BULL & BEAR FUNDS II INC, 485BPOS, 1997-09-02

BULL & BEAR FUNDS II INC
485BPOS, 1997-09-02

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As filed with the Securities and Exchange Commission on September 2, 1997
1933 Act File No. 2-57953
1940 Act File No. 811-2474
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 53
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 44

BULL & BEAR FUNDS II, INC.
(Formerly Bull & Bear Incorporated)
(Exact Name of Registrant as Specified in Charter)

11 Hanover Square
New York, New York 10005
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: 1-212-785-0900

Copies to:

WILLIAM J. MAYNARD STUART H. COLEMAN, ESQ.
Bull & Bear Advisers, Inc. Stroock & Stroock & Lavan LLP
11 Hanover Square 180 Maiden Lane
New York, New York 10005 New York, New York 10038
(Name and Address of
Agent for Service)

It is proposed that this filing will become effective:

ON SEPTEMBER 2, 1997 PURSUANT TO RULE 485(B)

Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Notice required by Rule 24f-2 for the fiscal year ended June 30,
1997 was filed on August 29, 1997.

<PAGE>

BULL & BEAR FUNDS II, INC.

CONTENTS OF REGISTRATION STATEMENT

This registration statement consists of the following papers and documents.

Cover Sheet

Calculation of Registration Fee Sheet

Table of Contents

Cross Reference Sheet - Bull & Bear Dollar Reserves

Bull & Bear Dollar Reserves

Part A - Prospectus

Part B - Statement of Additional Information

Part C - Other Information

Signature Page

Exhibits

<PAGE>

BULL & BEAR FUNDS II, INC.

CROSS REFERENCE SHEET

BULL & BEAR DOLLAR RESERVES

Part A. Item No. Prospectus Caption

1 Cover Page

2 Expense Tables

3 Financial Highlights
Yield Information

4 General

The Fund's Investment Program
Capital Stock
Cover Page

5 Investment Manager
Custodian and Transfer Agent

6 Cover Page
General
Investment Manager
Distributions and Taxes
Determination of Net Asset Value
Shareholder Services
Capital Stock
Back Cover Page

7 How to Purchase Shares
Shareholder Services
Determination of Net Asset Value
Distribution of Shares
Back Cover Page

8 How to Redeem Shares
Determination of Net Asset Value

9 Not Applicable

<PAGE>

BULL & BEAR FUNDS II, INC.

CROSS REFERENCE SHEET

BULL & BEAR DOLLAR RESERVES

Statement of Additional
Part B. Item No. Information Caption

10 Cover Page

11 Table of Contents

12 Cover Page

13 The Fund's Investment Program
Investment Restrictions
Appendix

14 Officers and Directors

15 Officers and Directors
Investment Manager

16 Officers and Directors
Investment Manager
Investment Management Agreement
Distribution of Shares
Custodian, Transfer and Dividend
Disbursing Agent
Auditors

17 Allocation of Brokerage

18 Not Applicable

19 Purchase of Shares
Determination of Net Asset Value

20 Dividends and Taxes

21 Distribution of Shares

22 Performance Information

<PAGE>

23 Financial Statements

<PAGE>

Bull & Bear Dollar Reserves is a high quality no-load money market fund
investing exclusively in obligations of the U.S. Government, its agencies and
instrumentalities. The Fund's objective is to provide its shareholders maximum
current income consistent with preservation of capital and maintenance of
liquidity. The monthly dividends the Fund pays to its shareholders are generally
exempt from state and local income taxes. Also, the value of an individual's
Fund shares is generally exempt from state intangible personal property taxes.

THE FUND IS MANAGED TO MAINTAIN A NET ASSET VALUE OF $1.00 PER SHARE, ALTHOUGH
THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO. AN INVESTMENT IN THE
FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. FUND SHARES ARE
NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK OR
ANY AFFILIATE OF ANY BANK.

The Fund waives the minimum initial investment of $1,000 if you invest $100 or
more per month through the Bull & Bear Automatic Investment Program.

<PAGE>

This prospectus contains information you should know about the Fund before you
invest. Please keep it for future reference. The Fund's Statement of Additional
Information, dated September 2, 1997, has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference in this prospectus.
It is available at no charge by calling toll-free at 1-888-503-FUND
(1-888-503-3863). The SEC maintains a Web site (http://www.sec.gov) that
contains the Fund's Statement of Additional Information, material incorporated
by reference, and other information regarding registrants that file
electronically with the SEC, as does the Fund.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

EXPENSE TABLES. The tables and example below are designed to help you understand
the costs and expenses that you will bear directly or indirectly as an investor
in the Fund. A $2 account fee is charged if your monthly balance is less than
$500, unless you are in the Bull & Bear Automatic Investment Program (see "How
to Purchase Shares").

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................................NONE
Sales Load Imposed on Reinvested Dividends.................................NONE
Deferred Sales Load........................................................NONE
Redemption Fees............................................................NONE
Exchange Fee...............................................................NONE

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver).............................................0.45%
12b-1 Fees (after waiver)..................................................0.00%
Other Expenses.............................................................0.46%
Total Fund Operating Expenses (after waivers)..............................0.91%

Example

You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and a redemption at the end of each time
period:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$9 $29 $50 $111

The example set forth above assumes reinvestment of all dividends and uses an
assumed 5% annual rate of return as required by the SEC. THE EXAMPLE IS AN
ILLUSTRATION ONLY AND SHOULD NOT BE CONSIDERED AN INDICATION OF PAST OR FUTURE
RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. The percentages given for "Annual Fund Operating Expenses" are
based on the Fund's expenses (after waivers of 12b-1 fees and management fees)
and average daily net assets during its fiscal year ended June 30, 1997,
although such expenses have been restated to reflect a waiver of 0.05% of the
management fee, which took effect as of September 1, 1997. Without such waivers,
management fees, 12b-1 fees, and total Fund operating expenses would have been
0.50%, 0.25% and 1.21%, respectively. "Other Expenses" include amounts paid to
the Fund's custodian and transfer agent and reimbursed to the Investment Manager
and Investor Service Center, the Distributor, and does not include interest
expense from the Fund's bank borrowing. As of June 30, 1997, the Distributor
intended to waive its 12b-1 fee during the fiscal year ending June 30, 1998.

FINANCIAL HIGHLIGHTS are presented below for a share of capital stock
outstanding throughout the period. The following information is supplemental to
the Fund's financial statements and report thereon of Tait, Weller & Baker,
independent accountants, appearing in the June 30, 1997 Annual Report to
Shareholders and incorporated by reference in the Statement of Additional
Information.

Years ended June 30,
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at
beginning of period.. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from investment
operations: Net
investment income.... 0.047 0.047 0.044 0.026 0.026 0.042 0.062 0.078 0.077 0.064
Less dividends:
Dividends from net
investment income.... (0.047) (0.047) (0.044) (0.026) (0.026) (0.042) (0.062) (0.078) (0.077) (0.064)
Net asset value at
end of period........ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN......... 4.83% 4.81% 4.53% 2.59% 2.63% 4.28% 6.41% 8.10% 8.04% 6.58%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period
(000's omitted)...... $62,908 $62,467 $65,278 $76,351 $64,673 $63,832 $77,984 $94,474 $103,975 $102,684
======= ======= ======= ======= ======= ======= ======= ======= ======== ========
Ratio of expenses to
average net assets (a) 0.71% 0.90% 0.89% 0.89% 0.75% 0.80% 0.85% 0.65% 1.10% 1.25%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Ratio of net investment
income to average net
assets (b)........... 4.73% 4.70% 4.41% 2.56% 2.59% 4.24% 6.30% 7.91% 7.62% 6.37%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
8

<PAGE>

- ---------

(a) Ratio prior to waivers by the Investment Manager and Distributor was
1.32%,1.13%, 1.00%, 1.22%, 1.25%, 1.39%, 1.39%, 1.40% and 1.21% in 1989,
1990, 1991, 1992 ,1993, 1994, 1995, 1996 and 1997, respectively.
(b) Ratio prior to waivers by the Investment Manager and Distributor was
7.40%, 7.43%, 6.15%, 3.82%, 2.09%, 2.06%, 3.91%, 4.20% and 4.23% in
1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996 and 1997, respectively.

<PAGE>

TABLE OF CONTENTS

Expense Tables.................2 Dividends and Taxes................11
Financial Highlights...........2 Determination of Net Asset Value...12
General........................3 Investment Manager.................12
The Fund's Investment Program..3 Yield Information..................12
How to Purchase Shares.........4 Distribution of Shares.............13
Shareholder Services...........6 Capital Stock......................13
How to Redeem Shares...........9 Custodian and Transfer Agent.......14

GENERAL

PURPOSES OF THE FUND. The Fund is a no load mutual fund designed to provide
investors an economical and convenient way to invest cash reserves for maximum
current income consistent with preservation of capital and maintenance of
liquidity. All Fund net income is declared daily as a dividend and distributed
monthly.

CHECK WRITING PRIVILEGE FOR EASY ACCESS. Shareholders have the convenience of
making redemptions without charge simply by writing a check for $250 or more.
Shareholders with a discount brokerage Bull & Bear Performance Plus Account(R)
may write a check in any amount. Checks are free and there is no limit on the
number of checks a shareholder may write.

YIELD INFORMATION. Please call toll-free at 1-888-503-FUND (1-888-503-3863) for
the Fund's yield.

THE FUND'S INVESTMENT PROGRAM

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 ("U.S. Government Securities"). The monthly dividends the Fund
pays are generally exempt from state and local income taxes. In addition, the
value of Fund shares is generally exempt from state intangible personal property
taxes. There can be no assurance that the Fund will achieve its investment
objective. In periods of declining interest rates, the Fund's yields may be
somewhat higher than prevailing market rates, and in periods of rising rates the
opposite may be true. Also, when interest rates are falling, net cash inflows
from the continuous sale of the Fund's shares are likely to be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing its yield. In periods of rising interest rates, the
opposite may be true.

The U.S. Government Securities in which the Fund may invest include U.S.
Treasury notes and bills and certain agency securities that are backed by the
full faith and credit of the U.S. Government. The Fund may also invest without
limit in securities issued by U.S. Government agencies and instrumentalities
that may have different degrees of government backing as to principal or
interest but which are not backed by the full faith and credit of the U.S.
Government. While the risks associated with investment in U.S. Government
Securities are minimal, an investment in the Fund is not completely risk free.
The U.S. Government is not obligated by law to provide financial support to
certain agencies, and securities issued by them may involve risk of loss of
principal and interest. For example, securities issued by the Federal Farm
Credit Banks are supported by the agency's limited right to borrow money from
the U.S. Treasury under certain circumstances, and securities issued by the
Federal Home Loan Banks are supported only by the credit of the agency that
issued them. The Fund invests in these securities only when satisfied that the
issuer's credit risk is minimal. The Fund is managed so the dollar-weighted
average maturity of its

<PAGE>

portfolio does not exceed 90 days, and all investments have, or are deemed to
have, a remaining maturity of less than 397 days.

WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
basis. In such transactions the price is fixed at the time the commitment to
make the purchase is made, but delivery and payment occur at a later date. The
Fund will only make commitments to purchase U.S. Government Securities maturing
in less than 397 days from the date of the commitment. Although the Fund will
enter into whenissued transactions with the intention of acquiring the
securities, the Fund may sell the securities prior thereto, which may result in
a gain or loss. Acquiring securities in this manner involves a risk that yields
available on the delivery date may be higher than those received in such
transactions, as well as the risk of price fluctuation. When the Fund purchases
securities on a when-issued basis, its custodian will set aside in a segregated
account cash or liquid securities whose value is marked to the market daily with
a market value at least equal to the amount of the commitment. If necessary,
assets will be added to the account daily so that the value of the account will
not be less than the amount of the Fund's purchase commitment. Failure of the
issuer to deliver the security may cause the Fund to incur a loss or miss an
opportunity to make an alternative investment.

LENDING. Pursuant to an arrangement with its custodian bank, the Fund may lend
portfolio securities or other assets to other parties limited to one third of
the Fund's total assets. If the Fund engages in lending transactions, it will
enter into agreements that require that the loans be continuously secured by
cash, U.S. Government Securities, or any combination of cash and such
securities, as collateral equal at all times to at least the market value of the
assets lent. To the extent of such activities, the custodian will apply credits
against its custodial charges. There are risks to the Fund of delay in receiving
additional collateral and risks of delay in recovery of, and failure to recover,
the assets lent should the borrower fail financially or otherwise violate the
terms of the lending agreement. Loans will be made only to borrowers deemed to
be of good standing. Any loan made by the Fund will provide that it may be
terminated by either party upon reasonable notice to the other party.

VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate U.S. Government Securities. The yield on these securities is
adjusted in relation to changes in specific rates, such as the prime rate, and
different securities may have different adjustment rates. The Fund's investments
in these securities must comply with conditions established by the SEC under
which they may be considered to have remaining maturities of 397 days or less.

OTHER INFORMATION. The Fund's investment objective is fundamental and may not be
changed without shareholder approval. The Fund is also subject to certain
investment restrictions, set forth in the Statement of Additional Information,
that are fundamental and cannot be changed without shareholder approval. The
Fund's other investment policies are not fundamental and may be changed by the
Board of Directors without shareholder approval. The Fund operates in accordance
with a nonfundamental policy that complies with Rule 2a-7 under the Investment
Company Act of 1940 ("1940 Act") that limits the amount the Fund may invest in
the securities of any one issuer to 5% of the Fund's total assets, except that
this limitation does not apply to U.S. Government Securities. The Fund is also
subject to a fundamental limitation that provides it with the ability to invest,
with respect to 25% of the Fund's assets, more than 5% of its total assets in
any one issuer. The Fund will operate in accordance with this fundamental
limitation only in the event that Rule 2a-7 is amended and the Fund's Board
amends the nonfundamental policy discussed above. The Fund may borrow money from
banks for temporary or emergency purposes (not for leveraging or investment),
but not in excess of an amount equal to one third of the Fund's total assets.
The Fund may also invest up to 10% of its net assets in illiquid assets and up
to 10% of its total assets in restricted securities.

<PAGE>

HOW TO PURCHASE SHARES

The Fund's shares are sold on a continuing basis at the net asset value per
share next determined after receipt and acceptance of the order by Investor
Service Center or its agent (see "Determination of Net Asset Value"). The
minimum initial investment is $1,000 for regular and Uniform Gifts/Transfers to
Minors Act custody accounts, and $500 for Bull & Bear retirement plans, which
include Individual Retirement Accounts ("IRAs"), SEP-IRAs, rollover IRAs, profit
sharing and money purchase plans, and 403(b) plan accounts. The minimum
subsequent investment is $100. The initial investment minimums are waived if you
elect to invest $100 or more each month in the Fund through the Bull & Bear
Automatic Investment Program (see "Additional Investments" below). The Fund may
in its discretion waive or lower the investment minimums.

INITIAL INVESTMENT. The Account Application accompanying this prospectus should
be completed, signed and, with a check or other negotiable bank draft drawn to
the order of Dollar Reserves, mailed to Investor Service Center, Box 419789,
Kansas City, MO 64141-6789. Initial investments also may be made by having your
bank wire money, as set forth below, in order to avoid mail delays.

ADDITIONAL INVESTMENTS. Additional investments may be made conveniently at any
time by any one or more of the following methods:

o BULL & BEAR AUTOMATIC INVESTMENT PROGRAM. With the Bull & Bear Automatic
Investment Program, you can establish a convenient and affordable long term
investment program through one or more of the Plans explained below. Each Plan
is designed to facilitate an automatic monthly investment of $100 or more into
your Fund account.

The BULL & BEAR BANK TRANSFER PLAN lets you purchase Fund shares on a
certain day each month by transferring electronically a specified dollar
amount from your regular checking account, NOW account, or bank money
market deposit account.

In the BULL & BEAR SALARY INVESTING PLAN, part or all of your salary may
be invested electronically in Fund shares on each pay date, depending upon
your employer's direct deposit program.

The BULL & BEAR GOVERNMENT DIRECT DEPOSIT PLAN allows you to deposit
automatically part or all of certain U.S. Government payments into your
Fund account. Eligible U.S. Government payments include Social Security,
pension benefits, military or retirement benefits, salary, veteran's
benefits and most other recurring payments.

For more information concerning these Plans, or to request the necessary
authorization form(s), please call Investor Service Center toll-free at
1-888-503-FUND (1-888-503-3863). You may modify or terminate the Bank Transfer
Plan at any time by written notice received at least 10 days prior to the
scheduled investment date. To modify or terminate the Salary Investing Plan or
Government Direct Deposit Plan, you should contact, respectively, your employer
or the appropriate U.S. Government agency. The Fund reserves the right to redeem
any account if participation in the Program is terminated and the account's
value is less than $500. The Program and the Plans do not assure a profit or
protect against loss in a declining market.

o CHECK. Mail a check or other negotiable bank draft ($100 minimum), drawn to
the order of Dollar Reserves, together with a Bull & Bear FastDeposit form to
Investor Service Center, Box 419789, Kansas City, MO 64141-6789. If you do not
use that form, please send a letter indicating the Fund and account number to
which the subsequent investment is to be credited, and name(s) of the
registered owner(s).

o ELECTRONIC FUNDS TRANSFER (EFT). With EFT, you may purchase additional shares
of the Fund quickly and simply, just by calling Investor Service Center
toll-free at 1-888-503-VOICE (1-888-503-8642) We will contact the bank you
designate on your Account Application or Authorization Form to arrange for the
EFT, which is done through the Automated Clearing House system, to your Fund
account. For requests

<PAGE>

received by 4 p.m., eastern time, the investment will be credited to your Fund
account ordinarily within two business days. There is a $100 minimum for each
EFT investment. Your designated bank must be an Automated Clearing House
member and any subsequent changes in bank account information must be
submitted in writing with a voided check.

o FEDERAL FUNDS WIRE. You may wire money, by following the procedures set forth
below, to begin accruing income on your investment as soon as possible.

