BULL & BEAR-----------------------------------------------------------------
PERFORMANCE DRIVEN(R)
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Bull & Bear Municipal Income Fund (the "Fund") at 10:00 a.m. on October 23, 1996
at the Fund's offices at 11 Hanover Square, New York, New York 10005.
At the Special Meeting, Fund shareholders will consider a proposal to
convert the Fund, the only outstanding series of Bull & Bear Municipal
Securities, Inc. (the "Company"), from an open-end, manage ment investment
company to a closed-end, management investment company. Please note that this
proposal is identical to that set forth in the Fund's proxy statement dated
August 8, 1996. The August 8, 1996 proxy statement, however, inadvertently
misdescribed the vote required to approve the proposal. The present meeting is
being convened for the purpose of obtaining the requisite affirmative vote of
the holders of a majority of the total number of shares of the Company entitled
to vote as of the record date, which has been fixed as the close of business on
September 30, 1996. The Fund and its shareholders will not bear any additional
expenses in connection with the October 23, 1996 Special Meeting. The Fund's
investment objective will remain unchanged. As a closed-end Fund, we would
expect its shares to be traded on the American Stock Exchange or
over-the-counter on Nasdaq and no longer redeemable at net asset value. As part
of the proposal to convert the Fund to closed-end format, shareholders will also
be asked to consider amending certain investment restrictions of the Fund
intended to increase the potential for higher yields and total returns. The
enclosed Proxy Statement describes the proposal in detail and should be read
carefully and retained for future reference.
The Board of Directors has unanimously approved the proposal and recommends
that shareholders vote in favor of it. The proposal is intended to provide the
Fund with greater flexibility to seek its investment objective of the highest
possible income exempt from Federal income tax that is consistent with the
preservation of principal. The Fund will have greater capacity as a closed-end
fund to invest in illiquid securities and employ leverage, which could offer the
potential to enhance the Fund's yields and total returns. Moreover, the Board
anticipates that conversion to closed-end status will permit the Fund to reduce
its operating expenses.
You are requested to give this matter your prompt attention and to sign,
date and mail the accompany ing proxy as soon as possible in the return envelope
provided for your convenience to ensure its receipt before the Special Meeting.
Very truly yours,
The Board of Directors
PLEASE VOTE NOW BY SIGNING AND RETURNING THE ENCLOSED
PROXY CARD. Otherwise, your Fund may incur needless delay to solicit
sufficient votes for the meeting.
<PAGE>
BULL & BEAR MUNICIPAL INCOME FUND
P.O. BOX 9043
SMITHTOWN, NEW YORK 11787
TOLL-FREE 1-800-847-4200
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NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS To Be Held on October
23, 1996
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To the Shareholders of
Bull & Bear Municipal Income Fund
Notice is hereby given that a Special Meeting of Shareholders of Bull &
Bear Municipal Income Fund (the "Fund") will be held at the Fund's offices at 11
Hanover Square, New York, New York 10005 on October 23, 1996 at 10:00 a.m., to
consider and vote upon the following:
To approve Charter amendments of Bull & Bear Municipal Securities, Inc.
that will result in the conversion of the Fund from open-end to
closed-end status, to delete the Fund's investment restrictions on
authority to borrow money, secure indebtedness and purchase securities
with conditions on resale, and to amend the Fund's investment
restriction on authority to issue senior securities.
Approval of this proposal would have the effect of converting the Fund from a
diversified series of a registered open-end, management investment company to a
registered closed-end, diversified management investment company.
The proposal is discussed in greater detail in the attached Proxy
Statement. No other business may come before said meeting or any adjournment
thereof.
The close of business on September 30, 1996, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting and any adjournments thereof.
By Order of the Directors
--------------------------
William J. Maynard
Secretary
October 8, 1996
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
IN ORDER TO AVOID THE ADDITIONAL DELAY OF FURTHER SOLICITATIONS, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY CARD PROMPTLY IF YOU DO NOT EXPECT TO
ATTEND THE MEETING. NO POSTAGE IS NECESSARY.
<PAGE>
BULL & BEAR MUNICIPAL INCOME FUND
--------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 23, 1996
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PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Directors of Bull & Bear Municipal Securities, Inc. (the
"Company") for use at a Special Meeting of Shareholders of Bull & Bear Municipal
Income Fund (the "Fund") to be held on October 23, 1996, at 10:00 a.m. at the
Fund's offices at 11 Hanover Square, New York, New York 10005, and at any
adjournments thereof (the "Meeting"). A notice of Special Meeting of
Shareholders and a proxy card accompany this Proxy Statement.
The business to be considered at the Meeting is:
A proposal to adopt Amended and Restated Articles of Incorporation for
the Company, attached hereto as Exhibit A, which would have the effect of
converting the Fund from a diversified series of a registered open-end,
management investment company to a registered closed-end, diversified
management investment company, and (i) to delete the current fundamental
investment restriction that prohibits the Fund from borrowing money (except
in certain circumstances), (ii) to delete the current fundamental
investment restriction that prohibits the transfer as security for
indebtedness any security owned by the Fund (except in certain
circumstances), (iii) to delete the current fundamental investment
restriction that prohibits the Fund from purchasing securities with legal
or contractual conditions on resale, and (iv) to replace the current
fundamental investment restriction that prohibits the Fund from issuing
senior securities (except reverse repurchase agreements, to the extent they
may be deemed to involve the issuance of senior securities) with a
provision that permits the Fund to issue senior securities (including
borrowing money on margin or otherwise) to the extent permitted under
applicable law.
If the proposal is approved, the Directors will determine the date of
conversion.
The Fund is currently a diversified series of an open-end, management
investment company. The Fund's investment objective is to provide its
shareholders with the highest possible income exempt from Federal income tax
that is consistent with the preservation of principal. The Fund seeks to achieve
its investment objective by investing principally in a diversified portfolio of
municipal securities. No assurances can be given that the Fund's objective will
be achieved. Skadden, Arps, Slate, Meagher & Flom, counsel to the Fund, believes
that the conversion will not be a taxable event to the Fund or its shareholders.
Application will be made to list the Fund's shares on the American Stock
Exchange (the "AMEX") under the symbol "BBM", or if such listing is not
available, to trade over-the-counter on Nasdaq with the symbol "BBMU". Although
there is no current trading market for shares of the Fund's common stock, it is
expected that "when issued" trading of such shares will commence approximately
four business days prior to the date the conversion takes place. Shares of
closed-end investment companies frequently trade at a discount to net asset
value. The Fund cannot predict whether its shares will trade at, below or above
net asset value.
The business address of the Fund is 11 Hanover Square, New York, New York
10005, its mailing address is P.O. Box 9043, Smithtown, New York 11787, and its
toll-free telephone number is 1-800-847-4200.
REQUIRED VOTE: APPROVAL OF THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE TOTAL NUMBER OF SHARES OF THE COMPANY ENTITLED
TO VOTE AS OF THE RECORD DATE.
