MUNICIPAL INCOME FUND
11 Hanover Square, New York, NY 10005
American Stock Exchange Symbol: BBM
August 10, 1998
Fellow Shareholders:
We are pleased to report that the Fund's total return, based on the change in
market price of the shares , was +10.09% with dividend reinvestment for the 6
months ended June 30, 1998. On a net asset value basis, the gain was +1.55%. The
Fund's current NAV on 8/10/98 is $16.56 per share. With a recent closing market
price on the Exchange of $15.63 per share, we believe this represents an
opportunity to purchase shares at an attractive discount from their underlying
value.
Dividend Distribution Increase Reflects New Policy
We are also pleased to report that since the fourth quarter of 1997 the Fund's
quarterly dividend distribution increased to $.25 per share from $.21 and $.19
previously as a result of the Fund's Board of Directors recently adopting a
managed 6% distribution policy. The policy is intended to provide shareholders
with a stable cash flow and eliminate or reduce the amount by which net asset
value per share exceeds the market price. Quarterly distributions of
approximately 1.5% of the
Fund's net asset value per share (6% on an annual basis) will be paid primarily
from ordinary income and any capital gains with the balance coming from return
of capital. We believe shares of the Fund are a sound value for safety conscious
income oriented investors.
Review and Outlook
We continue to anticipate attractive returns in the tax exempt bond market in
1998. Issuance of new long term municipals in 1997 reached $220 billion, the
highest since 1993. This was at least partly due to the low levels of interest
rates, reflecting in large measure a decline in the Federal deficit from $107
billion in 1996 to $22 billion in 1997. Our anticipation of somewhat lower rates
in 1998 should again contribute to an ample supply of new municipal debt. We
also note the large volume of municipals that are maturing in 1998, which will
promote reinvestment purchases.
While we have some concern that specific regions of the country may be more
sensitive to slowdowns associated with developments in Asia, we are more
impressed by the general increases in revenues most municipalities are
experiencing. Our outlook for the municipal market is positive.
An Easy Way to Grow Your Account
The Fund's Dividend Reinvestment Plan provides an attractive opportunity to add
to your holdings, particularly since the Fund's quarterly dividends are
reinvested without charge at the net asset value per share or market price,
whichever is lower.
Sincerely,
Thomas B. Winmill Steven A. Landis
President Senior Vice President
Portfolio Manager
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BULL & BEAR MUNICIPAL INCOME FUND, INC.
Schedule of Portfolio Investments - June 30, 1998 (Unaudited)
Principal Standard Market
Amount & Poors Value
Rating
Municipal Bonds (100.0%)
Alabama (2.0%)
<S> <C> <C>
$250,000 Alabama Special Care Facilities Revenue Bonds, 5%,
due 11/1/25 AA+ $ 239,740
Arizona (4.9%)
500,000 Phoenix General Obligation Bonds, Series A,
6.25%, due 7/1/16 AA+ 580,785
Florida (4.1%)
500,000 Tampa, Florida Revenue Bonds, 4.875%, due 11/15/23 AAA 478,915
Georgia (4.5%)
400,000 Georgia State Municipal Electric Authority Power Revenue
Bonds, 8.25%, due 1/1/11 A 524,836
Hawaii (8.6%)
500,000 Hawaii County General Obligation Bonds, Series A, 5.60%,
due 5/1/13 AAA 542,070
400,000 Honolulu City & County General Obligation Bonds, Series A,
8.75%, due 1/1/03 AA 472,436
1,014,506
Illinois (10.3%)
500,000 Chicago, Illinois General Obligation Bonds, Series A,
5.125%, due 1/1/25 AAA 492,165
350,000 Chicago, Illinois Sales Tax Revenue Bonds, 5.375%, due 1/1/27 AAA 355,099
250,000 Illinois Health Facilities Revenue Bonds, Series A, 5%, due 7/1/24 AAA 240,332
