<PAGE>
As Filed With the Securities and Exchange Commission on February 26, 1996
Registration No. 33-32819
811-6023
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 10 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 12 [x]
MANAGED MUNICIPAL FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
717 Fifth Avenue
New York, New York 10022
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (410) 727-1700
--------------
Edward J. Veilleux
135 E. Baltimore Street
Baltimore, Maryland 21202
---------------------------------------
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esquire
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
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It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
------
X on March 1, 1996 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on [Date] pursuant to paragraph (a)(2) of Rule 485.
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<PAGE>
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Title of Securities Amount Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Unit Aggregate Offering Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Shares of 1,219,692 $11.30 $100(1)
Common Stock shares
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</TABLE>
(1) Registrant has calculated the maximum aggregate offering price
pursuant to Rule 24e-2 under the Investment Company Act of 1940
(the "1940 Act") for its fiscal year ended October 31, 1995.
Registrant had actual aggregate redemptions of 2,788,372 shares
for its fiscal year ended October 31, 1995; has used 1,594,343 of
available redemptions for reductions pursuant to Rule 24f-2(c)
under the 1940 Act and has previously used no available
redemptions for reductions pursuant to Rule 24e-2(a) of the 1940
Act during the current year. Registrant elects to use redemptions
in the aggregate amount of 1,194,029 shares for reductions in its
current amendment.
Registrant has elected to maintain registration of an indefinite number of
shares of Common Stock pursuant to Rule 24f-2 under the Investment Company Act
of 1940. Registrant's Rule 24f-2 Notice for the fiscal year ended October 31,
1995 was filed with the Commission on December 20, 1995.
===============================================================================
<PAGE>
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
February 26, 1996
Cross Reference Sheet
<TABLE>
<CAPTION>
Registration
Statement
Items Required by Form N-1A Heading
- --------------------------- ------------
<S> <C> <C>
Part A - Information Required in a Prospectus
- --------
Item 1. Cover Page....................................................... Cover Page
Item 2. Synopsis......................................................... Fund Expenses
Item 3. Condensed Financial Information.................................. Financial Highlights
Item 4. General Description of Registrant................................ Investment Program;
Investment Restrictions;
General Information
Item 5. Management of the Fund........................................... Management of the Fund;
Investment Advisor;
Administrator;
Distributor; Custodian,
Transfer Agent,
Accounting Services
Item 5A. Management's Discussion of Fund Performance...................... *
Item 6. Capital Stock and Other Securities............................... Cover Page; Dividends
and Taxes; General
Information
Item 7. Purchase of Securities Being Offered............................. How to Invest in
the Fund; Distributor
Item 8. Redemption or Repurchase......................................... How to Redeem Shares
Item 9. Pending Legal Proceedings........................................ **
</TABLE>
- ---------------
* Information required by Item 5A is contained in Registrant's 1995 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
<TABLE>
<CAPTION>
Part B - Information Required in a Statement of Additional Information
- --------
<S> <C> <C>
Item 10. Cover Page....................................................... Cover Page
Item 11. Table of Contents................................................ Table of Contents
Item 12. General Information and History.................................. General Information
and History
Item 13. Investment Objectives and Policies............................... Investment Objectives
and Policies
Item 14. Management of the Fund........................................... Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities....................................................... Control Persons and
Principal Holders of
Securities
Item 16. Investment Advisory and Other Services........................... Investment Advisory
and Other Services;
Custodian, Transfer
Agent, Accounting
Services; Independent
Accountants
Item 17. Brokerage Allocation............................................. Portfolio Transactions
Item 18. Capital Stock and Other Securities............................... Capital Shares;
Reports
Item 19. Purchase, Redemption and Pricing of Securities Being
Offered.......................................................... Valuation of Shares
and Redemption
Item 20. Tax Status....................................................... Federal Tax Treatment
of Dividends and
Distributions
Item 21. Underwriters..................................................... Distribution of
Fund Shares
Item 22. Calculation of Performance Data.................................. Performance and
Yield Computations
Item 23. Financial Statements............................................. Financial Statements
</TABLE>
Part C - Other Information
- --------
Part C contains the information required by the items
contained therein under the items set forth in the form.
<PAGE>
LOGO
FLAG INVESTORS
MANAGED MUNICIPAL FUND CLASS A SHARES
(A Class of Managed Municipal Fund, Inc.)
Managed Municipal Fund, Inc. (the "Fund") is designed to provide a high
level of total return with relative stability of principal and, secondarily,
high current income exempt from federal income tax through investment in a
portfolio consisting primarily of tax-free municipal obligations. To achieve
this objective, the Fund invests primarily in municipal obligations rated
within the three highest rating categories of Moody's Investors Service, Inc.
or Standard & Poor's Ratings Group.
Flag Investors Class A Shares of the Fund ("Class A Shares") are available
through Alex. Brown & Sons Incorporated, the distributor of the Class A
Shares, as well as Participating Dealers and Shareholder Servicing Agents.
(See "How to Invest in the Fund.")
This Prospectus sets forth basic information that investors should know
about the Fund prior to investing and should be retained for future
reference. A Statement of Additional Information dated March 1, 1996 has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated herein by reference. It is available upon request and without
charge by calling the Fund at (800) 767-FLAG.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS
The date of this Prospectus is March 1, 1996
<PAGE>
FLAG INVESTORS
MANAGED MUNICIPAL FUND CLASS A SHARES
(A Class of Managed Municipal Fund, Inc.)