THIS PROXY STATEMENT SETS FORTH CONCISELY CERTAIN INFORMATION ABOUT THE
FUND AND THE PROPOSAL THAT SHAREHOLDERS SHOULD KNOW BEFORE GIVING A PROXY AND IT
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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GENERAL VOTING INFORMATION
In addition to the solicitation of proxies by mail, officers and regular
employees of the Fund, Bull & Bear Advisers, Inc. (the "Investment Manager"),
affiliates of the Investment Manager, and other representatives of the Fund may
also solicit proxies by telephone, telegraph or in person. In addition, the
Investment Manager has retained Shareholder Communications Corporation to assist
in the solicitation of proxies. The costs of solicitation and the expenses
incurred in connection with preparing this Proxy Statement and its enclosures
will be paid by the Investment Manager. The Investment Manager will reimburse
brokerage firms and others for its expenses in forwarding solicitation materials
to the beneficial owners of shares.
If the enclosed proxy is properly executed and returned in time to be voted
at the Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. Unless instructions to the contrary are marked
thereon, the proxy will be voted FOR the proposal. Any shareholder who has given
a proxy has the right to revoke it at any time prior to its exercise either by
attending the Meeting and voting his or her shares in person or by submitting a
letter of revocation or a proxy to the Fund at the above address prior to the
date of the Meeting.
In the event a quorum is present at the Meeting but sufficient votes to
approve the proposed transaction are not received, the persons named as proxies
may propose one or more adjournments of such Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares present at the Meeting in person or by proxy. If a
quorum is present, the persons named as proxies will vote those proxies which
they are entitled to vote FOR such proposal in favor of such an adjournment and
will vote those proxies required to be voted for rejection of such proposal
against any such adjournment.
The close of business on September 30, 1996 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting and all adjournments thereof.
Each shareholder is entitled to one vote for each full share and an
appropriate fraction of a vote for each fractional share held on each matter to
be voted upon. On September 30, 1996, there were ________ shares of the Fund
outstanding.
To the knowledge of the management of the Fund as of September 30, 1996, no
person owns of record or beneficially 5% or more of the shares of the Fund.
This Proxy Statement is first being mailed to shareholders on or about
October 8, 1996.
PROPOSAL:
TO APPROVE CHARTER AMENDMENTS THAT WILL RESULT IN THE CONVERSION OF BULL & BEAR
MUNICIPAL INCOME FUND FROM A DIVERSIFIED SERIES OF A REGISTERED OPEN-END,
MANAGEMENT INVESTMENT COMPANY TO A REGISTERED CLOSED-END, DIVERSIFIED MANAGEMENT
INVESTMENT COMPANY, TO DELETE THE FUND'S INVESTMENT RESTRICTIONS ON AUTHORITY TO
BORROW MONEY, SECURE INDEBTEDNESS AND PURCHASE SECURITIES WITH CONDITIONS ON
RESALE, AND TO AMEND THE FUND'S INVESTMENT RESTRICTION ON AUTHORITY TO ISSUE
SENIOR SECURITIES.
BACKGROUND
The Fund commenced operations in 1984 and is presently the only series of
shares issued by the Company (see "Description of Common Stock"), an open-end
management investment company organized as a Maryland corporation in 1983. The
investment objective of the 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 seeks to achieve its objective by investing
principally in a diversified portfolio of municipal securities of varying
maturities, depending on the Investment Manager's evaluation of current and
anticipated market conditions.
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The Board of Directors has approved, subject to shareholder approval, the
conversion of the Fund from open-end to closed-end status. If the proposal is
approved and implemented, after conversion, a shareholder will be able to sell
shares at the current market price on a securities exchange or over-the-counter
market but will no longer be able to redeem shares at net asset value.
Application has been made for the Fund's shares to be listed on the AMEX with
the symbol "BBM", or if such listing is not available, to trade over-the-counter
on Nasdaq with the symbol "BBMU". The record date for conversion and the date of
conversion will be determined by the Board of Directors following shareholder
approval of the conversion.
REASONS FOR THE CONVERSION
The Board of Directors believes that the conversion will provide the Fund
with greater flexibility to seek its investment objective with lower operating
expenses.
Investment Flexibility. Open-end funds may not hold in excess of 15% of
their net assets in securities that are not readily marketable, including
restricted securities. In order to maintain a highly liquid portfolio that is
readily priced on a daily basis, the Fund has avoided investing in various
securities that the Investment Manager had otherwise found attractive. A
closed-end fund, however, may invest up to 100% of its assets in such securities
and generally values its assets only once per week. Moreover, in connection with
the conversion, the Fund's current fundamental investment restriction that
prohibit it from purchasing securities with legal or contractual conditions on
resale would be deleted. Although the Fund would not expect to invest 100% of
its assets in restricted and illiquid securities, the ability to invest a higher
proportion than 15% without the overriding need for daily liquidity experienced
in an open-end fund, in the view of the Board of Directors and the Investment
Manager, may increase the potential for higher yields and total returns and
therefore be beneficial to shareholders. Operating in the closed-end format
would give the Fund greater flexibility in pursuing these kinds of investments.
The Fund currently may not, pursuant to its fundamental investment
restrictions, (1) borrow money, except for temporary purposes and then only from
banks in amounts not exceeding 10% of the market value of its assets, except
that the Fund may enter into reverse repurchase agreements on up to an
additional 25% of its assets, provided in either case that immediately
thereafter there is an asset coverage of at least 300%, or (2) issue any class
of securities senior to any other class of securities, except to the extent
reverse repurchase agreements may be deemed to involve the issuance of senior
securities. Closed-end funds, however, have greater flexibility in borrowing and
issuing senior securities, including debt or preferred stock, so long as such
preferred securities do not exceed one-half, and such debt does not exceed
one-third, of such fund's total assets. In accordance with SEC staff guidelines,
any such debt or preferred stock may be convertible, which may permit the Fund
to obtain leverage at attractive rates. Therefore, in connection with the
conversion, the Fund's fundamental investment restriction regarding borrowing
would be deleted and its fundamental investment restriction regarding senior
securities would be amended, as follows: "[The Fund may not:] issue senior
securities (including borrowing money) except to the extent permitted by
applicable law".
Under the Fund's current fundamental investment restrictions, the Fund may
not mortgage, pledge, hypothecate or, in any other manner, transfer as security
for indebtedness any security owned by the Fund, except as may be necessary in
connection with permissible bank borrowings (as discussed above), in which event
such mortgaging, pledging, or hypothecating may not exceed 15% of the Fund's
assets, valued at market. If the Fund converts to closed-end format, its greater
flexibility in borrowing money will be facilitated by the ability to transfer
securities it owns as security for indebtedness. Therefore, in connection with
the conversion, the Fund's current fundamental investment restriction that
prohibits such transfers would be deleted.
Use of leverage by the Fund would increase the Fund's total return to
shareholders if the Fund's returns on its investments out of the proceeds of
such leverage exceed the cost of such leverage. Although in the past the Fund
has not used leverage and there can be no assurance that if employed, it will be
successful, the Board of Directors and Investment Manager believe that increased
capacity to employ leverage may potentially increase yields and total returns.
