- --------------------------------------------------------------------------------
PROSPECTUS
APRIL 15, 1995 MUNICIPAL
INCOME
FUND
-------------------------------------------------
11 HANOVER SQUARE
NEW YORK, NY 10005
1-800-847-42001-212-363-1100
The objective of Bull & Bear Municipal Income Fund is to obtain for its
shareholders the highest possible income exempt from Federal income tax that is
consistent with the preservation of principal. The Fund invests primarily in a
diversified portfolio of municipal securities of varying maturities, depending
on the Investment Manager's evaluation of current and anticipated market
conditions. There is no assurance that the Fund will achieve its objective.
Dividends are declared daily and paid monthly.
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NEWSPAPER LISTING. Shares of the Fund
are sold at the net asset value per
share which is shown daily in the
mutual fund section of newspapers
under the "Bull & Bear Group" heading.
----------------------------------------------------------------------
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 April 15, 1995, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
prospectus. It is available at no charge by calling 1-800-847-4200. Shares of
the Fund are not bank deposits or obligations of, or guaranteed or endorsed by
any bank or any affiliate of any bank, and are not Federally insured by,
obligations of or otherwise supported by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
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.
1
<PAGE>
EXPENSE TABLE. The tables and example below are designed to help you
understand the various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. A $2 monthly account fee is charged if
your average monthly balance is less than $500, except for accounts in the
Bull & Bear Automatic Investment Program (see "How to Purchase Shares").
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases........ NONE
Sales Load Imposed on Reinvested Divi-
dends................................. NONE
Deferred Sales Load.................... NONE
Redemption Fees........................ NONE
Exchange Fees.......................... NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees (after waiver)......... 0.49%
12b-1 Fees............................. 0.35%
Other Expenses......................... 0.76%
-----
Total Fund Operating Expenses (after
waiver)............................... 1.60%
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
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............................ $16 $50 $87 $190
</TABLE>
The example set forth above assumes reinvestment of all dividends and
distributions and uses an assumed 5% annual rate of return as required by the
Securities and Exchange Commission ("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 expenses are based on the Fund's
operating expenses and average daily net assets during its fiscal year ended
December 31, 1994. Without the Investment Manager's waiver, investment
management fees and total operating expenses would have been 0.60% and 1.71%
of average net assets, respectively. Long term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.'s ("NASD") rules regarding
investment companies. "Other Expenses" includes amounts paid to the Fund's
Custodian (net of brokerage commission credits pursuant to an arrangement not
anticipated to increase materially brokerage commissions paid by the Fund--see
"The Investment Manager") and Transfer Agent and reimbursable to the
Investment Manager and the Distributor for certain administrative and
shareholder services, and does not include interest expense from the Fund's
bank borrowing.
FINANCIAL HIGHLIGHTS are presented below for a share of capital stock
outstanding throughout each year for the past ten years. The following
information is supplemental to the Fund's financial statements and report
thereon of Tait, Weller & Baker, independent accountants, appearing in the
December 31, 1994 Annual Report to Shareholders and incorporated by reference
in the Statement of Additional Information.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
PER SHARE DATA ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at be-
ginning of period...... $17.63 $17.06 $17.27 $16.91 $17.29 $17.44 $16.74 $18.17 $16.88 $15.04
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income.. .68 .75 .89 1.02 1.01 1.11 1.22 1.26 1.32 1.39
Net realized and
unrealized gain (loss)
on investments........ (2.38) 1.02 .11 1.23 (.38) .40 .67 (1.43) 1.86 1.84
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ (1.70) 1.77 1.00 2.25 .63 1.51 1.89 (.17) 3.18 3.23
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income..... (.68) (.75) (.89) (1.03) (1.01) (1.14) (1.19) (1.26) (1.31) (1.39)
Distributions from net
realized gains........ -- (.45) (.32) (.86) -- (.52) -- -- (.58) --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions.... (.68) (1.20) (1.21) (1.89) (1.01) (1.66) (1.19) (1.26) (1.89) (1.39)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value at end
of period.............. $15.25 $17.63 $17.06 $17.27 $16.91 $17.29 $17.44 $16.74 $18.17 $16.88
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN............ (9.76)% 10.59% 6.04% 13.69% 3.88% 8.93% 11.63% (.91%) 19.63% 22.45%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of pe-
riod (000's omitted)... $15,921 $21,345 $20,781 $20,458 $20,560 $20,482 $19,241 $16,141 $21,771 $11,011
Ratio of expenses to av-
erage net assets(a).... 1.60% 1.61% 1.60% 1.60% 1.50% 1.35% 1.27% 1.18% 1.18% 1.02%
Ratio of net investment
income to average net
assets(b).............. 4.23% 4.25% 5.19% 5.86% 5.94% 6.35% 7.11% 7.18% 7.29% 8.70%
Portfolio turnover rate. 275% 74% 320% 511% 172% 188% 70% 62% 60% 46%
</TABLE>
- --------
(a) Ratio prior to waiver by the Investment Manager was 1.71%, 1.62%, 1.62%,
1.63%, 1.86%, and 1.76% respectively, for 1994, 1993, 1991, 1990, 1989, and
1988.
(b) Ratio prior to waiver by the Investment Manager was 4.12%, 4.24%, 5.84%,
5.81%, 5.84%, and 6.62% respectively, for 1994, 1993, 1991, 1990, 1989, and
1988.