135 East Baltimore Street
Baltimore, Maryland 21202
TABLE OF CONTENTS
-----------------
Page
1. Fund Expenses .................................... 2
2. Financial Highlights ............................. 3
3. Investment Program ............................... 5
4. Investment Restrictions .......................... 11
5. How to Invest in the Fund ........................ 12
6. How to Redeem Shares ............................. 17
7. Telephone Transactions ........................... 18
8. Dividends and Taxes .............................. 19
9. Management of the Fund ........................... 22
10. Investment Advisor ............................... 22
11. Administrator .................................... 23
12. Distributor ...................................... 24
13. Custodian, Transfer Agent, Accounting Services ... 25
14. Performance Information .......................... 25
15. General Information .............................. 27
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No person has been authorized to give any information or to make
representations not contained in this Prospectus and, if given or made,
such information must not be relied upon as having been authorized by the
Fund or its distributor. This Prospectus does not constitute an offering by
the Fund or by its distributor in any jurisdiction in which such offering
may not lawfully be made. Shares may be offered only to residents of those
states in which such shares are eligible for purchase.
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1
<PAGE>
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1. Fund Expenses
..........................................................................
SHAREHOLDER TRANSACTION EXPENSES:
(as a percentage of offering price)
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<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases .............. 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends ... None
Deferred Sales Charge .................................. None*
</TABLE>
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ANNUAL FUND OPERATING EXPENSES (NET OF FEE WAIVERS):
(as a percentage of average daily net assets)
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<TABLE>
<CAPTION>
<S> <C>
Management Fees (net of fee waivers) ............. .27%**
12b-1 Fees ....................................... .25%
Other Expenses (net of fee waivers) .............. .38%**
--------
Total Fund Operating Expenses (net of fee waivers) .90%**
</TABLE>
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* Purchases of $1 million or more are not subject to an initial sales
charge, however, a contingent deferred sales charge of .50% may be
imposed on such purchases. (See "How to Invest in the Fund -- Offering
Price.")
** The Fund's investment advisor and administrator intend, but are not
obligated, to waive their fees proportionately to the extent required so
that Total Fund Operating Expenses do not exceed .90% of the Fund's
average net assets. Absent fee waivers, Management Fees would be .40%,
Other Expenses (including administration fees) would be .45%, and Total
Fund Operating Expenses would be 1.10%, respectively, of the Fund's
average net assets.
Example:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: 1 year 3 years 5 years 10 years
----------------------------------------- ---------- ----------- ----------- ------------
$54 $73 $94 $156
</TABLE>
* The example is based on Total Fund Operating Expenses, net of fee waivers.
Absent fee waivers, expenses would be higher.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Fund will bear directly and indirectly. A
person who purchases Class A Shares through a financial institution may be
charged separate fees by the financial institution. (For more complete
descriptions of the various costs and expenses, see "How to Invest in the
Fund -- Offering Price", "Investment Advisor", "Administrator" and
"Distributor.") The Expenses and Example appearing in the table above are
based on the Fund's expenses for the fiscal year ended October 31, 1995
which, net of fee waivers, were .90% of its average net assets.
2
<PAGE>
The rules of the SEC require that the maximum sales charge (in the Class A
Shares' case, 4.50% of the offering price) be reflected in the above table.
However, certain investors may qualify for reduced sales charges (see "How to
Invest in the Fund -- Offering Price"). Due to the continuous nature of Rule
12b-1 fees, long-term shareholders of the Fund may pay more than the
equivalent of the maximum front-end sales charges permitted by the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
- --------------------------------------------------------------------------
2. Financial Highlights
The Fund was organized as a corporation under the laws of the State of
Maryland on January 5, 1990 and commenced operations on February 26, 1990.
The Fund commenced offering the Class A Shares on October 23, 1990. The Fund
has offered another class of shares (ISI Class Shares) since February 26,
1990. The financial highlights included in this table are a part of the
Fund's financial statements for the periods indicated and have been audited
by Coopers & Lybrand L.L.P., the Fund's independent accountants. The
financial statements and financial highlights for the fiscal year ended
October 31, 1995 and the report thereon of Coopers & Lybrand L.L.P. are
included in the Statement of Additional Information. Additional performance
information is contained in the Fund's Annual Report for the fiscal year
ended October 31, 1995, which can be obtained at no charge by calling the
Fund at (800) 767-FLAG.
3
<PAGE>
(For a Share outstanding throughout each period)
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<TABLE>
<CAPTION>
For the Period
February 26, 1990
Year Ended October 31, Through
1995 1994 1993 1992 1991 October 31, 1990
--------- --------- --------- --------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period $9.81 $11.10 $10.31 $10.36 $9.99 $10.00
Income from Investment
Operations:
Net investment income 0.48 0.46 0.50 0.50 0.57 0.38
Net realized and
unrealized gain/(loss)
on investments 0.98 (1.15) 0.94 0.22 0.49 (0.02)
Total from Investment
Operations 1.46 (0.69) 1.44 0.72 1.06 0.36
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net
investment income
and net realized
short-term gains (0.54) (0.56) (0.61) (0.65) (0.69) (0.37)
Distributions from net
realized long-term
gains (0.08) (0.04) (0.04) (0.12) -- --
------ ------ ------ ------ ------ ------
Total Distributions (0.62) (0.60) (0.65) (0.77) (0.69) (0.37)
------ ------ ------ ------ ------ ------
Net asset value at end
of period $10.65 $9.81 $11.10 $10.31 $10.36 $9.99
====== ====== ====== ====== ====== ======
Total Return:*
Flag Investors Class A
Shares 15.42% (6.49)% 14.36% 6.06% 10.85% 1.21%**
ISI Class Shares 15.42% (6.49)% 14.36% 6.06% 10.85% 3.78%
Ratios to Average Net
Assets:
Expenses(2) 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%(1)
Net investment income(3) 4.72% 4.37% 4.38% 4.78% 5.57% 6.12%(1)
Supplemental Data:
Net assets at end of
period (000):
Flag Investors Class A
Shares $45,980 $49,903 $53,486 $45,536 $38,491 $5,698
ISI Class Shares $86,292 $83,607 $88,378 $51,420 $20,053 $17,290
Portfolio turnover rate 55% 37% 68% 95% 86% 99%
</TABLE>
- ----------------
* Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges.