INVESTING BY WIRE. For an initial investment by wire, you must first telephone
Investor Service Center toll-free at 1-888-503-FUND (1-888-503-3863), to give
the name(s) under which the account is to be registered, tax identification
number and the name of the bank sending the wire, and to be assigned a Bull &
Bear Dollar Reserves account number. You may then purchase shares by requesting
your bank to transmit immediately available funds ("Federal funds") by wire to:
United Missouri Bank NA, ABA #10-10- 00695; for Account 98-7052-724-3; Dollar
Reserves. Your account number and name(s) must be specified in the wire as they
are to appear on the account registration. You should then enter your account
number on your completed Account Application and promptly forward it to Investor
Service Center, Box 419789, Kansas City, MO 64141-6789. This service is not
available on days when the Federal Reserve wire system is closed. Subsequent
investments by wire may be made at any time without having to call Investor
Service Center by simply following the same wiring procedures.

SHAREHOLDER ACCOUNTS. When you invest in the Fund, your account will be credited
with all full and fractional shares (to two decimal places), together with any
dividends that are paid in additional shares (see "Dividends and Taxes"). For
joint tenant accounts, any account owner has the authority to act on the account
without notice to the other account owners. Investor Service Center in its sole
discretion and for its protection may, but is not obligated to, require the
written consent of all account owners of a joint tenant account prior to acting
upon the instructions of any account owner. Stock certificates will be issued
only for full shares when requested in writing. In order to facilitate
redemptions and exchanges and provide safekeeping, we recommend that you do not
request certificates. You will receive transaction confirmations upon purchasing
or selling shares, and quarterly statements.

WHEN ORDERS ARE EFFECTIVE. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Investor
Service Center of a purchase order in proper form. Purchase orders submitted in
proper form along with payment in Federal funds available to the Fund for
investment by 11 a.m. eastern time on any Fund business day will be of record at
the close of business that day and entitled to receive that day's dividends. A
"Fund business day" is any day on which the New York Stock Exchange is open for
business. The following are not Fund business days: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be drawn
in U.S. dollars on a U.S. bank. No second or third party checks will be accepted
and the Fund reserves the right to reject any order for any reason. Accounts are
charged $30 by the Transfer Agent for submitting checks for investment which are
not honored by the investor's bank.

SHAREHOLDER SERVICES

You may modify or terminate your participation in any of the Fund's special
plans or services at any time. Shares or cash should not be withdrawn from any
tax-advantaged retirement plan described below, however, without consulting a
tax adviser concerning possible adverse tax consequences. Additional information
regarding any of the following services is available from Investor Service
Center by calling toll-free at 1-888-503-FUND (1-888-503-3863).

DIRECT ACCESS. Investor Service Center's free Direct Access service gives you
instant 24 hour access to your Fund investments either by toll-free telephone or
by using your personal computer for Internet access. With Direct Access you can
monitor your investments, check your account balance and account activity,

<PAGE>

retrieve your account history, exchange between Funds offered by Investor
Service Center, review recent transactions, and make transfers using EFT from or
to your authorized bank account. For Direct Access by phone, just dial toll-free
at 1-888-503-VOICE (1-888-503-8642) and follow the prompts. For Internet Direct
Access, visit Investor Service Center's Internet site at www.mutualfunds.net and
select "Access Your Fund Account." You will need your account number and your
Personal Identification Number ("PIN"), which is the last 4 digits of the social
security number or taxpayer identification number associated with your account
number. If you would like a different PIN, just call an Investor Service
Representative toll-free at 1-800-345-0051. There is no charge for using Direct
Access, and your account information is based on the most recent Fund prices,
updated every business day. Any transactions you request are carried out at the
Fund's net asset value next determined after receipt of your order. You will
receive in the mail written confirmations for all transactions you request
through Direct Access, and if you purchase or redeem Fund shares using EFT, your
bank statement will reflect the appropriate electronic credit or debit.

CHECK WRITING PRIVILEGE FOR EASY ACCESS. The Fund's Check Writing Privilege
enables you to continue receiving dividends on shares redeemed by check until
such time as the check is presented to the Transfer Agent's bank for payment.
You may establish an account in either of two ways for check writing:

O BULL & BEAR FUND ACCOUNTS. Upon request, shareholders will receive FREE,
UNLIMITED check writing with only a $250 minimum per check. The Fund will
arrange for shareholder checks to be honored by UMB Bank for this purpose.

o BULL & BEAR PERFORMANCE PLUS ACCOUNT(R). Bull & Bear Securities, Inc., an
affiliate of the Investment Manager, offers discount brokerage services.
Investors purchasing Fund shares through a Bull & Bear Performance Plus
Account(R) with $5,000 minimum equity receive upon request FREE, UNLIMITED
CHECK WRITING WITH NO MINIMUM AMOUNT PER CHECK. You may request a Discount
Brokerage Account Application from Bull & Bear Securities, Inc. by calling
toll-free at 1-800-262-5800.

With both types of accounts, the check clearing bank has the right to refuse
any checks which do not conform with its requirements. The shareholder will be
subject to the bank's rules and regulations governing checking accounts,
including a $20 charge for refused checks, which may change without notice. When
such a check is presented for payment, a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the check
will be redeemed. The Fund generally will not honor a check written by a
shareholder that requires the redemption of recently purchased shares for up to
10 days or until the Fund is reasonably assured of payment of the check
representing the purchase. Since the value of your account changes each day as a
result of daily dividends, you should not attempt to close an account by writing
a check.

ELECTRONIC FUNDS TRANSFER (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account through Bull & Bear's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated box on
the Account Application. Your designated bank must be an Automated Clearing
House member and any subsequent changes in bank account information must be
submitted in writing (and the Transfer Agent may require the signature to be
guaranteed) with a voided check.

DIVIDEND SWEEP PRIVILEGE. You may elect to have all dividends paid by the Fund
automatically invested in any other Bull & Bear Fund. Shares of the other Bull &
Bear Fund will be purchased at the current net asset value calculated on the
payment date. For more information concerning this privilege and the other Bull
& Bear Funds, or to request a Dividend Sweep Authorization Form, please call
Investor Service Center toll-free at 1-888-503-FUND (1-888-503-3863). You may
cancel this privilege by mailing written notification to Investor Service
Center, Box 419789, Kansas City, MO 64141-6789. To select a new Bull & Bear Fund
after cancellation, you must submit a new Authorization Form. Enrollment in or
cancellation of this

<PAGE>

privilege is generally effective three business days following receipt. This
privilege is available only for existing accounts and may not be used to open
new accounts.

SYSTEMATIC WITHDRAWAL PLAN. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed or variable amounts, subject to a minimum amount of
$100. Under the Systematic Withdrawal Plan, all dividends are reinvested in the
Fund.

ASSIGNMENT. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center by calling toll-free at 1-888-503-FUND
(1-888-503-3863)

EXCHANGE PRIVILEGE. You may exchange at least $500 worth of Fund shares for
shares of any Bull & Bear Fund listed below (provided the registration is
exactly the same, the shares may be sold in your state of residence, and the
exchange may otherwise legally be made).

To exchange shares, please call Investor Service Center toll-free at
1-888-503-VOICE (1-888-503-8642) between 9 a.m. and 5 p.m. eastern time on any
Fund business day and provide your account registration information including
address, account number and taxpayer identification number; percentage, number,
or dollar value of shares to be redeemed; name and, if different, the account
number of the Bull & Bear Fund to be purchased; and your identity and telephone
number. The other Bull & Bear Funds are:

o BULL & BEAR GOLD INVESTORS seeks long term capital appreciation in investments
with the potential to provide a hedge against inflation and preserve the
purchasing power of the dollar.

o BULL & BEAR U.S. AND OVERSEAS FUND invests worldwide for the highest possible
total return.

o BULL & BEAR SPECIAL EQUITIES FUND invests aggressively for maximum capital
appreciation.

Exchange requests received between 9 a.m. and 4 p.m. eastern time on any Fund
business day will be effected at the net asset values of the Fund and the other
Bull & Bear Fund as determined at the close of that business day. Exchange
requests received between 4 p.m. and 5 p.m. eastern time on any Fund business
day will be effected at the net asset values of the Fund and the other Bull &
Bear Fund as determined at the close of the next Fund business day. If you are
unable to reach Investor Service Center at the above telephone number you may,
in emergencies, call toll-free at 1-888-503-VOICE (1-888-503- 8642). Exchanges
may be difficult or impossible to implement during periods of rapid changes in
economic or market conditions. Exchange privileges may be terminated or modified
by the Fund without notice. A free prospectus containing more complete
information including charges, expenses and performance, on any of the Bull &
Bear Funds listed above is available from Investor Service Center by calling
toll-free at 1-888-503-FUND (1-888-503-3863). The other Bull & Bear Fund's
prospectus should be read carefully before exchanging shares. You may give
exchange instructions to Investor Service Center by telephone without further
documentation. If you have requested share certificates, this procedure may be
utilized only if, prior to giving telephone instructions, you deliver the
certificates to the Transfer Agent for deposit into your account.

o BULL & BEAR SECURITIES (DISCOUNT BROKERAGE ACCOUNT) TRANSFERS. If you have an
account at Bull & Bear Securities, Inc., an affiliate of the Investment
Manager and a wholly owned subsidiary of Bull & Bear Group, Inc. offering
discount brokerage services, you may access your investment in any Bull & Bear
Fund to pay for securities purchased in your brokerage account and have
proceeds of securities sold in your brokerage account used to purchase shares
of any Bull & Bear Fund. You may request a Discount Brokerage Account
Application from Bull & Bear Securities, Inc. by calling toll-free at 1-800-
262-5800.

TAX-ADVANTAGED RETIREMENT PLANS. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible for Federal

<PAGE>

income tax purposes as noted below. Information on any of these plans is
available from Investor Service Center by calling toll-free at 1-888-503-FUND
(1-888-503-3863).

The minimum investment to establish a Bull & Bear Retirement Plan is $500.
Minimum subsequent investments are $100. The initial investment minimums are
waived if you elect to invest $100 or more each month in the Fund through the
Bull & Bear Automatic Investment Program. There are no set-up fees for any Bull
& Bear Retirement Plan. Subject to change on 30 days' notice, the plan custodian
charges Bull & Bear Retirement Plans a $10 annual fiduciary fee, $10 for each
distribution prior to age 59 1/2, and a $20 plan termination fee; however, the
annual fiduciary fee is waived for Bull & Bear Retirement Plans with assets of
$10,000 or more or if you invest regularly through the Bull & Bear Automatic
Investment Program.

|XIRA AND SEP-IRA ACCOUNTS. Anyone with earned income who is less than age 70
1/2 at the end of the tax year, even if also participating in another type of
retirement plan, may establish an IRA and contribute each year up to $2,000 or
100% of earned income, whichever is less. For married couples, each spouse may
contribute up to $2,000 into an IRA regardless of whether each spouse has
$2,000 of earned income, provided, however, that their aggregate earned income
is at least $4,000 (where such income is less than $4,000, special rules
apply). Employers may also make contributions to an IRA on behalf of an
individual under a Simplified Employee Pension Plan ("SEP") in any amount up
to 15% of up to $150,000 of compensation. Also, as of January 1, 1997, a small
employer with 100 or fewer employees may establish a Savings Incentive Match
Plan for Employees of Small Employers ("SIMPLE"), which will allow certain
eligible employees to make elective contributions to a SIMPLE IRA of up to
$6,000 per year and will require the employer to make either matching or
non-matching contributions.

Generally, taxpayers may contribute to an IRA during the tax year and through
the next year until the income tax return for that year is due, without regard
to extensions. Thus, most individuals may contribute for the 1997 tax year
through April 15, 1998 and for the 1998 tax year from January 1, 1998 through
April 15, 1999.

BULL & BEAR NO-FEE IRA(R). The $10 annual fiduciary fee is waived if your Bull
& Bear IRA or Bull & Bear SEP-IRA has assets of $10,000 or more or if you
invest through the Bull & Bear Automatic Investment Program.

DEDUCTIBILITY. IRA contributions are fully deductible for many taxpayers. For
a taxpayer who is an active participant in an employer-maintained retirement
plan (or whose spouse is), a portion of IRA contributions is deductible if
adjusted gross income (before the IRA deductions) is $40,000-$50,000 (if
married) and $25,000-$35,000 (if single). Only IRA contributions by a taxpayer
who is an active participant in an employer-maintained retirement plan (or
whose spouse is) and has adjusted gross income of more than $50,000 (if
married) and $35,000 (if single) will not be deductible at all. An eligible
individual may establish a Bull & Bear IRA under the prototype plan available
through the Fund, even though such individual or spouse actively participates
in an employer-maintained retirement plan.

o IRA TRANSFER AND ROLLOVER ACCOUNTS. Special forms are available from Investor
Service Center by calling toll-free at 1-888-503-FUND (1-888-503-3863), which
make it easy to transfer or roll over IRA assets to a Bull & Bear IRA. An IRA
may be transferred from one financial institution to another without adverse
tax consequences. Similarly, no taxes need be paid on a lump-sum distribution
that you may receive as a payment from a qualified pension or profit sharing
plan due to retirement, job termination or termination of the plan, so long as
the assets are put into an IRA Rollover account within 60 days of the receipt
of the payment. Withholding for Federal income tax is required at the rate of
20% for "eligible rollover distributions" made from any retirement plan (other
than an IRA) that are not directly transferred to an "eligible retirement
plan," such as a Bull & Bear Rollover Account.

o PROFIT SHARING AND MONEY PURCHASE PLANS. These Plans provide an opportunity to
accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and

<PAGE>

their employees generally to contribute (and deduct) up to $30,000 annually
or, if less, 25% (15% for profit sharing plans) of compensation or
self-employment earnings of up to $150,000. Corporations and partnerships, as
well as all self-employed persons, are eligible to establish these Plans. In
addition, a person who is both salaried and self-employed, such as a college
professor who serves as a consultant, may adopt these retirement plans based
on self-employment earnings.

|XSECTION 403(B) ACCOUNTS. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment of custodial accounts on
behalf of employees of public school systems and certain tax-exempt
organizations. A participant in such a plan does not pay taxes on any
contributions made by the participant's employer to the participant's account
pursuant to a salary reduction agreement, up to a maximum amount, or
"exclusion allowance." The exclusion allowance is generally computed by
multiplying the participant's years of service times 20% of the participant's
compensation included in gross income received from the employer (reduced by
any amount previously contributed by the employer to any 403(b) account for
the benefit of the participant and excluded from the participant's gross
income). However, the exclusion allowance may not exceed the lesser of 25% of
the participant's compensation (limited as above) or $30,000. Contributions
and subsequent earnings thereon are not taxable until withdrawn, when they are
received as ordinary income.

HOW TO REDEEM SHARES

Generally, you may redeem by any of the methods explained below. Requests for
redemption should include the following information: your account registration
information including address, account number and taxpayer identification
number; dollar value, number or percentage of shares to be redeemed; how and to
where the proceeds are to be sent; if applicable, the bank's name, address, ABA
routing number, bank account registration and account number, and a contact
person's name and telephone number; and your daytime telephone number.

BY MAIL. You may request that the Fund redeem any amount of shares by submitting
a written request to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, signed by the record owner(s). If the written request is sent to the
Fund, it will be forwarded to the above address. If stock certificates have been
issued for shares being redeemed, they must accompany the written request.

CHECK WRITING PRIVILEGE. See "Shareholder Services" above for redemption of
shares by writing free, unlimited, personalized checks, provided by the Fund, in
amounts of $250 or more for regular accounts, and in any amount for investors
with a Bull & Bear Performance Plus Account(R) at discount broker Bull & Bear
Securities, Inc.

BY TELEPHONE. You may telephone Investor Service Center toll-free at
1-888-503-FUND (1-888-503-3863) to expedite redemption of Fund shares if share
certificates have not been issued.

You may redeem as little as $250 worth of shares by requesting Bull & Bear's
Electronic Funds Transfer (EFT) service. With EFT, you can redeem Fund shares
quickly and conveniently because Investor Service Center will contact the bank
designated on your Account Application or Authorization Form to arrange for the
electronic transfer of your redemption proceeds (through the Automated Clearing
House system) to your bank account. EFT proceeds are ordinarily available in
your bank account within two business days.

If you are redeeming $1,000 or more worth of shares, you may request that the
proceeds be mailed to your address of record or mailed or wired to your
authorized bank.

Telephone requests received on Fund business days by 4 p.m. eastern time will
be redeemed from your account that day, and if after, on the next Fund business
day. Any subsequent changes in bank account information must be submitted in
writing, signature guaranteed, with a voided check or deposit slip. If you are
unable to reach Investor Service Center at the above telephone number you may,
in emergencies, call toll-free at 1-888-503-VOICE (1-888-503-8642). Redemptions
by telephone may be difficult or impossible to implement during periods of rapid
changes in economic or market conditions.

<PAGE>

REDEMPTION PRICE. The redemption price is the net asset value per share next
determined after receipt of the redemption request in proper form. Registered
broker/dealers, investment advisers, banks, and insurance companies may open
accounts and redeem shares by telephone or wire and may impose a charge for
handling purchases and redemptions when acting on behalf of others.