Information relating to outstanding debt during the fiscal periods shown
below:
<TABLE>
<CAPTION>
Amount of Debt Average Amount of Average Number of Average Amount of
Fiscal Year Ended Outstanding at End Debt Outstanding Shares Outstanding Debt Per Share
December 31 of Period During the Period During the Period During the Period
----------------- ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
1994 $0 $113,655 1,157,754 $0.10
1993 $0 $115,984 1,235,288 $0.09
</TABLE>
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Transaction and Operating Expenses.. 2
Financial Highlights................ 2
General............................. 3
The Fund's Investment Program....... 4
Distributions and Taxes............. 6
Tax-Free versus Taxable Yields...... 7
How to Purchase Shares.............. 7
Shareholder Services................ 9
</TABLE>
<TABLE>
<S> <C>
How to Redeem Shares................ 10
Determination of Net Asset Value.... 12
The Investment Manager.............. 12
Distribution of Shares.............. 12
Performance Information............. 13
Capital Stock....................... 14
Custodian and Transfer Agent........ 14
</TABLE>
GENERAL
PURPOSES OF THE FUND. The Fund is for investors seeking the highest possible
income exempt from Federal income tax, but who are concerned with preservation
of principal. By investing in the Fund, you may seek these benefits, plus
diversification, liquidity, and professional management, without having to
become involved with the detailed accounting and safekeeping procedures
normally associated with direct investment in municipal securities. The Fund
is not intended for investors who wish to speculate on short term swings in
the municipal bond market, or for tax-advantaged retirement plans or tax-
exempt entities. The Fund's yield and net asset value will fluctuate with
interest rates and the market value of its portfolio securities.
CHECK WRITING PRIVILEGE FOR EASY ACCESS. Upon your request, you may write
checks on your account for $250 or more. The checks may be made payable to
anyone you wish, and there is no limit on the number of checks you may write.
CERTAIN ECONOMIES OF SIZE. Purchases or sales of municipal securities often
entail disproportionately large costs on small transactions. Due to the size
and volume of its transactions, the Fund, as compared with most individuals
investing for their own accounts, generally is able to execute transactions to
produce better net prices, thus effecting important savings.
TAXATION OF DIVIDENDS. Income dividends you receive from the Fund are
generally derived from interest on municipal securities, the income from which
is exempt from Federal income tax, though possibly an item of tax preference
("ITP") for purposes of the Federal alternative minimum tax ("AMT"). The
Fund's income is thus Federally tax-free to you if you are not subject to AMT.
The Fund's dividends may be subject to state and local taxes. Dividends paid
from taxable investments and capital gain distributions, if any, will be
subject to Federal income tax and may also be subject to state and local
taxes.
MONTHLY DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund declares dividends from
net investment income daily and distributes such dividends to shareholders
monthly. The Fund may also realize net capital gains from the sale of
securities, and it distributes any such gains to shareholders annually.
Dividends and other distributions are reinvested in additional shares of the
Fund or, at your option, paid in cash.
YIELD INFORMATION. Please call 1-800-847-4200 or 1-212-363-1100 to obtain the
Fund's yield.
PORTFOLIO MANAGEMENT. The Fund's Portfolio Manager is Steven A. Landis. Mr.
Landis is Senior Vice President and a member of the Investment Policy
Committee of Bull & Bear Advisers, Inc. (the "Investment Manager") with
overall responsibility for the Bull & Bear fixed income funds. Mr. Landis was
formerly Associate Director -- Proprietary Trading at Barclays De Zoete Wedd
Securities Inc. and Director, Bond Arbitrage at WG Trading Company. Mr. Landis
received his MBA in Finance from Columbia University.
3
<PAGE>
THE FUND'S INVESTMENT PROGRAM
The Fund seeks to obtain for its shareholders the highest possible income
exempt from Federal income tax that is consistent with preservation of
principal. The Fund seeks to achieve this objective by investing principally
in a diversified portfolio of municipal bonds rated at the time of purchase
within the four highest grades assigned by Fitch Investors Service, Inc.
("Fitch") (AAA, AA, A and BBB), Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa, A, and Baa), or Standard & Poor's Ratings Group ("Standard &
Poor's") (AAA, AA, A and BBB) or, if unrated, determined by the Investment
Manager to be of comparable quality. Municipal bonds rated Baa or BBB are
medium grade securities and Moody's considers securities rated Baa to have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity for such
securities to make principal and interest payments than is the case for higher
grade municipal securities. The Fund may also invest in municipal notes rated
at the time of purchase within the three highest grades assigned by Moody's
(MIG1/VMIG1, MIG2/VMIG2, and MIG3/VMIG3), Fitch (F-1+, F-1, and F-2) or
Standard & Poor's (SP1+, SP1, and SP2), tax-free commercial paper rated at the
time of purchase within the two highest grades assigned by Moody's (P-1 and P-
2) or the top three grades assigned by Fitch (F-1+, F-1, and F-2) or Standard
& Poor's (A-1+, A-1, and A-2) and unrated municipal notes and tax-free
commercial paper determined by the Investment Manager to be of comparable
quality. Descriptions of Fitch's, Moody's and Standard & Poor's ratings appear
in the Appendix to the Statement of Additional Information. The Fund may not
invest more than 20% of its total assets in unrated securities unless such
securities are secured by the full faith and credit of the U.S. Government.