** Flag Investors Class A Shares commenced operations on October 23, 1990.
(1) Annualized.
(2) Without the waiver of advisory and administration fees, the ratio of
expenses to average net assets would have been 1.10%, 1.11%, 1.14%,
1.27%, 1.47% and 1.92% for the periods ended October 31, 1995, 1994,
1993, 1992, 1991 and 1990, respectively.
(3) Without the waiver of advisory and administration fees, the ratio of net
investment income to average net assets would have been 4.52%, 4.16%,
4.14%, 4.41%, 4.99% and 5.11% for the periods ended October 31, 1995,
1994, 1993, 1992, 1991 and 1990, respectively.
4
<PAGE>
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3. Investment Program
...........................................................................
INVESTMENT OBJECTIVE, POLICIES AND RISK
CONSIDERATIONS
The investment objective of the Fund is a high level of total return with
relative stability of principal, and secondarily, high current income exempt
from federal income tax through investment in a portfolio consisting
primarily of tax-free municipal obligations ("Municipal Obligations").
Municipal Obligations include securities of states, territories and
possessions of the United States and the District of Columbia, and their
political subdivisions, agencies and instrumentalities, the interest on which
is exempt from federal income tax in the opinion of bond counsel for the
issuer. Under normal market conditions, the Fund will invest at least 80% of
its net assets in Municipal Obligations. This policy is fundamental and may
be changed only by a majority vote of shareholders. The Fund does not
currently intend to acquire Municipal Obligations that are subject to
alternative minimum tax but may so invest up to 20% of its net assets. Any
capital gains from investments in Municipal Obligations will not be exempt
from federal income tax. (See "Dividends and Taxes -- Tax Treatment of
Dividends and Distributions.") There can be no assurance that the Fund will
achieve its investment objective.
The Fund will invest at least 75% of its portfolio of Municipal
Obligations in securities rated, on the date of investment, A1 or higher (in
the case of municipal bonds) and higher than MIG 3 (in the case of municipal
notes) by Moody's Investors Service, Inc. ("Moody's") or rated A+ or higher
(in the case of municipal bonds) and higher than SP-2 (in the case of
municipal notes) by Standard & Poor's Ratings Group ("S&P") or, if unrated,
of comparable quality as determined by the Fund's investment advisor under
criteria approved by the Board of Directors. The Fund may invest up to 25% of
its portfolio of Municipal Obligations in securities rated A (in the case of
municipal bonds) or MIG 3 (in the case of municipal notes) by Moody's or
rated A (in the case of municipal bonds) or SP-2 (in the case of municipal
notes) by S&P or, if unrated, of comparable quality as determined by the
investment advisor under criteria approved by the Board of Directors.
Even under normal circumstances the Fund may invest to a limited extent in
taxable obligations depending on market conditions. These obligations may
include U.S. Government and agency, bank and corporate securities and
5
<PAGE>
repurchase agreements collateralized by such securities. For temporary
defensive purposes, the Fund may invest without limit in short-term
obligations of these types. The Fund may also invest in financial futures,
"when-issued" securities, standby commitments of brokers, dealers or banks and
variable and floating rate demand obligations. These investment practices,
which may involve certain special risks, are described below. The Fund's
investment objective may be changed only by the affirmative vote of a majority
of the outstanding shares of all classes of the Fund.
.............................................................................
SELECTION OF INVESTMENTS
The Fund's investment advisor is International Strategy and Investment
Inc. ("ISI" or the "Advisor" -- see "Investment Advisor"). ISI buys and sells
securities for the Fund's portfolio with a view toward, first, a high level
of total return with relative stability of principal and, second, high
current income that is federally tax exempt. Therefore, in addition to yield,
the potential for capital gains and appreciation resulting from possible
changes in interest rates will be a consideration in selecting investments.
While income distributions to shareholders will generally be tax exempt,
distributions of capital gains will be taxable. Accordingly, to the extent
the Fund achieves its investment objective, a larger portion of its
distribution will be taxable than would be the case if the Fund placed a
greater emphasis on earning tax exempt income. (See "Investment Program --
Taxable Investments" and "Dividends and Taxes -- Tax Treatment of Dividends
and Distributions.") ISI will be free to take full advantage of the entire
range of maturities offered by Municipal Obligations and may adjust the
average maturity of the Fund's portfolio from time to time, depending on its
assessment of the relative yields available on securities of different
maturities and its expectations of future changes in interest rates. Thus, at
certain times the average maturity of the portfolio may be relatively short
(under five years, for example) and at other times may be relatively long (in
the 20-30 year range, for example). In determining which direction interest
rates are likely to move, the Advisor relies on the economic analysis made by
its chairman, Edward S. Hyman. There is no assurance that such economic
analysis will accurately predict interest rate trends or that the portfolio
strategies based on Mr. Hyman's economic analysis will be effective.
.............................................................................
SPECIAL RISK CONSIDERATIONS
As with other debt securities, the value of Municipal Obligations changes
as interest rates fluctuate. Changes in the value of portfolio securities
6
<PAGE>
will not affect interest income from those securities but will be reflected in
the Fund's net asset value. Thus, a decrease in interest rates will generally
result in an increase in the value of the Shares. Conversely, during periods
of rising interest rates, the value of the Shares will generally decline. The
magnitude of these fluctuations will generally be greater at times when the
average maturity of the Fund's portfolio securities is longer.
.............................................................................