REDEMPTION PAYMENT. Payment for shares redeemed will ordinarily be made within
seven days after receipt of the redemption request in proper form. The right of
redemption may not be suspended, or date of payment delayed more than seven
days, except for any period (i) when the New York Stock Exchange is closed or
trading thereon is restricted as determined by the SEC; (ii) under emergency
circumstances as determined by the SEC that make it not reasonably practicable
for the Fund to dispose of securities owned by it or fairly to determine the
value of its assets; or (iii) as the SEC may otherwise permit. The mailing of
proceeds on redemption requests involving any shares purchased by personal,
corporate, or government check or EFT transfer is generally subject to a fifteen
business day delay to allow the check or transfer to clear. The fifteen day
clearing period does not affect the trade date on which a purchase or redemption
order is priced, or any dividends to which you may be entitled through the date
of redemption. The clearing period does not apply to purchases made by wire. Due
to the relatively higher cost of maintaining small accounts, the Fund reserves
the right, upon 60 days' notice, to redeem any account, other than Bull & Bear
Retirement Plan accounts, worth less than $500 except if solely from market
action, unless an investment is made to restore the minimum value.

TELEPHONE PRIVILEGES. You automatically have all telephone privileges to, among
other things, authorize purchases, redemptions and exchanges, with EFT or by
other means, unless declined on the Account Application or otherwise in writing.
Neither the Fund nor Investor Service Center shall be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it does not, it may be
liable for losses due to unauthorized or fraudulent transactions. These
procedures include requiring personal identification prior to acting upon
telephone instructions, providing written confirmation of such transactions, and
recording telephone conversations. The Fund may modify or terminate any
telephone privileges or shareholder services (except as noted) at any time
without notice.

SIGNATURE GUARANTEES. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the National Association of Securities Dealers, Inc. A notary
public may not guarantee signatures. The Transfer Agent may require further
documentation, and may restrict the mailing of redemption proceeds to your
address of record within 60 days of such address being changed unless you
provide a signature guarantee as described above.

DIVIDENDS AND TAXES

DIVIDENDS. The Fund declares dividends each day from net investment income
(investment income less expenses plus or minus all realized gains or losses on
the Fund's portfolio securities) to shareholders of record as of the close of
regular trading on the New York Stock Exchange on that day. Shareholders
submitting purchase orders in proper form and payment in Federal funds available
to the Fund for investment by 11 a.m. eastern time are entitled to receive that
day's dividend. Shares redeemed by 11 a.m. eastern time are not entitled to that
day's dividend, but proceeds of the redemption normally are available to
shareholders by Federal funds wire the same day. Shares redeemed after 11 a.m.
eastern time and before the close of regular trading on the New York Stock
Exchange are entitled to that day's dividend, and proceeds of the redemption
normally are available to shareholders by Federal funds wire the next Fund
business day. Distributions of declared dividends are made the last business day
of each month in additional shares of the Fund, unless you elect to receive
dividends in cash on the Account Application

<PAGE>

or so elect subsequently by calling Investor Service Center toll-free at
1-888-503-FUND (1-888-503-3863). For Federal income tax purposes, such
distributions are generally taxable as ordinary income, whether or not a
shareholder receives such dividends in additional shares or elects to receive
cash. Any election will remain in effect until you notify Investor Service
Center to the contrary. The Fund does not expect to realize net long term
capital gains and thus does not anticipate payment of any long term capital gain
distributions.

TAXES. According to Tait, Weller & Baker, the Fund's auditors, dividends paid by
the Fund to its shareholders (except Massachusetts corporate shareholders) are
exempt from state income tax to the extent the Fund derives its income from
direct U.S. Government securities and, where applicable, the Fund meets the
state income, investment, and reporting criteria required to maintain exempt
status. However, if the Fund invests in securities other than "direct" U.S.
Government obligations (such as agency obligations not backed by the full faith
and credit of the United States), dividends paid to its shareholders
attributable to the interest on these investments are taxable in some states. In
some states, shareholders also may be subject to local taxes on the shares they
own or on distributions from the Fund.

The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (generally consisting
of net investment income and net short term capital gains) that is distributed
to its shareholders. Shareholders not subject to Federal income tax on their
income will generally not be required to pay tax on amounts distributed to them
by the Fund. The Fund is required to withhold 31% of all dividends payable to
any individuals and certain other noncorporate shareholders who do not provide
the Fund with a correct taxpayer identification number or who otherwise are
subject to backup withholding. Each shareholder is advised promptly after each
calendar year of the dollar amount and taxable status of the year's
distributions received by such shareholder. The foregoing is only a summary of
some of the important income tax considerations generally affecting the Fund and
its shareholders; see the Statement of Additional Information for a further
discussion. Because other tax considerations may apply, you should consult your
tax adviser.

DETERMINATION OF NET ASSET VALUE

The value of a share of the Fund is based on the value of its net assets. The
Fund's net assets are the total of its investments and all other assets minus
any liabilities. The value of one share is determined by dividing the net assets
by the total number of shares outstanding. This is referred to as "net asset
value per share" and is determined at 11 a.m. eastern time and as of the close
of regular trading on the New York Stock Exchange (currently 4 p.m. eastern
time, unless weather, equipment failure or other factors contribute to an
earlier closing) each Fund business day. The Fund values its portfolio
securities using the amortized cost method of valuation, under which market
value is approximated by amortizing the difference between the acquisition cost
and value at maturity of an instrument on a straight-line basis over its
remaining life.

INVESTMENT MANAGER

Bull & Bear Advisers, Inc. ("Investment Manager") acts as general manager of
the Fund, being responsible for the various functions assumed by it, including
the regular furnishing of advice with respect to portfolio transactions. The
Investment Manager manages the investment and reinvestment of the Fund's assets,
subject to the control and oversight of the Board of Directors. For its
services, the Investment Manager receives a management fee, payable monthly,
based on the average daily net assets of the Fund, at the annual rate of 0.50%
of the first $250 million, 0.45% from $250 million to $500 million, and 0.40%
over $500 million. From time to time, the Investment Manager may waive all or
part of this fee to improve the Fund's yield and total return. The Investment
Manager provides certain administrative services to the Fund at cost. During the
fiscal year ended June 30, 1997, the investment management fees paid by the Fund
represented approximately 0.25% of its average daily net assets (net of the
Investment Manager's waiver). The Investment Manager is a wholly owned
subsidiary of Bull & Bear

<PAGE>

Group, Inc. ("Group"). Group, a publicly owned company whose securities are
listed on the Nasdaq Stock Market and traded in the over-the-counter market, is
a New York based manager of mutual funds and discount brokerage services.
Bassett S. Winmill may be deemed a controlling person of Group and may therefore
be deemed a controlling person of the Investment Manager.

YIELD INFORMATION

From time to time the Fund advertises its current yield and its effective
yield. All advertised current yield or effective yield figures are based upon
historical earnings and are not intended to indicate future performance. The
current yield of the Fund refers to the income generated by an investment in the
Fund over a seven day period (which period will be stated in the advertisement).
This income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52 week
period and is shown as a percentage of the investment. The effective yield is
the annualized current yield which is compounded by assuming the current income
to be reinvested. For the Fund's yield, please call toll-free at 1-888-503-FUND
(1-888-503-3863).

THE FUND'S STATE TAX-FREE YIELD VERSUS TAXABLE YIELDS. Assuming your dividends
from the Fund would be state tax-free (see "Dividends and Taxes"), your yield
from the Fund may actually be higher than other state-taxable investments
stating a higher pre-tax yield.

For example, if your state income tax rate is 11% and the Fund's yield is 5%,
the Fund's AFTER STATE TAX YIELD IS ACTUALLY HIGHER than a state-taxable
investment with a yield of 5.61% or less. The computation is:

The Fund's Yield
-------------------------------- = Your Taxable Equivalent Yield
100% minus Your State Tax Rate

5%
---------------- = 5.618%
100% - 11%

DISTRIBUTION OF SHARES

Pursuant to a Distribution Agreement between the Fund and Investor Service
Center, Inc. ("Distributor"), the Distributor acts as the Fund's principal agent
for the sale of Fund shares. The Investment Manager is an affiliate of the
Distributor. The Fund has also adopted a plan of distribution ("Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund pays the
Distributor monthly a fee in the amount of 0.25% per annum of the Fund's average
daily net assets as compensation for 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 fee
may be retained or passed through by the Distributor to brokers, banks and
others who provide services to Fund shareholders. The Fund will pay the fees to
the Distributor until either the Plan is terminated or not renewed. In that
event, the Distributor's expenses in excess of fees received or accrued through
the termination day will be the Distributor's sole responsibility and not
obligations of the Fund. During the period they are in effect, the Distribution
Agreement and Plan obligate the Fund to pay fees to the Distributor as
compensation for its service and distribution activities. If the Distributor's
expenses exceed the fees, the Fund will not be obligated to pay any additional
amount to the Distributor and, if the Distributor's expenses are less than such
fees, it may realize a profit. As of the date hereof, the Distributor intends to
waive the fee during the fiscal year ending June 30, 1998. Such waiver, however,
may be discontinued at any time. Certain other advertising and sales materials
may be prepared which relate to the promotion of the sale of shares of the Fund
and one or more other affiliated investment companies. In such cases, the
expenses will be allocated among the investment companies involved based on the
inquiries resulting from the materials or other factors deemed appropriate by
the Board of Directors.

<PAGE>

The costs of personnel and facilities of the Distributor to respond to inquiries
by shareholders and prospective shareholders will also be allocated based on
such relative inquiries or other factors. There is no certainty that the
allocation of any of the foregoing expenses will precisely allocate to the Fund
costs commensurate with the benefits it receives, and it may be that other
affiliated investment companies and Bull & Bear Securities, Inc. will benefit
therefrom.

CAPITAL STOCK

The Fund is a series of Bull & Bear Funds II, Inc. ("Corporation"), a Maryland
corporation incorporated in 1974. Prior to October 29, 1993, the Corporation
operated under the name Bull & Bear Incorporated. The Corporation is a series
investment company authorized to issue up to 1,000,000,000 shares ($.01 par
value), 500,000,000 of which have been designated by the Board of Directors as
Bull & Bear Dollar Reserves. The Board of Directors of the Corporation may
establish one or more new series, although it has no current intention to do so.

The Fund's stock is fully paid and non-assessable and is freely assignable by
way of pledge (as, for example, for collateral purposes), gift, settlement of an
estate, and also by an investor to another investor. In case of dissolution or
other liquidation of the Fund or the Corporation, shareholders will be entitled
to receive ratably per share the net assets of the Fund. Shareholders of series
of the Corporation vote for Directors with each share entitled to one vote. Each
share entitles the holder to one vote for all purposes. Shares have no
preemptive or conversion rights. Except to the extent that the Board of
Directors might provide by resolution that the holders of shares of a particular
series are entitled to vote as a class on specified matters, and except for
approval of investment management agreements, plans of distribution, and changes
in fundamental investment objectives and limitations which are voted upon by
each series, separately as a class, there will be no right for any series to
vote as a class unless such right exists under Maryland law. The Corporation's
Articles of Incorporation contain no provision entitling the holders of the
present classes of capital stock to a vote as a class on any matter other than
the foregoing. Where a matter is to be voted upon separately by series, the
matter is effectively acted upon for such series if a majority of the
outstanding voting securities of that series approves the matter,
notwithstanding that: (1) the matter has not been approved by a majority of the
outstanding voting securities of any other series, or (2) the matter has not
been approved by a majority of the outstanding voting securities of the
Corporation.

In accordance with the General Corporation Law of the State of Maryland
applicable to open-end investment companies incorporated in Maryland and
registered under the 1940 Act, as is the Corporation, the Corporation's By-Laws
provide that there will be no annual meeting of shareholders in any year except
as required by law. In practical effect, this means that the Fund will not hold
an annual meeting of shareholders in years in which the only matters which would
be submitted to shareholders for their approval are the election of Directors
and ratification of the Directors' selection of accountants, although holders of
10% of the Corporation's shares may call a meeting at any time. There will
normally be no meetings of shareholders for the purpose of electing Directors
unless fewer than a majority of the Directors holding office have been elected
by shareholders. Shareholder meetings will be held in years in which shareholder
approval of the Fund's investment management agreement, plan of distribution, or
changes in its fundamental investment objective, policies or restrictions is
required by the 1940 Act.

CUSTODIAN AND TRANSFER AGENT

Investors Fiduciary Trust Company, 811 Main, 11th Floor, Kansas City, MO
64105-1716, acts as custodian of the Fund's assets. The custodian also performs
certain accounting services for the Fund. The Fund's transfer and dividend
disbursing agent is DST Systems, Inc., Box 419789, Kansas City, MO 64141- 6789.
The Distributor provides shareholder administration services to the Fund and is
reimbursed its cost by the Fund. The costs of facilities, personnel and other
related expenses are allocated among the Fund and other affiliated investment
companies based on the relative number of inquiries and other factors deemed
appropriate by the Board of Directors. The Fund may also enter into agreements
with brokers,

<PAGE>

banks and others who may perform on behalf of their customers certain
shareholder services not otherwise provided by the Transfer Agent or the
Distributor.

<PAGE>

[Left Side of Back Cover Page]

DOLLAR
RESERVES

- -------------------------------------------------------------------------------

11 HANOVER SQUARE
NEW YORK, NY 10005

- -------------------------------------------------------------------------------

FOR FUND PROSPECTUSES AND OTHER INVESTMENT INFORMATION, CALL TOLL-FREE

1-888-503-FUND

1-888-503-3863

FOR SHAREHOLDER SERVICES BY DIRECT ACCESS, CALL TOLL-FREE

1-888-503-VOICE

1-888-503-8642

OR, ACCESS THE FUND ON THE WEB AT

WWW.MUTUALFUNDS.NET

- -------------------------------------------------------------------------------

<PAGE>

[Right Side of Back Cover Page]

DOLLAR
RESERVES

- -------------------------------------------------------------------------------

A HIGH QUALITY
MONEY MARKET FUND
INVESTING IN U.S. GOVERNMENT
SECURITIES- INCOME IS GENERALLY
FREE FROM STATE AND LOCAL
INCOME TAXES

HIGH DAILY INCOME
ELECTRONIC FUNDS TRANSFERS
RETIREMENT PLANS
NO-LOAD
FREE CHECK WRITING

- -------------------------------------------------------------------------------

MINIMUM INITIAL INVESTMENT:
REGULAR ACCOUNTS, $1,000;
IRAS, $500; AUTOMATIC
INVESTMENT PROGRAMS, $100

MINIMUM SUBSEQUENT INVESTMENTS: $100

- -------------------------------------------------------------------------------

PROSPECTUS
SEPTEMBER 2, 1997

BULL
&
BEAR
PERFORMANCE DRIVEN(R) ----------------------

Printed on recycled paper

DR-148-11-7

<PAGE>

Statement of Additional Information September 2, 1997

BULL & BEAR DOLLAR RESERVES
11 Hanover Square
New York, NY 10005
1-888-503-FUND

Bull & Bear Dollar Reserves ("Fund") is a diversified series of Bull & Bear
Funds II, Inc. ("Corporation"), an open-end management investment company
organized as a Maryland corporation. This Statement of Additional Information
regarding the Fund is not a prospectus and should be read in conjunction with
the Fund's Prospectus dated September 2, 1997. The Prospectus is available
without charge upon request to Investor Service Center, Inc., the Fund's
distributor ("Distributor"), 11 Hanover Square, New York, NY 10005, by calling
toll-free at 1-888-503-FUND (1-888-503- 3863).

TABLE OF CONTENTS

THE FUND'S INVESTMENT PROGRAM..............................................2
INVESTMENT RESTRICTIONS....................................................2
THE INVESTMENT COMPANY COMPLEX.............................................3
OFFICERS AND DIRECTORS.....................................................3
INVESTMENT MANAGER.........................................................5
INVESTMENT MANAGEMENT AGREEMENT............................................5
YIELD AND PERFORMANCE INFORMATION .........................................6
DISTRIBUTION OF SHARES.....................................................8
DETERMINATION OF NET ASSET VALUE...........................................9
PURCHASE OF SHARES.........................................................9
ALLOCATION OF BROKERAGE....................................................9
DIVIDENDS AND TAXES.......................................................10
REPORTS TO SHAREHOLDERS...................................................11
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT.........................11
AUDITORS..................................................................11
FINANCIAL STATEMENTS......................................................11

<PAGE>

THE FUND'S INVESTMENT PROGRAM

The Fund's investment objective is to provide its shareholders maximum
current income consistent with preservation of capital and maintenance of
liquidity. The Fund seeks to achieve this objective by investing exclusively in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). Although the Fund's investment
policies also permit the Fund to invest in bank obligations and instruments
secured thereby, high quality commercial paper, high grade corporate
obligations, and repurchase agreements pertaining to these securities and U.S.
Government Securities, the Board of Directors has determined that the Fund shall
not do so until and after 60 days' notice to shareholders. There can be no
assurance that the Fund will achieve its investment objective.

Dividends from net investment income paid by the Fund to its shareholders
(except Massachusetts corporate shareholders) are exempt from state income taxes
to the extent such income is derived from holding debt securities of the U.S.
Government, its agencies or instrumentalities, the income from which is state
tax exempt by Federal law. The following states currently have no state
individual income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington,
and Wyoming. This information is current as of the date of this Statement of
Additional Information and is subject to change.

BORROWING. Subject to the limit on borrowing described in Investment
Restriction (5) below, the Fund may incur overdrafts at its custodian bank from
time to time in connection with redemptions and/or the purchase of portfolio
securities. In lieu of paying interest to the custodian bank, the Fund may
maintain equivalent cash balances prior or subsequent to incurring such
overdrafts. If cash balances exceed such overdrafts, the custodian bank may
credit interest thereon against fees.

