<PAGE>
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DOLLAR RESERVES
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11 Hanover Square, New York, NY 10005
1-888-503-FUND for Investment Information
1-888-503-VOICE for Shareholder Services
www.mutualfunds.net
August 15, 1997
Fellow Shareholders,
It is a pleasure to submit this Annual Report and to welcome our many new
shareholders who have joined us since our last Report by opening regular,
Gifts/Transfers to Minors, and qualified retirement plan accounts, plus all of
the Bull & Bear Securities discount brokerage customers whose cash balances are
automatically swept into the Fund.
We believe the Fund's approach of investing exclusively in short term U.S.
Government securities, the income from which is generally free from all state
income and personal property taxes, make it a sound choice for safety-conscious
investors. The Fund provides a combination of high quality, low risk, tax
advantages and daily income paid monthly, with the extra convenience of free,
unlimited check writing.
Review and Outlook
The first half of 1997 will be remembered as a time of strong economic
growth, low levels of unemployment and low levels of inflation. While debt
markets were volatile during the first half of the year, we believe that short
term U.S. Government money market instruments offer attractive rates of return
for investors.
Interest rates generally rose during the first quarter of 1997, as market
participants worried about the inflationary impact of strong economic growth and
tight labor markets. In March, the Federal Reserve Bank increased short term
rates by 0.25%, ending one of the longest periods of unchanged rates in recent
history. By the end of the first quarter, holders of U.S. Treasury ten year
notes had a 1.98% negative total return, whereas shareholders of Dollar Reserves
enjoyed an increase in its annualized 7-day compound return to 4.81% from 4.75%.
While interest rates rose during the first quarter, "real" interest rates,
i.e., those adjusted for inflation, rose even more because the rate of inflation
declined steadily throughout the first half of the year. During the second
quarter of the year, interest rates declined. Shareholders of Dollar Reserves,
however, benefitted from an increase in yield as the 7-day compound rate of
return showed a further gain to 5.07% at June 30, 1997. We believe that the
economy will continue to be characterized by moderate levels of growth, although
different economic sectors or geographic regions may experience varying periods
of strength or weakness at times.
<PAGE>
The ongoing strategy for Dollar Reserves will be to continue to invest for
consistent returns in short term U.S. Government instruments having a high
degree of safety and liquidity, with the goal of optimizing shareholder results
by investing in those securities which offer the highest level of relative value
at time of purchase. To take advantage of this, we recommend building your
account on a regular basis, which can be done safely, automatically and
conveniently through the Bull & Bear Bank Transfer Plan, the Bull & Bear Salary
Investing Plan, and the Bull & Bear Government Direct Deposit Plan. For
information on these free services, simply give us a call and we will help get
you started.
If you have any questions or would like information on any of the Bull &
Bear Funds, the Bull & Bear No-Fee IRA(R) or opening a discount brokerage
account at Bull & Bear Securities, as described on page 3, we would be pleased
to hear from you. Just call toll-free 1-888-503-FUND (1-888-503-3863), and an
Investor Service Representative will be glad to assist you, as always, without
any obligation on your part.
Sincerely,
/s/ Robert D. Anderson /s/ Steven A. Landis
Robert D. Anderson Steven A. Landis
Vice Chairman Senior Vice President
Portfolio Manager
2
<PAGE>
Bull & Bear_____________________________________________________________________
Performance Driven (R)
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MUTUAL FUNDS
o Bull & Bear A high quality money market fund
Dollar Reserves investing in U.S. Government securities.
Income is generally free from state
income and intangible personal property
taxes. Free, unlimited check writing
with only a $250 minimum per check.
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o Bull & Bear Seeks long term capital appreciation in
Gold Investors investments with the potential to
provide a hedge against inflation and
preserve the purchasing power of the
dollar.
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o Bull & Bear Invests aggressively for maximum capital
Special Equities Fund appreciation.
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o Bull & Bear Invests worldwide for the highest
U.S. and Overseas Fund possible total return.
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Call toll-free 1-888-503-FUND (1-888-503-3863) for a prospectus containing more
complete information, including charges and expenses. Please read it carefully
before you invest.