PURCHASE OF WHEN-ISSUED SECURITIES
New issues of Municipal Obligations are usually offered on a when-issued
basis, which means that delivery and payment for such Municipal Obligations
normally take place within 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will be received
on a when-issued security are fixed at the time the purchase commitment is
entered into, although no interest on such security accrues to the Fund prior
to payment and delivery. A segregated account of the Fund consisting of cash,
cash equivalents or U.S. Government securities or other high quality liquid
debt securities equal at all times to the amount of the when-issued
commitments will be established and maintained by the Fund at the Fund's
custodian. Additional cash or liquid debt securities will be added to the
account when necessary. While the Fund will purchase securities on a
when-issued basis only with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date if it is deemed
advisable to limit the effects of adverse market action. The securities so
purchased or sold are subject to market fluctuation so, at the time of
delivery of the securities, their value may be more or less than the purchase
or sale price. The Fund will ordinarily invest no more than 40% of its net
assets at any time in Municipal Obligations purchased on a when-issued basis.
............................................................................
STAND-BY COMMITMENTS
The Fund may acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, a broker,
dealer or bank is obligated to repurchase, at the Fund's option, specified
securities in the Fund's portfolio at a specified price. In this respect,
stand-by commitments are comparable to put options and thus the Fund's
ability to enforce such obligations is subject to the risk that the seller of
the commitment may default on its obligations. The Fund will acquire stand-by
commitments as a means of changing the average maturity of its portfolio in
response to expected changes in market interest rates.
7
<PAGE>
The Fund anticipates that stand-by commitments will generally be available
from brokers, dealers and banks without the payment of any direct or indirect
consideration, but the Fund may have to pay for stand-by commitments, thus
increasing the cost of acquiring and holding the underlying security and
similarly decreasing such security's yield. Gains realized in connection with
stand-by commitments will be taxable.
..............................................................................
VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS
The Fund may purchase floating and variable rate demand notes and bonds,
which are tax-exempt obligations normally having stated maturities in excess
of one year, but which permit the holder to demand payment of principal
either at any time or at specified intervals. The interest rates on these
obligations fluctuate from time to time in response to changes in the market
interest rates. Frequently, such obligations are secured by letters of credit
or other credit support arrangements provided by banks. Where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem will be dependent on the ability of
the borrower to pay principal and interest on demand. Each demand note and
bond purchased by the Fund will meet the quality criteria established for the
purchase of other Municipal Obligations. The Advisor, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations in the Fund's portfolio.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. The Fund will not
invest more than 10% of its net assets in floating or variable rate demand
obligations as to which the Fund cannot exercise the demand feature on less
than seven days' notice if there is no secondary market available for these
obligations.
.............................................................................
FUTURES CONTRACTS
The Fund may purchase and sell U.S. exchange traded futures contracts on
bond indices ("Futures Contracts"). At the same time a Futures Contract is
purchased or sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). The initial deposit varies but may be as low as
5% or less of the value of the contract. Daily thereafter, the Futures
Contract is valued and the payment of "variation margin" may be required, so
each day the Fund would provide or receive cash that reflects any decline
8
<PAGE>
or increase in the contract's value. A Futures Contract based on a municipal
bond index provides for a cash payment equal to the amount, if any, by which
the value of the index at maturity is above or below the value of the index at
the time the contract was entered into times a fixed index "multiplier." The
index underlying such a Futures Contract is generally a broad based index of
securities designed to reflect movements in the relevant market as a whole.
The index assigns weighted values to the securities included in the index, and
its composition is changed periodically.
These instruments will be used only to protect against anticipated future
changes in interest rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date. Should
interest rates move in an unexpected manner, the Fund may not achieve the
anticipated benefits of the Futures Contract and may realize a loss on the
Futures Contract in excess of any corresponding gain in the hedged portfolio
positions. Futures transactions involve other risks as well. For example, a
lack of correlation between the index and the assets being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and could result in losses on the Futures Contract in excess of
any corresponding gain in the hedged portfolio positions. In addition, there
can be no assurance that a liquid secondary market will exist for any Futures
Contract purchased or sold, and the Fund may be required to maintain a
position until exercise or expiration, which could result in losses on the
Futures Contract in excess of any corresponding gain in the hedged portfolio
positions.
Regulations of the Commodity Futures Trading Commission (the "CFTC")
require that the Fund enter into transactions in Futures Contracts for
hedging purposes only, or that in the case of long positions in Futures
Contracts, an alternative test be satisfied, in order to assure that the Fund
will not be deemed to be a "commodity pool" as defined in CFTC regulations.
In addition, under CFTC rules the Fund may not purchase or sell such
instruments if, immediately thereafter, the sum of the amount of initial
margin deposits on existing Futures Contracts would exceed 5% of the Fund's
total assets. In addition, the Fund will not enter into Futures Contracts if
obligations under all Futures Contracts would amount to more than 30% of its
total assets.
Gains recognized from futures transactions engaged in by the Fund are
taxable income to shareholders. The Fund reserves the right to invest in
other types of financial futures without obtaining prior shareholder
approval.
9
<PAGE>
............................................................................
REPURCHASE AGREEMENTS
The Fund may agree to purchase U.S. Treasury Securities from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase the securities at an established time and price. U.S.
Treasury Securities include Treasury bills, Treasury notes, Treasury bonds
and Separate Trading of Registered Interest and Principal of Securities
("STRIPS"), all of which are direct obligations of the U.S. Government and
are supported by the full faith and credit of the United States. The Fund
will enter into repurchase agreements only with banks and broker-dealers that
have been determined to be creditworthy by the Fund's Board of Directors
under criteria established with the assistance of the Advisor. Default by the
seller may, however, expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the Fund may be delayed or limited in
its ability to sell the collateral.
.............................................................................