INVESTMENT RESTRICTIONS

The following fundamental investment restrictions may not be changed without
the approval of the lesser of (a) 67% or more of the Fund's voting securities
present at a meeting if the holders of more than 50% of the Fund's outstanding
voting securities are present or represented by proxy, or (b) more than 50% of
the Fund's outstanding voting securities. Any investment restriction involving a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition of securities or assets of, or borrowing by, the Fund.
The Fund may not:

(1)Purchase the securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of such issuer,
or the Fund would own or hold 10% or more of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to these limitations and provided that these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;

(2)Issue senior securities as defined in the Investment Company Act of 1940
("1940 Act"). The following will not be deemed to be senior securities for
this purpose: (a) evidences of indebtedness that the Fund is permitted to
incur, (b) the issuance of additional series or classes of securities that
the Board of Directors may establish, (c) the Fund's futures, options, and
forward currency transactions, and (d) to the extent consistent with the 1940
Act and applicable rules and policies adopted by the Securities and Exchange
Commission ("SEC"), (i) the establishment or use of a margin account with a
broker for the purpose of effecting securities transactions on margin and
(ii) short sales;

(3)Lend its assets, provided however, that the following are not prohibited: (a)
the making of time or demand deposits with banks, (b) the purchase of debt
securities such as bonds, debentures, commercial paper, repurchase agreements
and short term obligations in accordance with the Fund's investment objective
and policies and (c) engaging in securities and other asset loan transactions
limited to one third of the Fund's total assets;

(4)Underwrite the securities of other issuers, except to the extent that the
Fund may be deemed to be an underwriter under the Federal securities laws in
connection with the disposition of the Fund's authorized investments;

(5)Borrow money, except to the extent permitted by the 1940 Act;

(6)Purchase or sell commodities or commodity futures contracts, although it may
enter into (i) financial and foreign currency futures contracts and options
thereon, (ii) options on foreign currencies, and (iii) forward contracts on
foreign currencies;

(7)Purchase or sell real estate, provided that the Fund may invest in securities
(excluding limited partnership interests) secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein; or

(8)Purchase any securities, other than obligations of domestic branches of U.S.
or foreign banks, or the U.S. Government or its agencies or
instrumentalities, if, immediately after such purchase, more than 25% of the
value of the Fund's total assets would be invested in the securities of
issuers in the same industry.

The Fund, notwithstanding any other investment policy or restrictions
(whether or not fundamental), may, as a matter of fundamental policy, invest all
of its assets in the securities or beneficial interests of a singled pooled
investment fund having substantially the same investment objective, policies and
restrictions as the Fund.

The Corporation's Board of Directors has established the following
non-fundamental investment limitations with respect to the Fund that may be
changed by the Board without shareholder approval:

<PAGE>

(i) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets, which amount
may include warrants which are not listed on the New York Stock
Exchange or American Stock Exchange provided that such warrants, valued
at the lower of cost or market, do not exceed 2% of the Fund's net
assets;

(ii) The Fund may not purchase the securities of any one issuer if as a
result more than 5% of the Fund's total assets would be invested in the
securities of such issuer, provided that this limitation does not apply
to securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities;

(iiThe Fund may not invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in the securities
of issuers which invest in or sponsor such programs or such leases;

(ivThe Fund may not invest more than 5% of its total assets in securities of
companies having a record of less than three years continuous operations
(including operations of predecessors);

(v) The Fund may not purchase or otherwise acquire any security or invest
in a repurchase agreement if, as a result, more than 10% of the Fund's
net assets (taken at current value) would be invested in illiquid
assets, including repurchase agreements not entitling the holder to
payment of principal within seven days;

(viThe Fund may not purchase or retain securities of any issuer if to the
knowledge of the Fund, those officers or Directors of the Corporation or its
investment manager who each own beneficially more than 1/2 of 1% of the
securities of an issuer, own beneficially together more than 5% of the
securities of that issuer;

(viThe Fund may not purchase the securities of any investment company except (a)
by purchase in the open market where no commission or profits to a sponsor or
dealer results from such purchase provided that immediately after such
purchase no more than: 10% of the Fund's total assets are invested in
securities issued by investment companies, 5% of the Fund's total assets are
invested in securities issued by any one investment company, or 3% of the
voting securities of any one such investment company are owned by the Fund,
and (b) when such purchase is part of a plan of merger, consolidation,
reorganization, or acquisition of assets;

(viThe Fund may not borrow money, except from a bank for temporary or emergency
purposes (not for leveraging or investment), provided however, that such
borrowing does not exceed an amount equal to one third of the total value of
the Fund's assets taken at market value, less liabilities other than the
borrowing. The Fund may not purchase securities for investment while any bank
borrowing equaling 5% or more of its total assets is outstanding. If at any
time the Fund's borrowing comes to exceed the limitation set forth in (5)
above, such borrowing will be promptly (within three days, not including
Sundays and holidays) reduced to the extent necessary to comply with this
limitation; and

(ixThe Fund may not purchase securities on margin except that the Fund may
obtain such short term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits made in
connection with transactions in options, futures contracts, forward currency
contracts, and other derivative instruments shall not be deemed to constitute
purchasing securities on margin.

THE INVESTMENT COMPANY COMPLEX

The investment companies advised by affiliates of Bull & Bear Group, Inc.
("Investment Company Complex") are:

Bull & Bear Funds I, Inc., whose sole series is Bull & Bear U.S.
and Overseas Fund.
Bull & Bear Funds II, Inc., whose sole series is Bull & Bear Dollar
Reserves.
Bull & Bear Global Income Fund, Inc.
Bull & Bear Gold Investors Ltd.
Bull & Bear Municipal Income Fund, Inc.
Bull & Bear Special Equities Fund, Inc.
Bull & Bear U.S. Government Securities Fund, Inc.
Midas Fund, Inc.
Rockwood Fund, Inc.

OFFICERS AND DIRECTORS

The officers and Directors of the Fund, their respective offices, dates of
birth and principal occupations during the last five years are set forth below.
Unless otherwise noted, the address of each is 11 Hanover Square, New York, NY
10005.

BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of
seven of the other investment companies in the Investment Company Complex and of
the parent of the Investment Manager, Bull & Bear Group, Inc. ("Group"). He was
born February 10, 1930. He is a member of the New York Society of Security
Analysts, the Association for Investment Management and Research and the
International Society of Financial Analysts. He is the father of Mark C. Winmill
and Thomas B. Winmill.

ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman of the
other investment companies in the Investment Company Complex and of the
Investment Manager and its affiliates. He was born December 7, 1929. He is a
member of the Board of Governors of the Mutual Fund Education Alliance, and of
its predecessor, the No-Load Mutual Fund Association. He has also been a member
of the District #12, District Business Conduct and Investment Companies
Committees of the National Association of Securities Dealers, Inc.

<PAGE>

RUSSELL E. BURKE III -- Director. 900 Park Avenue, New York, NY 10021. He was
born August 23, 1946. He is President of Russell E. Burke III, Inc. Fine Art,
New York, New York. From 1988 to 1991, he was President of Altman Burke Fine
Arts, Inc. From 1983 to 1988, he was Senior Vice President of Kennedy Galleries.
He is also a Director of five of the other investment companies in the
Investment Company Complex.

BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is Senior Consultant with The Berger Financial Group, LLC specializing in
financial, estate and insurance matters. From March 1995 to December 31, 1995 he
was President of Huber Hogan Knotts Consulting, Inc. From 1990 to March 1995 he
was president of Huber-Hogan Associates. He was born February 7, 1930. He is
also a Director of eight other investment companies in the Investment Company
Complex.

JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Hunt & Howe, Inc., executive recruiting consultants. He was born
December 14, 1930. He is also a Director of eight other investment companies in
the Investment Company Complex.

FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926. He
is also a Director of eight other investment companies in the Investment
Company Complex.

JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of eight other investment companies in the
Investment Company Complex.

MARK C. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
Chief Financial Officer. He is Co-President, Co-Chief Executive Officer, and
Chief Financial Officer of the Investment Company Complex and of Group and
certain of its affiliates, Chairman of the Investment Manager and the
Distributor, and President of Bull & Bear Securities, Inc. ("BBSI"). He was
born November 26, 1957. He received his M.B.A. from the Fuqua School of
Business at Duke University in 1987. From 1983 to 1985 he was Assistant
Vice President and Director of Marketing of E.P. Wilbur & Co., Inc., a real
estate development and syndication firm and Vice President of E.P.W. Securities,
its broker/dealer subsidiary. He is a son of Bassett S. Winmill and brother of
Thomas B. Winmill. He is also a Director of four other investment companies
in the Investment Company Complex.

THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
General Counsel. He is Co-President, Co-Chief Executive Officer, and General
Counsel of the Investment Company Complex and of Group and certain of its
affiliates, President of the Investment Manager and the Distributor, and
Chairman of BBSI. He was born June 25, 1959. He is a member of the New York
State Bar and the SEC Rules Committee of the Investment Company Institute. He is
a son of Bassett S. Winmill and brother of Mark C. Winmill. He is also a
Director of five other investment companies in the Investment Company Complex.

STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Company Complex, the Investment Manager and certain of its
affiliates. He was born March 1, 1955. From 1993 to 1995, he was Associate
Director -- Proprietary Trading at Barclays De Zoete Wedd Securities Inc., from
1992 to 1993 he was Director, Bond Arbitrage at WG Trading Company, and from
1989 to 1992 he was Vice President of Wilkinson Boyd Capital Markets.

JOSEPH LEUNG, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer and
Chief Accounting Officer of the Investment Company Complex, the Investment
Manager and its affiliates. From 1992 to 1995 he held various positions with
Coopers & Lybrand L.L.P., a public accounting firm. From 1991 to 1992, he was
the accounting supervisor at Retirement Systems Group, a mutual fund company.
From 1987 to 1991, he held various positions with Ernst & Young, a public
accounting firm. He is a member of the American Institute of Certified Public
Accountants. He was born September 15, 1965.

WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Investment Company Complex, the Investment Manager and its
affiliates. He was born September 13, 1964. From 1991 to 1994 he was associated
with the law firm of Skadden, Arps, Slate, Meagher & Flom. He is a member of
the New York State Bar.

* Bassett S. Winmill, Robert D. Anderson, Mark C. Winmill and Thomas B. Winmill
are "interested persons" of the Fund as defined by the 1940 Act, because
of their positions and other relationships with the Investment Manager.

<PAGE>

COMPENSATION TABLE

NAME OF PERSON, AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
POSITION COMPENSATION BENEFITS ACCRUED AS PART BENEFITS UPON FUND AND INVESTMENT COMPANY
FROM FUND OF FUND EXPENSES RETIREMENT COMPLEX PAID TO DIRECTORS
- --------------------- ------------- ------------------------ ---------------- ---------------------------
<S> <C> <C> <C> <C>
Russell E. Burke III, $9,500 from 6
Director $2,000 None None Investment Companies

Bruce B. Huber, $12,500 from 9
Director $2,000 None None Investment Companies

James E. Hunt, $12,500 from 9
Director $2,000 None None Investment Companies

Frederick A. Parker, $12,500 from 9
Director $2,000 None None Investment Companies

John B. Russell, $12,500 from 9
Director $2,000 None None Investment Companies
</TABLE>

Information in the above table is based on fees paid during the fiscal year
ended June 30, 1997.

No officer, Director or employee of the Investment Manager receives any
compensation from the Fund for acting as an officer, Director or employee of the
Fund. As of August 14, 1997, officers and Directors of the Fund owned less than
1% of the outstanding shares of the Fund. As of August 14, 1997, the following
owner of record owned more than 5% of the outstanding shares of the Fund: U.S.
Clearing Corp., 26 Broadway, New York, NY 10004-1798, 45.62%.

INVESTMENT MANAGER

The Investment Manager acts as general manager of the Fund, being responsible
for the various functions assumed by it, including regularly furnishing advice
with respect to portfolio transactions. Group's other principal subsidiaries
include Investor Service Center, Inc., the Fund's Distributor and a registered
broker/dealer, Midas Management Corporation and Rockwood Advisers, Inc.,
registered investment advisers, and BBSI, a registered broker/dealer providing
discount brokerage services.

Group is a publicly owned company whose securities are listed on the Nasdaq
Stock Market ("Nasdaq") and traded in the OTC market. Bassett S. Winmill may be
deemed a controlling person of Group on the basis of his ownership of 100% of
Group's voting stock and, therefore, of the Investment Manager. The Fund and its
affiliated investment companies had net assets in excess of $330,000,000 as of
August 12, 1997.

INVESTMENT MANAGEMENT AGREEMENT

Under the Investment Management Agreement, the Fund assumes and pays all
expenses required for the conduct of its business including, but not limited to,
custodian and transfer agency fees, accounting and legal fees, investment
management fees, fees of disinterested Directors, association fees, printing,
salaries of certain administrative and clerical personnel, necessary office
space, all expenses relating to the registration or qualification of the shares
of the Fund under Blue Sky laws and reasonable fees and expenses of counsel in
connection with such registration and qualification, miscellaneous expenses and
such non-recurring expenses as may arise, including actions, suits or
proceedings affecting the Fund and the legal obligation which the Corporation
may have to indemnify its officers and Directors with respect thereto.

The Investment Manager has agreed in the Investment Management Agreement that
it will waive all or part of its fee or reimburse the Fund monthly if, and to
the extent that, the Fund's aggregate operating expenses exceed the most
restrictive limit imposed by any state in which shares of the Fund are qualified
for sale. Currently, the Fund is not subject to any such state-imposed
limitations. Certain expenses, such as brokerage commissions, taxes, interest,
distribution fees, certain expenses attributable to investing outside the United
States and extraordinary items, are excluded from this limitation. For the
fiscal years ended June 30, 1995, 1996 and 1997, the Investment Manager received
$339,025, $305,752 and $319,712, respectively, in management fees from the Fund
and waived $169,513, $152,876 and $159,856, respectively, of such fees to
improve the Fund's yield.

If requested by the Corporation's Board of Directors, the Investment Manager
may provide other services to the Fund such as, without limitation, the
functions of billing, accounting, certain shareholder communications and
services, administering state and Federal registrations, filings and controls
and other administrative services. Any services so requested and performed will
be for the Fund's account, and the Investment Manager's costs to render such
services shall be reimbursed by the Fund subject to examination by those
Directors of the Corporation who are not "interested persons" of the Investment
Manager or any affiliate thereof. For the fiscal years ended June 30, 1995,
1996, and 1997, the Fund reimbursed the Investment Manager $19,900, $24,625 and
$25,462, respectively, for such services.

The Investment Management Agreement provides that the Investment Manager will
not be liable to the Fund or any Fund shareholder for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which the agreement relates. Nothing contained in the

<PAGE>

Investment Management Agreement, however, may be construed to protect the
Investment Manager against any liability to the Fund by reason of the Investment
Manager's willful misfeasance, bad faith, or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under the Investment Management Agreement.

The Investment Management Agreement will continue in effect, unless sooner
terminated as described below, for successive periods of twelve months, provided
such continuance is specifically approved at least annually by (a) the Board of
Directors of the Corporation or by the holders of a majority of the outstanding
voting securities of the Fund as defined in the 1940 Act and (b) a vote of a
majority of the Directors of the Corporation who are not parties to the
Investment Management Agreement, or interested persons of any such party. The
Investment Management Agreement may be terminated without penalty at any time
either by a vote of the Board of Directors of the Corporation or the holders of
a majority of the outstanding voting securities of the Fund, as defined in the
1940 Act, on 60 days' written notice to the Investment Manager, or by the
Investment Manager on 60 days' written notice to the Fund, and shall immediately
terminate in the event of its assignment.

Group has granted the Corporation a non-exclusive license to use various
service marks, including "Bull & Bear," "Bull & Bear Performance Driven," and
"Performance Driven" under certain terms and conditions on a royalty free basis.
Such license will be withdrawn in the event the investment manager of the
Corporation shall not be the Investment Manager or another subsidiary of Group.
If the license is terminated, the Corporation will eliminate all reference to
"Bull & Bear" in its corporate name and cease to use any of such service marks
or any similar service marks in its business.

YIELD AND PERFORMANCE INFORMATION

The Fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to indicate future
performance. Yield will fluctuate and, although the Fund is managed to maintain
a net asset value of $1.00 per share, there can be no assurance that it will be
able to do so. Consequently, quotations of yield should not be considered as
representative of what the Fund's yield may be for any specified period in the
future. Since performance will vary, these results are not necessarily
representative of future results. Performance is a function of the type and
quality of portfolio securities and will reflect general market conditions and
operating expenses. See "The Fund's Investment Program" in the prospectus. This
Statement of Additional Information may be in use for a full year and
performance results for periods subsequent to June 30, 1997 may vary
substantially from those shown below. An investment in the Fund is neither
insured nor guaranteed by the U.S. Government as is a bank account or
certificate of deposit.

The Fund's yield used in advertisements, sales material and shareholder
communications, reflecting the payment of a dividend each month, may be
calculated in two ways in order to show Current Yield and Effective Yield, in
each case to two decimal places. To obtain the Fund's yield, please call
Investor Service Center toll-free at 1-800-847-4200.

Current Yield refers to the income generated by an investment in the Fund
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized," that is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The Effective Yield is
the annualized current yield which is compounded by assuming the current income
to be reinvested.

Set forth below is the Fund's Current Yield and Effective Yield for the seven
calendar days ended August 12, 1997.

Current Yield 4.92%
Effective Yield 5.04%

Yield information is useful in reviewing the Fund's performance, but may not
provide a basis for comparison with bank deposits, which may be insured, since
an investment in the Fund is not insured and its yield is not guaranteed. Yield
for a prior period should not be considered a representation of future
performance, which will change in response to fluctuations in interest rates on
portfolio investments, the quality, type and maturity of such investments, the
Fund's expenses and by the investment of a net inflow of new money at interest
rates different than those being earned from the Fund's then current holdings.

The Investment Manager and certain of its affiliates serve as investment
managers to the Fund and other affiliated investment companies, which have
individual and institutional investors throughout the United States and in 37
foreign countries. The Fund may also provide performance information based on an
initial investment in the Fund and/or cumulative investments of varying amounts
over periods of time. Some or all of this information may be provided either
graphically or in tabular form.

