Statement I tells us that some bottles are bags, which means that a portion of bottles could also be bags.
Statement II tells us that all bags are pencils, so the bottles that are bags must also be pencils.
Conclusion I ("No bottle is a pencil") cannot be true because some bottles are bags, and all bags are pencils, meaning those bottles that are bags must also be pencils.
Conclusion II ("Some bottles are pencils") follows because the bottles that are bags must also be pencils as per Statement II.
Therefore, only Conclusion II follows.
The correct answer is (d) Only conclusion II follows.