Investing in illiquid securities, including securities with legal or
contractual conditions on resale, and using leverage for investment purposes
entail certain risks. With respect to illiquid securities, including securities
with legal or contractual conditions on resale, the Fund may not be able to
dispose of a security at the desired price at the time it wishes to make such
disposition. In addition, such securities often sell at a discount from liquid
and freely tradeable securities of the same
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class or type, although they are also usually purchased at an equivalent
discount which enhances yield while the securities are held by the Fund. Such
securities may also be more difficult to price accurately although this is less
significant in a closed-end fund where shares are not purchased or sold solely
on the basis of net asset value. Leverage is a speculative investment technique
and, as such, entails two primary risks. The first risk is that the use of
leverage magnifies the impact on the common shareholders of changes in net asset
value. For example, a fund that uses leverage of one third of its total assets
will show a 1.5% increase or decline in net asset value for each 1% increase or
decline in the value of its total assets. The second risk is that if the cost of
leverage exceeds the return on the securities acquired with the proceeds of that
leverage, it will diminish rather than enhance the return to common
shareholders. These two risks would generally make the Fund's total return to
common shareholders more volatile. However, if the Fund is able to provide total
returns on its assets exceeding the costs of leverage, the use of leverage would
over the longer term enhance the Fund's yields and total returns, although there
can be no assurance that this can be achieved.
Moreover, to assist the Fund in meeting redemption requests, the Fund has
generally maintained a certain percentage of its assets in highly liquid but
lower-yielding securities. This investment strategy is considered important by
the Fund in managing redemption risk in the open-end format but would become
unnecessary if the Fund were to become closed-end. The shift to closed-end
format would enable the Fund to invest substantially all of its assets in
accordance with its investment objective, thereby potentially increasing yields
and total returns, as well as potential losses, to common shareholders of the
Fund.
By voting in favor of the conversion, shareholders will authorize the
deletions and amendments to the Fund's fundamental investment restrictions
described above. As consistent with the Fund's investment objective, the Fund
intends to utilize the additional investment flexibility afforded by these
changes after conversion to closed-end format, depending on the Investment
Manager's evaluation of current and anticipated market conditions, but there can
be no assurance that such additional flexibility will be utilized or, if
utilized, enhance the Fund's performance or materially affect its yields or
total returns. Although to some extent these changes could have been adopted by
the Fund in an open-end format, the capacity of the Fund as a closed-end fund to
invest in illiquid securities, including those with legal or contractual
conditions to resale, and employ leverage is greater.
Reduced Fund Expenses. The conversion may enable the Fund to reduce certain
operating expenses.
As a closed-end fund the Fund will save money by not having to maintain
registrations in each state for sales of its shares, by terminating its
shareholder administration agreement and by terminating its plan of distribution
adopted pursuant to Rule 12b-1 under the 1940 Act. These cost savings will be
partially offset by fees associated with the requirement of annual shareholder
meetings and listing of the Fund's shares on the AMEX or Nasdaq, although the
Fund's expenses as a closed-end fund are expected to remain the same or
decrease.
The impact of the elimination or reduction of those expenses of the Fund
which are not assessed as a percentage of net assets, including the shareholder
administration and state registration fees described above, and other such costs
such as registration under the Securities Act of 1933, as amended (the "1933
Act"), transfer agency and net asset value calculation accounting, depends
greatly upon the total net assets of the Fund. Accordingly, since it is
impossible to predict whether and to what extent net redemptions of shares of
the Fund may occur prior to its conversion to closed-end status, the expense
ratio after such conversion cannot be stated with certainty. If net assets
decrease, operating expense ratios will increase. Moreover, although to the
extent the Fund employs leverage its expenses will increase, leverage would only
be employed with the intention to at least commensurately increase the Fund's
gross income and net income and thereby increase the Fund's yields and total
returns.
At meetings on June 13, 1996 and June 26, 1996, the Board considered the
Fund's investment objective and policies in view of its recent operating
results, total net assets, prospects, market conditions, and other factors and
alternatives to conversion of the Fund and changes to its investment
restrictions, together with features and characteristics of closed-end funds
generally and pro forma and other information pertaining to the Fund, including
an assessment of risks, costs, and expenses pertaining to the conversion. After
consideration of these and other relevant matters, the Board unanimously
approved the proposal, advised the Amended and Restated Articles of
Incorporation, and recommended that shareholders of the Fund vote in favor of
the proposal. The Board believes that the conversion is in the best interests of
the shareholders and the benefits thereof outweigh its costs. For a description
of the costs and expenses relating to the conversion, see "The Conversion
Expenses" below.
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MANNER OF EFFECTING THE CONVERSION
Upon shareholder approval of the conversion, the Fund will mail
shareholders a notice of its intent to complete the conversion on a specified
date not less than 15 days after the date of such notice. Shareholders will
continue to be able to redeem their shares at net asset value until the
conversion occurs. Thereupon, the Company will file its Amended and Restated
Articles of Incorporation with the Secretary of State of Maryland, have the
Fund's registration of common shares with the SEC under the Securities and
Exchange Act of 1934 declared effective, file an amended registration statement
under the 1940 Act changing the Fund's status from open-end to closed-end and,
if approved for listing on the AMEX or over-the-counter on Nasdaq, commence
"when issued" trading approximately four days prior to the actual conversion.
Shareholders who have elected to reinvest dividends and distributions would
automatically be included in the Fund's dividend reinvestment plan (see
"Dividend Reinvestment Plan"). Shareholders will not be required to turn in
their share certificates or take any other action to effectuate the conversion.
Shareholders will be able to redeem shares up to and including the day prior to
the date of conversion.
THE CONVERSION EXPENSES
The costs to be incurred by the Fund to convert to closed-end status are
estimated to be approximately $60,000. See also "The Reasons for the Conversion
- - Reduced Fund Expenses" herein.
MARKET TRADING; DISCOUNT TO NET ASSET VALUE
Open-end funds are redeemable at any time at net asset value and cannot be
sold at a premium or discount in the marketplace. Closed-end funds, on the other
hand, are bought and sold in the securities markets and may trade at either a
premium to or discount from net asset value. Shares of closed-end funds
frequently trade at a discount from net asset value, which is a risk separate
and apart from the risk that the net asset value of the Fund's shares will
decrease. Prior to the conversion, there will have been no market for the Fund's
shares and no history of Fund investment performance as a closed-end fund,
increasing the likelihood of the risk that its shares will trade at a discount.
In addition, compared to other closed-end funds with similar investment
objective and policies, the Fund's relatively smaller amount of total net assets
and shares outstanding also increases the risk of trading at a discount.
Shareholders should also bear in mind that they will incur brokerage or other
transaction costs if they sell shares of closed-end funds in the securities
markets, whereas the transaction costs of redemptions of open-end funds are
generally absorbed by the fund. The Investment Manager, however, has arranged
with its affiliate, Bull & Bear Securities, Inc., that for two years after the
conversion, any shares in the Fund held by the Fund's transfer agent in its book
entry account may be sold at market value without commission if sold through
Bull & Bear Securities, Inc.
INVESTMENT MANAGEMENT SERVICES
INVESTMENT MANAGER
The Fund's Investment Manager is Bull & Bear Advisers, Inc., 11 Hanover
Square, New York, New York 10005. The Investment Manager, a registered
investment adviser, is a wholly-owned subsidiary of the Bull & Bear Group, Inc.
("Group"). Group is a publicly-owned company whose shares are traded on Nasdaq.