TAXABLE INVESTMENTS
Although the Fund intends, to the extent feasible but subject to market
conditions, to invest up to 100% of its assets in tax exempt Municipal
Obligations, it may invest, from time to time, in securities, the interest on
which is subject to federal income tax. The Fund may make such investments
(a) pending investment of proceeds from sales of Fund shares or portfolio
securities in tax-exempt securities, (b) pending settlement of purchases of
portfolio securities, (c) to maintain liquidity for meeting anticipated
redemptions, or (d) when in the Advisor's opinion it is advisable because of
adverse conditions affecting the market for Municipal Obligations. The
taxable investments in which the Fund may invest consist of U.S. Treasury
Securities and repurchase agreements fully collateralized by U.S. Treasury
Securities (collectively, the "Taxable Investments"). The Fund may invest up
to 20% of its net assets in Taxable Investments. The Fund may earn taxable
income from other sources. Dividends paid by the Fund that are attributable
to interest earned from Taxable Investments and to taxable income from other
investments will be taxable to investors. (See "Dividends and Taxes -- Tax
Treatment of Dividends and Distributions.")
10
<PAGE>
.............................................................................
SIZE OF FUND
The Fund currently intends to limit the size of the Fund and to accept
share purchases only from existing shareholders at such time as the assets of
the Fund are in excess of $200 million but less than $250 million, and
thereafter not to accept any share purchases other than dividend
reinvestments.
- -----------------------------------------------------------------------------
4. Investment Restrictions
The Fund's investment program is subject to a number of restrictions which
reflect both self-imposed standards and federal and state regulatory
limitations. The investment restrictions recited below are matters of
fundamental policy and may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. Accordingly, the Fund will
not:
1) Concentrate 25% or more of its total assets in securities of issuers in
any one industry (for this purpose, the U.S. Government or any state or
local government or their agencies and instrumentalities are not
considered to be an industry);
2) With respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any single issuer (for this purpose, the U.S.
Government or its agencies and instrumentalities are not considered to be
an issuer and, in the case of Municipal Obligations, the public or private
entity ultimately responsible for payment of principal and interest on the
security is considered to be the issuer);
3) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only from banks and in an amount not exceeding 10% of
the value of the total assets of the Fund at the time of such borrowing,
provided that, while borrowings by the Fund equalling 5% or more of the
Fund's total assets are outstanding, the Fund will not purchase
securities; or
4) Invest more than 10% of its total assets in illiquid securities, including
repurchase agreements with maturities of greater than seven days and
floating or variable rate demand obligations as to which the Fund cannot
exercise the demand feature on less than seven days' notice if there is no
secondary market available for these obligations.
11
<PAGE>
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
- -----------------------------------------------------------------------------
5. How to Invest in the Fund
Class A Shares may be purchased from Alex. Brown & Sons Incorporated
("Alex. Brown"), 135 East Baltimore Street, Baltimore, Maryland 21202 or
through any securities dealer which has entered into a dealer agreement with
Alex. Brown ("Participating Dealers") or through any financial institution
which has entered into a shareholder servicing agreement with the Fund
("Shareholder Servicing Agents"). Class A Shares may also be purchased by
completing the Application Form attached to this Prospectus and returning it,
together with payment of the purchase price (including any applicable
front-end sales charge), to the address shown on the Application Form.
The minimum initial investment is $2,000, except that the minimum initial
investment for shareholders of any other Flag Investors fund or class is $500
and the minimum initial investment for participants in the Fund's Automatic
Investing Plan is $250. Each subsequent investment must be at least $100,
except that the minimum subsequent investment under the Fund's Automatic
Investing Plan is $250 for quarterly investments and $100 for monthly
investments. (See "Purchases Through Automatic Investing Plan" below.) Orders
for purchases of Class A Shares are accepted on any day on which the New York
Stock Exchange is open for business ("Business Day").
The Fund reserves the right to suspend the sale of Class A Shares at any
time at the discretion of Alex. Brown. Purchase orders for Class A Shares
will be executed at a per share purchase price equal to the net asset value
next determined after receipt of the purchase order plus any applicable
front-end sales charge (the "Offering Price") on the date such net asset
value is determined (the "Purchase Date"). Purchases made by mail must be
accompanied by payment of the Offering Price. Purchases made through Alex.
Brown or a Participating Dealer or Shareholder Servicing Agent must be in
accordance with such entity's payment procedures. Alex. Brown may, in its
sole discretion, refuse to accept any purchase order.
The net asset value per share is determined once daily as of the close of
the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on
each Business Day. Net asset value per share of a class is calculated by
valuing all assets held by the Fund, deducting all liabilities, including
12
<PAGE>
liabilities attributable to that specific class, and dividing the resulting
amount by the number of then outstanding shares of the class. For this
purpose, portfolio securities are given their market value where feasible
based on quotations furnished by a pricing service approved by the Board of
Directors. Options and futures are valued at the settlement price, or if no
sales are reported, at the average of the last reported bid and asked prices.
Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established from time to time and monitored by the Fund's Board of
Directors. Debt obligations with maturities of 60 days or less are valued at
amortized cost which constitutes fair value as determined by the Fund's Board
of Directors.
.............................................................................
OFFERING PRICE
Class A Shares may be purchased from Alex. Brown, Participating Dealers or
Shareholder Servicing Agents at the Offering Price, which includes a sales
charge which is calculated as a percentage of the Offering Price and
decreases as the amount of purchase increases, as shown below:
<TABLE>
<CAPTION>
Sales Charge
as Percentage of Dealer
------------------------------ Retention
Offering Net Amount as Percentage of
Amount of Purchase Price Invested Offering Price
------------ ............ ------------ -------------- -------------------
<S> <C> <C> <C>
Less than $ 50,000 ... 4.50% 4.71% 4.00%
$ 50,000 - $ 99,999 ... 3.50% 3.63% 3.00%
$ 100,000 - $249,999 ... 2.50% 2.56% 2.00%
$ 250,000 - $499,999 ... 2.00% 2.04% 1.50%
$ 500,000 - $999,999 ... 1.50% 1.52% 1.25%
$1,000,000 and over ..... None* None* None*
- ---------------------------------------------------------------------------------
</TABLE>
* Purchases of $1 million or more may be subject to a contingent deferred
sales charge. (See below.) The distributor may make payments to dealers in
the amount of .50% of the Offering Price.