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CLOSED-END INVESTMENT COMPANIES LISTED ON THE AMERICAN STOCK EXCHANGE
o Bull & Bear Investing for a high level of income
Global Income Fund from a global portfolio of primarily
investment grade fixed income
securities.
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o Bull & Bear Investing for the highest possible
Municipal Income Fund income exempt from Federal income tax
that is consistent with preservation of
principal.
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o Bull & Bear Investing for a high level of current
U.S. Government income, liquidity, and safety of
Securities Fund principal.
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DISCOUNT BROKERAGE SERVICES
o Bull & Bear Bull & Bear Securities is committed to
Securities, Inc. providing investors with major
commission savings, free investment
ideas and services, free cash management
services with no minimum for check
writing, and American Airlines(R)
AAdvantage(R) miles for many of your
investing activities. And now you can
take advantage of Bull & Bear
Securities' web trading flat commission
rate of $19.95 per trade at
www.ebullbear.com on the first 1,000
shares, plus 2(cents) per share on each
share over 1,000 shares, and earn 200
AAdvantage(R) miles every time you
trade!
Call toll-free 1-800-BULL-BEAR
(1-800-285-5232).
- --------------------------------------------------------------------------------
Total Return Performance. At June 30, 1997, Bull & Bear Dollar Reserves'
annualized 7-day compound yield was 5.07% on a current yield of 4.95%. Past
performance does not guarantee future results. Investment return will fluctuate,
and there can be no assurance a net asset value of $1.00 per share will be able
to be maintained.
3
<PAGE>
BULL & BEAR DOLLAR RESERVES
Schedule of Portfolio Investments - June 30, 1997
<TABLE>
<CAPTION>
Principal
Amount Yield* Value**
- ------------ ------ ------------
<C> <S> <C> <C>
U.S. Government Agencies (100%)
$6,000,000 Federal Farm Credit, due 7/01/97................................ 5.93% $ 6,000,000
850,000 Federal Farm Credit, due 7/18/97................................ 5.41 847,836
3,280,000 Federal Farm Credit, due 8/01/97................................ 5.38 3,278,713
1,000,000 Federal Farm Credit, due 8/01/97................................ 5.55 999,771
1,190,000 Federal Farm Credit, due 8/18/97................................ 5.52 1,181,337
3,000,000 Federal Farm Credit, due 9/02/97................................ 5.50 2,999,030
5,840,000 Federal Farm Credit, due 9/02/97................................ 5.36 5,839,905
1,710,000 Federal Farm Credit, due 9/03/97................................ 5.62 1,709,180
3,500,000 Federal Farm Credit, due 9/08/97................................ 5.50 3,463,574
1,050,000 Federal Farm Credit, due 9/12/97................................ 5.49 1,038,460
3,000,000 Federal Farm Credit, due 10/1/97................................ 5.69 3,000,000
1,000,000 Federal Home Loan Banks, due 7/07/97............................ 6.50 1,000,142
3,000,000 Federal Home Loan Banks, due 7/10/97............................ 5.38 2,996,069
1,060,000 Federal Home Loan Banks, due 7/14/97............................ 5.47 1,057,918
1,000,000 Federal Home Loan Banks, due 7/14/97............................ 6.05 1,000,170
2,225,000 Federal Home Loan Banks, due 7/17/97............................ 5.45 2,219,655
1,000,000 Federal Home Loan Banks, due 7/18/97............................ 5.85 1,000,095
1,000,000 Federal Home Loan Banks, due 7/25/97............................ 6.44 1,000,420
4,095,000 Federal Home Loan Banks, due 7/30/97............................ 5.55 4,076,892
3,500,000 Federal Home Loan Banks, due 8/01/97 ........................... 5.59 3,483,393
2,000,000 Federal Home Loan Banks, due 8/04/97............................ 5.59 1,989,574
1,200,000 Federal Home Loan Banks, due 8/11/97............................ 5.60 1,192,456
700,000 Federal Home Loan Banks, due 8/21/97............................ 5.48 694,635
3,600,000 Federal Home Loan Banks, due 8/28/97............................ 5.52 3,568,390
2,000,000 Federal Home Loan Banks, due 9/03/97............................ 5.50 1,980,693
1,000,000 Federal Home Loan Banks, due 9/10/97............................ 5.49 989,311
1,300,000 Federal Home Loan Banks, due 9/24/97............................ 5.50 1,283,364
1,500,000 Federal Home Loan Banks, due 10/09/97........................... 5.69 1,476,834
1,200,000 Federal Home Loan Banks, due 10/16/97........................... 5.73 1,199,572
3,000,000 Student Loan Marketing Assn., due 10/01/97...................... 5.80 3,000,000
-----------
Total Investments (100%)............................... $65,567,389
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</TABLE>
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* Represents annualized yield at date of purchase for discount securities,
or coupon for coupon-bearing securities.