Bassett S. Winmill may be deemed a controlling person, as that term is defined
by the rules and regulations of the 1940 Act, of Group and the Investment
Manager on the basis of his ownership of 100% of Group's voting stock. The
investment companies (which includes the Fund) managed by the Investment Manager
and its affiliates had net assets in excess of $430 million as of September 27,
1996.
INVESTMENT MANAGEMENT AGREEMENT
Under the terms of the current Investment Management Agreement, the
management fee is calculated based upon the average daily net assets of the
Fund; upon the Fund's conversion to closed-end format, at which time the Fund's
net assets will be calculated weekly, the Investment Management Agreement would
be amended to provide that the fee be calculated based upon the average weekly
net assets of the Fund. Accordingly, by voting in favor of the proposal,
shareholders will approve this conforming amendment to the current Investment
Management Agreement. In all other material respects, the terms of the
Investment Management Agreement would remain the same.
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DESCRIPTION OF COMMON STOCK
COMMON STOCK
Bull & Bear Municipal Income Fund is currently the only series of Bull &
Bear Municipal Securities, Inc., which was incorporated under the laws of the
State of Maryland in 1983. The Company is authorized to issue one billion shares
of stock, par value $.01 per share (the "Common Stock") of which 50 million
shares have been designated Bull & Bear Municipal Income Fund. Each share has
equal voting, dividend, distribution and liquidation rights. The shares
outstanding are fully paid and nonassessable, are redeemable at net asset value
per share next determined after the Fund receives a redemption request and have
no preemptive, conversion or cumulative voting rights. Upon conversion of the
Fund to closed-end status, shares of Common Stock will no longer be redeemable
at net asset value, and will continue not to have preemptive, conversion or
cumulative voting rights.
LISTING OF SHARES
Application will be made to list the Fund's shares on the AMEX upon notice
of issuance thereof with the symbol "BBM", or if such listing is not available,
to trade over-the-counter on Nasdaq with the symbol "BBMU". Although there is no
current trading market for shares of the Fund's Common Stock, it is expected
that "when issued" trading of such shares will commence approximately four
business days prior to the date the conversion takes place.
REPURCHASE OF SHARES
In the event the conversion is completed, the Fund will be a closed-end,
diversified management investment company and as such shareholders will not have
the right to redeem their shares directly from the Fund. As a closed-end fund,
however, the Fund will be able to repurchase its shares from time to time as and
when it deems such a repurchase advisable. Pursuant to the 1940 Act, the Fund
may repurchase its shares on a securities exchange (provided that the Fund has
informed its shareholders within the preceding six months of its intention to
repurchase such shares) or as otherwise permitted in accordance with Rule 23c-1
under the 1940 Act. Under that Rule, certain conditions must be met regarding,
among other things, distribution of net income from the preceding fiscal year,
identity of the seller, price paid, brokerage commissions, prior notice to
shareholders of an intention to purchase shares and purchasing in a manner and
on a basis which does not discriminate unfairly against the other shareholders
through their interest in the Fund.
Shares repurchased by the Fund will constitute authorized and unissued
shares of the Fund available for reissuance. The Fund may incur debt to finance
share repurchase transactions. Any gain in the value of the investments of the
Fund during the term of the borrowing that exceeds the interest paid on the
amount borrowed would cause the net asset value of its shares to increase more
rapidly than in the absence of borrowing. Conversely, any decline in the value
of the investments of the Fund would cause the net asset value of its shares to
decrease more rapidly than in the absence of borrowing. Borrowing money thus
creates an opportunity for greater capital gain at the risk of greater exposure
to capital loss.
When the Fund repurchases its shares for a price below their net asset
value, the net asset value of those shares that remain outstanding will be
enhanced, but this does not necessarily mean that the market price of those
outstanding shares will be affected, either positively or negatively. Further,
interest on borrowings to finance share repurchase transactions will reduce the
net income of the Fund except to the extent the gross income attributable to
such shares exceeds the costs of such borrowings.
Although the Fund does not currently intend to repurchase shares, no
assurance can be given that the Fund will decide to repurchase shares in the
future, or, if undertaken, that such repurchases will reduce any market discount
that may develop. While the Fund does not currently intend to repurchase its
shares, its officers and directors, and the Investment Manager and its
affiliates may do so from time to time.
DIVIDEND REINVESTMENT PLAN
The Board has adopted, effective upon conversion, a Dividend Reinvestment
Plan (the "Plan"). Under the Plan, distributions will be reinvested in
additional shares automatically, unless such shareholders elect to receive cash.
Each dividend and capital gains distribution, if any, declared by the Fund on
outstanding shares, 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,
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will be paid on the payment date fixed by the Board of Directors in that number
of additional shares of the Fund equal to (a) the amount of such dividend
divided by the Fund's net asset value per share if the average closing market
price on the five trading days prior to the date the shares trade ex-dividend
(the "Market Price") is at or above such net asset value per share on the record
date for such distribution and (b) the amount of such dividend divided by the
Market Price if the Market Price is less than such net asset value per share on
the record date for such distribution. Upon a shareholder's request to receive a
certificate for his shares, a certificate will be issued for such shares in
whole share amounts and any fractional share amounts will be paid in cash. There
are no sales or other charges in connection with the reinvestment of dividends
and capital gains distributions. There is no fixed dividend rate and there can
be no assurance that the Fund will pay any dividends or realize any capital
gains.
CERTAIN PROVISIONS OF THE PROPOSED CHARTER OF THE FUND
In connection with the proposed conversion of the Fund to a closed-end,
registered investment company, the Board of Directors proposes the adoption of
the Amended and Restated Articles of Incorporation of the Company (the "Proposed
Charter"), attached hereto as Exhibit A. The major differences between the
Proposed Charter and the current Articles of Incorporation are discussed below.
The adoption of the Proposed Charter would result in conversion of the Fund
to a closed-end investment company. Under the Proposed Charter, shareholders
would not have the right to acquire or redeem shares at net asset value directly
from the Fund; instead, shares would be traded on the AMEX or Nasdaq.
The net asset value of each share of the Company's capital stock would be
the current net asset value per share as determined in accordance with
procedures adopted from time to time by the Board of Directors which comply with
the 1940 Act. In the event of the liquidation or dissolution of the Fund, the
holders of the Common Stock would be entitled to receive all the net assets of
the Company not attributable to other classes of stock through any preference.
On each matter submitted to a vote of shareholders, each holder of a share
of capital stock of the Company would be entitled to one vote for each share
standing in such holder's name on the books of the Company. The Proposed Charter
provides that the Board of Directors may classify or reclassify any unissued
capital stock from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of the stock.
Under the Proposed Charter, the Company would be entitled to purchase
shares of its capital stock, to the extent that it may lawfully effect such
purchase under the 1940 Act and the Maryland General Corporation Law, upon such
terms and conditions and for such consideration as the Board of Directors shall
deem advisable. Currently, the Company is obligated to repurchase its shares at
net asset value upon request.
Each person who at any time is or was a director or an officer of the
Company shall be indemnified by the Company to the fullest extent permitted by
the Maryland General Corporation Law as it may be amended or interpreted from
time to time, including the advancing of expenses, subject to any limitations
imposed by the 1940 Act and the rules and regulations promulgated thereunder.