The Fund's portfolio will consist of long, short, and intermediate term
municipal securities. The proportion invested in each category is expected to
vary within wide limits depending upon the Investment Manager's evaluation of
anticipated market conditions. The dollar-weighted average maturity of the
Fund's portfolio is expected to normally range from five to more than 25
years. As a matter of fundamental investment policy, which may not be changed
without shareholder approval, at least 80% of the Fund's income during any
fiscal year will be exempt from Federal income tax. Also, as a matter of
fundamental policy, the Fund will not purchase any security if, as a result,
less than 80% of the Fund's total assets (exclusive of cash) would be invested
in securities the income from which is exempt from Federal income tax, except
that the Fund may temporarily invest more than 20% of its total assets in
taxable obligations during periods of abnormal market conditions. While at
least 80% of the income from the Fund's investments will normally be exempt
from Federal income tax, such income may nevertheless be subject to the AMT.
Because the objective of the Fund is to provide income exempt from Federal
income tax, the Fund will invest in taxable obligations only when the
Investment Manager believes it would be in the best interest of shareholders.
MUNICIPAL SECURITIES. Municipal securities include obligations issued by or on
behalf of states, territories, and possessions of the United States and the
District of Columbia, and their political subdivisions, agencies, and
instrumentalities, the interest on which is generally exempt from Federal
income tax, though possibly an ITP for purposes of the AMT. The Fund's
portfolio may consist of any combination of general obligation bonds, revenue
bonds, industrial development bonds ("IDBs") and private activity bonds
("PABs"). The percentage of such bonds in the Fund's portfolio will vary. The
Fund will not, however, invest more than 25% of its total assets in municipal
securities issued by agencies of the same state or issued to finance a
particular project. While the Fund may invest up to 50% of its assets in IDBs,
the Fund will not invest more than 25% of its assets in IDBs whose
nongovernmental users are in any one industry.
General obligation bonds are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities financed by the bonds to meet its financial
obligations and secured by the pledge, if any, of real and personal property
so financed. IDBs and PABs are issued by or on behalf of public authorities to
finance various privately operated facilities, such as airport or pollution
control facilities. PABs generally are such bonds issued after August 15,
1986. These obligations are
4
<PAGE>
included within the term "municipal bonds" if the interest paid thereon is
exempt from Federal income tax in the opinion of the bond issuer's counsel.
IDBs and PABs are in most cases revenue bonds and thus are not payable from
the unrestricted revenues of the issuer. The credit quality of IDBs and PABs
is usually directly related to the credit standing of the user of the
facilities being financed.
RISK CONSIDERATIONS. The Fund may not be suitable or appropriate for all
investors. While the Fund seeks to reduce risk by investing in a diversified
portfolio, such diversification does not eliminate risk. There is no assurance
that the Fund will achieve its investment objective. Yields on municipal
securities are dependent on a variety of factors, including the general
conditions of the municipal and fixed income security markets, the financial
condition of the issuer, the size of a particular offering, the maturity of
the obligation, the credit quality and rating of the issue, and expectations
regarding changes in tax rates. Municipal securities with longer maturities
tend to produce higher rates of interest paid and are generally subject to
potentially greater capital appreciation and depreciation than obligations
with shorter maturities and lower interest rates. An increase in interest
rates will generally reduce the value of portfolio investments, and a decline
in interest rates will generally increase the value of portfolio investments.
The Fund's ability to achieve its investment objective depends also on the
continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations to pay interest and principal due. Municipal
securities have also traditionally not been subject to regulation by or
registration with the SEC.
Obligations of issuers of municipal securities are subject to the provisions
of bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the U.S. Bankruptcy Code. In addition, the obligations of
such issuers may become subject to laws enacted in the future by Congress,
state legislators, or referendum extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. Litigation, if any, or other
conditions may also materially affect an issuer's ability to pay when due the
principal of and interest on its municipal securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements on up to 25% of its assets. In a reverse repurchase agreement, the
Fund sells a security (known as the "underlying security") to a well-
established securities dealer or a bank which is a member of the Federal
Reserve System and agrees to repurchase it at an agreed-upon date and price
reflecting a market rate of interest. Reverse repurchase agreements are
considered borrowings. Such borrowing is referred to as leverage, is
speculative, and increases both investment opportunity and investment risk.
Such agreements are subject to the risk that the value of the security
purchased with the proceeds of the sale by the Fund will be less than the
Fund's obligation to repurchase the underlying security. The Board of
Directors believes, however, that this is a sufficiently attractive investment
strategy to justify its use in seeking a high level of current income for
shareholders. The Fund will maintain a segregated account with its custodian
or subcustodian consisting of cash, U.S. Government securities or other
liquid, high grade debt securities with a market value at least equal to its
commitment to repurchase securities in reverse repurchase agreements. The
Investment Company Act of 1940 ("1940 Act") currently permits a mutual fund to
borrow from a bank, provided that the fund maintain asset coverage for all
borrowings of at least 300%, and should such asset coverage at any time fall
below 300%, the fund reduce its borrowings within three days (excluding
Sundays and holidays) to the extent necessary so such asset coverage be at
least 300%. To reduce its borrowing the Fund might be required to sell
securities at a disadvantageous time. Interest on money borrowed is an expense
of the Fund which it would not otherwise incur, and it may have little or no
investment income during periods when its borrowings are substantial.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
basis. In such transactions the commitment to make delivery or payment is
contingent upon the issuance of the purchased securities at a future date.