A shareholder who purchases additional Class A Shares may obtain reduced
sales charges, as set forth in the table above, through a right of
accumulation. In addition, an investor may obtain reduced sales charges as
set forth above through a right of accumulation of purchases of Class A
Shares and purchases of shares of other Flag Investors funds with the same
sales charge and purchases of shares of Flag Investors Intermediate-Term
Income Fund, Inc. and Flag Investors Maryland Intermediate Tax Free Income
Fund, Inc. (the "Intermediate Funds"). The applicable sales charge will be
determined based on the total of (a) the shareholder's current purchase plus
13
<PAGE>
(b) an amount equal to the then current net asset value or cost, whichever is
higher, of all Class A Shares and of all Flag Investors shares described above
and any Flag Investors Class D shares held by the shareholder. To obtain the
reduced sales charge through a right of accumulation, the shareholder must
provide Alex. Brown, either directly or through a Participating Dealer or
Shareholder Servicing Agent, as applicable, with sufficient information to
verify that the shareholder has such a right. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases.
The term "purchase" refers to an individual purchase by a single
purchaser, or to concurrent purchases, which will be aggregated, by a
purchaser, the purchaser's spouse and their children under the age of 21
years purchasing Class A Shares for their own account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of Intent which states the investor's intention to
invest at least $50,000 within a 13-month period in Class A Shares. Each
purchase of Class A Shares under a Letter of Intent will be made at the
Offering Price applicable at the time of such purchase to the full amount
indicated on the Letter of Intent. A Letter of Intent is not a binding
obligation upon the investor to purchase the full amount indicated. The
minimum initial investment under a Letter of Intent is 5% of the full amount.
Class A Shares purchased with the first 5% of the full amount will be held in
escrow (while remaining registered in the name of the investor) to secure
payment of the higher sales charge applicable to the Class A Shares actually
purchased if the full amount indicated is not invested. Such escrowed shares
will be involuntarily redeemed to pay the additional sales charge, if
necessary. When the full amount indicated has been purchased, the escrowed
shares will be released. An investor who wishes to enter into a Letter of
Intent in conjunction with an investment in Class A Shares may do so by
completing the appropriate section of the Application Form attached to this
Prospectus.
No sales charge will be payable at the time of purchase on investments of
$1 million or more of Class A Shares. However, a contingent deferred sales
charge may be imposed on such investments in the event of a redemption
within 24 months following the purchase, at the rate of .50% on the lesser of
the value of the Class A Shares redeemed or the total cost of such shares. No
contingent deferred sales charge will be imposed on purchases of $3 million
or more of Class A Shares redeemed within 24 months of purchase if the
Participating Dealer and Alex. Brown have entered into an agreement under
which the Participating Dealer agrees to return any payments received on the
sale of such shares. In determining whether a contingent deferred sales
14
<PAGE>
charge is payable, and, if so, the amount of the charge, it is assumed that
Class A Shares not subject to such charge are the first redeemed followed by
other Class A Shares held for the longest period of time.
The Fund may sell Class A Shares at net asset value (without sales charge)
to the following: (i) banks, bank trust departments, registered investment
advisory companies, financial planners and broker-dealers purchasing Class A
Shares on behalf of their fiduciary and advisory clients, provided such
clients have paid an account management fee for these services (investors may
be charged a fee if they effect transactions in Fund shares through a broker
or agent); (ii) participants in a Flag Investors fund payroll savings plan
program; (iii) investors who have redeemed Class A Shares, or shares of any
other mutual fund in the Flag Investors family of funds with the same sales
charges, or who have redeemed shares of the Intermediate Funds which they had
held for at least 24 months prior to redemption, in an amount that is not
more than the total redemption proceeds, provided that the purchase is within
90 days after the redemption; and (iv) current or retired Directors of the
Fund and directors and employees (and their immediate families) of ISI, Alex.
Brown, Participating Dealers and their respective affiliates.
Class A Shares may also be purchased through a Systematic Purchase Plan.
An investor who wishes to take advantage of such a plan should contact Alex.
Brown or a Participating Dealer or Shareholder Servicing Agent.
............................................................................
PURCHASES BY EXCHANGE
As permitted pursuant to any rule, regulation or order promulgated by the
SEC, shareholders of other Flag Investors funds may exchange their Class A
shares of those funds for an equal dollar amount of Class A Shares. Except as
provided below, Class A Shares issued pursuant to this offer will not be
subject to the sales charges described above or any other charge.
Shareholders of Flag Investors Cash Reserve Prime Class A Shares may exchange
into Class A Shares upon payment of the difference in sales charges, as
applicable.
When a shareholder acquires Class A Shares through an exchange from
another fund in the Flag Investors family of funds, the Fund will combine the
period for which the original shares were held prior to the exchange with the
holding period of the Class A Shares acquired in the exchange for purposes of
determining what, if any, contingent deferred sales charge is applicable upon
a redemption of any such shares. Shareholders of the Intermediate Funds may
15
<PAGE>
exchange into Class A Shares upon payment of the difference in sales charges,
as applicable, except that the exchange will be made at net asset value if the
shares of such funds have been held for more than 24 months.
The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day,
provided that the exchange request is received prior to 4:00 p.m. (Eastern
Time). Exchange requests received after 4:00 p.m. (Eastern Time) will be
effected on the next Business Day.
Shareholders of any mutual fund not affiliated with the Fund who have paid
a sales charge may exchange shares of such fund for an equal dollar amount of
Class A Shares by submitting to Alex. Brown or a Participating Dealer the
proceeds of the redemption of such shares, together with evidence of the
payment of a sales charge and the source of such proceeds. Class A shares
issued pursuant to this offer will not be subject to the sales charges
described above or any other charge.