Furthermore, to the fullest extent permitted by the Maryland General Corporation
Law, as it may be amended or interpreted from time to time, subject to the
limitations imposed by the 1940 Act and the rules and regulations promulgated
thereunder, no director or officer of the Company would be personally liable to
the Company or its shareholders. No amendment of the Proposed Charter or repeal
of any of its provisions would be permitted to limit or eliminate any of the
benefits provided to any person who at any time is or was a director or officer
of the Fund in respect of any act or omission that occurred prior to such
amendment or repeal.
The Board of Directors would have the exclusive authority to make, alter or
repeal from time to time any of the ByLaws of the Company except any particular
By-Law which is specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of the 1940 Act and the rules and
regulations promulgated thereunder.
As described in the following paragraphs, certain provisions of the
Proposed Charter could have the effect of limiting (i) the ability of other
entities or persons to acquire control of the Fund, (ii) the Fund's freedom to
engage in certain
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transactions, or (iii) the ability of the Board of Directors or shareholders to
amend the Proposed Charter or By-Laws or effectuate changes in the Fund's
management.
Except as otherwise provided in the Proposed Charter and notwithstanding
any other provision of the Maryland General Corporation Law to the contrary, any
action submitted to a vote by stockholders requires the affirmative vote of at
least 80% of the outstanding shares of all classes of voting stock, voting
together, in person or by proxy at a meeting at which a quorum is present,
unless such action is approved by the vote of a majority of the Board of
Directors, in which case such action requires (A) if applicable, the proportion
of votes required by the 1940 Act, or (B) the lesser of (1) a majority of all
the votes cast at a meeting at which a quorum is present in person or by proxy
with the shares of all classes of voting stock voting together, or (2) if such
action may be taken or authorized by a lesser proportion of votes under
applicable law, such lesser proportion. In the absence of action by the
directors to remove the foregoing 80% requirement, such requirement would have
the effect of making it very difficult for stockholders to elect directors or
modify the composition of the Board of Directors.
The Company elects not to be governed by any provision of Section 3-602 of
Subtitle 6 of the Maryland General Corporation Law.
The proposed Charter provides that any business combination (including any
merger, consolidation, or share exchange with any interested shareholder or any
affiliate thereof) requires the affirmative vote of the holders of at least 80%
of the votes entitled to be cast by holders of voting stock, unless approved by
the vote of at least a majority of the Board of Directors, in which case such
business combination requires the affirmative vote of the holders of at least a
majority of the votes entitled to be cast by such holders.
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
authority of the direction of the Board of Directors, as to the amount of
assets, obligations or liabilities of the Company, as to the amount of net
income of the Company from dividends and interest for any period or amounts at
any time legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created, shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged), as
to the price of any security owned by the Company or as to any other matters
relating to the issuance, sale, redemption or other acquisition or disposition
of securities or shares of capital stock of the Company, and any reasonable
determination made in good faith by the Board of Directors would be final and
conclusive, and would be binding upon the Company and all holders of its capital
stock past, present and future, and shares of capital stock of the Company are
issued and sold on the condition and understanding, evidenced by the purchase of
shares of capital stock or acceptance of share certificates, that any and all
such determinations shall be binding. No provision of the Proposed Charter would
be effective to (a) require a waiver of compliance with any provision of the
1940 Act, or of any valid rule, regulation or order of the SEC thereunder or (b)
protect or purport to protect any director or officer of the Company against any
liability to the Company or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
The private property of shareholders would not be subject to the payment of
corporate debts to any extent whatsoever.
The affirmative vote of holders of at least 80% of the votes entitled to be
cast by holders of voting stock is necessary to authorize the conversion of the
Fund from a closed-end to an open-end investment company, unless approved by the
vote of at least a majority of the Board of Directors, in which case such
conversion requires the affirmative vote of the holders of at least a majority
of the votes entitled to be cast by such holders.
The Company would reserve the right to amend, alter, change or repeal any
provision contained in the Proposed Charter, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders in the
Proposed Charter would be granted subject to this reservation. Notwithstanding
any other provisions of the Proposed Charter or ByLaws (and notwithstanding the
fact that a lesser percentage may be specified by law or by the Proposed Charter
or ByLaws), the amendment or repeal of Section 10 of Article V, Sections 3, 4
and 5 of Article VI, Sections 1 and 2 of Article VIII, Article X, Article XI,
Article XII and Article XIII of the proposed Charter would require the
affirmative vote of the holders of at least 80% of the votes entitled to be cast
by holders of voting stock, unless approved by the vote of at least a majority
of the Board of Directors, in which case such amendment or repeal would require
the affirmative vote of the
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holders of at least a majority of the votes entitled to be cast by such holders.
These sections involve the applicability of the Proposed Charter and By-Laws to
shareholders, number and classification of directors, indemnification of
officers and directors, actions taken by concurrence of a majority vote of
shareholders, limited liability of shareholders, unlimited existence, conversion
to open-end status and amending the foregoing provisions.
The provisions of the Proposed Charter would provide for the Board of
Directors to be divided into five classes, each having a term of five years
(except, to ensure that the term of a class of directors expires each year, the
first class of directors will serve an initial one-year term and five-year terms
thereafter, the second class of directors will serve an initial two-year term
and five-year terms thereafter, the third class of directors will serve an
initial three-year term and five-year terms thereafter, and the fourth class of
directors will serve an initial four-year term and five-year terms thereafter).
Each year the term of one class of directors will expire. Accordingly, only
those directors in one class may be changed in any one year, and it would
require three years to change a majority of the Board of Directors. Such system
of electing directors may have the effect of maintaining continuity of
management and, thus, make it more difficult for shareholders to change the
majority of directors.
The provisions of the governing documents described above could have the
effect of depriving shareholders in the Fund of opportunities to sell their
shares at a premium over prevailing market prices, by discouraging a third party
from seeking to obtain control of the Fund in a tender offer or similar
transaction. The overall effect of these provisions is to render more difficult
the accomplishment of a merger or the assumption of control by a third party
unless approved by the Board of Directors.
TAX MATTERS
SUBCHAPTER M AND OTHER TAX MATTERS
The Fund has qualified and intends to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Fund qualifies as a regulated investment company
and complies with certain distribution requirements, the Fund will not be
subject to Federal income tax on that part of its net investment income and
realized capital gains which it distributes to its shareholders.
To qualify as a regulated investment company, the Fund must meet certain
relatively complex tests. The loss of status as a regulated investment company
would result in the Fund being subject to Federal income tax on all its taxable
income and gains without regard to dividends and distributions paid to
shareholders.
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 gain, if any, when
designated as such, are taxable to shareholders as long term capital gains,
whether received in cash or additional 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 private activity bonds (including, in the case of a
regulated investment company receiving interest on such bonds, a proportionate
part of the exempt-interest dividends paid by that regulated investment company)
is an item of tax preference for purposes of the alternative minimum tax.
Exempt-interest dividends received by a corporate shareholder may be subject to
the alternative minimum tax in any event. Fund dividends may be subject to taxes
of states and other taxing authorities.