Although the Fund will enter into when-issued transactions with the intention
of accepting delivery of and paying for the securities, the Fund may terminate
the commitment prior thereto for investment reasons, which may result in a
gain or loss. When-issued transactions involve a risk that yields available on
the delivery date may be higher than those received on the commitment
5
<PAGE>
date. When the Fund agrees to purchase securities on a when-issued basis, its
custodian will set aside in a segregated account cash, U.S. Government
securities or other liquid, high grade debt securities 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 commitment. If the issuer fails to deliver the
security, the Fund may incur a loss or miss an opportunity to make an
alternative investment.
OTHER INFORMATION. Although the Fund's policy is to invest for the long term,
its portfolio turnover rate will vary from year to year depending on market
conditions. For the fiscal years ended December 31, 1994 and December 31,
1993, the Fund's portfolio turnover rate was 275% and 74%, respectively. The
rate was lower in 1993 due to less realization of gains and repositioning of
the Fund's portfolio in light of a comparatively less volatile interest rate
environment. Higher turnover may result in increased transaction costs and an
increase in taxable income from realized gains. When the Investment Manager
deems it advisable, the Fund may for temporary defensive or emergency
purposes, such as when interest rates are rising sharply, hold cash or invest
all or a portion of its assets in taxable money market instruments, including
obligations of the U.S. Government, its agencies or instrumentalities;
certificates of deposit, bankers' acceptances, and other short term debt
obligations of U.S. banks with total domestic assets of at least
$1,000,000,000; and commercial paper rated F-2 or better by Fitch, P-2 or
better by Moody's or A-2 or better by Standard & Poor's. The Fund's investment
objective is fundamental and may not be changed without shareholder approval.
The Fund is also subject to fundamental investment restrictions, set forth in
the Statement of Additional Information, that may not be changed without
shareholder approval. These investment restrictions, among other things,
permit the Fund, in addition to the reverse repurchase agreements described
above, to borrow money from banks for temporary purposes in an amount not
exceeding 10% of its assets. Unless otherwise noted, all other investment
policies may be changed by the Board of Directors without shareholder
approval.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. Dividends from the Fund's net investment income are declared
daily and paid monthly. Distributions of substantially all of the Fund's net
realized capital gain, if any, after deducting any capital loss carryovers,
are declared and payable to shareholders of record on a date in December of
each year. Such distributions may be paid in January of the following year but
will be deemed to have been received by shareholders on December 31 for
Federal income tax purposes. The Fund may also make an additional distribution
following the end of its fiscal year out of undistributed income and capital
gain. You will be advised promptly after each calendar year of the dollar
amount and taxable status of the distributions you received during the year.
Dividends and other distributions will be made in additional shares of the
Fund, unless you elect to receive cash on the Account Application or so elect
subsequently by calling Bull & Bear Service Center, 1-800-847-4200. Any
election will remain in effect until you notify Bull & Bear Service Center to
the contrary.
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, so that it will be relieved of Federal income tax on that part of its
investment company taxable income (consisting generally of taxable net
investment income and any net short term capital gains) and net capital gain,
(the excess of net long term capital gain over net short term capital loss),
if any, that is distributed to shareholders. The Fund's distributions of net
interest earned on tax-exempt securities, designated by the Fund as "exempt-
interest dividends," are not subject to Federal income tax. In order to pay
exempt-interest dividends, the Fund must (and intends to continue to) satisfy
the requirement that at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consists of tax-exempt securities.
Dividends from interest earned on taxable securities and any net short term
capital gains are taxable as ordinary income whether received in cash or
additional shares. Distributions of the Fund's net capital gains, if any, when
designated as such, are taxable to shareholders as long term capital gains,
whether received in cash or additional
6
<PAGE>
shares and regardless of the length of time the Fund's shares are owned.
Interest on indebtedness to purchase or carry Fund shares is not deductible
for Federal income tax purposes to the extent the Fund's distributions consist
of exempt-interest dividends. Tax-exempt interest attributable to certain PABs
(including, in the case of a RIC receiving interest on such bonds, a
proportionate part of the exempt-interest dividends paid by that RIC) is an
ITP for purposes of the AMT. Exempt-interest dividends received by a corporate
shareholder may be subject to the AMT in any event. Fund dividends may be
subject to taxes of states and other taxing authorities. The foregoing is only
a summary of some of the important Federal tax considerations generally
affecting the Fund and its shareholders; see the Statement of Additional
Information. Because other Federal, state and local tax considerations may
apply, you should consult your tax adviser.
TAX-FREE VERSUS TAXABLE YIELDS
The table below illustrates, at 1994 Federal tax rates, the yield you would
have to obtain from taxable investments to equal tax-free yields ranging from
5% to 8%. The stated maximum tax rate does not take into account the phaseout
of deductions for personal exemptions or the limit on itemized deductions and
does not reflect state and local income taxes.
<TABLE>
<CAPTION>
TAX BRACKETS BASED ON FILING STATUS: TO EQUAL A FEDERAL TAX-
(TAXABLE INCOME) FREE YIELD OF
--------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
JOINT SINGLE Marginal 5% 6% 7% 8%
Tax Rate =========================
A Taxable Investment Must
Earn
===========================================================================
$0-$38,000 $0-$22,750 15% 5.88% 7.06% 8.24% 9.41%
---------------------------------------------------------------------------
$38,001-$91,850 $22,751-$55,100 28% 6.94% 8.33% 9.72% 11.11%
---------------------------------------------------------------------------
$91,851-$140,000 $55,101-$115,000 31% 7.25% 8.70% 10.14% 11.59%
---------------------------------------------------------------------------
$140,001-$250,000 $115,001-$250,000 36% 7.81% 9.38% 10.94% 12.50%
---------------------------------------------------------------------------
Over $250,000 Over $250,000 39.6% 8.28% 9.93% 11.59% 13.25%
---------------------------------------------------------------------------
</TABLE>
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 an order by Bull & Bear
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $1,000. The minimum subsequent investment is $100. The $1,000
minimum initial investment is waived if you elect to invest $100 or more each
month in the Fund through the Bull & Bear Automatic Investment Program.