The exchange privilege with respect to other Flag Investors funds may also
be exercised by telephone. (See "Telephone Transactions" below.) The exchange
privilege may be exercised only in those states where the class of shares of
such other funds may legally be sold. Investors should receive and read the
applicable prospectus prior to tendering shares for exchange. The Fund may
modify or terminate this offer of exchange at any time upon 60 days' prior
written notice to the shareholder.
............................................................................
PURCHASES THROUGH AUTOMATIC INVESTING PLAN
Shareholders may purchase Class A Shares regularly by means of an
Automatic Investing Plan with a pre-authorized check drawn on their checking
accounts. Under this plan, the shareholder may elect to have a specified
amount invested monthly or quarterly in Class A Shares. The amount specified
will be withdrawn from the shareholder's checking account using the
pre-authorized check and will be invested in Class A Shares at the applicable
Offering Price determined on the date the amount is available for investment.
Participation in the Automatic Investing Plan may be discontinued either by
the Fund or the shareholder upon 30 days' prior written notice to the other
party. A shareholder who wishes to enroll in the Automatic Investing Plan may
do so by completing the appropriate section of the Application Form attached
to this Prospectus.
16
<PAGE>
.............................................................................
DIVIDEND REINVESTMENT PLAN
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Class A Shares. A
shareholder who wishes to enroll in the Dividend Reinvestment Plan should check
the appropriate box on the Application Form or call (800) 553-8080 for
additional information.
Alternately, shareholders may have their distributions invested in Class A
shares of other funds in the Flag Investors family of funds or in shares of the
Intermediate Funds. Shareholders who are interested in this option should call
(800) 553-8080 for additional information.
Reinvestments of distributions will be effected without a sales charge.
- -----------------------------------------------------------------------------
6. How to Redeem Shares
Shareholders may redeem all or part of their investment on any Business
Day by transmitting a redemption order through Alex. Brown, a Participating
Dealer, a Shareholder Servicing Agent or by regular or express mail to the
Fund's transfer agent (the "Transfer Agent"). Shareholders may also redeem
Class A Shares by telephone (in amounts up to $50,000). (See "Telephone
Transactions" below.) A redemption order is effected at the net asset value
per share (reduced by any applicable contingent deferred sales charge) next
determined after receipt of the order (or, if stock certificates have been
issued for the Class A Shares to be redeemed, after the tender of the stock
certificates for redemption). Redemption orders received after 4:00 p.m.
(Eastern Time) will be effected at the net asset value next determined on the
following Business Day. Payment for redeemed Class A Shares will be made by
check and will be mailed within seven days after receipt of a duly authorized
telephone redemption request or of a redemption order fully completed and, as
applicable, accompanied by the documents described below:
1) A letter of instructions, specifying the shareholder's account number with
a Participating Dealer or Shareholder Servicing Agent, if applicable, and
the number of Class A Shares or dollar amount to be redeemed, signed by
all owners of the Class A Shares in the exact names in which their account
is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of each
registered owner by a member of the Federal Deposit Insurance Corporation,
a trust company, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency, or savings
association;
17
<PAGE>
3) If Class A Shares are held in certificate form, stock certificates either
properly endorsed or accompanied by a duly executed stock power for Class
A Shares to be redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of Class A Shares will be
paid on the next dividend payable date. If all of the Class A Shares in a
shareholder's account have been redeemed on a dividend payable date, the
dividend will be remitted by check to the shareholder.
The Fund has the power, under its Articles of Incorporation, to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' written notice.
............................................................................
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who hold Class A Shares having a value of $10,000 or more may
arrange to have a portion of their Class A Shares redeemed monthly or
quarterly under the Fund's Systematic Withdrawal Plan. Such payments are
drawn from income dividends, and, to the extent necessary, from share
redemptions (which would be a return of principal and, if reflecting a gain,
would be taxable). If redemptions continue, a shareholder's account may
eventually be exhausted. Because share purchases include a sales charge that
will not be recovered at the time of redemption, a shareholder should not
have a withdrawal plan in effect at the same time he is making recurring
purchases of Class A Shares. A shareholder who wishes to enroll in the
Systematic Withdrawal Plan may do so by completing the appropriate section of
the Application Form attached to this Prospectus.
- ----------------------------------------------------------------------------
7. Telephone Transactions
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Class A Shares in amounts up to $50,000, by
notifying the Transfer Agent by telephone at (800) 553-8080 on any Business
Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time) or by regular
or express mail at its address listed under "Custodian, Transfer Agent,
Accounting Services." Telephone transaction privileges are automatic.
Shareholders may specifically request that no telephone redemptions or
exchanges be accepted for their accounts. This election may be made on the
Application Form or at any time thereafter by completing and returning
appropriate documentation supplied by the Transfer Agent.
18
<PAGE>
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or
the close of the New York Stock Exchange, whichever is earlier, is effective
that day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be
effected at the net asset value (less any applicable contingent deferred
sales charge on redemptions) as determined on the next Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, all telephone
transaction requests will be recorded and investors may be required to
provide additional telecopied instructions of such transaction requests. The
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent telephone instructions if either of them does not employ these
procedures. If these procedures are employed, neither the Fund nor the
Transfer Agent will be responsible for any loss, liability, cost or expense
for following instructions received by telephone that either of them
reasonably believes to be genuine. During periods of extreme economic or
market changes, shareholders may experience difficulty in effecting telephone
transactions. In such event, requests should be made by regular or express
mail. Class A Shares held in certificate form may not be exchanged or
redeemed by telephone. (See "How to Invest in the Fund -- Purchases by
Exchange" and "How to Redeem Shares.")
- -----------------------------------------------------------------------------
8. Dividends and Taxes
.............................................................................