In any year, if the Fund has excess net realized long-term capital gains
over its net realized short-term capital losses, the Fund reserves authority not
to distribute such excess. If such excess is not distributed, a shareholder must
include in taxable income as long-term capital gain his share thereof. However,
the Fund will pay the taxes imposed on any such undistributed gain and the
shareholder will receive a credit or refund for taxes on his share of such
excess. If, for any year, the total distributions exceed accumulated
undistributed net investment income and net realized capital gains, the excess
will generally be treated as a tax-free return of capital (up to the amount of
the shareholder's tax basis in his shares). The amount treated as a tax-free
return of capital will reduce the shareholder's adjusted basis in his shares,
thereby increasing his potential loss on the sale of his shares.
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The Fund will be required to make back-up withholding in an amount equal to
31% of a shareholder's dividend or capital gain distribution or the proceeds of
a redemption unless such shareholder has furnished the Fund with a taxpayer
identification number (a social security number in the case of an individual)
and certifies that the number is correct and that such shareholder has not been
notified by the Internal Revenue Service that the shareholder is subject to
back-up withhold ing.
Skadden, Arps, Slate, Meagher & Flom, legal counsel for the Fund, is of the
opinion, for U.S. Federal income tax purposes, that the conversion will not be a
taxable event to the Fund or any shareholder.
The foregoing is a general and abbreviated summary of the provisions of the
Code applicable to a shareholder's investment in the Fund. Dividends and
distributions declared by the Fund may also be subject to state and local taxes.
Shareholders are urged to consult their tax advisers concerning the Federal,
state and local tax consequences of their particular investment in the Fund.
THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, HAS
UNANIMOUSLY APPROVED THE PROPOSAL AND RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE PROPOSAL.
REPORTS TO SHAREHOLDERS
The Fund sends unaudited semi-annual and audited annual reports to its
shareholders, including a list of investments held. The Fund will furnish,
without charge, a copy of the Annual Report for the fiscal year ended December
31, 1995 upon request to the Fund at 11 Hanover Square, New York, New York
10005, toll-free telephone 1-800-847-4200.
ADDITIONAL INFORMATION
BROKER NON-VOTES AND ABSTENTIONS
If a proxy which is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power), is unmarked or marked with an abstention
(collectively, "abstentions"), the shares represented thereby will be considered
to be present at the meeting for purposes of determining the existence of a
quorum for the transaction of business. Under Maryland law, abstentions do not
constitute a vote "for" or "against" a matter and will be disregarded in
determining the "votes cast" on an issue.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next annual
meeting (to be held in 1997) must be received by the Company on or before March
27, 1997 (or 30 days before the annual meeting if such meeting is held after
April 28, 1997) in order to be included in the proxy statement and proxy for
that meeting.
ANNUAL MEETING REQUIREMENTS
If the Fund becomes closed-end and lists its shares on the AMEX or the
Nasdaq National Market System, it will be required to hold annual shareholder
meetings.
OTHER MATTERS TO COME BEFORE THE MEETING
The Directors do not intend to present any other business at the Meeting,
nor are they aware that any shareholder intends to do so. If, however, any other
matters are properly brought before the Meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their judgment.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BULL & BEAR MUNICIPAL INCOME FUND, INC.
* * * * *
ARTICLE I
1. The name and address of each incorporator of the Corporation are as follows:
Perez C. Ehrich
11 Pine Ridge Road
Greenwich, Connecticut 06830
John T. Landry, Jr.
438 Scarsdale Road
Yonkers, New York 10707
2. Each of said incorporators is over eighteen years of age.
3. Said incorporators are forming a corporation under the general laws of the
State of Maryland.
ARTICLE II
NAME
The name of the corporation is Bull & Bear Municipal Income Fund, Inc. (the
"Corporation").
ARTICLE III
PURPOSES AND POWERS
The purpose for which the Corporation is formed is to exercise
and enjoy all of the general powers, rights and privileges granted to, or
conferred upon, corporations by the Maryland General Corporation Law now or
hereafter in force.
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ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the Corporation in the
State of Maryland is 11 East Chase Street, Baltimore, Maryland 21202. The name
of the resident agent of the Corporation in the State of Maryland is United
States Corporation Company, a corporation of the State of Maryland, and the
address of the resident agent is 11 East Chase Street, Baltimore, Maryland
21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is One Billion
(1,000,000,000) shares, all of which shall have a par value of ($.01) per share
and an aggregate par value of Ten Million Dollars ($10,000,000).
(2) (a) The Board of Directors of the Corporation is
authorized to classify or to reclassify, from time to time, any unissued shares
of stock of the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms and
conditions or rights to require redemption of the stock.
(b) Without limiting the generality of the foregoing, the dividends and
distributions or other payments with respect to the stock of the Corporation,
and with respect to each class that hereafter may be created, shall be in such
amount as may be declared from time to time by the Board of Directors, and such
dividends and distributions may vary from class to class to such extent and for
such purposes as the Board of Directors may deem appropriate, including, but not
limited to, the purpose of complying with requirements of regulatory or
legislative authorities.
(c) Until such time as the Board of Directors shall provide otherwise
pursuant to the authority granted in this section (2), all the authorized shares
of the Corporation are designated as Common Stock. Shares of the Common Stock
and the holders thereof, and shares of any class and the holders thereof, shall
be subject to the following provisions, provided, however, that if no shares of
any class other than Common Stock are outstanding, the shares of the Common
Stock and the holders thereof shall nevertheless be subject to the following
provisions except to the extent that such provisions are by their terms
applicable only when shares of two or more classes are outstanding.
(3) The net asset value of each share of the Corporation's
capital stock issued, sold or purchased at net asset value shall be the current
net asset value per share as determined in accordance with procedures adopted
from time to time by the Board of Directors which comply with the Investment
Company Act of 1940, as amended (the "1940 Act").
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<PAGE>
(4) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors, acting in its sole discretion, with
respect to such class.
(5) In the event of the liquidation or dissolution of the
Corporation, the holders of the Common Stock of the Corporation's stock shall be
entitled to receive all the assets of the Corporation not attributable to other
classes of stock through any preference. The assets so distributable to the
stockholders shall be distributed among such stockholders in proportion to the
number of shares of that class held by them and recorded on the books of the
Corporation.
(6) Unless otherwise expressly provided in these Amended and
Restated Articles of Incorporation, including any Articles Supplementary
creating any additional class of capital stock, on each matter submitted to a
vote of stockholders, each holder of a share of capital stock of the Corporation
shall be entitled to one vote for each share outstanding in such holder's name
on the books of the Corporation, irrespective of the class thereof, and all
shares of all classes of capital stock shall vote together as a single class;
provided, however, that as to any matter with respect to which a separate vote
of any class or series is required by applicable law, such requirement as to a
separate vote by that class or series shall apply in lieu of a vote of all
classes voting together as a single class as described above.
(7) All shares purchased by the Corporation shall constitute
authorized but unissued shares and the number of the authorized shares of stock
of the Corporation shall not be reduced by the number of any shares purchased by
it. Unless and until their classification is changed in accordance with section
(2) of this Article V, all shares of capital stock so purchased shall continue
to belong to the same class to which they belonged at the time of their
purchase.