BULL & BEAR AUTOMATIC INVESTMENT PROGRAM. By participating in the Bull & Bear
Automatic Investment Program, you can establish a convenient and affordable
long term investment program. Under the Program, investments of $100 or more
are transferred electronically each month into your Fund account.
. The BULL & BEAR BANK TRANSFER PLAN lets you automatically purchase Fund
shares each month by transferring a specified dollar amount from your
regular checking account, NOW account, or bank money market deposit
account.
. Through the BULL & BEAR SALARY INVESTING PLAN, part or all of your salary
may be invested electronically in shares of the Fund at each pay period,
depending upon the direct deposit program of your employer.
7
<PAGE>
. The BULL & BEAR GOVERNMENT DIRECT DEPOSIT PLAN allows you to deposit
automatically part or all of certain U.S. Government checks in your Fund
account. Eligible U.S. Government checks include payments for Social
Security, pension benefits, military or retirement benefits, salary,
veteran's benefits and most other recurring payments.
For more information concerning this Program, or to request the necessary
authorization form(s), please call Bull & Bear Service Center, 1-800-847-4200.
You may terminate participation in the Program at any time by written notice
received at least 10 days prior to the scheduled investment date. 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 Plans do not assure
a profit or protect against loss in a declining market.
INITIAL INVESTMENT. The Account Application that accompanies this Prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to Municipal Income Fund, mailed to Bull & Bear Service Center, P.O.
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.
SUBSEQUENT INVESTMENTS. Subsequent investments may be made at any time by
wiring money as set forth below, or by mailing a check or other negotiable
bank draft ($100 minimum), made payable to Municipal Income Fund, together
with a Bull & Bear FastDeposit form to Bull & Bear Service Center, P.O. Box
419789, Kansas City, MO 64141-6789. If that form is not used, a letter should
indicate the Fund and account number to which the subsequent investment is to
be credited, and name(s) of the registered owner(s).
INVESTMENT BY TELEPHONE. You may purchase additional shares of the Fund by
telephone through the Automated Clearing House (ACH) system as long as your
bank is a member of the ACH system and you have a completed, approved
authorization on file. The funding for the purchase will be automatically
deducted from the bank account designated on your authorization. For requests
received by 3:00 p.m., eastern time, the investment will normally be credited
to your Fund account within two business days. There is a minimum of $100 for
each investment by telephone. Any subsequent changes in bank information must
be submitted in writing and accompanied by a sample voided check or deposit
slip. To initiate an investment by telephone, please call 1-800-847-4200.
INVESTING BY WIRE. For an initial investment by wire, you must first telephone
Bull & Bear Service Center, 1-800-847-4200, to give the name(s) under which
the account is to be registered, tax identification number, the name of the
bank sending the wire, and to be assigned a Bull & Bear Municipal Income Fund
account number. You may then purchase shares by requesting your bank to
transmit immediately available funds ("Federal funds") by wire to the Transfer
Agent at: United Missouri Bank NA, ABA #10-10-00695; for Account 98-7052-724-3
Municipal Income Fund. 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 Bull & Bear Service Center, P.O. Box 419789, Kansas City, MO
64141-6789. After your first purchase of shares by wire, you may make
additional wire purchases without having to call Bull & Bear 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 three decimal places),
together with any dividends paid in additional shares. Stock certificates will
be issued only for full shares when requested in writing. In order to
facilitate redemptions and transfers, we recommend that you not request
certificates. You will receive quarterly statements showing monthly dividends
and confirmation statements upon purchase or sale of shares.
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 Bull &
Bear Service Center of a purchase order in proper form. All checks are
accepted subject to collection at full face value in Federal funds and must be
drawn in U.S. dollars on a U.S. bank. The Fund reserves the right to reject
any order. Accounts are charged $30 by the Transfer Agent for submitting
checks for investment which are not honored by the investor's bank. The Fund
may in its discretion waive or lower the investment minimums.
8
<PAGE>
SHAREHOLDER SERVICES
You may terminate or modify your participation in any of the Fund's special
plans or services at any time. Additional information regarding any of the
following services is available from the Fund's Distributor, Bull & Bear
Service Center, 1-800-847-4200.
CHECK WRITING PRIVILEGE FOR EASY ACCESS. Upon request, you can receive
personalized checks drawn against your Fund account through UMB Bank that may
be made payable to anyone's order in any amount of $250 or more. The Bank has
the right to refuse any checks which do not conform with its requirements. You
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, the Transfer Agent, as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check. This 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 for payment. The Fund may not honor for up to 10 days a check written by
a shareholder that requires shares recently purchased by check to be redeemed
or until it is reasonably assured of payment of the check representing the
purchase. Since the value of an account changes daily, you should not attempt
to close an account by writing a check.
DIVIDEND SWEEP PRIVILEGE. You may elect to have invested automatically either
all dividends, or all dividends and any capital gain distributions paid by the
Fund 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 Bull &
Bear Service Center, 1-800-847-4200. You may cancel this Privilege by mailing
written notification to Bull & Bear Service Center, P.O. Box 419789, Kansas
City, MO 64141-6789. To select a new Fund after cancellation, you must submit
a new Authorization Form. Enrollment in or cancellation of this 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.