125,000 Illinois Health Facilities Revenue Bonds, 5.25%, due 8/1/17 AAA 125,359
<PAGE>
1,212,955
Louisiana (2.9%)
325,000 Louisiana Public Facilities Authority Revenue Bonds, Series A,
6.50%, due 3/1/02 Aaa* 342,690
Massachusetts (11.6%)
300,000 Cambridge, Massachusetts General Obligation Bonds, 4.50%,
due 2/1/17 AA+ 278,367
500,000 Massachusetts Municipal Wholesale Electric Power Supply
System
Revenue Bonds, 5%, due 7/1/17 AAA 490,085
500,000 Massachusetts State General Obligation Bonds, 5%, due 8/1/17 AA- 497,240
110,000 Massachusetts State Water Resource Revenue Bonds,
5%, due 12/1/25 AAA 107,192
1,372,884
Mississippi (4.4%)
$500,000 Mississippi State General Obligation Bonds, 5.10%, due A $
11/15/11 A 522,955
Nevada (4.5%)
495,000 Nevada Housing Division Single Family Revenue Bonds,
6.35%, due 10/1/12 AAA 526,343
New Jersey (3.2%)
155,000 Hoboken, New Jersey General Obligation Bonds, 4.75%, due AAA 156,424
8/1/11
200,000 Southern Regional High School District General Obligation Bonds,
5.50%, due 9/1/07 AAA 215,018
371,442
New Mexico (4.5%)
500,000 Las Cruces Revenue Bonds, 5.45%, due 12/1/08 AAA 532,930
<PAGE>
New York (7.8%)
250,000 New York General Obligation Bonds, Series H, 6.0%, due 8/1/13 BBB+ 270,328
40,000 City of New York General Obligation Bonds, Series D,
7.50%, due 2/1/16 BBB+ 44,316
500,000 New York State Dormitory Authority State University Revenue
Bonds, Series C, 7.375%, due 5/15/10 A- 603,085
917,729
North Carolina (3.4%)
400,000 Martin County Industrial Facility Revenue Bonds, 5.65%, due A 406,636
12/1/23
Oklahoma (4.6%)
500,000 McAlester Public Works Authority Revenue Bonds, 5.50%,
due 12/1/09 AAA 536,620
Pennsylvania (2.4%)
250,000 Philadelphia Water & Waste Revenue Bonds, 6.25%, due 8/1/08 AAA 287,148
South Carolina (2.0%)
250,000 Piedmont Municipal Power Agency Revenue Bonds, Series A,
4.75%, due 1/1/25 AAA 235,800
Texas (9.2%)
500,000 Austin Independent School District General Obligation Bonds,
5.75%, due 8/1/16 AAA 531,330
500,000 Dallas-Fort Worth International Airport Revenue Bonds,
7.25%, due 11/1/30 BBB- 555,745
1,087,075
Wisconsin (5.1%
500,000 Wisconsin Clean Water Revenue Bonds, Series 1,
6.875%, due 6/1/11 AA+ 606,025
Total Investments (cost: $11,055,413) (100.0%) $11,798,014
* Moody's rating.
</TABLE>
See accompanying notes to financial statements.
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STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
ASSETS:
Investments at market value
(cost: $11,055,412) (note 1) $11,798,014
Interest receivable 197,803
Cash 176,246
Other assets 2,982
Total assets 12,175,045
LIABILITIES:
Accrued expenses 24,395
Accrued management fees 6,010
Other liabilities 294
Total liabilities 30,699
NET ASSETS: (applicable to 736,879
outstanding shares: 1,000,000,000
shares of $.01 par value authorized) $12,144,346
NET ASSET VALUE PER SHARE
($12,144,346 ÷ 736,879 shares outstanding) $16.48
At June 30, 1998, net assets consisted of:
Paid-in capital $11,767,677
Net unrealized appreciation
on investments 742,602
Accumulated deficit in net investment
income
Accumulated net realized loss
on investments
$12,144,346
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
INVESTMENT INCOME:
Interest $322,716
EXPENSES:
Investment management (note 3) 36,148
Transfer agent 15,245
Directors 14,925
Professional (note 3) 13,673
Custodian 13,333
Printing 11,873
Registration (note 3) 8,256
Interest (note 5) 634
Other 8,547
Total expenses 122,634
Fee reductions (note 4) (2,959)
Net expenses 119,675
Net investment income 203,041
ON INVESTMENTS:
Net realized gain on investments 71,213
Unrealized depreciation of investments
during the period (91,773)
Net realized and unrealized loss on
investments (20,560)
Net increase in net assets resulting
from operations $182,481
See accompanying notes to financial statements.
