for tax/book purposes, the taxability of unrealized appreciation (depreciation)
on certain forward currency contracts and the utilization of capital loss
carryforwards. These distributions are classified as "distributions from paid-in
capital" in the Statement of Changes in Net Assets.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average daily net
assets of the Fund, at the annual rate of 7/10 of 1% of the first $250 million,
5/8 of 1% from $250 million to $500 million, and 1/2 of 1% over $500 million.
The Investment Manager has 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 monthly 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 the remaining net assets. If the Fund's expenses exceed
such rates, the Investment Manager will reimburse the Fund for any excess.
Certain officers and directors of the Fund are officers and directors of the
Investment Manager and Investor Service Center, Inc., the Fund's Distributor.
During the year ended June 30, 1996, the Fund paid $5,487 to Bull & Bear
Securities, Inc., an affiliate of the Investment Manager, as commissions for
brokerage services. The Fund reimbursed the Investment Manager $16,889 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 pays
the Distributor a fee in an amount of one-quarter of one percent per annum of
the Fund's average daily net assets as compensation for service activities and a
fee in an amount of one-quarter of one percent per annum of the Fund's average
daily net assets as compensation for distribution activities. The fee for
service activities is intended to cover personal services provided to
shareholders in the Fund and the maintenance of shareholder accounts. The fee
for distribution activities is to cover all other activities and expenses
primarily intended to result in the sale of the Fund's shares. Investor Service
Center also provides shareholder administration services to the Fund at cost,
for which it received $39,484 for the year ended June 30, 1996.
(4) Purchases and sales of securities other than short term notes aggregated
$198,476,529 and $202,560,534, respectively, for the year ended June 30, 1996.
(5) The Fund has a committed bank line of credit. As part of the agreement the
Fund is required to pledge securities it holds in its portfolio if there is an
outstanding balance. At June 30, 1996, there was no balance outstanding and the
interest rate was equal to the Federal Reserve Funds Rate plus 1.75 percent. 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 $3,552.
9
<PAGE>
(6) At June 30, 1996, open forward currency and futures contracts outstanding
consisted of:
<TABLE>
<CAPTION>
UNREALIZED
FACE VALUE CONTRACT VALUE APPRECIATION
(U.S. DOLLARS) PRICE DATE (DEPRECIATION)
--------------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Australian Dollar (Buy) $1,000,000 0.7912 07/11/96 $ (7,924)
Japanese Yen (Buy) . . 1,000,184 108.7700 07/11/96 (4,099)
Financial Rand (Buy) . 511,852 4.3520 07/05/96 1,071
---------- --------
$2,512,036 $(10,952)
========== ========
Danish Krone (Sell) . $1,739,277 5.9220 07/10/96 $(18,855)
Japanese Yen (Sell) . 1,000,000 108.7900 07/11/96 3,915
---------- --------
$2,739,277 (14,940)
========== --------
Total Open Forward
Currency Contracts, net . . . . . . . . . . . . . . . . . $(25,892)
========
U.S. 10 yr Treasury
Notes (Sell) . . . . $1,061,180 106.1250 09/30/96 $(13,820)
U.S. 10 yr Treasury
Notes (Sell) . . . . 525,590 105.1250 09/30/96 (11,910)
---------- --------
Total Open Futures
Contracts . . . . . . $1,586,770 $(25,730)
========== ========
</TABLE>
(7) At June 30, 1996, options written consisted of:
CONTRACTS/EXPIRATION DATE/EXERCISE PRICE NUMBER OF CONTRACTS VALUE
- ---------------------------------------- ------------------- -------
Euro$ 1 yr Mid-curve/Sept./.18 50 $11,250
=======
-----------------
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 . . $ 8.00 $ 8.25 $ 9.39 $ 8.56 $ 7.97
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income . .26 .17 .60 .66 .77
Net realized and
unrealized gain (loss)
on investments . . . . .23 .18 (1.02) .92 .54
------- ------- ------- ------- -------
Total from investment
operations. . . . . . .49 .35 (.42) 1.58 1.31
------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income . . . (.26) (.17) (.60) (.66) (.72)
Distributions in excess
of net realized gains . -- -- (.12) (.09) --
Distributions from
paid-in capital . . . . (.31) (.43) -- -- --
------- ------- ------- ------- -------
Total distributions . . (.57) (.60) (.72) (.75) (.72)
------- ------- ------- ------- -------
Net asset value at end of
period . . . . . . . . . $ 7.92 $ 8.00 $ 8.25 $ 9.39 $ 8.56
======= ======= ======= ======= =======
TOTAL RETURN . . . . . . 6.26% 4.52% (5.12)% 19.39% 17.09%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
period (000's omitted) . $30,865 $39,180 $44,355 $51,768 $44,323
======= ======= ======= ======= =======
Ratio of expenses to
average net assets . . . 2.18% 2.21% 1.98% 1.95% 1.93%
======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets . . . . . . . . . 6.55% 6.20% 6.58% 7.44% 9.25%
======= ======= ======= ======= =======
Portfolio turnover rate . 585% 385% 223% 172% 206%
======= ======= ======= ======= =======
Average commission per
share. . . . . . . . . . $ .05
=======
</TABLE>
- ---------
*Per share income and operating expenses and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
10
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bull & Bear Global Income Fund,
a series of Bull & Bear Funds II, Inc.:
We have audited the accompanying statement of assets and liabilities of Bull &
Bear Global Income Fund, 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 and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Bull &
Bear Global Income Fund 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
11