SOURCE MATERIAL

From time to time, in marketing pieces and other Fund literature, the Fund's
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities. Evaluations of Fund
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for Fund performance information may include, but
are not limited to, the following:

Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance and other data.

Bloomberg, a computerized market data source and portfolio analysis system.

Bond Buyer Municipal Bond Index (20 year), an index of municipal bonds provided
by a national periodical reporting on municipal securities.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.

<PAGE>

CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.

Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.

Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Goldman Sachs Convertible Bond Index -- currently includes 67 bonds and 33
preferred shares. The original list of names was generated by screening for
convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.

Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.

IBC's Money Fund Report, a weekly publication of money market fund total net
assets, yield, and portfolio composition.

Individual Investor, a newspaper that periodically reviews mutual fund
performance and other data.

Investment Advisor, a monthly publication reviewing performance of mutual funds.

Investor's Business Daily, a nationally distributed newspaper which regularly
covers financial news.

Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.

Lehman Brothers, Inc. "The Bond Market Report" reports on various Lehman
Brothers bond indices.

Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.

Lehman Long Term Treasury Bond Index -- is comprised of all bonds covered by the
Lehman Treasury Bond Index with maturities of 10 years or greater.

Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.

Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

Morgan Stanley Capital International EAFE Index, is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.

Morningstar Investor, Morningstar Mutual Funds and Morningstar Principia,
publications of Morningstar, Inc., periodically reviewing mutual funds
industry-wide by means of various methods of analysis and textual commentary.

Mutual Fund Forecaster, a newsletter providing a mutual fund rating service.

Nasdaq Industrial Index -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.

New York Times, a nationally distributed newspaper which regularly covers
financial news.

The No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performance, rates funds, and discusses investment strategies for mutual fund
investors.

Personal Finance, a monthly magazine frequently reporting mutual fund data.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indices, and
portfolio holdings.

Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York and American Stock Exchanges or the
Nasdaq over-the-counter market, accounting for over 90% of the market value of
publicly traded stocks in the U.S.

Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.

Smart Money, a monthly magazine frequently reporting mutual fund data.

<PAGE>

Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.

Salomon Brothers High-Grade Corporate Bond Index -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.

Salomon Brothers Broad Investment-Grade Bond Index -- is a market-weighted index
that contains approximately 4,700 individually priced investment-grade corporate
bonds rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.

Salomon Brothers Market Performance tracks the Salomon Brothers bond index.

Standard & Poor's 500 Composite Stock Price Index -- is an index of 500
companies representing the U.S. stock market.

Standard & Poor's 100 Composite Stock Price Index -- is an index of 100
companies representing the U.S. stock market.

Standard & Poor's Preferred Index is an index of preferred securities.

Success, a monthly magazine targeted to entrepreneurs and growing businesses,
often featuring mutual fund performance data.

USA Today, a national newspaper that periodically reports mutual fund
performance data.

U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.

The Wall Street Journal, a nationally distributed newspaper which regularly
covers financial news.

The Wall Street Transcript, a periodical reporting on financial markets and
securities.

Wilshire 5000 Equity Indexes -- consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.

Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard & Poor's 500 Index.

Indices prepared by the research departments of such financial organizations
as Salomon Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Bear
Stearns & Co., Inc., and Ibbotson Associates may be used, as well as information
provided by the Federal Reserve Board.

DISTRIBUTION OF SHARES

Pursuant to a Distribution Agreement, Investor Service Center, Inc. acts as
the principal Distributor of the Fund's shares. Under the Distribution
Agreement, the Distributor shall use its best efforts, consistent with its other
businesses, to sell shares of the Fund. Fund shares are offered continuously.
Pursuant to a Plan of Distribution ("Plan") adopted pursuant to Rule 12b-1 under
the 1940 Act, the Fund pays the Distributor monthly a fee in the amount of 0.25%
per annum of the Fund's average daily net assets as compensation for
distribution and service activities.

In performing distribution and service activities pursuant to the Plan, the
Distributor may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who service shareholder
accounts; fulfillment expenses, including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and internal costs incurred by the
Distributor and allocated by the Distributor to its efforts to distribute shares
of the Fund such as office rent and equipment, employee salaries, employee
bonuses and other overhead expenses.

Among other things, the Plan provides that (1) the Distributor will submit to
the Corporation's Board of Directors at least quarterly, and the Directors will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment or
agreement related thereto is approved, by the Corporation's Board of Directors,
including those Directors who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related to the Plan ("Plan Directors"), acting in person at a
meeting called for that purpose, unless terminated by vote of a majority of the
Plan Directors, or by vote of a majority of the outstanding voting securities of
the Fund, (3) payments by the Fund under the Plan may not be materially
increased without the affirmative vote of the holders of a majority of the
outstanding voting securities of the Fund and (4) while the Plan remains in
effect, the selection and nomination of Directors who are not "interested
persons" of the Fund will be committed to the discretion of the Directors who
are not "interested persons" of the Fund.

With the approval of a majority of the entire Board of Directors and of the
Plan Directors of the Fund, the Distributor has entered into a related agreement
with Hanover Direct Advertising Company, Inc. ("Hanover Direct"), a wholly owned
subsidiary of Group, in an attempt to obtain cost savings on the marketing of
the Fund's shares. Hanover Direct will provide services to the Distributor on
behalf of the Fund and the other Bull & Bear Funds at standard industry rates,
which includes commissions. The amount of Hanover Direct's commissions over its
cost of providing Fund marketing will be credited to the Fund's distribution
expenses and represent a saving on marketing, to the benefit of the Fund. To the
extent Hanover Direct's costs exceed such commissions, Hanover Direct will
absorb any of such costs.

It is the opinion of the Board of Directors that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
fund shrinks in size and its ability to maintain quality shareholder services

<PAGE>

declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. Offsetting redemptions
through sales efforts benefits shareholders by maintaining a fund's viability.
In periods of net sales, additional benefits may accrue relative to portfolio
management and increased shareholder servicing capability. In addition,
increased assets enable the establishment and maintenance of a better
shareholder servicing staff which can respond more effectively and promptly to
shareholder inquiries and needs. While net increases in total assets are
desirable, the primary goal of the Plan is to prevent a decline in assets
serious enough to cause disruption of portfolio management and impair the Fund's
ability to maintain a high level of quality shareholder services.

The Plan increases the overall expense ratio of the Fund; however, a
substantial decline in Fund assets is likely to increase the portion of the
Fund's expense ratio comprised of management fees and fixed costs (i.e., costs
other than the Plan) while a substantial increase in Fund assets would be
expected to reduce the portion of the expense ratio comprised of management fees
(reflecting a larger portion of the assets falling within fee scale-down
levels), as well as of fixed costs. Nevertheless, the net effect of the Plan is
to increase overall expenses. To the extent the Plan maintains a flow of
subscriptions to the Fund, there results an immediate and direct benefit to the
Investment Manager by maintaining or increasing its fee revenue base,
diminishing the obligation, if any, of the Investment Manager to make an expense
reimbursement to the Fund, and eliminating or reducing any contribution made by
the Investment Manager to marketing expenses. Other than as described herein, no
Director or "interested person" of the Fund had any direct or indirect financial
interest in the operation of the Plan or any related agreement.

During the fiscal year ended June 30, 1997, the Distributor waived the entire
fee it was entitled to receive under the Plan.

The Glass-Steagall Act prohibits certain banks from engaging in the business
of underwriting, selling, or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being paid for administrative and accounting services under the Plan.
If, because of changes in law or regulation, or because of new interpretations
of existing law, a bank or the Fund were prevented from continuing these
arrangements, it is expected that other arrangements for these services will be
made. In addition, state securities laws on this issue may differ from the
interpretation of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

DETERMINATION OF NET ASSET VALUE

The Fund's net asset value per share is determined as of 11:00 a.m. eastern
time and as of the close of regular trading on the New York Stock Exchange
("NYSE") (currently 4:00 p.m. eastern time) on each Fund business day. The
following days are not Fund business days: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Net asset value per share is determined
by dividing the value of the Fund's net assets by the total number of shares
outstanding.

The Fund has adopted the amortized cost method of valuing portfolio
securities provided by Rule 2a-7 under the 1940 Act. To use amortized cost to
value its portfolio securities, the Fund must adhere to certain conditions under
that Rule relating to the Fund's investments. Amortized cost is an approximation
of market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account and
thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that a
large number of redemptions take place at a time when interest rates have
increased, the Fund might have to sell portfolio securities prior to maturity
and at prices that might not be desirable.

The Board of Directors may authorize the use of one or more pricing services
which provide bid valuations (some of which may be "readily available market
quotations") on certain of the securities in which the Fund invests. Such
pricing services may employ electronic data processing techniques including the
use of a matrix pricing system which takes into consideration factors such as
yields, prices, maturities, call features and ratings on comparable securities.
Information obtained from such services may be used by the Fund both in the fair
valuation of securities for which there are no readily available market
quotations and in connection with the determination of the market prices of
securities held in the Fund's portfolio.

PURCHASE OF SHARES

The Fund will only issue shares upon payment of the purchase price by check
made drawn to the Fund's order in U.S. dollars on a U.S. bank, or by Federal
Reserve wire transfer. Second and third party checks, credit cards, and cash
will not be accepted. The Fund reserves the right to reject any order, to cancel
any order due to nonpayment, to accept initial orders by telephone or telegram,
and to waive the limit on subsequent orders by telephone, with respect to any
person or class of persons. Orders to purchase shares are not binding on the
Fund until they are confirmed by the Fund's transfer agent. If an order is
canceled because of non-payment or because the purchaser's check does not clear,
the purchaser will be responsible for any loss the Fund incurs. If the purchaser
is already a shareholder, the Fund can redeem shares from the purchaser's
account to reimburse the Fund for any loss. In addition, the purchaser may be
prohibited or restricted from placing future purchase orders in the Fund or any
of the other Funds in the Investment Company Complex. In order to permit the
Fund's shareholder base to expand, to avoid certain shareholder hardships, to
correct transactional errors, and to address similar exceptional situations,
the Fund may waive or lower the investment minimums with respect to any
person or class of persons.

ALLOCATION OF BROKERAGE

Under present investment policies the Fund is not expected to incur any
substantial brokerage commission costs. For the fiscal years ended June 30,
1995, 1996 and 1997 the Fund did not pay any brokerage commissions. The Fund is
not currently obligated to deal with any particular broker, dealer or group
thereof.

The Fund seeks to obtain prompt execution of orders at the most favorable net
prices. The Fund may purchase portfolio securities from dealers and underwriters
as well as from issuers. Purchases of securities include a commission or
concession paid to the underwriter, and purchases from dealers include a spread
between the bid and asked price. When securities are purchased directly from an
issuer, no commissions or discounts are paid.

<PAGE>

Transactions may be directed to dealers who provide research and other
services in the execution of orders. There is no certainty that such services
provided, if any, will be beneficial to the Fund, and it may be that other
affiliated investment companies will derive benefit therefrom. It is not
possible to place a dollar value on such services received by the Investment
Manager from dealers effecting transactions in portfolio securities. Such
services may permit the Investment Manager to supplement its own research and
other activities and may make available to the Investment Manager the opinions
and information of individuals and research staffs of other securities firms.
Portfolio transactions will not be directed to dealers solely on the basis of
research services provided. The Fund will not purchase portfolio securities at a
higher price or sell such securities at a lower price in connection with
transactions effected with a dealer who furnishes research services to the
Investment Manager than would be the case if no weight were given by the
Investment Manager to the dealer's furnishing of such services. The Distributor
pays BBSI compensation monthly for distribution and shareholder services in the
amount of 0.25% per annum of Fund assets held by customers of BBSI.

Investment decisions for the Fund and for the other Funds managed by the
Investment Manager or its affiliates are made independently based on each Fund's
investment objectives and policies. The same investment decision, however, may
occasionally be made for two or more Funds. In such a case, the Investment
Manager may combine orders for two or more Funds for a particular security if it
appears that a combined order would reduce brokerage commissions and/or result
in a more favorable transaction price. Combined purchase or sale orders are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each Fund. While in some cases this practice could have a
detrimental effect upon the price or quantity available of the security with
respect to the Fund, the Investment Manager believes that the larger volume of
combined orders can generally result in better execution and prices.

The Fund is not obligated to deal with any particular broker, dealer or group
thereof. Certain broker/dealers that the Investment Company Complex does
business with may, from time to time, own more than 5% of the publicly traded
Class A non-voting Common Stock of Group, the parent of the Investment Manager,
and may provide clearing services to BBSI.

DIVIDENDS AND TAXES

DIVIDENDS. All of the net income of the Fund is declared daily as dividends to
shareholders of record as of the close of regular trading on the NYSE each
Business Day. Net income of the Fund (during the period commencing at the time
of the immediately preceding dividend declaration) consists of accrued interest
or earned discount (including both original issue and market discounts) on the
assets of the Fund for so long as the Fund utilizes the amortized cost method of
valuing portfolio securities, less the estimated expenses of the Fund plus or
minus all realized gains or losses on the Fund's portfolio securities applicable
to that period. The Fund's net income is determined by the Custodian on a daily
basis as of the close of regular trading on the NYSE on each Business Day (see
"Determination of Net Asset Value").

If the Fund incurs or anticipates any unusual expense, loss or depreciation
that could adversely affect its income or net asset value, the Corporation's
Board of Directors would at that time consider whether to adhere to the present
income accrual and distribution policy described above or to revise it in light
of then prevailing circumstances. For example, under such unusual circumstances
the Directors might reduce or suspend declaration of daily dividends in order to
prevent to the extent possible the per share net asset value of the Fund from
being reduced below $1.00. Thus, such expenses or losses or depreciation may
result in shareholders receiving less income.

If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional Fund shares at the then
current net asset value in lieu of the cash payment and to thereafter issue such
shareholder's distributions in additional Fund shares. No interest will accrue
on amounts represented by uncashed distribution or redemption checks.

TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for that treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (generally consisting of net investment income and net short-term
capital gains) and must meet several additional requirements. Among these
requirements are the following: (1) at least 90% of the Fund's gross income each
taxable year must be derived from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities, or
other income derived with respect to its business of investing in securities;
(2) the Fund must derive less than 30% of its gross income each taxable year
from the sale or other disposition of securities that were held for less than
three months, although this requirement will no longer apply to the Fund after
June 30, 1998; and (3) the Fund's investments must satisfy certain
diversification requirements. In any year during which the applicable provisions
of the Code are satisfied, the Fund will not be liable for Federal income tax on
net income and gains that are distributed to its shareholders. If for any
taxable year the Fund does not qualify for treatment as a RIC, all of its
taxable income will be taxed at corporate rates.

The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year an amount equal to the sum
of (1) 98% of its ordinary income, (2) 98% of its capital gain net income
(determined on an October 31 fiscal year basis), plus (3) generally, income and
gain not distributed or subject to corporate tax in the prior calendar year. The
Fund intends to avoid imposition of this excise tax by making adequate
distributions.

The foregoing discussion of Federal tax consequences is based on the tax law
in effect on the date of this Statement of Additional Information, which is
subject to change by legislative, judicial, or administrative action. The Fund
may be subject to state or local tax in jurisdictions in which it may be deemed
to be doing business.

<PAGE>

REPORTS TO SHAREHOLDERS

The Fund issues, at least semi-annually, reports to its shareholders
including a list of investments held and statements of assets and liabilities,
income and expense, and changes in net assets. The Fund's fiscal year ends on
June 30.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

Investors Fiduciary Trust Company, 811 Main, 11th Floor, Kansas City, MO
64105-1716 has been retained by the Corporation to act as Custodian of the
Fund's investments and may appoint one or more subcustodians. The Custodian also
performs certain accounting services for the Fund. As part of its agreement with
the Corporation, the Custodian may apply credits or charges for its services to
the Fund for, respectively, positive or deficit cash balances maintained by the
Fund with the Custodian. DST Systems, Inc., Box 419789, Kansas City, Missouri
64141-6789, is the Fund's Transfer and Dividend Disbursing Agent. The
Distributor provides certain administrative and shareholder services to the Fund
pursuant to the Shareholder Services Agreement and is reimbursed by the Fund the
actual costs incurred with respect thereto. For shareholder services, the Fund
paid the Distributor for the fiscal years ended June 30, 1995, 1996, and 1997
approximately $70,937, $38,280 and $25,921, respectively.

AUDITORS

Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19102-1707, are the Fund's independent accountants. Financial statements of the
Fund are audited annually.

FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended June 30, 1997,
together with the Report of the Fund's independent accountants thereon, appear
in the Fund's Annual Report to Shareholders and are incorporated herein by
reference.

<PAGE>

BULL & BEAR FUNDS II, INC.

Part C. Other Information

Item 24. Financial Statements and Exhibits

(a) Financial Statements included in Part A of this Registration
Statement for Bull & Bear Dollar Reserves:

Financial Highlights

The Annual Report to Shareholders for Bull & Bear Dollar Reserves for
the fiscal period ended June 30, 1997 containing financial statements
as of and for the fiscal period ended June 30, 1997 is incorporated
into Bull & Bear Dollar Reserves' Statement of Additional Information
by reference. The letter to shareholders and other information
contained on pages 1 through 2 of said Annual Report to Shareholders is
not incorporated in Part B by reference and is not a part of this
Registration Statement.