(8) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of capital stock having proportionately to the
respective fractions represented thereby all the rights of whole shares of the
same class, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the Corporation, but excluding the right to receive a stock
certifi cate representing fractional shares.
(9) [Reserved.]
(10) All persons who shall acquire capital stock or other
securities of the Corporation shall acquire the same subject to the provisions
of these Amended and Restated Articles of Incorporation and the Amended and
Restated By-Laws of the Corporation, as each may be amended from time to time.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE DIRECTORS AND STOCKHOLDERS
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(1) The number of directors of the Corporation shall initially
be six (6), which number may be increased or decreased by or pursuant to the
Amended and Restated By-Laws of the Corporation but shall never be less than
three nor more than fifteen. The names of the persons who shall act as directors
until the initial annual meeting and until their successors are duly elected and
qualify are:
Bassett S. Winmill
Robert D. Anderson
Bruce B. Huber
James E. Hunt
Frederick A. Parker
John B. Russell
Beginning with the initial annual meeting, the directors shall
be divided into five classes, designated Class I, Class II, Class III, Class IV
and Class V. Prior to any change in the number of directors, Classes I-IV shall
consist of one director each and Class V shall consist of two directors. At the
initial annual meeting of stockholders, the Class I director shall be elected
for an initial term of one year, Class II director for an initial term of two
years, Class III director for an initial term of three years, Class IV director
for an initial term of four years and Class V directors for an initial term of
five years. Upon the expiration of the initial term of each class, such
succeeding class of directors shall be elected for a five-year term. A director
elected at an annual meeting shall hold office until the annual meeting for the
year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes, as of the
annual meeting of stockholders next succeeding any such change, so as to
maintain a number of directors in each class as nearly equal as possible. In no
case shall a decrease in the number of directors shorten the term of any
incumbent director. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the entire
Board of Directors, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the directors
then in office, whether or not sufficient to constitute a quorum, or by a sole
remaining director; provided, however, that if the stockholders of any class of
the Corporation's capital stock are entitled separately to elect one or more
directors, a majority of the remaining directors elected by that class or the
sole remaining director elected by that class may fill any vacancy among the
number of directors elected by that class. A director elected by the Board of
Directors to fill any vacancy in the Board of Directors shall serve until the
next annual meeting of stockholders and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. At any annual meeting of stockholders,
any director elected to fill any vacancy in the Board of Directors that has
arisen since the preceding annual meeting of stockholders (whether or not any
such vacancy has been filled by election of a new director by the Board of
Directors) shall hold office for a term which coincides with the remaining term
of the class to which such directorship was previously assigned, if such vacancy
arose other than by an increase in the number of directors, and until his
successor shall be elected and shall qualify. In the event such vacancy arose
due to an increase in the number of directors, any director so elected to fill
such vacancy at an annual meeting shall hold office for a term which coincides
with that of the class to which such directorship has been apportioned as
heretofore provided, and until his successor shall be
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<PAGE>
elected and shall qualify. A director may be removed for cause only, and not
without cause, and only by action taken by the holders of at least eighty
percent (80%) of the outstanding shares of all classes of voting stock then
entitled to vote in an election of such director.
(2) The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such limitations as may be set forth
in these Amended and Restated Articles of Incorporation or in the Amended and
Restated By-Laws of the Corporation or applicable law.
(3) (a) To the maximum extent permitted by applicable law, as
currently in effect or as may hereafter be amended:
(i) no director or officer of the Corporation shall be liable to the
Corporation or its shareholders for monetary damages; and
(ii) the Corporation shall indemnify and advance expenses to its present
and past directors, officers, employees and agents, and persons who are serving
or have served at the request of the Corporation as a director, officer,
employee or agent in similar capacities for other entities.
(b) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability.
(c) Any repeal or modification of this Section (3) of this Article VI by
the share holders of the Corporation, or adoption or modification of any other
provision of the Amended and Restated Articles of Incorporation or Amended and
Restated By-Laws inconsistent with this Section, shall be prospective only, to
the extent that such repeal or modification would, if applied retrospectively,
adversely affect any limitation on the liability of any director or officer of
the Corporation or indemnification and advance of expenses available to any
person covered by these provisions with respect to any act or omission which
occurred prior to such repeal, modification or adoption.
(4) The Board of Directors of the Corporation shall have the
exclusive authority to make, alter or repeal from time to time any of the
Amended and Restated By-Laws of the Corporation except any particular By-Law
which is specified as not subject to alteration or repeal by the Board of
Directors.
(5) [Reserved.]
ARTICLE VII
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DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of his
holding shares of capital stock have any preemptive or preferential right to
purchase or subscribe to any shares of capital stock of the Corporation, now or
hereafter authorized, or any notes, debentures, bonds or other securities
convertible into shares of capital stock, now or hereafter to be authorized,
whether or not the issuance of any such shares of capital stock, or notes,
debentures, bonds or other securities would adversely affect the dividend or
voting rights of such stockholder; and the Board of Directors may issue shares
of any class of capital stock of the Corporation, or any notes, debentures,
bonds, or other securities convertible into shares of any class of capital stock
of the Corporation, either, whole or in part, to the existing stockholders.
ARTICLE VIII
CERTAIN VOTES OF STOCKHOLDERS
(1) (a) Except as otherwise provided in these Amended and
Restated Articles of Incorporation and notwithstanding any other provision of
the Maryland General Corporation Law to the contrary, any action submitted to a
vote by stockholders requires the affirmative vote of at least eighty percent
(80%) of the outstanding shares of all classes of voting stock, voting together,
in person or by proxy at a meeting at which a quorum is present, unless such
action is approved by the vote of a majority of the Board of Directors, in which
case such action requires (A) if applicable, the proportion of votes required by
the 1940 Act, or (B) the lesser of (1) a majority of all the votes cast at a
meeting at which a quorum is present in person or by proxy with the shares of
all classes of voting stock voting together, or (2) if such action may be taken
or authorized by a lesser proportion of votes under applicable law, such lesser
proportion.
(b) The Corporation elects not to be governed by any provision of Section
3-602 of Subtitle 6 of the Maryland General Corporation Law.
(2) (a) Except as otherwise provided in paragraph (b) of this
Section (2) of this Article VIII, the affirmative votes of at least eighty
percent (80%) of the outstanding shares of all classes of voting stock, voting
together, in person or by proxy at a meeting at which a quorum is present, other
than voting stock held by any interested shareholder or any affiliate thereof,
shall be necessary to authorize any of the following actions:
(i) The merger or consolidation or share exchange of
the Corporation with or into any other person or company (including,
without limitation, a partnership, corporation, joint venture, business
trust, common law trust or any other business organization);
(ii) the issuance or transfer by the Corporation (in
one or a series of transactions in any 12-month period) of any
securities of the Corporation to any other person or entity for cash,
securities or other property (or combination thereof) having an
aggregate fair market value of $1,000,000 or more, excluding (A) sales
of any securities of the Corporation in connection with
6
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a public offering thereof, (B) issuance of securities of the
Corporation pursuant to a dividend reinvestment plan adopted by the
Corporation and (C) issuances of securities of the Corporation upon the
exercise of any stock subscription rights distributed by the
Corporation;
(iii) a sale, lease, exchange, mortgage, pledge,
transfer or other disposition by the Corporation (in one or a series of
transactions in any 12-month period) to or with any person of any
assets of the Corporation having an aggregate fair market value of
$1,000,000 or more, except for transactions in securities effected by
the Corporation in the ordinary course of its business; or
(iv) any proposal as to the voluntary liquidation or
dissolution of the Corporation or any amendment to the Corporation's
Amended and Restated Articles of Incorporation to termi nate its
existence.