** Cost of investments for financial reporting and for Federal income tax
purposes is the same as value.
See accompanying notes to financial statements
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS:
Investments at value which equals
amortized cost (note 1)............. $65,567,389
Interest receivable................... 500,229
Other assets.......................... 6,471
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Total assets...................... 66,074,089
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LIABILITIES:
Payables:
Securities purchased................ 3,000,000
Bank overdraft...................... 63,825
Distributions....................... 2,464
Accrued expenses...................... 99,879
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Total liabilities................. 3,166,168
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NET ASSETS: (applicable to 62,838,416
outstanding shares: 500,000,000
shares of $.01 par value authorized). $62,907,921
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NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($62,907,921 / 62,838,416)............ $1.00
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At June 30, 1997, net assets consisted of:
Paid-in capital....................... $62,916,497
Accumulated net realized loss on
investments......................... (8,576)
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$62,907,921
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STATEMENT OF OPERATIONS
For The Year Ended June 30, 1997
INVESTMENT INCOME:
Interest.............................. $3,477,957
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EXPENSES:
Investment management (note 3)........ 319,712
Distribution (note 3)................. 159,856
Transfer agent........................ 109,733
Custodian............................. 49,416
Registration (note 3)................. 36,979
Professional (note 3)................. 36,195
Shareholder administration (note 3)... 25,921
Directors............................. 10,513
Other ................................ 23,037
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Total expenses.................... 771,362
Investment management fees and
distribution plan expenses waived
(note 3)........................ (319,712)
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Net expenses...................... 451,650
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Net investment income............. 3,026,307
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NET REALIZED GAIN FROM SECURITY
TRANSACTIONS:......................... 401
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Net increase in net assets resulting
from operations................. $3,026,708
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STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30,
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................................................. $ 3,026,307 $ 2,870,569
Net realized gain (loss) from security transactions ............................... 401 (108)
------------ ------------
Net increase in net assets resulting from operations ............................ 3,026,708 2,870,461
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.47 and $0.47 per share, respectively) (3,025,265) (2,871,484)
CAPITAL SHARE TRANSACTIONS:
Change in net assets resulting from capital share transactions (a) ................ 439,197 (2,809,991)
------------ ------------
Total increase (decrease) in net assets ........................................... 440,640 (2,811,014)
NET ASSETS:
Beginning of period ............................................................... 62,467,281 65,278,295
------------ ------------
End of period ..................................................................... $ 62,907,921 $ 62,467,281
============ ============
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(a) Transactions in capital shares were as follows:
1997 1996
--------------------------
Shares sold...................................................................... $66,841,991 $ 122,565,315
Shares issued in reinvestment of distributions................................... 2,945,036 2,786,829
Shares redeemed.................................................................. (69,347,830) (128,162,135)
--------------------------
Net increase (decrease).......................................................... $ 439,197 $ (2,809,991)
==========================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Notes to Financial Statements
(1) The Fund is a diversified series of common stock of Bull & Bear Funds II,
Inc. (the "Company"), a Maryland corporation registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to provide its shareholders maximum current
income consistent with preservation of capital and maintenance of liquidity. The
Fund invests exclusively in obligations of the U.S. Government, its agencies and
instrumentalities, as set forth in its prospectus. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The market value of the Fund's
portfolio securities is cost adjusted for amortization of premiums and accretion
of discounts. Dividends from net investment income (investment income less
expenses plus or minus all realized gains or losses on the Fund's portfolio
securities) are declared daily and reinvested or paid monthly. Security
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Interest income is recorded on the accrual basis. In
preparing financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At June 30, 1997, the
Fund had an unused capital loss carryforward of approximately $8,600 which
expires in 2003.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average daily net
assets of the Fund, at the annual rate of .50 of 1% of the first $250 million,
.45 of 1% from $250 million to $500 million, and .40 of 1% over $500 million.
The Investment Manager has agreed to waive all or part of its fee or reimburse
the Fund monthly if and to the extent the aggregate operating expenses of the
Fund exceed the most restrictive limit imposed by any state in which shares of
the Fund are qualified for sale, although currently the Fund is not subject to
any such limits. The Investment Manager voluntarily waived $159,856 of its
management fee for the year ended June 30, 1997. Certain officers and directors
of the Fund are officers and directors of the Investment Manager and Investor
Service Center, Inc., the Fund's Distributor. The Fund reimbursed the Investment
Manager $25,462 for providing certain administrative and accounting services at
cost for the year ended June 30, 1997. The Fund has adopted a plan of
distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan"). Pursuant to the Plan, the Fund may pay the Distributor a fee in an
amount of one quarter of one percent per annum of the Fund's average daily net
assets as compensation for distribution and service activities. The fee is
intended to cover personal services provided to shareholders in the Fund and the
maintenance of shareholder accounts and all other activities and expenses
primarily intended to result in the sale of the Fund's shares. The distribution
fees were waived by Investor Service Center for the year ended June 30, 1997.
Investor Service Center also received $25,921 for shareholder administration
services it provided to the Fund at cost for the year ended June 30, 1997.
6
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ................. $1.000 $1.000 $1.000 $1.000 $1.000
Income from investment operations:
Net investment income .............................. .047 .047 .044 .026 .026
Less distributions:
Distributions from net investment income ........... (.047) (.047) (.044) (.026) (.026)
------- ------- ------- ------- -------
Net asset value at end of period ....................... $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= =======
TOTAL RETURN ........................................... 4.83% 4.81% 4.53% 2.59% 2.63%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) ............ $62,908 $62,467 $65,278 $76,351 $64,673
======= ======= ======= ======= =======
Ratio of expenses to average net assets (a) ............ .71% .90% .89% .89% .75%
======= ======= ======= ======= =======
Ratio of net investment income to average net assets (b) 4.73% 4.70% 4.41% 2.56% 2.59%
======= ======= ======= ======= =======
</TABLE>
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(a) Ratio prior to waiver by the Investment Manager and Distributor was 1.21%,
1.40%, 1.39%, 1.39%, and 1.25% for the years ended June 30, 1997, 1996,
1995, 1994, and 1993, respectively.
(b) Ratio prior to waiver by the Investment Manager and Distributor was 4.23%,
4.20%, 3.91%, 2.06% and 2.09% for the years ended June 30, 1997, 1996, 1995,
1994 and 1993, respectively.
----------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of Bull & Bear Dollar Reserves, a series
of Bull & Bear Funds II, Inc.:
We have audited the accompanying statement of assets and liabilities of
Bull & Bear Dollar Reserves, a series of Bull & Bear Funds II, Inc., including
the schedule of portfolio investments as of June 30, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Bull & Bear Dollar Reserves as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
July 11, 1997
7
<PAGE>
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DOLLAR
RESERVES
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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
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Tait, Weller & Baker
Independent Accountants
Printed on recycled paper [Logo]
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. The report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective Prospectus.
DOLLAR RESERVES
================================================================================
A High Quality Money
Market Fund Investing in
U.S. Government Securities --
Income is Generally Free from
State and Local Income Taxes
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Annual Report
June 30, 1997
Bull & Bear_____________________________________________________________________
Performance Driven (R)
DR-111-6/7 BUL709009