(b) Exhibits
(1)Amended and Restated Articles of Incorporation. Incorporated herein
by reference to Post-Effective Amendment No. 51 to the Registration
Statement, SEC File No. 2-57953, filed October 26, 1995 (Accession
Number 0000015260-95-000010)
(2)Amended By-Laws. Incorporated herein by reference to Post-Effective
Amendment No. 51 to the Registration Statement, SEC File No.
2-57953, filed October 26, 1995 (Accession Number 0000015260-95-
000010)
(3)Voting trust agreement -- none
(4)Specimen securities. Incorporated herein by reference to Post-
Effective Amendment No. 51 to the Registration Statement, SEC File
No. 2-57953, filed October 26, 1995 (Accession Number 0000015260-95
-000010)
(5)Investment Management Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 51 to the Registration Statement, SEC
File No. 2-57953, filed October 26, 1995 (Accession Number
0000015260-95-000010)
(6)(a) Distribution agreement. Incorporated herein by reference to
Post-Effective Amendment No. 51 to the Registration Statement,
SEC File No. 2-57953, filed October 26, 1995 (Accession Number
0000015260-95-000010)
(b) Form of Broker Services Agreement. Incorporated herein by
reference to Post-Effective Amendment No. 51 to the Registration
Statement, SEC File No. 2-57953, filed October 26, 1995
(Accession Number 0000015260-95-000010)
(7)Bonus, profit-sharing or pension plans--none.
(8)Custodial and Investment Accounting Agreement. Filed herewith.
(9)(a) Shareholder services agreement. Incorporated herein by reference
to Post-Effective Amendment No. 51 to the Registration
Statement, SEC File No. 2-57953, filed October 26, 1995
(Accession Number 0000015260-95-000010)
(b) Transfer Agency Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 51 to the Registration Statement,
SEC File No. 2-57953,

<PAGE>

filed October 26,1995 (Accession Number 0000015260-95-000010)
(c) Agency Agreement. Incorporated herein by reference to Post-
Effective Amendment No. 51 to the Registration Statement, SEC
File No. 2-57953, filed October 26, 1995 (Accession Number
0000015260-95-000010)
(d) Credit Agreement. Incorporated herein by reference to Post-
Effective Amendment No. 52 to the Registration Statement, SEC
File No. 2-57953, filed November 1, 1996 (Accession Number
0000015260-96-000016)
(e) Licensing Agreement.Incorporated herein by reference to
Post-Effective Amendment No. 52 to the Registration Statement,
SEC File No. 2-57953, filed November 1, 1996 (Accession Number
0000015260-96-000016)
(10) Opinion of counsel. Previously filed.
(11)(a) Accountants' consent. Filed herewith.
(b) Opinion of counsel with respect to eligibility for
effectiveness under paragraph (b) of Rule 485. Filed herewith.
(12) Financial statements omitted from Item 23 -- no applicable
(13) Agreement for providing initial capital -- not applicable
(14) Prototype retirement plans
(a) Standardized Profit Sharing Adoption Agreement. Incorporated
herein by reference to Post-Effective Amendment No. 51 to the
Registration Statement, SEC File No. 2-57953, filed October 26,
1995 (Accession Number 0000015260-95-000010)
(b) Defined Contribution Basic Plan Document. Incorporated herein by
reference to Post-Effective Amendment No. 51 to the Registration
Statement, SEC File No. 2-57953, filed October 26, 1995
(Accession Number 0000015260-95-000010)
(c) Standardized Money Purchase Adoption Agreement. Incorporated
herein by reference to Post-Effective Amendment No. 51 to the
Registration Statement, SEC File No. 2-57953, filed October 26,
1995 (Accession Number 0000015260-95-000010)
(d) Simplified Profit Sharing Adoption Agreement. Incorporated
herein by reference to Post-Effective Amendment No. 51 to the
Registration Statement, SEC File No. 2-57953, filed October 26,
1995 (Accession Number 0000015260-95-000010)
(e) Simplified Money Purchase Adoption Agreement. Incorporated
herein by reference to Post-Effective Amendment No. 51 to the
Registration Statement, SEC File No. 2-57953, filed October 26,
1995 (Accession Number 0000015260-95-000010)
(f) 403(b) Tax-Sheltered Custodial Account Agreement. Incorporated
herein by reference to Post-Effective Amendment No. 51 to the
Registration Statement, SEC File No. 2-57953, filed October 26,
1995 (Accession Number 0000015260-95-000010)
(g) SEP Basic Plan Document. Incorporated herein by reference to
Post-Effective Amendment No. 51 to the Registration Statement,
SEC File No. 2-57953, filed October 26, 1995 (Accession Number
0000015260-95-000010)
(h) SEP Adoption Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 51 to the Registration Statement,
SEC File No. 2-57953, filed October 26, 1995 (Accession Number
0000015260-95-000010)
(15)(a) Plan pursuant to Rule 12b-1. Incorporated herein by reference
to PostEffective Amendment No. 51 to the Registration
Statement, SEC File No. 2-57953, filed October 26,

<PAGE>

1995 (Accession Number 0000015260-95-000010)
(b) Related Agreement to Plan of Distribution pursuant to Rule
12b-1 between Investor Service Center, Inc. and Hanover Direct
Advertising Company, Inc. Incorporated herein by reference to
Post-Effective Amendment No. 51 to the Registration Statement,
SEC File No. 2-57953, filed October 26, 1995 (Accession Number
0000015260-95-000010)
(16) Schedule for computation of performance quotations
(a) Basic information. Previously filed.
(b) Supplemental information. Incorporated herein by reference to
corresponding exhibit of Post Effective Amendment No. 50 to the
Registration Statement, SEC File No. 2-57953.
(17) Financial Data Schedule. Filed herewith.
(18) Not applicable

Item 25. Persons Controlled by or under Common Control with Registrant

Not applicable.

Item 26. Number of Holders of Securities

Number of Record Holders
Title of Class (as of August 22, 1997)
Shares of Common Stock,
$0.01 par value
Dollar Reserves 3,108

Item 27. Indemnification

The Registrant is incorporated under Maryland law. Section 2-418 of the
Maryland General Corporation Law requires the Registrant to indemnify its
directors, officers and employees against expenses, including legal fees, in a
successful defense of a civil or criminal proceeding. The law also permits
indemnification of directors, officers, employees and agents unless it is proved
that (a) the act or omission of the person was material and was committed in bad
faith or was the result of active or deliberate dishonesty, (b) the person
received an improper personal benefit in money, property or services or (c) in
the case of a criminal action, the person had reasonable cause to believe that
the act or omission was unlawful.

Registrant's amended and restated Articles of Incorporation: (1)
provide that, to the maximum extent permitted by applicable law, a director or
officer will not be liable to the Registrant or its stockholders for monetary
damages; (2) require the Registrant to indemnify and advance expense as provided
in the By-laws to its present and past directors, officers, employees and
agents, and persons who are serving or have served at the request of the
Registrant in similar capacities for other entities in advance of final
disposition of any action against that person to the extent permitted by
Maryland law and the 1940 Act; (3) allow the corporation to purchase insurance
for any present or past director, officer, employee, or agent; and (4) require
that any repeal or modification of the amended and restated Articles of
Incorporation by the shareholders, or adoption or modification of any provision
of the Articles of Incorporation inconsistent with the indemnification
provisions, be prospective only to the extent such repeal or modification would,
if applied retrospectively, adversely

<PAGE>

affect any limitation on the liability of or indemnification available to any
person covered by the indemnification provisions of the amended and restated
Articles of Incorporation.

Section 11.01 of Article XI of the By-Laws sets forth the procedures by
which the Registrant will indemnify its directors, officers, employees and
agents. Section 11.02 of Article XI of the By-Laws further provides that the
Registrant may purchase and maintain insurance or other sources of reimbursement
to the extent permitted by law on behalf of any person who is or was a director
or officer of the Registrant, or is or was serving at the request of the
Registrant as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in or arising out of his or her position.

Registrant's Investment Management Agreement between the Registrant and
Bull & Bear Advisers, Inc. ("Investment Manager"), with respect to Bull & Bear
Dollar Reserves provides that the Investment Manager shall not be liable to the
Registrant or its series or any shareholder of the Registrant or its series for
any error of judgment or mistake of law or for any loss suffered by the
Registrant in connection with the matters to which the Investment Management
Agreement relates. However, the Investment Manager is not protected against any
liability to the Registrant or to the series by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under the Investment
Management Agreement.

Section 9 of the Distribution Agreement between Bull & Bear Funds II,
Inc. and Investor Service Center, Inc. ("Service Center") provides that the
Registrant will indemnify Service Center and its officers, directors and
controlling persons against all liabilities arising from any alleged untrue
statement of material fact in the Registration Statement or from any alleged
omission to state in the Registration Statement a material fact required to be
stated in it or necessary to make the statements in it, in light of the
circumstances under which they were made, not misleading, except insofar as
liability arises from untrue statements or omissions made in reliance upon and
in conformity with information furnished by Service Center to the Registrant for
use in the Registration Statement; and provided that this indemnity agreement
shall not protect any such persons against liabilities arising by reason of
their bad faith, gross negligence or willful misfeasance; and shall not inure to
the benefit of any such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against public policy
as expressed in the Securities Act of 1933. Section 9 of the Distribution
Agreement also provides that Service Center agrees to indemnify, defend and hold
the Registrant, its officers and Directors free and harmless of any claims
arising out of any alleged untrue statement or any alleged omission of material
fact contained in information furnished by Service Center for use in the
Registration Statement or arising out of any agreement between Service Center
and any retail dealer, or arising out of supplementary literature or advertising
used by Service Center in connection with the Distribution Agreement.

The Registrant undertakes to carry out all indemnification provisions
of its Articles of Incorporation and By-Laws and the above-described Investment
Management Agreement in accordance with Investment Company Act Release No. 11330
(September 4, 1980) and successor releases.

<PAGE>

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to directors, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

Item 28. Business and other Connections of Investment Adviser

The directors and officers of the Investment Manager are also directors
and officers of other Funds managed by Midas Management Corporation and Rockwood
Advisers, Inc., both of which are wholly owned subsidiaries of Bull & Bear
Group, Inc. ("Funds"). In addition, such officers are officers and directors of
Bull & Bear Group, Inc. and its other subsidiaries; Service Center, the
distributor of the Registrant and the Funds and a registered broker/dealer; and
Bull & Bear Securities, Inc., a discount brokerage firm. Bull & Bear Group,
Inc.'s predecessor was organized in 1976. In 1978, it acquired control of and
subsequently merged with Investors Counsel, Inc., a registered investment
adviser organized in 1959. The principal business of both companies since their
founding has been to serve as investment manager to registered investment
companies. Bull & Bear Advisers, Inc. serves as investment manager of Bull &
Bear Dollar Reserves, the sole series of shares issued by Bull & Bear Funds II,
Inc.; Bull & Bear Global Income Fund, Inc.; Bull & Bear Municipal Income Fund,
Inc.; Bull & Bear Gold Investors Ltd.; Bull & Bear U.S. and Overseas Fund, the
sole series of shares of Bull & Bear Funds I, Inc.; Bull & Bear Special Equities
Fund, Inc., and Bull & Bear U.S. Government Securities Fund, Inc. Midas
Management Corporation serves as investment manager of Midas Fund, Inc., and
Rockwood Advisers, Inc. serves as investment adviser of Rockwood Fund, Inc.

Item 29. Principal Underwriters

a) In addition to the Registrant, Service Center serves as principal
underwriter of Bull & Bear Gold Investors Ltd., Bull & Bear Special Equities
Fund, Inc., Bull & Bear Funds I, Inc., Midas Fund, Inc., and Rockwood Fund, Inc.

b) Service Center will serve as the Registrant's principal underwriter with
respect to Bull & Bear Dollar Reserves. The directors and officers of Service
Center, their principal business addresses, their positions and offices with
Service Center and their positions and offices with the Registrant (if any) are
set forth below.

Name and Principal Position and Offices Position and Offices
Business Address with Investor Service with Registrant
Center, Inc.

Bassett S. Winmill n/a Chairman of the
11 Hanover Square Board
New York, NY 10005

Robert D. Anderson Vice Chairman Vice Chairman
11 Hanover Square and Director and Director
New York, NY 10005

Steven A. Landis Senior Vice President Senior Vice
11 Hanover Square President
New York, NY 10005

Mark C. Winmill Chairman, Director and Co-President,
11 Hanover Square Chief Financial Officer Director and Chief
New York, NY 10005 Financial Officer

Thomas B. Winmill President, Director, Co-President,
11 Hanover Square General Counsel Director, and
New York, NY 10005 General Counsel

Kathleen B. Fliegauf Vice President and None
11 Hanover Square Assistant Treasurer
New York, NY 10005

William J. Maynard Vice President Vice President
11 Hanover Square and Secretary and Secretary
New York, NY 10005

Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005

Joseph Leung Treasurer, Chief Treasurer, Chief
11 Hanover Square Accounting Officer Accounting Officer
New York, NY 10005

Michael J. McManus Vice President None
11 Hanover Square
New York, NY 10005

Item 30. Location of Accounts and Records

The minute books of Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
the Registrant and its Investment Manager). All other records required by
Section 31(a) of the Investment Company Act of 1940 are located at Investors
Fiduciary Trust Company, 811 Main, 11th Floor, Kansas City, MO 64105-1716 (the
offices of Registrant's custodian) and DST Systems, Inc., 1055 Broadway, Kansas
City, MO 64105-1594 (the offices of the Registrant's Transfer and Dividend
Disbursing Agent). Copies of certain of the records located at Investors
Fiduciary Trust Company & DST Systems, Inc. are kept at 11 Hanover Square, New
York, NY 10005 (the offices of the Registrant and the Investment Manager).

Item 31. Management Services -- none

Item 32. Undertakings -- The Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a copy of the
Registrant's annual report to shareholders upon request and without
charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City, County and State of New York on this 2nd day of
September, 1997.

BULL & BEAR FUNDS II, INC.

Thomas B. Winmill
By: Thomas B. Winmill

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:

Mark C. Winmill Director, Co-President and Co-Chief September 2, 1997
Mark C. Winmill Executive Officer

Thomas B. Winmill Director, Co-President and Co-Chief September 2, 1997
Thomas B. Winmill Executive Officer

Bassett S. Winmill Director, Chairman of the September 2, 1997
- ------------------
Bassett S. Winmill Board of Directors

Joseph Leung Treasurer, Principal September 2, 1997
Joseph Leung Accounting Officer

Robert D. Anderson Director, Vice Chairman September 2, 1997
- ------------------
Robert D. Anderson

Bruce B. Huber Director September 2, 1997
Bruce B. Huber

James E. Hunt Director September 2, 1997
- -------------
James E. Hunt

Frederick A. Parker, Jr. Director September 2, 1997
- ------------------------
Frederick A. Parker, Jr.

John B. Russell Director September 2, 1997
- ---------------
John B. Russell

Russell E. Burke III Director September 2, 1997
- --------------------
Russell E. Burke III

<PAGE>

EXHIBIT INDEX

PAGE
EXHIBIT NUMBER

8 Custodial and Investment Accounting Agreement

11 (a) Accountants' consent

11 (b) Opinion of counsel with respect to eligibility for
effectiveness under paragraph (b) of Rule 485.

17 Financial Data Schedule

<PAGE>

CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT

THIS AGREEMENT made the 25th day of April, 1996, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at l27 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and each registered investment company
listed on Exhibit A hereto, as it may be amended from time to time, each a
having its principal office and place of business at 11 Hanover Square, New
York, NY 10005 (each a "Fund" and collectively the "Funds").

WITNESSETH:

WHEREAS, each Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of such Fund's investment portfolio and
as its agent to perform certain investment accounting and recordkeeping
functions; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment; NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound,
mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Each Fund hereby constitutes and appoints
Custodian as:
A. Custodian of the securities and monies at any time owned by the
Fund; and
B. Agent to perform certain accounting and recordkeeping
functions relating to portfolio transactions required of a duly
registered investment company under Rule 31a of the Investment
Company Act of 1940 (the "1940 Act") and to calculate the net asset
value of the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Each Fund hereby represents, warrants and acknowledges to
Custodian:
1. That it is a corporation duly organized and
existing and in good standing under the laws of its state
of organization, and that it is registered under the 1940
Act; and
2. That it has the requisite power and authority
under applicable law, its articles of incorporation and its
bylaws to enter into this Agreement; that it has taken all
requisite action necessary to appoint Custodian as
custodian and investment accounting and recordkeeping agent
for the Fund; that this Agreement has been duly executed
and delivered by Fund; and that this Agreement constitutes
a legal, valid and binding obligation of Fund, enforceable
in accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to the Funds:

<PAGE>

1. That it is a trust company duly organized and existing and
in good standing under the laws of the State of Missouri;
and
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter into
and perform this Agreement; that this Agreement has been
duly executed and delivered by Custodian; and that this
Agreement constitutes a legal, valid and binding obligation
of Custodian, enforceable in accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets

Except as permitted by the 1940 Act, each Fund will deliver or cause
to be delivered to Custodian on the effective date of this
Agreement, or as soon thereafter as practicable, and from time to
time thereafter, all portfolio securities acquired by it and monies
then owned by it or from time to time coming into its possession
during the time this Agreement shall continue in effect. Custodian
shall have no responsibility or liability whatsoever for or on
account of securities or monies not so delivered.
B. Delivery of Accounts and Records

Each Fund shall turn over or cause to be turned
over to Custodian all of the Fund's relevant accounts and records
previously maintained. Custodian shall be entitled to rely
conclusively on the completeness and correctness of the accounts and
records turned over to it, and each Fund shall indemnify and hold
Custodian harmless of and from any and all expenses, damages and
losses whatsoever arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such Fund's accounts and
records or in the failure of such Fund to provide, or to provide in
a timely manner, any accounts, records or information needed by the
Custodian to perform its functions hereunder.
C. Delivery of Assets to Third Parties

Custodian will receive delivery of and keep safely the
assets of each Fund delivered to it from time to time segregated in
a separate account, and if any Fund is comprised of more than one
portfolio of investment securities (each a "Portfolio") Custodian
shall keep the assets of each Portfolio segregated in a separate
account. Custodian will not deliver, assign, pledge or hypothecate
any such assets to any person except as permitted by the provisions
of this Agreement or any agreement executed by it according to the
terms of Section 3.S. of this Agreement. Upon delivery of any such
assets to a subcustodian pursuant to Section 3.S. of this Agreement,
Custodian will create and maintain records identifying those assets
which have been delivered to the subcustodian as belonging to the
applicable Fund, by Portfolio if

<PAGE>

applicable. The Custodian is responsible for the safekeeping of the
securities and monies of the Funds only until they have been
transmitted to and received by other persons as permitted under the
terms of this Agreement, except for securities and monies
transmitted to subcustodians appointed under Section 3.S. of this
Agreement, for which Custodian remains responsible to the extent
provided in Section 3.S. hereof. Custodian may participate directly
or indirectly through a subcustodian in the Depository Trust Company
(DTC), Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved by the
Funds (as such entities are defined at 17 CFR Section 270.17f-4(b))
(each a "Depository" and collectively, the "Depositories").