(b) Notwithstanding paragraph (a) of this Section (2), the actions
enumerated in such paragraph will be authorized if approved by a vote of at
least (i) a majority of the members of the Board of Directors of the Corporation
and (ii) a majority of the number of votes entitled to be cast thereon.
ARTICLE IX
DETERMINATION BINDING
Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practice by or
pursuant to the authority of the direction of the Board of Directors, as to the
amount of assets, obligations or liabilities of the Corporation, as to the
amount of net income of the Corporation from dividends and interest for any
period or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created, shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security or other instrument or asset owned
by the Corporation or as to any matters relating to the issuance, sale,
redemption or other acquisition or disposition of securities or shares of
capital stock of the Corporation, and any reasonable determination made in good
faith by the Board of Directors shall be final and conclusive, and shall be
binding upon the Corporation and all holders of its capital stock, past, present
and future, and shares of capital stock of the Corporation are issued and sold
on the condition and understanding, evidenced by the purchase of shares of
capital stock or acceptance of share certificates or other evidence thereof,
that any and all such determinations shall be binding as aforesaid. No provision
of these Amended and Restated Articles of Incorporation shall be effective to
(a) require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or (b) protect or purport to
protect any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise be subject by
reason of willful misfea sance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
7
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ARTICLE X
PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to
the payment of corporate debts to any extent whatsoever.
ARTICLE XI
UNLIMITED TERM OF EXISTENCE
The Corporation shall have an unlimited period of existence.
ARTICLE XII
CONVERSION TO OPEN-END COMPANY
Notwithstanding any other provisions of these Amended and
Restated Articles of Incorporation or the Amended and Restated By-Laws of the
Corporation, the approval, adoption or authorization of any amendment to these
Amended and Restated Articles of Incorporation that makes the Common Stock or
any other class of capital stock a "redeemable security" as that term is defined
in the 1940 Act shall require the affirmative vote of the holders of at least
eighty percent (80%) of the outstanding shares of all classes of voting stock,
voting together, in person or by proxy at a meeting at which a quorum is
present, unless approved by at least a majority of the Directors, in which case
such amendment or repeal would require the affirmative vote of the holders of a
majority of the number of votes entitled to be cast thereon.
The Corporation shall notify the holders of all capital stock
of the approval, in accordance with the preceding paragraph of this Article XII,
of any amendment to these Amended and Restated Articles of Incorporation that
makes the Common Stock or any other class of capital stock a "redeemable
security" (as that term is defined in the 1940 Act) no later than thirty (30)
days prior to the date of filing of such amendment with the Department of
Assessments and Taxation (or any successor agency) of the State of Maryland;
such amendment may not be so filed, however, until the later of (a) ninety (90)
days following the date of approval of such amendment by the holders of capital
stock in accordance with the preceding paragraph of this Article XII and (b) the
next January 1 or July 1, whichever is sooner, following the date of such
approval by holders of capital stock.
8
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ARTICLE XIII
AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Amended and Restated Articles of
Incorporation, in the manner now or hereafter pre scribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding any other provisions of these Amended and Restated
Articles of Incorporation or the Amended and Restated By-Laws of the Corporation
(and notwithstanding the fact that a lesser percentage may be specified by law,
these Amended and Restated Articles of Incorporation or the Amended and Restated
By-Laws of the Corporation), the amendment or repeal of Section (10) of Article
V, Section (1), Section (3), Section (4) or Section (5) of Article VI, Section
(1) and Section (2) of Article VIII, Article X, Article XI, Article XII or this
Article XIII of these Amended and Restated Articles of Incorporation shall
require the affirmative vote of the holders of at least eighty percent (80%) of
the outstanding shares of all classes of voting stock, voting together, in
person or by proxy at a meeting at which a quorum is present, unless approved by
at least a majority of the Directors, in which case such amendment or repeal
would require the affirmative vote of the holders of a majority of the number of
votes entitled to be cast thereon.
ARTICLE XIV
The name "Bull & Bear" included in the name of the Corporation
shall be used pursuant to a royalty-free nonexclusive license from Bull & Bear
Group, Inc. or a subsidiary of Bull & Bear Group, Inc. The license may be
withdrawn by Bull & Bear Group, Inc. or its subsidiary at any time in their sole
discretion, in which case the Corporation shall have no further right to use the
name "Bull & Bear" in its corporate name or otherwise and the Corporation, the
holders of its capital stock and its officers and directors, shall promptly take
whatever action may be necessary to change its name accordingly.
[Signature omitted]
9
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BULL & BEAR MUNICIPAL INCOME FUND
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints Robert D. Anderson and Thomas B. Winmill,
and each of them, attorneys and proxies of the undersigned, with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of Bull & Bear Municipal Income Fund (the "Fund")
which the undersigned is entitled to vote at the Special Meeting of Shareholders
(the "Meeting") of the Fund to be held at the offices of the Fund, 11 Hanover
Square, New York, New York 10005 on October 23, 1996, at 10:00 a.m., and at any
adjournments thereof. The undersigned hereby acknowledges receipt of the Notice
of Special Meeting of Shareholders and Proxy Statement dated October 8, 1996 and
hereby instructs said attorneys and proxies to vote said shares as indicated
herein. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
A majority of the proxies present and acting at the Meeting in person or by
substitute (or, if only one shall be so present, then that one) shall have and
may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
Please sign exactly as your name appears hereon. If shares are registered in
more than one name, all should sign but if one signs, it binds the others. When
signing as attorney, executor, administrator, agent, trustee, or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by an authorized officer. If a partnership, please sign in partnership name
by an authorized person.
______________________________________(L.S.)
Signature
______________________________________(L.S.)
Signature
Dated__________________________________, 1996
To avoid the delay of adjourning the meeting, please return this proxy promptly
in the enclosed postage paid envelope.
<PAGE>
Please indicate your vote by an "X" in the appropriate box below.
This proxy, if properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR the proposal. Please refer to the Proxy Statement for a discussion of the
proposal.
TO APPROVE CHARTER AMENDMENTS OF BULL & BEAR MUNICIPAL SECURITIES, INC.
THAT WILL RESULT IN THE CONVERSION OF BULL & BEAR MUNICIPAL INCOME FUND
FROM OPEN-END TO CLOSED-END STATUS, TO DELETE THE FUND'S INVESTMENT
RESTRICTIONS ON AUTHORITY TO BORROW MONEY, SECURE INDEBTEDNESS AND PURCHASE
SECURITIES WITH CONDITIONS ON RESALE, AND TO AMEND THE FUND'S INVESTMENT
RESTRICTIONS ON AUTHORITY TO ISSUE SENIOR SECURITIES.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