The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
SYSTEMATIC WITHDRAWAL PLAN. If you own Fund shares with a value of at least
$20,000 you may elect an automatic withdrawal of cash in fixed or variable
amounts from your Fund account at monthly or quarterly intervals in a minimum
amount of $100. Under the Systematic Withdrawal Plan all dividends and
distributions, if any, are reinvested in the Fund.
ASSIGNMENT. Shares of the Fund may be transferred to another owner.
Instructions are available from Bull & Bear Service Center, 1-800-847-4200.
EXCHANGE PRIVILEGE. You may exchange your investment by exchanging at least
$500 worth of shares of the Fund for shares of any other Bull & Bear Fund
(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).
Information, including a free prospectus, on any of the Funds listed below is
available from Bull & Bear Service Center, 11 Hanover Square, New York, NY
10005, 1-800-847-4200. The other Fund's prospectus should be read in advance.
To exchange shares, call Bull & Bear Service Center toll-free at 1-800-847-
4200 and provide the following information: account registration including
address and number; 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:
. BULL & BEAR DOLLAR RESERVES is a high quality money market fund investing
in U.S. Government securities. Income is free from state income taxes. Free
unlimited check writing ($250 minimum per check). Pays monthly dividends.
9
<PAGE>
. BULL & BEAR U.S. GOVERNMENT SECURITIES FUND invests for a high level of
current income, liquidity, and safety of principal. Free unlimited check
writing ($250 minimum per check). Pays monthly dividends.
. BULL & BEAR GLOBAL INCOME FUND seeks a high level of income from a global
portfolio of primarily investment grade fixed income securities. Free
unlimited check writing ($250 minimum per check). Pays monthly dividends.
. BULL & BEAR QUALITY GROWTH FUND seeks growth of capital and income from a
portfolio of common stocks of large, quality companies with potential for
significant growth of earnings and dividends.
. BULL & BEAR U.S. AND OVERSEAS FUND invests worldwide for the highest
possible total return.
. BULL & BEAR SPECIAL EQUITIES FUND invests aggressively for maximum capital
appreciation.
. 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.
Exchange requests received between 9 a.m. and 4 p.m. eastern time, on any
business day of the Fund, will be effected at the net asset values of the Fund
and the other Bull & Bear Fund as determined at the close of regular trading
on that business day. Exchange requests received between 4 p.m. and 5 p.m.
eastern time, on any business day of the Fund will be effected at the close of
regular trading on the next business day of the Fund. If you are unable to
reach Bull & Bear Service Center at the above telephone number you may, in
emergencies, call 1-212-363-1100 or communicate by fax 1-212-363-1103 or cable
to the address BULLNBEAR NEWYORK. Transfers may be difficult or impossible to
implement during periods of rapid changes in economic or market conditions.
Transfer privileges may be terminated or modified by the Fund upon 60 days'
notice. For tax purposes, transfers are treated as a redemption and purchase
of shares. You may give transfer instructions to Bull & Bear 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.
. 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
use proceeds of securities sold in your brokerage account to purchase
shares of any Bull & Bear Fund. You may request a Discount Brokerage
Account Application from Bull & Bear Securities, Inc., 1-800-262-5800.
HOW TO REDEEM SHARES
LIQUIDITY. Generally, you may request that the Fund redeem your shares by
submitting a written request to Bull & Bear Service Center, P.O. Box 419789,
Kansas City, MO 64141-6789, signed by the record owner(s). If a written
redemption 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. In addition, you may redeem shares by
writing checks against your Fund account and also expedite redemption requests
by telephoning as described below.
REDEMPTION BY TELEPHONE. You may redeem shares by telephone and receive the
proceeds through the ACH system as long as your bank is a member of the ACH
system and you have a completed, approved authorization on file. The proceeds
of your redemption will be automatically deducted from your Fund account. The
proceeds will normally be credited to your bank account within two business
days following the telephone request. The request must be received no later
than 3:00 p.m., eastern time. There is a minimum of $250 for each redemption
by telephone. Any subsequent changes in bank information must be submitted in
writing and accompanied by a sample voided check or deposit slip. To initiate
a redemption by telephone, please call 1-800-847-4200.
10
<PAGE>
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.
EXPEDITED REDEMPTION. If you are redeeming at least $1,000 worth of shares
(for which certificates have not been issued) you may obtain expedited
redemption by calling Bull & Bear Service Center, 1-800-847-4200. You may
request that payment be sent to your bank designated on the authorization by
Federal funds wire (or if a check is requested, by regular mail) or to your
address of record by regular mail.
For expedited redemption, call Bull & Bear Service Center toll-free at 1-
800-847-4200 between 9 a.m. and 5 p.m. eastern time, and provide the following
information: Fund account registration including address, account number, and
taxpayer identification number; number, percentage, or dollar value of shares
to be redeemed; whether the proceeds are to be mailed to your address of
record, or mailed or wired to your bank; the bank name, address, ABA routing
number, bank account registration and account number, and a contact person's
name and telephone number; and your identity and telephone number. If you are
unable to reach Bull & Bear Service Center at the above telephone number you
may, in emergencies, call 1-212-363-1100 or communicate by fax 1-212-363-1103
or cable to the address BULLNBEAR NEWYORK. Expedited redemptions may be
difficult or impossible to implement during periods of rapid changes in
economic or market conditions. Expedited redemption privileges may be
terminated or modified by the Fund upon 60 days' notice.