D. Registration of Securities

The Custodian shall at all times hold
registered securities of the Funds in the name of the Custodian, the
applicable Fund, or a nominee of either of them, unless specifically
directed by instructions to hold such registered securities in
so-called "street name," provided that, in any event, all such
securities and other assets shall be held in an account of the
Custodian containing only assets of the applicable Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian
at all times shall indicate the Fund or other customer for which
such securities and other assets are held in such account and the
respective interests therein. If, however, any Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by the applicable Fund, which are held by
Custodian hereunder, however, shall at all times be identifiable on
the records of the Custodian. Each Fund agrees to hold Custodian and
its nominee harmless for any liability as a shareholder of record of
its securities held in custody.

E. Exchange of Securities

Upon receipt
of instructions as defined herein in Section 4.A, Custodian will
exchange, or cause to be exchanged, portfolio securities held by it
for the account of a Fund for other securities or cash issued or
paid in connection with any reorganization, recapitalization,
merger, consolidation, split-up of shares, change of par value,
conversion or otherwise, and will deposit any such securities in
accordance with the terms of any reorganization or

<PAGE>

protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value
of the stock is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.

F. Purchases of Investments of a Fund - Other Than Options and Futures
Each Fund will, on each business day on which a purchase of
securities (other than options and futures) shall be made by it,
deliver to Custodian instructions which shall specify with respect
to each such purchase:
1. If applicable, the name of the Portfolio making such
purchase;

2. The name of the issuer and description of the security;

3. The number of shares and the principal amount
purchased, and accrued interest, if any;

4. The trade date;

5. The settlement date;

6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the
purchase;

7. The total amount payable upon such purchase;

8. The name of the person from whom or the broker or
dealer through whom the purchase was made; and

9. Whether the security is to be received in certificated form
or via a specified Depository.

In accordance with such instructions, Custodian will pay for out of
monies held for the account of the applicable Fund, but only insofar
as such monies are available for such purpose, and receive the
portfolio securities so purchased by or for the account of the
applicable Fund, except that Custodian may in its sole discretion
advance funds to the Fund which may result in an overdraft because
the monies held by the Custodian on behalf of the Fund are
insufficient to pay the total amount payable upon such purchase.
Except as otherwise instructed by the applicable Fund, such payment
shall be made by the Custodian only upon receipt of securities: (a)
by the Custodian; (b) by a clearing corporation of a national
exchange of which the Custodian is a member; or (c) by a Depository.
Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by
book-entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the

<PAGE>

Depository require that the Depository make payment of such funds
only upon transfer by book-entry of the securities underlying the
repurchase agreement in such account; (ii) in the case of time
deposits, call account deposits, currency deposits and other
deposits, foreign exchange transactions, futures contracts or
options, the Custodian may make payment therefor before receipt of
an advice or confirmation evidencing said deposit or entry into such
transaction; and (iii) in the case of the purchase of securities,
the settlement of which occurs outside of the United States of
America, the Custodian may make, or cause a subcustodian appointed
pursuant to Section 3.S.2. of this Agreement to make, payment
therefor in accordance with generally accepted local custom and
market practice.

G. Sales and Deliveries of Investments of a Fund-Other Than Options
and Futures

Each Fund will, on each business day on
which a sale of investment securities (other than options and
futures) of such Fund has been made, deliver to Custodian
instructions specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such sale;

2. The name of the issuer and description of the securities;

3. The number of shares and principal amount sold, and accrued
interest, if any;

4. The date on which the securities sold were purchased or
other information identifying the securities sold
and to be delivered;

5. The trade date;

6. The settlement date;

7. The sale price per unit and the brokerage
commission, taxes or other expenses payable in connection
with such sale;
8. The total amount to be received by Fund upon such
sale; and

9. The name and address of the broker or
dealer through whom or person to whom the sale was made.

In accordance with such instructions, Custodian will deliver or
cause to be delivered the securities thus designated as sold for the
account of the applicable Fund to the broker or other person
specified in the instructions relating to such sale. Except as
otherwise instructed by the applicable Fund, such delivery shall be
made upon receipt of: (a) payment therefor in such form as is
satisfactory to the Custodian; (b) credit to the account of the
Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such

<PAGE>

securities shall be delivered in accordance with "street delivery
custom" to a broker or its clearing agent; or (ii) in the case of
the sale of securities, the settlement of which occurs outside of
the United States of America, the Custodian may make, or cause a
subcustodian appointed pursuant to Section 3.S.2. of this Agreement
to make, such delivery upon payment therefor in accordance with
generally accepted local custom and market practice.

H. Purchases or Sales of Options and Futures

Each Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or
dealer through whom the sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and

<PAGE>

j. The name and address of the broker or dealer
through whom the sale or purchase was made, or
other applicable settlement instructions.

4. Security Index Futures Contracts
a. The last trading date specified in the contract
and, when available, the closing level, thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account
(in addition to instructions, and if not
already in the
possession of Custodian, Fund shall deliver a
substantially complete and executed custodial
safekeeping account and procedural agreement which
shall be incorporated by reference into this
Custody Agreement); and
f. The name and address of the
futures commission merchant through whom the sale
or purchase was made, or other applicable
settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of the applicable
Fund, and subject to such additional terms and conditions as
Custodian may require:
1. Upon receipt of instructions, Custodian will release or
cause to be released securities held in custody to the
pledgee designated in such instructions by way of pledge or
hypothecation to secure any loan incurred by such Fund;
provided, however, that the securities shall be released
only upon payment to Custodian of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
securities may be released or caused to be released for
that

<PAGE>

purpose upon receipt of instructions. Upon receipt of
instructions, Custodian will pay, but only from funds
available for such purpose, any such loan upon redelivery
to it of the securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such
loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated in
such instructions; provided, however, that the securities
will be released only upon deposit with Custodian of full
cash collateral as specified in such instructions, and that
such Fund will retain the right to any dividends, interest
or distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will
release the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution,
purchase, transfer, or other dealings with securities or other
property of the Funds except as may be otherwise provided in this
Agreement or directed from time to time by the applicable Fund in
writing.
K. Deposit Accounts
Custodian will open and maintain one or
more special purpose deposit accounts for each Fund in the name of
Custodian ("Accounts"), subject only to draft or order by Custodian
upon receipt of instructions. All monies received by Custodian from
or for the account of any Fund shall be deposited in the appropriate
Accounts. Barring events not in the control of the Custodian such as
strikes, lockouts or labor disputes, riots, war or equipment or
transmission failure or damage, fire, flood, earthquake or other
natural disaster, action or inaction of governmental authority or
other causes beyond its control, at 9:00 a.m., Kansas City time, on
the second business day after deposit of any check into an Account,
Custodian agrees to make Fed Funds available to the applicable Fund
in the amount of the check. Deposits made by Federal Reserve wire
will be available to the Fund immediately and ACH wires will be
available to the Fund on the next business day. Income earned on the
portfolio securities will be credited to the Fund based on the
schedule attached as Exhibit A. The Custodian will be entitled to
reverse any credited amounts where credits have been made and monies
are not finally collected. If monies are collected after such
reversal, the Custodian will credit the Fund in that amount.
Custodian may open and maintain Accounts in such banks or trust
companies as may be designated by it or by the applicable Fund in
writing, all such Accounts, however,

<PAGE>

to be in the name of Custodian and subject only to its draft or
order. Funds received and held for the account of different
Portfolios shall be maintained in separate Accounts established for
each Portfolio.
L. Income and Other Payments to the Funds
Custodian will:
1. Collect, claim and receive and deposit for the account of
the applicable Fund all income and other payments which
become due and payable on or after the effective date of
this Agreement with respect to the securities deposited
under this Agreement, and credit the account of such Fund
in accordance with the schedule attached hereto as Exhibit
A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse
that credited amount.
2. Execute ownership and other
certificates and affidavits for all federal, state and
local tax purposes in connection with the collection of
bond and note coupons; and
3. Take such other action as may be
necessary or proper in connection with:
a. the collection, receipt and deposit of such income
and other payments, including but not limited to
the presentation for payment of:
1. all coupons and other income
items requiring presentation; and
2. all other securities which may
mature or be called, redeemed,
retired or otherwise become
payable and regarding which the
Custodian has actual knowledge,
or should reasonably be expected
to have knowledge; and
b. the endorsement for collection, in the name of the
applicable Fund, of all checks, drafts or other
negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction
against the costs and expenses of such suit or other actions.
Custodian will receive, claim and collect all stock dividends,
rights and other similar items and will deal with the same pursuant
to instructions.
M. Payment of Dividends and Other Distributions
On the declaration of any dividend or other distribution on the
shares of capital stock of any Fund ("Fund Shares") by the Board of
Directors of such Fund, such Fund shall deliver to Custodian
instructions with respect thereto. On the date specified in such
instructions for the payment of such dividend or other distribution,
Custodian will pay out of the monies held for

<PAGE>

the account of such Fund, insofar as the same shall be available for
such purposes, and credit to the account of the Dividend Disbursing
Agent for such Fund, such amount as may be specified in such
instructions.
N. Shares of a Fund Purchased by Such Fund
Whenever any
Fund Shares are repurchased or redeemed by a Fund, such Fund or its
agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the account of such Fund and either deposit the same in
the account maintained for the purpose of paying for the repurchase
or redemption of Fund Shares or deliver the same in accordance with
such advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been canceled and removed from the shareholder records.
O. Shares of a Fund Purchased from Such Fund
Whenever Fund Shares are purchased from any Fund, such Fund will
deposit or cause to be deposited with Custodian the amount
received for such shares.
Custodian shall not have any duty or responsibility to determine
that Fund Shares purchased from any Fund have been added to the
proper shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or
mailed to the applicable Fund all proxies properly signed, all
notices of meetings, all proxy statements and other notices,
requests or announcements affecting or relating to securities held
by Custodian for such Fund and will, upon receipt of instructions,
execute and deliver or cause its nominee to execute and deliver or
mail or have delivered or mailed such proxies or other
authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by
Custodian, neither it nor its nominee will exercise any power
inherent in any such securities, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such securities, or give any consent,
approval or waiver with respect thereto, or take any other similar
action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other obligations
of each Fund (including but not limited to obligations in

<PAGE>

connection with the conversion, exchange or surrender of securities
owned by such Fund, interest charges, dividend disbursements, taxes,
management fees, custodian fees, legal fees, auditors' fees,
transfer agents' fees, brokerage commissions, compensation to
personnel, and other operating expenses of such Fund) pursuant to
instructions of such Fund setting forth the name of the person to
whom payment is to be made, the amount of the payment, and the
purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to each Fund a
detailed statement of the amounts received or paid and of
securities received or delivered for the account of the Fund
during each business day.
Custodian will, from time to time, upon request by any Fund, render
a detailed statement of the securities and monies held for such Fund
under this Agreement, and Custodian will maintain such books and
records as are necessary to enable it to do so. Custodian will
permit such persons as are authorized by any Fund, including such
Fund's independent public accountants, reasonable access to such
records or will provide reasonable confirmation of the contents of
such records, and if demanded, Custodian will permit federal and
state regulatory agencies to examine the securities, books and
records. Upon the written instructions of any Fund or as demanded by
federal or state regulatory agencies, Custodian will instruct any
subcustodian to permit such persons as are authorized by such Fund,
including such Fund's independent public accountants, reasonable
access to such records or to provide reasonable confirmation of the
contents of such records, and to permit such agencies to examine the
books, records and securities held by such subcustodian which relate
to such Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, all
or any of the monies or securities of the Funds may be held
in Custodian's own custody or in the custody of one or more
other banks or trust companies acting as subcustodians as
may be selected by Custodian. Any such subcustodian
selected by the Custodian must have the qualifications
required for a custodian under the 1940 Act, as amended.
Custodian shall be responsible to the applicable Fund for
any loss, damage or expense suffered or incurred by the
Fund resulting from the actions or omissions of any
subcustodians selected and appointed by Custodian (except
subcustodians appointed at the request of the Fund and as
provided in Subsection 2 below) to the same extent
Custodian would be

<PAGE>

responsible to the Fund under Section 5. of this Agreement
if it committed the act or omission itself. Upon request of
any Fund, Custodian shall be willing to contract with other
subcustodians reasonably acceptable to the Custodian for
purposes of (i) effecting third-party repurchase
transactions with banks, brokers, dealers, or other
entities through the use of a common custodian or
subcustodian, or (ii) providing depository and clearing
agency services with respect to certain variable rate
demand note securities, or (iii) for other reasonable
purposes specified by such Fund; provided, however, that
the Custodian shall be responsible to the Fund for any
loss, damage or expense suffered or incurred by the Fund
resulting from the actions or omissions of any such
subcustodian only to the same extent such subcustodian is
responsible to the Custodian. The Fund shall be entitled to
review the Custodian's contracts with any such
subcustodians appointed at its request. Custodian shall be
responsible to the applicable Fund for any loss, damage or
expense suffered or incurred by the Fund resulting from the
actions or omissions of any Depository only to the same
extent such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this Agreement,
each Fund's foreign securities (as defined in Rule
17f-5(c)(1) under the 1940 Act) and each Fund's cash or
cash equivalents, in amounts deemed by the Fund to be
reasonably necessary to effect Fund's foreign securities
transactions, may be held in the custody of one or more
banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by such Fund's Board of Directors, may be
transferred to accounts maintained by any such subcustodian
with eligible foreign custodians, as defined in Rule
17f-5(c)(2). Custodian shall be responsible to the Fund for
any loss, damage or expense suffered or incurred by the
Fund resulting from the actions or omissions of any foreign
subcustodian only to the same extent the foreign
subcustodian is liable to the domestic subcustodian with
which the Custodian contracts for foreign subcustody
purposes.
T. Accounts and Records
Custodian will prepare and maintain, with the direction and as
interpreted by each Fund, its accountants and/or other advisors, in
complete, accurate and current form all accounts and records (i)
required to be maintained by such Fund with respect to portfolio
transactions under Rule 31a of the 1940 Act, (ii) required to be
maintained as a basis for calculation of such

<PAGE>

Fund's net asset value, and (iii) as otherwise agreed upon between
the parties. Custodian will preserve said records in the manner and
for the periods prescribed in the 1940 Act or for such longer period
as is agreed upon by the parties. Custodian relies upon each Fund to
furnish, in writing or its electronic or digital equivalent,
accurate and timely information needed by Custodian to complete such
Fund's records and perform daily calculation of such Fund's net
asset value. Custodian shall incur no liability and each Fund shall
indemnify and hold harmless Custodian from and against any liability
arising from any failure of such Fund to furnish such information in
a timely and accurate manner, even if such Fund subsequently
provides accurate but untimely information. It shall be the
responsibility of each Fund to furnish Custodian with the
declaration, record and payment dates and amounts of any dividends
or income and any other special actions required concerning each of
its securities when such information is not readily available from
generally accepted securities industry services or publications.
U. Accounts and Records Property of the Funds
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the
property of the applicable Fund, and will be made available
to such Fund for inspection or reproduction within a
reasonable period of time, upon demand.
Custodian will assist any Fund's independent auditors, or upon
approval of the Fund, or upon demand, any regulatory body, in any
requested review of the Fund's accounts and records but shall be
reimbursed by the Fund for all expenses and employee time invested
in any such review outside of routine and normal periodic reviews.
Upon receipt from any Fund of the necessary information or
instructions, Custodian will supply information from the books and
records it maintains for such Fund that the Fund needs for tax
returns, questionnaires, periodic reports to shareholders and such
other reports and information requests as such Fund and Custodian
shall agree upon from time to time.
V. Adoption of Procedures
Custodian and each Fund may from time to time adopt procedures
as they agree upon, and Custodian may conclusively assume
that no procedure approved or directed by a Fund or its
accountants or other advisors
conflicts with or violates any requirements of its prospectus,
articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which such Fund may
be bound. Each Fund will be responsible to notify

<PAGE>

Custodian of any changes in statutes, regulations, rules,
requirements or policies which might necessitate changes in
Custodian's responsibilities or procedures.
W. Calculation of Net Asset Value
Custodian will calculate each Fund's net asset value, in
accordance with such Fund's prospectus. Custodian will price the
securities and foreign currency holdings of each Fund for which
market quotations are available by the use of outside services
designated by such Fund which are normally used and contracted with
for this purpose; all other securities and foreign currency holdings
will be priced in accordance with such Fund's instructions.
Custodian will have no responsibility for the accuracy of the prices
quoted by these outside services or for the information supplied by
any Fund or for acting upon such instructions.
X. Advances
In the event Custodian or any subcustodian shall, in its sole
discretion, advance cash or securities for any purpose
(including but not limited to
securities settlements, purchase or sale of foreign exchange or
foreign exchange contracts and assumed settlement) for the benefit
of any Fund or Portfolio thereof, the advance shall be payable by
the applicable Fund or Portfolio on demand. Any such cash advance
shall be subject to an overdraft charge at the rate set forth in the
then-current fee schedule from the date advanced until the date
repaid. As security for each such advance, each Fund hereby grants
Custodian and such subcustodian a lien on and security interest in
all property at any time held for the account of the Fund or
applicable Portfolio, including without limitation all assets
acquired with the amount advanced. Should the Fund fail to promptly
repay the advance, the Custodian and such subcustodian shall be
entitled to utilize available cash and to dispose of such Fund's or
Portfolio's assets pursuant to applicable law to the extent
necessary to obtain reimbursement of the amount advanced and any
related overdraft charges.
Y. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer
or trustee thereof, or to the agent of such issuer or trustee,
for the purpose of exercise or sale, provided that the new
securities, cash or other
assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided
that the consideration for such securities is to be paid or
delivered to the Custodian or the tendered securities are to be
returned to the Custodian.
4. INSTRUCTIONS.