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<TABLE>
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STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1998 (Unaudited) and the Year Ended
December 31, 1997
June 30, December
1998 31, 1997
OPERATIONS:
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Net investment income $ 203,041 $ 414,399
Net realized gain on investments 71,213 146,070
Unrealized appreciation (depreciation) of investments during the (91,773) 367,776
period
Net increase in net assets resulting from operations 182,481 928,245
Subtraction from paid-in capital (note 6) _ (35,093)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($.28 and $.58 per share, (203,041) (414,399)
respectively)
Distributions in excess of net investment income ($.10 and $.26 per (71,213) (182,289)
share, respectively)
Distributions from paid in capital ($.12 per share) (89,736) _
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital share transactions (a) (note 186,434 351,667
6)
Total increase in net assets 4,925 648,131
NET ASSETS:
Beginning of period 12,139,421 11,491,290
End of period $12,144,346 $12,139,421
(a) Transactions in capital shares were as follows:
</TABLE>
June 30, 1998 December 31, 1997
Shares Value Shares Value
Shares issued in
reinvestment of distributions 11,671 $186,434 24,789 $351,667
Net increase 11,671 $186,434 24,789 $351,667
See accompanying notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) The Fund, a Maryland corporation, is registered under the Investment Company
Act of 1940, as amended, as a diversified closed-end management investment
company. The Fund's shares are listed on the American Stock Exchange, Inc. The
investment objective of the Fund is to provide investors with the maximum level
of income exempt from Federal income tax that is consistent with the
preservation of capital, as set forth in its prospectus. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. With respect to security valuation,
municipal securities which have remaining maturities of more than 60 days and
for which market quotations are readily available are valued at the mean between
the most recently quoted bid and asked prices. Money market securities which
have remaining maturities of more than 60 days and for which market quotations
are readily available are valued at the most recent bid price or yield
equivalent. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Securities for which quotations are not readily available or reliable and other
assets may be valued as determined in good faith by or under the direction of
the Board of Directors. Investment transactions are accounted for on the trade
date (date the order to buy or sell is executed). Interest income is recorded on
the accrual basis. Premiums and discounts are amortized in accordance with
income tax regulations. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At December 31, 1997, the
Fund had an unused capital loss carryforward of approximately $366,000 which
expires in 2002. Based on Federal income tax cost of $11,055,412, gross
unrealized appreciation and gross unrealized depreciation were $748,323 and
$5,721, respectively at June 30, 1998.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average weekly net
assets of the Fund at the annual rate of 6/10 of 1% on the first $500 million
and 1/2 of 1% over $500 million. Certain officers and directors of the Fund are
officers and directors of the Investment Manager and Investor Service Center,
Inc., the Fund's former Distributor. The Fund reimbursed the Investment Manager
$1,993 for providing certain administrative and accounting services at cost for
the six months ended June 30, 1998.
(4) Purchases and proceeds of sales of securities other than short term notes
aggregated $1,366,664 and $1,366,340, respectively, for the six months ending
June 30, 1998. The Fund has entered into an arrangement with its custodian
whereby interest earned on uninvested cash balances was used to offset a portion
of the Fund's expenses. During the six months ending June 30, 1998, the Fund's
custodian fees were reduced by $2,959 under such arrangements.
(5) The Fund has a committed bank line of credit. At June 30, 1998, there was no
balance outstanding and the interest rate was equal to the Federal Reserve Funds
Rate plus 1.00 percentage point. For the six months ending June 30, 1998, the
weighted average interest rate was 6.34% based on the balances outstanding
during the period and the weighted average amount outstanding was $4,766.
(6) Effective November 8, 1996, the Fund converted from an open-end management
investment company to a closed-end management investment company. In connection
with the conversion, costs of approximately $35,100 were charged against paid-in
capital in 1997. In addition, the Fund has adopted a Dividend Reinvestment Plan
(the "Plan"). Under the Plan, each dividend and capital gain distribution, if
any, declared by the Fund on outstanding shares will, unless elected otherwise
by each shareholder by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution, be paid on the payment
date fixed by the Directors in additional shares in accordance with the
following: whenever the Market Price (as defined below) per share is equal to or
exceeds the net asset value per share at the time shares are valued for the
purpose of determining the number of shares equivalent to the cash dividend or
capital gain distribution (the
<PAGE>
"Valuation Date"), participants will be issued additional shares equal to the
amount of such dividend divided by the Fund's net asset value per share.