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. Payment
for shares redeemed will be made as soon as possible, ordinarily within 7 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 7 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 ACH transfer is generally subject to a 10
day delay to allow the check to clear. The 10 day clearing period does not
affect the trade date on which a purchase or redemption order is priced, or
any dividends and capital gain distributions to which you may be entitled
through the date of redemption. Fund check writing redemption checks received
during the 10 day clearing period will be rejected and marked "uncollected."
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 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 an expedited redemption or transfer, unless
declined on the Account Application or otherwise in writing. Neither the Fund
nor Bull & Bear 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, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, or tape
recording of telephone instructions. The Fund may modify or terminate any
telephone privilege or shareholder service (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 proceeds of the redemption
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 NASD. A
11
<PAGE>
notary public may not guarantee signatures. The Transfer Agent may require
further documentation. The Transfer Agent may restrict the mailing of
redemption proceeds to your address of record within 30 days of such address
being changed unless you provide a signature guarantee as described above.
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 the Fund's 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 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 business day of the Fund. A business day of the Fund is any day on which
the New York Stock Exchange is open for business. The following are not
business days of the Fund: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if available. Because market quotations are
often unavailable, assets are usually valued by a method that the Board of
Directors believes accurately reflects fair value.
THE INVESTMENT MANAGER
Bull & Bear Advisers, Inc. (the "Investment Manager") acts as general
manager of the Fund and is responsible for various functions assumed by it
including regularly furnishing advice with respect to portfolio transactions.
The Investment Manager manages the investment and reinvestment of the assets
of the Fund, subject to the control and final direction of the Board of
Directors. The Investment Manager may allocate brokerage transactions by
taking into account the sales of shares of the Fund and the other Bull & Bear
Funds. The Investment Manager may also allocate portfolio transactions to
broker/dealers that remit a portion of their commissions as a credit against
the Fund's expenses.
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 .60% on the first $500 million and .50% over $500 million. From time to
time, the Investment Manager may waive all or part of this fee or reimburse
the Fund monthly to improve the Fund's yield and total return. The Investment
Manager provides certain administrative services at cost to the Fund. During
the fiscal year ended December 31, 1994, the management fees paid by the Fund
were .49% of average daily net assets.
The Investment Manager is a wholly-owned subsidiary of Bull & Bear Group,
Inc. ("Group"). Group, a publicly-owned company whose securities are listed on
NASDAQ 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, therefore, may be deemed a
controlling person of the Investment Manager.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, the Fund has appointed Bull & Bear
Service Center, Inc. as Distributor to act as its principal agent for the sale
of its shares. The Fund has also adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund may
reimburse the Distributor for expenditures incurred in connection with the
Distributor's service activities in an amount up to one-quarter of one percent
per annum of the Fund's average daily net assets and for expenditures incurred
in connection with the Distributor's distribution activities in an amount up
to one-quarter of one percent per annum of the Fund's average daily net
assets. From time to time, the Distributor may limit all or a portion of this
reimbursement to improve the Fund's yield and total return. Such expenditures
may include advertising, direct mail and promotional expenses; fulfillment
expenses including the cost of printing and mailing prospectuses and sales
literature to prospective investors; payments to third parties at the rate of
25 basis points who sell shares of the Fund; reimbursement of
12
<PAGE>
and compensation to brokers, dealers, banks, and other intermediaries for
administrative and accounting services; and telephone, office expenses,
salaries, which may include persons who are officers or employees of the
Distributor and the Investment Manager, their affiliates, or of the Fund, and
any other costs of effectuating the Plan. In addition, the Distributor and the
Investment Manager may make similar payments from their own resources.
Certain advertising and sales materials may be prepared which relate only to
the promotion of the sale of the Fund's shares, although they may mention the
other Bull & Bear Funds (e.g., with reference to the exchange privilege among
the Bull & Bear Funds) or the discount brokerage services offered by Bull &
Bear Securities, Inc. as an additional service offered to Fund shareholders
and others. The cost of such materials will be borne by the Fund. 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 Bull & Bear
Funds. In such cases, the expenses will be allocated among the Funds involved
based on the inquiries resulting from the materials or other factors deemed
appropriate by the Board of Directors. 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 the other Funds and Bull & Bear
Securities, Inc. will benefit therefrom.
From time to time, the Distributor may have incurred expenses in
distributing shares of the Fund in excess of the amounts currently reimbursed
by the Fund pursuant to the Plan, which expenses may be reimbursed in the
future. At December 31, 1994, approximately $428,500 in distribution expenses
had been incurred which had not yet been reimbursed to the Distributor by the
Fund which may be reimbursed in the future. Such amount is equal to
approximately 2.7% of the Fund's net assets as of December 31, 1994. Because
there is no requirement under the Plan that the Distributor be reimbursed for
all its expenses or any requirement that the Plan be continued from year to
year, such amount is not treated as a liability of the Fund. The Fund is not
charged interest or financing charges for unreimbursed or carried over
amounts. If the Plan is terminated for any reason other than adoption of a new
plan, the Fund will not reimburse the Distributor for any expenses incurred in
excess of the amount accrued by the Fund under the Plan prior to the effective
date of such termination.