<PAGE>

A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian
reasonably believes were given by a designated representative of any
Fund. Each Fund shall deliver to Custodian, prior to delivery of any
assets to Custodian and thereafter from time to time as changes
therein are necessary, written instructions naming one or more
designated representatives to give instructions in the name and on
behalf of such Fund, which instructions may be received and accepted
by Custodian as conclusive evidence of the authority of any
designated representative to act for such Fund and may be considered
to be in full force and effect (and Custodian will be fully
protected in acting in reliance thereon) until receipt by Custodian
of notice to the contrary. Unless such written instructions
delegating authority to any person to give instructions specifically
limit such authority to specific matters or require that the
approval of anyone else will first have been obtained, Custodian
will be under no obligation to inquire into the right of such
person, acting alone, to give any instructions whatsoever which
Custodian may receive from such person. If any Fund fails to provide
Custodian any such instructions naming designated representatives,
any instructions received by Custodian from a person reasonably
believed to be an appropriate representative of such Fund shall
constitute valid and proper instructions hereunder. "Designated
representatives" of a Fund may include its employees and agents,
including investment managers and their employees.
B. No later than the next business day immediately following each
oral instruction, the applicable Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may
record on tape, or otherwise, any oral instruction whether given in
person or via telephone, each such recording identifying the date
and the time of the beginning and ending of such oral instruction.
C. If Custodian shall provide any Fund any direct access to any
computerized recordkeeping and reporting system used hereunder or if
Custodian and any Fund shall agree to utilize any electronic system
of communication, such Fund shall be fully responsible for any and
all consequences of the use or misuse of the terminal device,
passwords, access instructions and other means of access to such
system(s) which are utilized by, assigned to or otherwise made
available to the Fund. Each Fund agrees to implement and enforce
appropriate security policies and procedures to prevent unauthorized
or improper access to or use of such system(s). Custodian shall be
fully protected in acting hereunder upon any instructions,
communications, data or other information received by Custodian by
such means as fully and

<PAGE>

to the same effect as if delivered to Custodian by written
instrument signed by the requisite authorized representative(s) of
the applicable Fund. Each Fund shall indemnify and hold Custodian
harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability which may be
suffered or incurred by Custodian as a result of the use or misuse,
whether authorized or unauthorized, of any such system(s) by such
Fund or by any person who acquires access to such system(s) through
the terminal device, passwords, access instructions or other means
of access to such system(s) which are utilized by, assigned to or
otherwise made available to the Fund, except to the extent
attributable to any negligence or willful misconduct by Custodian.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due diligence
and act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the applicable Fund
shall indemnify and hold Custodian harmless from and against, any
and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability which may be asserted against Custodian,
incurred by Custodian or for which Custodian may be held to be
liable, arising out of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement
or any instructions provided to it hereunder, provided that
Custodian has acted in good faith and with due diligence
and reasonable care; and
2. The Fund's refusal or failure to comply with the terms of
this Agreement (including without
limitation the Fund's failure to pay or reimburse Custodian
under this indemnification provision), the Fund's
negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and
remain true and correct in all respects at all times.
B. Custodian may request and obtain at the expense of the applicable
Fund the advice and opinion of counsel for such Fund or of its own
counsel with respect to questions or matters of law, and it shall be
without liability to such Fund for any action taken or omitted by it
in good faith, in conformity with such advice or opinion. If
Custodian reasonably believes that it could not prudently act
according to the instructions of any Fund or the Fund's accountants
or counsel, it may in its discretion, with notice to the Fund, not
act according to such instructions.
C. Custodian may rely upon the
advice and statements of any Fund, its accountants and officers or
other authorized individuals, and other persons believed by it in
good faith to be expert in

<PAGE>

matters upon which they are consulted, and Custodian shall not be
liable for any actions taken, in good faith, upon such advice and
statements.
D. If any Fund requests Custodian in any capacity to take
any action which involves the payment of money by Custodian, or
which might make it or its nominee liable for payment of monies or
in any other way, Custodian shall be indemnified and held harmless
by such Fund against any liability on account of such action;
provided, however, that nothing herein shall obligate Custodian to
take any such action except in its sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon
any instructions, advice, notice, request, consent, certificate
or other instrument or paper appearing to it to be genuine and
to have been properly
executed. Custodian shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained
from any Fund hereunder a certificate signed by an officer or
designated representative of the Fund. Each Fund shall also provide
Custodian instructions with respect to any matter concerning this
Agreement requested by Custodian.
F. Custodian shall be under no duty or obligation to inquire into,
and shall not be liable for:
1. The validity of the issue of any securities purchased by or
for any Fund, the legality of the purchase of any
securities or foreign currency positions or evidence of
ownership required by any Fund to be received by Custodian,
or the propriety of the decision to purchase or amount paid
therefor;
2. The legality of the sale of any securities or
foreign currency positions by or for any Fund, or the
propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Fund Shares,or
the sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any
Fund Shares, or the propriety of the amount to be paid
therefor; or
5. The legality of the declaration of any dividend by any
Fund, or the legality of the issue of any Fund Shares in
payment of any stock dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the
payment of money to be received by it on behalf of the applicable
Fund until Custodian actually receives such money; provided,
however, that it shall advise such Fund promptly if it fails to
receive any such money in the ordinary course of business and shall
cooperate with the Fund toward the end that such money shall be
received.

<PAGE>

H. Except as provided in Section 3.S., Custodian shall not be
responsible for loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other person
with whom Custodian may deal.
I. Custodian shall not be responsible or
liable for the failure or delay in performance of its obligations
under this Agreement, or those of any entity for which it is
responsible hereunder, arising out of or caused, directly or
indirectly, by circumstances beyond the affected entity's reasonable
control, including, without limitation: any interruption, loss or
malfunction of any utility, transportation, or communication service
or computer (hardware or software) services of third parties
unrelated to Custodian; inability to obtain labor, material,
equipment or transportation, or a delay in mails; governmental or
exchange action, statute, ordinance, rulings, regulations or
direction; war, strike, riot, emergency, civil disturbance,
terrorism, vandalism, explosions, labor disputes, freezes, floods,
fires, tornados, acts of God or public enemy, revolutions, or
insurrection.
J. EXCEPT FOR VIOLATIONS OF SECTION 9, IN NO EVENT AND
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE
LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY,
FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT OR
FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED
OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder as Custodian and
investment accounting and recordkeeping agent, each Fund will pay to
Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by the Funds and Custodian from time to time. A
copy of the initial fee schedule is attached hereto and incorporated herein
by reference. Custodian shall also be entitled to receive, and each Fund
agrees to pay to Custodian, on demand, reimbursement for Custodian's cash
disbursements and reasonable out-of-pocket costs and expenses, including
attorney's fees, incurred by Custodian in connection with the performance
of services hereunder. Custodian may charge such compensation against
monies held by it for the account of the applicable Fund. Custodian will
also be entitled to charge against any monies held by it for the account of
the applicable Fund the amount of any loss, damage, liability, advance,
overdraft or expense for which it shall be entitled to reimbursement from
such Fund, including but not limited to fees and expenses due to Custodian
for other services provided to the Fund by Custodian. Custodian will be
entitled to reimbursement by the Fund for the losses, damages, liabilities,
advances,

<PAGE>

overdrafts and expenses of subcustodians only to the extent that (i)
Custodian would have been entitled to reimbursement hereunder if it had
incurred the same itself directly, and (ii) Custodian is obligated to
reimburse the subcustodian therefor.
7. TERM AND TERMINATION. The initial term
of this Agreement shall be for a period of one year. Thereafter, each Fund
and Custodian may terminate the same by notice in writing, delivered or
mailed, postage prepaid, to the other and received not less than ninety
(90) days prior to the date upon which such termination will take effect.
Upon termination of this Agreement, each applicable Fund will pay Custodian
its fees and compensation due hereunder and its reimbursable disbursements,
costs and expenses paid or incurred to such date and each applicable Fund
shall designate a successor custodian by notice in writing to Custodian by
the termination date. In the event no written order designating a successor
custodian has been delivered to Custodian on or before the date when such
termination becomes effective, then Custodian may, at its option, deliver
the securities, funds and properties of the Fund to a bank or trust company
at the selection of Custodian, and meeting the qualifications for custodian
set forth in the 1940 Act and having not less that Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as shown by
its last published report, or apply to a court of competent jurisdiction
for the appointment of a successor custodian or other proper relief, or
take any other lawful action under the circumstances; provided, however,
that the applicable Fund shall reimburse Custodian for its costs and
expenses, including reasonable attorney's fees, incurred in connection
therewith. Custodian will, upon termination of this Agreement and payment
of all sums due to Custodian from each applicable Fund hereunder or
otherwise, deliver to the successor custodian so specified or appointed, or
as specified by the court, at Custodian's office, all securities then held
by Custodian hereunder, duly endorsed and in form for transfer, and all
funds and other properties of each applicable Fund deposited with or held
by Custodian hereunder, and Custodian will co-operate in effecting changes
in book-entries at all Depositories. Upon delivery to a successor custodian
or as specified by the court, Custodian will have no further obligations or
liabilities under this Agreement. Thereafter such successor will be the
successor custodian under this Agreement and will be entitled to reasonable
compensation for its services. In the event that securities, funds and
other properties remain in the possession of the Custodian after the date
of termination hereof owing to failure of any Fund to appoint a successor
custodian, the Custodian shall be entitled to compensation as provided in
the then-current fee schedule hereunder for its services during such period
as the Custodian retains possession of such

<PAGE>

securities, funds and other properties, and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall
remain in full force and effect.
8. NOTICES. Notices, requests, instructions
and other writings addressed to any Fund at 11 Hanover Square, New York, NY
10005, or at such other address as the Funds may have designated to
Custodian in writing, will be deemed to have been properly given to such
Fund hereunder; and notices, requests, instructions and other writings
addressed to Custodian at its offices at 127 West 10th Street, Kansas City,
Missouri 64105, Attention: Custody Department, or to such other address as
it may have designated to the Funds in writing, will be deemed to have been
properly given to Custodian hereunder.
9. CONFIDENTIALITY.
A. Each Fund shall preserve the confidentiality of the computerized
investment portfolio and custody recordkeeping and accounting
systems used by Custodian (the "Systems") and the tapes, books,
reference manuals, instructions, records, programs, documentation
and information of, and other materials relevant to, the Systems and
the business of Custodian ("Confidential Information"). Each Fund
agrees that it will not voluntarily disclose any such Confidential
Information to any other person other than its own employees who
reasonably have a need to know such information pursuant to this
Agreement. Each Fund shall return all such Confidential Information
to Custodian upon termination or expiration of this Agreement.
B. Each Fund has been informed that the Systems are licensed for use by
Custodian from third parties ("Licensors"), and each Fund
acknowledges that Custodian and the Licensors have proprietary
rights in and to the Systems and all other Custodian or Licensor
programs, code, techniques, know-how, data bases, supporting
documentation, data formats, and procedures, including without
limitation any changes or modifications made at the request or
expense or both of any Fund (collectively, the "Protected
Information"). Each Fund acknowledges that the Protected Information
constitutes confidential material and trade secrets of Custodian and
the Licensors. Each Fund shall preserve the confidentiality of the
Protected Information, and each Fund hereby acknowledges that any
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a
computer, computer system, or computer network, or the knowing and
unauthorized accessing or causing to be accessed of any computer,
computer system, or computer network, may be subject to civil
liabilities and criminal penalties under applicable law. Each Fund
shall so inform employees and agents who have access to the
Protected Information or to any computer equipment capable

<PAGE>

of accessing the same. The Licensors are intended to be and shall be
third party beneficiaries of the Funds' obligations and undertakings
contained in this paragraph.
10. MULTIPLE FUNDS AND PORTFOLIOS.
A. Each Fund, and as to any Fund which is comprised of more than one
Portfolio, each Portfolio, shall be regarded for all purposes
hereunder as a separate party apart from each other. Unless the
context otherwise requires, with respect to every transaction
covered by this Agreement, every reference herein to a Fund shall be
deemed to relate solely to the particular Fund, and, if applicable,
Portfolio thereof to which such transaction relates. Under no
circumstances shall the rights, obligations or remedies with respect
to a particular Fund or Portfolio constitute a right, obligation or
remedy applicable to any other. The use of this single document to
memorialize the separate agreement of each Fund is understood to be
for clerical convenience only and shall not constitute any basis for
joining the Funds for any reason.
B. Additional Funds and Portfolios
may be added to this Agreement, provided that Custodian consents to
such addition. Rates or charges for each additional Fund or
Portfolio shall be as agreed upon by Custodian and the applicable
Fund in writing. Additional Funds may be added hereto by execution
of instruments amending Exhibit A to add such Funds thereto.

11. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
C. The representations and warranties, the indemnifications
extended hereunder, and the provisions of Section 9. hereof are
intended to and shall continue after and survive the expiration,
termination or cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and
executed by each party hereto.
E. The failure of any party to insist upon the performance of
any terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed
as a continuing or permanent waiver of any such terms, conditions,
rights or privileges, but the same shall continue and remain in full
force and effect as if no such forbearance or waiver had occurred.

<PAGE>

No waiver, release or discharge of any party's rights hereunder
shall be effective unless contained in a written instrument signed
by the party sought to be charged.
F. The captions in the Agreement are
included for convenience of reference only, and in no way define or
limit any of the provisions hereof or otherwise affect their
construction or effect.
G. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
H. If any provision of this Agreement shall be determined to be invalid
or unenforceable, the remaining provisions of this Agreement shall
not be affected thereby, and every provision of this Agreement shall
remain in full force and effect and shall remain enforceable to the
fullest extent permitted by applicable law.
I. This Agreement may not be assigned by any Fund or Custodian
without the prior written consent of the other.
J. Neither the execution nor performance of this
Agreement shall be deemed to create a partnership or joint venture
by and between Custodian and any Fund or Funds.
K. Except as specifically provided herein, this Agreement does not in
any way
affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.

22
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.

INVESTORS FIDUCIARY TRUST COMPANY

By:

Title:

EACH REGISTERED INVESTMENT
COMPANY LISTED ON EXHIBIT A
HERETO

By:

Title:

<PAGE>

EXHIBIT A

LIST OF FUNDS

Bull & Bear Funds I, Inc.:
Bull & Bear U.S. and Overseas Fund

Bull & Bear Funds II, Inc.:
Bull & Bear Dollar Reserves

Bull & Bear Global Income Fund, Inc.

Bull & Bear U.S. Government Securities Fund, Inc.

Bull & Bear Special Equities Fund, Inc.

Bull & Bear Gold Investors Ltd.

Bull & Bear Municipal Income Fund, Inc.

Midas Fund, Inc.

Rockwood Fund, Inc.

<PAGE>

Consent of Independent Certified Public Accountants

We consent to the use of our report dated July 11, 1997 on the financial
statements and financial highlights of Bull & Bear Dollar Reserves, a series of
common stock of Bull & Bear Funds II, Inc. Such financial statements and
financial highlights appear in the 1997 Annual Report to Shareholders which is
incorporated by reference in the Statement of Additional Information filed in
Post-Effective Amendment No. 53 under the Securities Act of 1933 and Amendment
No. 44 under the Investment Company Act of 1940 to the Registration Statement on
Form N-1A of Bull & Bear Dollar Reserves. We also consent to the references to
our Firm in the Registration Statement and Prospectus.

/s/ Tait, Weller & Baker
Tait, Weller & Baker

Philadelphia, Pennsylvania
August 26, 1997

<PAGE>

STROOCK & STROOCK & LAVAN LLP

180 MAIDEN LANE
NEW YORK, NY 10038-4982

PHONE 212-806-5400
FAX 212-806-6006

August 27, 1997

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Ladies and Gentlemen:

We are counsel to Bull & Bear Funds II, Inc. (the "Fund"), and in so acting have
reviewed Post-Effective Amendment No. 53 (the "PostEffective Amendment") to the
Fund's Registration Statement on Form N- 1A, Registration File No. 2-57953.
Representatives of the Fund have advised us that the Fund will file the
Post-Effective Amendment pursuant to paragraph (b) of Rule 485 ("Rule 485")
promulgated under the Securities Act of 1933. In connection therewith, the Fund
has requested that we provide this letter.

In our examination of the Post-Effective Amendment, we have assumed the
conformity to the originals of all documents submitted to us as copies.

Based upon the foregoing, we hereby advise you that the prospectus included as
part of the Post-Effective Amendment does not include disclosure which we
believe would render it ineligible to become effective pursuant to paragraph (b)
of Rule 485.

Very truly yours,

STROOCK & STROOCK & LAVAN LLP

<PAGE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Bull &
Bear Dollar Reserves Fund Annual Report and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000015260
<NAME> Bull & Bear Funds II, Inc.
<SERIES>
<NUMBER> 001
<NAME> Bull & Bear Dollar Reserves Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar

<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 65,567,389
<INVESTMENTS-AT-VALUE> 65,567,389
<RECEIVABLES> 500,229
<ASSETS-OTHER> 6,471
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,074,089
<PAYABLE-FOR-SECURITIES> 3,000,000
<SENIOR-LONG-TERM-DEBT> 0
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</TABLE>