Whenever the Market Price per share is less than such net asset value on the
Valuation Date, participants will be issued additional shares equal to the
amount of such dividend divided by the Market Price. The Valuation Date is the
dividend or distribution payment date or, if that date is not an American Stock
Exchange trading day, the next trading day. For all purposes of the Plan: (a)
the Market Price of the shares on a particular date shall be the average closing
market price on the five trading days the shares traded ex-dividend on the
Exchange prior to such date or, if no sale occurred on the Exchange prior to
such date, then the mean between the closing bid and asked quotations for the
shares on the Exchange on such date, and (b) net asset value per share on a
particular date shall be as determined by or on behalf of the Fund.
The date after which notice of a shareholder proposal for the Fund's annual
meeting of stockholders submitted outside the processes of 17 CFR S240.14a-8 is
considered untimely is September 7, 1998. In addition to any other applicable
requirements, for a nomination to be made by a stockholder or for any other
business to be properly brought before the annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written to the
Secretary of the Fund in the manner set forth in the Fund's By-laws.
<PAGE>
FINANCIAL HIGHLIGHTS
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<CAPTION>
Years Ended December 31,
Six Months 1997 1996 1995 1994 1993
Ended June
30, 1998
(Unaudited)
PER SHARE DATA*
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $16.74 $16.41 $17.04 $15.25 $17.63 $17.06
Income from investment operations:
Net investment income .28 .58 .69 .70 .68 .75
Net realized and unrealized gain (loss) on (.04) .59 (.62) 1.78 (2.38) 1.02
investments
Total from investment operations .24 1.17 .07 2.48 (1.70) 1.77
Less distributions:
Distributions from net investment income (.28) (.58) (.70) (.69) (.68) (.75)
Distributions in excess of net investment income (.10) (.26) -- -- -- --
Distributions from net realized gains on investments -- -- -- -- -- (.45)
Distributions from paid in capital (.12) -- -- -- -- --
Total distributions (.50) (.84) (.70) (.69) (.68) (1.20)
Net asset value at end of period $16.48 $16.74 $16.41 $17.04 $15.25 $17.63
Per share market value at end of period $15.88 $14.88 $14.38
TOTAL RETURN ON NET ASSET VALUE BASIS 1.55% 8.17% .61% 16.58% (9.76)% 10.59%
TOTAL RETURN ON MARKET VALUE BASIS (a) 10.09% 9.73% (11.87%)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $12,144 $12,139 $11,491 $16,220 $15,921 $21,345
Ratio of expenses to average net assets (b) (c) 2.04%** 1.70% 1.68% 1.78% 1.60% 1.61%
Ratio of net investment income to average net 3.37%** 3.53% 4.14% 4.31% 4.23% 4.25%
assets (d)
Portfolio turnover rate 11% 43% 78% 172% 275% 74%
</TABLE>
* Per share net investment income and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share.
** Annualized.
(a) Effective November 8, 1996, the Fund converted from on open-end management
investment company to a closed-end management investment company. The Fund has
calculated total return on market value basis based on purchases and sales of
shares of the Fund at current market values and reinvestment of dividends and
<PAGE>
distributions at the lower rate of the per share net asset value on the payment
date or the average of the closing market prices for the five days preceding the
payment date.
(b) Ratio prior to reimbursement by the Investment Manager was 1.94%, 1.95%,
1.71%, and 1.62% for the years ended December 31, 1996, 1995, 1994, and 1993,
respectively.
(c) Ratio after the reduction of custodian fees under a custodian agreement was
1.99%**, 1.68% and 1.62% for the six months ended June 30, 1998 and for the
years ended December 31, 1997 and 1995, respectively. Prior to 1995, such
reductions were reflected in the expense ratios. There were no custodian fee
credits for 1996.
(d) Ratio prior to reimbursement by the Investment Manager was 3.88%, 4.14%,
4.12%, and 4.24% for the years ended December 31, 1996, 1995, 1994, and 1993,
respectively.
MUNICIPAL INCOME FUND
11 Hanover Square
New York, NY 10005
1-888-847-4200
MUNICIPAL INCOME FUND
American Stock
Exchange Symbol:
