N-30D: Initial annual and semi-annual reports mailed to investment company shareholders pursuant to Rule 30e-1 (other than those required to be submitted as part of Form NCSR.)
Published on March 10, 1997
Bull & Bear
Global Income Fund
Investing for a high level of income from a global portfolio of primarily
investment grade fixed income securities.
Annual Report
December 31, 1996
Global Income Fund
11 Hanover Square, New York, NY 10005
1-800-847-4200
1-212-363-1100
http://www.bull-and-bear.com
Bull & Bear Global Income Fund
February 14, 1997
Dear Shareowner,
We are very pleased to submit this First Report since shareowners
voted to convert the Bull & Bear Global Income Fund to closed-end status at
their Special Meeting held on January 22, 1997. The conversion was effective
February 7, 1997 and the Fund's shares are now listed and traded on the American
Stock Exchange (symbol: BBZ). The Board of Directors of the Fund anticipates
that the conversion may help reduce the Fund's operating expenses. This,
together with the greater investment flexibility now available to the Fund, is
expected to enhance the potential for a higher yield and total return as the
Fund seeks a high level of income for its shareowners, with capital appreciation
as a secondary objective.
Review and Outlook
During the second half of the year, the domestic economy was
characterized by moderate growth and consistently low levels of inflation, with
"overall" and "core" Consumer Price Index figures up just 3.3% and 2.6%,
respectively. Reflecting this, the Federal Reserve has maintained its targeted
Federal Funds rate, the amount banks charge each other for overnight loans, at a
relatively low level of 5.25% since January 1996. This is the longest period of
unchanged rates since 1993, and confirms the modestly expanding overall economy
and acceptable rates of inflation we have enjoyed throughout this period.
Over 1.2 million new jobs were created in the United States during
the last six months of 1996. Although this was about 25% less than were created
during the first half of the year, the unemployment rate nevertheless fell to
its lowest level since 1989. Other measures of employment, such as the length of
the average work week and overtime hours also continue to confirm increased
demands for labor. Tightness in labor markets needs to be monitored closely
because it creates the potential for inflationary pressure on wages, and as
personal income rises, the demand for goods and services rises throughout the
economy.
Internationally, several themes were notable during the second half
of the year. On the one hand, the Fund's recent U.S. weighting was helped by the
U.S. dollar's rise against the currencies of Japan and Germany. On the other,
the British pound, Canadian dollar, and Italian lira were strong against the
U.S. dollar, and the Fund's investments denominated in those currencies made a
positive contribution to the Fund's performance. The Fund also benefitted by
maintaining investment grade positions in Columbia, China, Chile, and Indonesia.
The Fund may allocate up to 35% of its assets to below investment grade debt,
and within this sector, holdings in Mexico, Argentina, Brazil, Russia and
Venezuela also contributed to total return. Our analysis suggests that selective
allocations in emerging market countries still offer the potential for
substantial enhancement of total return.
Looking ahead, we see several variables that support the continuation
domestically of last year's moderate growth and low inflation experience. While
personal income continues to grow at a rapid pace, demand pressures should be
moderated by high levels of consumer debt. Demographic trends should also
restrain consumption, particularly demand related to housing and durable goods.
We therefore anticipate relatively stable intermediate and long term domestic
interest rates over the balance of the year.
Dividend Reinvestment Plan
The Bull & Bear Global Income Fund Dividend Reinvestment Plan is
particularly attractive because monthly dividend distributions are reinvested
without charge at the lower of net asset value per share or market price. The
market price is determined by averaging the closing ex-dividend prices of the
Fund on the American Stock Exchange for the five trading days prior to the
payment date. Reinvesting at the lower of net asset value or market price per
share can be a considerable advantage for shareowners, and can contribute
importantly to growing your investment over time.
We appreciate your support and look forward to continuing to serve
your investment needs.
Sincerely,
Robert D. Anderson Steven A. Landis
Vice Chairman Senior Vice President
Portfolio Manager
Mutual Funds
Bull & Bear Dollar
Reserves
A high quality moneymarket fund investing in U.S. Government securities. Income
is generally free from state income and intangible personalproperty taxes. Free,
unlimited check writing with only a $250 minimum per check.
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.
Bull & Bear
Special Equities Fund
Invests aggressively for maximum capital appreciation.
Bull & Bear
U.S. and Overseas Fund
Invests worldwide for the highest possible total return.
Call our toll-free number for a prospectus containing more complete information,
including charges and expenses. Please read it carefully before you invest.
Closed-end investment companies listed on the American Stock Exchange
Bull & Bear Global Income Fund
Investing for a high level of income from a global portfolio of primarily
investment grade fixed income American securities.
Bull & Bear Municipal
Investing for the highest possible income exempt from Income Fund Federal income
tax that is consistent with preservation of principal.
Bull & Bear U.S. Government Securities Fund
Investing for a high level of current income, liquidity and safety of principal.
Discount Brokerage
Services
Discount Brokerage
Services
Receive the investment information you need and the low commissions you expect.
Plus you can earn American Airlines(R) AAdvantage(R) miles every time you trade.
And you can save an additional 10% off our already low commission rates when you
use Bull & Bear PC OnLine Investment CenterSM and/or Bull & Bear TeleQuote/
TeleTrade SM. (There is no check writing minimum for Bull & Bear Performance
Plus(R) accounts.)
Call Toll Free1-800-VIP-4200 Total Return Performance. For the period ended
December 31, 1996, Bull & Bear Dollar Reserves' 7-day compound yield was 4.75%
on a current yield of 4.64%. 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.
(1) Par value of foreign denominated obligations stated in local currency unless
otherwise indicated, market value stated in U.S. dollars.
(2) Purchased pursuant to Rule 144A exemption from Federal registration
requirements.
(3) Non-income producing security.
(4) On December 31, 1996, the security, valued at $4,009,400 plus accrued
interest of $47,056, was pledged as collateral for the following outstanding
floating rate reverse repurchase agreement:
Acquisition Interest Accrued
Amount Date Rate Due Interest Broker
$3,080,000 11/4/96 7.50% 1/7/97 $28,670 Prudential Securities Inc.
See accompanying notes to financial statements.
Global Income Fund
See accompanying notes to financial statements.
Global Income Fund
See accompanying notes to financial statements.
Global Income Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1996 (Unaudited) and for the Year Ended
June 30, 1996
See accompanying notes to financial statements.
Global Income Fund
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) The Fund is a diversified series of common stock of Bull & Bear Funds II,
Inc. (the "Company"), which is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Bull & Bear
Dollar Reserves is the other series of the Company. The primary objective of the
Fund is a high level of income and secondarily, capital appreciation. The Fund
seeks to achieve its investment objective by investing primarily in foreign and
domestic fixed income securities and other securities, depending on the
Investment Manager's evaluation of current and anticipated market conditions, as
set forth in its prospectus. The Fund is subject to the risk of price
fluctuations of the securities held in its portfolio which is generally a
function of the underlying credit ratings of an issuer, the maturity length of
its securities, the securities' yield, the general economic and interest rate
conditions. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. With respect to security valuation, securities traded on a national
securities exchange or the Nasdaq National Market System ("NMS") are valued at
the last reported sales price on the day the valuations are made. Such
securities that are not traded on a particular day and securities traded in the
over-the-counter market that are not on NMS are valued at the mean between the
current bid and asked prices. Certain of the securities in which the Fund
invests are priced through pricing services which may utilize a matrix pricing
system which takes into consideration factors such as yields, prices,
maturities, call features and ratings on comparable securities. Bonds may be
valued according to prices quoted by a dealer in bonds which offers pricing
services. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Securities of foreign issuers denominated in foreign currencies are translated
into U.S. dollars at prevailing exchange rates. Forward currency contracts are
undertaken to hedge certain assets denominated in foreign currencies. Forward
contracts are marked to market daily and the change in market value is recorded
by the Fund as an unrealized gain or loss. When a contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed. The
Fund could be exposed to risk if the counterparties are unable to meet the terms
of the contracts or if the value of the currency changes unfavorably. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Interest income is recorded on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions to shareholders are recorded
on the ex-dividend date. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At June 30, 1996, the
Company had an unused capital loss carryforward of approximately $52,067,000 of
which $17,987,000 expires in 1997, $17,712,000 in 1998, $8,549,000 in 1999,
$1,656,000 in 2000, $4,110,000 in 2001, $173,000 in 2003 and $1,880,000 in 2004.
Based on Federal income tax cost of $33,814,971, gross unrealized appreciation
and gross unrealized depreciation were $751,646 and $405,259, respectively, at
December 31, 1996. Distributions paid to shareholders during the year ended June
30, 1996 differ from net investment income and net gains (losses) from security,
foreign currency and futures transactions as determined for financial reporting
purposes principally as a result of the characterization of realized foreign
currency gains (losses) for tax/book purposes, the taxability of unrealized
appreciation (depreciation) on certain forward currency contracts and the
utilization of capital loss carryforwards. These distributions are classified as
"distributions from paid-in capital" in the Statement of Changes in Net Assets.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average daily net
assets of the Fund, at the annual rate of 7/10 of 1% of the first $250 million,
5/8 of 1% from $250 million to $500 million, and 1/2 of 1% over $500 million.
The Investment Manager has agreed to waive all or
Global Income Fund
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. Certain officers and directors of the
Fund are officers and directors of the Investment Manager and Investor Service
Center, Inc., the Fund's Distributor. During the six months ended December 31,
1996, the Fund paid $875 to Bull & Bear Securities, Inc., an affiliate of the
Investment Manager, as commissions for brokerage services. The Fund reimbursed
the Investment Manager $5,976 for providing certain administrative and
accounting services at cost for the six months ended December 31, 1996.
Global Income Fund
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "12b-1 Plan"). Pursuant to the 12b-1 Plan,
the Fund pays the Distributor a fee in an amount of one-quarter of one percent
per annum of the Fund's average daily net assets as compensation for service
activities and a fee in an amount of one-quarter of one percent per annum of the
Fund's average daily net assets as compensation for distribution activities. The
fee for service activities is intended to cover personal services provided to
shareholders in the Fund and the maintenance of shareholder accounts. The fee
for distribution activities is to cover all other activities and expenses
primarily intended to result in the sale of the Fund's shares. Investor Service
Center also provides shareholder administration services to the Fund at cost,
for which it received $12,162 for the six months ended December 31, 1996.
(4) Purchases and sales of securities other than short term notes aggregated
$70,157,213 and $68,539,235, respectively, for the year ended June 30, 1996.
(5) The Fund has a committed bank line of credit. At December 31, 1996, there
was no balance outstanding and the interest rate was equal to the Federal
Reserve Funds Rate plus 1.75 percentage points. For the six months ended
December 31, 1996, the weighted average interest rate was 5.85% based on the
balances outstanding from the line of credit and the reverse repurchase
agreement during the period and the weighted average amount outstanding was
$976,368.
(6) At December 31, 1996, open forward currency contracts outstanding consisted
of:
UNREALIZED
FACE VALUE CONTRACT VALUE APPRECIATION
(U.S. DOLLARS) PRICE DATE (DEPRECIATION)
Danish Krone (Sell) $897,392 5.95203 01/21/97 $(3,214)
=================== -------- ======= ======== --------
Total Open Forward Currency
Contracts, net $(3,214)
(7) A Special Meeting of Shareholders ("Special Meeting") of Bull & Bear Global
Income Fund, a series of Bull & Bear Funds II, Inc. (the "Series Fund") was held
on January 22, 1997 pursuant to notice given to all shareholders of record at
the close of business on December 13, 1996. At the Special Meeting, shareholders
approved a proposal to convert Series Fund from a diversified series of a
registered open-end management investment company to a registered closed-end
management investment company with 1,538,959 shares voting in favor of the
conversion, 495,212 shares voting against the conversion, and 177,794 shares
abstaining.
Effective February 7, 1997, the Fund converted from an open-end management
investment company to a closed-end management investment company pursuant to the
vote of the Fund's shareholders on January 22, 1997. In connection with the
conversion, costs of approximately $63,200 have been charged against paid-in
capital. In addition, the Fund has adopted a Dividend Reinvestment Plan (the
"Plan"). Under the Plan, each dividend and capital gain distribution, if any,
declared by the Fund on outstanding shares will, unless elected otherwise by
each shareholder by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution, be paid on the payment
date fixed by the Directors in additional shares in accordance with the
following: whenever the Market Price (as defined below) per share is equal to or
exceeds the net asset value per share at the time shares are valued for the
purpose of determining the number of shares equivalent to the cash dividend or
capital gain distribution (the "Valuation Date"), participants will be issued
additional shares equal to the amount of such dividend divided by the Fund's net
asset value per share. Whenever the Market Price per share is
Global Income Fund
less than such net asset value on the Valuation Date, participants will be
issued additional shares equal to the amount of such dividend divided by the
Market Price. The Valuation Date is the dividend or distribution payment date
or, if that date is not an American Stock Exchange trading day, the next trading
day. For all purposes of the Plan: (a) the Market Price of the shares on a
particular date shall be the average closing market price on the five trading
days the shares traded ex-dividend on the Exchange prior to such date or, if no
sale occurred on the Exchange prior to such date, then the mean between the
closing bid and asked quotations for the shares on the Exchange on such date,
and (b) net asset value per share on a particular date shall be as determined by
or on behalf of the Fund.
Global Income Fund
* Per share income and operating expenses and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
** Unaudited.
*** Annualized.
Global Income Fund
Global income Dfund
11 Hanover Square
New York, NY 10005
1-800-847-4200 1-212-363-1100
http://www.bull-and-bear.com
Call toll-free for Fund performance, telephone purchases, exchanges among the
Bull & Bear Funds, and to obtain information concerning your account.
1-800-847-4200
1-212-363-1100
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.
Global Income Fund