The Fund treats as an expense all amounts accrued under the Plan during a
year whether or not paid to reimburse the Distributor during the same year so
that such accruals will be available to reimburse the Distributor for
expenditures in subsequent periods. Expenditures in excess of amounts paid by
the Fund during a year are not charged as an expense for such year but are
charged in subsequent years as and if accrued and paid by the Fund. Therefore,
if you purchase shares after the expenses have been incurred you will
nevertheless contribute to payment thereof to the extent there remain
carryover expenses, while shareholders who held shares when the expenses were
incurred but redeem thereafter will not contribute to the reimbursement of any
carryover expenses outstanding at the date of redemption. If amounts are
accrued but not utilized before you redeem, you will have contributed to
distribution expenditures not actually incurred while you were a shareholder.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its current yield, its compounded
yield and a tax-equivalent yield. Current yield is computed by dividing the
Fund's net investment income per share for the most recent month, determined
in accordance with SEC rules and regulations, by the net asset value per share
on the last day of such month and annualizing the result. Compounded yield is
the annualized current yield which is compounded by assuming the current
income to be reinvested. Tax-equivalent yield is the current yield you would
have to obtain from taxable investments for stated tax brackets to equal the
Federal income tax-free current yield of the Fund. The Fund may also publish a
dividend distribution rate in sales material from time to time. The dividend
distribution rate of the Fund is the current rate of distribution paid per
share by the Fund during a specified period divided by the net asset value per
share at the end of such period and annualizing the result. When considering
the Fund's performance,
13
<PAGE>
fluctuations in share value must be considered together with any published
dividend distribution rate. Whenever the Fund advertises its current yield,
compounded yield, tax-equivalent yield and its dividend distribution rate, it
will also advertise its "average annual total return" or "average annual
compound total return" over specified periods. For these purposes, total
return is based on an increase (or decrease) in a hypothetical $1,000 invested
in the Fund at the beginning of each of the specified periods, assuming the
reinvestment of any dividends and distributions paid by the Fund during such
periods. Advertisements may show such total return as a percentage rate or as
the value of a hypothetical investment at the end of the period. The Fund's
performance may be compared to the performance of broad groups of comparable
mutual funds, or the performance of unmanaged indexes of comparable
securities. The Fund does not impose any initial sales charge or redemption
fee on the purchase or redemption of its shares. The investment returns and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. All
advertised yield or total return figures are based upon historical performance
information and are not intended to indicate future performance. The Fund's
annual report to shareholders contains further information about the Fund's
performance. The annual report is available upon request and free of charge.
CAPITAL STOCK
The Fund is a diversified series of shares issued by Bull & Bear Municipal
Securities, Inc. (the "Company"), an open-end management investment company
organized as a Maryland corporation in 1983. The Company is authorized to
issue up to 1 billion shares ($.01 par value), of which 50 million shares have
been designated Bull & Bear Tax-Free Income Fund (doing business as Bull &
Bear Municipal Income Fund) as the only series presently. The Board of
Directors of the Company may establish one or more new series. The Fund's
stock is fully paid and non-assessable and is freely assignable by way of
pledge (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 Company, shareholders will be entitled to
receive ratably per share the net assets of the Fund. Each share entitles the
holder to one vote for all purposes. Shares have no preemptive or conversion
rights.
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 Company, the Company's By-Laws
provide that there will be no annual meeting of shareholders in any year
except as required by law. 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 Company'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 Bank & Trust Company, 89 South Street, Boston, MA 02109, acts as
custodian of the Fund's assets and may appoint one or more subcustodians
provided such subcustodianship is in compliance with the rules and regulations
promulgated under the 1940 Act. The custodian also performs certain accounting
services for the Fund.
The Fund's transfer and dividend disbursing agent is DST Systems, Inc., P.O.
Box 419789, Kansas City, MO 64141-6789. The Distributor provides certain
shareholder services to the Fund and is reimbursed its cost by the Fund. Such
services include receiving and responding to shareholder inquiries concerning
their accounts and processing shareholder telephone requests for transfers,
purchases, redemptions, changes of address and similar matters. The costs of
facilities, personnel and other related expenses are allocated among the Bull
& Bear Funds based on the relative number of inquiries and other factors
deemed appropriate by the Board of Directors.
14
<PAGE>
MUNICIPAL
INCOME
FUND
- --------------------------------------------------------------------------------
11 HANOVER SQUARE
NEW YORK, NY 10005
1-800-847-4200 1-212-363-1100
- --------------------------------------------------------------------------------
CALL TOLL-FREE FOR FUND PERFORMANCE,
TELEPHONE PURCHASES, TRANSFERS AMONG
THE BULL & BEAR FUNDS AND TO OBTAIN
INFORMATION CONCERNING YOUR ACCOUNT.
1-800-847-4200 1-212-363-1100
- --------------------------------------------------------------------------------
Printed on recycled paper LOGO
MUNICIPAL
INCOME
FUND
- --------------------------------------------------------------------------------
INVESTING FOR THE HIGHEST
POSSIBLE INCOME EXEMPT
FROM FEDERAL INCOME TAX
THAT IS CONSISTENT WITH
PRESERVATION OF PRINCIPAL
MONTHLY DIVIDENDS
NO TRANSFER CHARGES
NO REDEMPTION FEES
CHECK WRITING PRIVILEGES
- --------------------------------------------------------------------------------
PROSPECTUS
APRIL 15, 1995
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT:
REGULAR ACCOUNTS: $1,000
AUTOMATIC INVESTMENT PROGRAMS: $100
MINIMUM SUBSEQUENT INVESTMENTS: $100
BULL
& BEAR
Performance Driven (R)