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute to shareholders substantially all of
its net investment income in the form of monthly dividends. The Fund may
distribute to shareholders any net capital gains (the excess of net long-term
capital gains over net short-term capital losses) on an annual basis or,
alternatively, may elect to retain such net capital gains and pay tax
thereon.
Unless the shareholder elects otherwise, all income and capital gains
distributions will be reinvested in additional Class A Shares at net asset
value. Shareholders may elect to terminate automatic reinvestment by giving
written notice to the Transfer Agent (see "Custodian, Transfer Agent,
Accounting Services"), either directly or through their Participating Dealer
or Shareholder Servicing Agent, at least five days before the next date on
which dividends or distributions will be paid.
19
<PAGE>
.............................................................................
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a general summary of certain federal tax
considerations affecting the Fund and the shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the Fund or the
shareholders, and the discussion here is not intended as a substitute for
careful tax planning.
The following summary is based on current tax laws and regulations, which
may be changed by legislative, judicial, or administrative action. The
Statement of Additional Information sets forth further information concerning
taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As long as the Fund qualifies for this tax
treatment, it will be relieved of federal income tax on amounts distributed
to shareholders. The Fund also intends to make sufficient distributions prior
to the end of each calendar year to avoid liability for federal excise tax.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by satisfying the Code's requirement that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
consists of obligations the interest on which is exempt from federal income
tax.
As long as this and certain other requirements are met, dividends derived
from the Fund's net tax-exempt interest income will be "exempt-interest
dividends" that are excluded from the gross income of the Fund's shareholders
for federal income tax purposes. Exempt-interest dividends may, however, have
collateral federal income tax consequences, including alternative minimum tax
consequences. Furthermore, the Fund may not be an appropriate investment for
persons who are "substantial users" of facilities financed with industrial
development bonds or private activity bonds (or related parties to
"substantial users"). (See the Statement of Additional Information.)
Current federal tax law limits the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of the Fund to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment of exempt
interest dividends.
20
<PAGE>
Distributions to shareholders of net investment income of the Fund that is
not tax-exempt interest and of net short-term capital gains of the Fund will
be taxable to shareholders as ordinary income, whether such distributions are
received in cash or in additional Class A Shares.
Distributions to shareholders of net capital gains of the Fund are taxable
to shareholders as long-term capital gains, whether received in cash or
additional Class A Shares, and regardless of how long a shareholder has held
the shares. Shareholders will be advised annually as to the federal income
tax status of distributions made during the year.
Ordinarily, shareholders will include all dividends declared by the Fund
as income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
The sale, exchange or redemption of Class A Shares is a taxable event for
the shareholder.
Any gain or loss recognized on a sale, exchange or redemption of Class A
Shares by a shareholder who is not a dealer in securities will generally be
treated as a long-term capital gain or loss if the Class A Shares have been held
for more than twelve months and otherwise will be generally treated as a
short-term capital gain or loss. Any loss recognized by a shareholder upon the
sale or redemption of Class A Shares held for six months or less, however, will
be disallowed to the extent of any exempt-interest dividends received by the
shareholder with respect to such Shares. If Class A Shares on which a capital
gains distribution has been received are subsequently sold or redeemed and such
shares have been held for six months or less, any loss recognized will be
treated as a long term capital loss to the extent of the capital gains
distribution.
Interest on indebtedness incurred or continued by shareholders to purchase
or carry Class A Shares will not be deductible for federal income tax
purposes.
The Fund may not be a suitable investment for tax-exempt shareholders and
plans, because such shareholders and plans would not gain any additional
benefit from the receipt of exempt-interest dividends.
Shareholders are encouraged to consult with their tax advisors concerning
the application of the rules set forth above to their particular
circumstances and the application of state and local taxes to an investment
in the Fund.
21
<PAGE>
- -----------------------------------------------------------------------------
9. Management of the Fund
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, distributor, administrator, custodian
and transfer agent. The day-to-day operations of the Fund are delegated to
the Fund's officers, to Alex. Brown, as distributor of the Class A Shares, to
the Advisor and to the Fund's administrator. Four Directors and all of the
officers of the Fund are officers or employees of Alex. Brown, ISI or the
Fund's administrator. The other Directors of the Fund have no affiliation
with Alex. Brown, ISI or the Fund's administrator.
The Fund's Directors and officers are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
*Edward S. Hyman Chairman Edward J. Veilleux Vice President
*W. James Price Vice Chairman Brian C. Nelson Vice President
*Richard T. Hale Vice Chairman and Secretary
*R. Alan Medaugh Director and President Nancy Lazar Vice President
James J. Cunnane Director Carrie L. Butler Vice President
John F. Kroeger Director Joseph A. Finelli Treasurer
Louis E. Levy Director Denice De Florio Assistant Vice
Eugene J. McDonald Director President
Harry Woolf Director Laurie D. DePrine Assistant Secretary
</TABLE>
- ------
* Messrs. Hyman, Price, Hale and Medaugh are "interested persons" of the Fund
within the meaning of Section 2(a)(19) under the Investment Company Act of
1940, as amended (the "Investment Company Act").
- ----------------------------------------------------------------------------
10. Investment Advisor
ISI, a registered investment advisor, serves as investment advisor to the
Fund pursuant to an investment advisory agreement dated as of April 1, 1991. ISI
employs Messrs. Edward S. Hyman and R. Alan Medaugh. Due to their stock
ownership, Messrs. Hyman and Medaugh may be deemed to be controlling persons of
ISI. As of December 31, 1995, the Advisor had approximately $1 billion under
management representing both tax-free and taxable accounts. The Advisor also
acts as investment advisor to Total Return U.S. Treasury Fund, Inc. and North
American Government Bond Fund, Inc., open-end investment companies with
approximately $438 million of aggregate net assets as of December 31, 1995.
For the fiscal year ended October 31, 1995, ISI received a fee (net of fee
waivers) equal to .27% of the Fund's average daily net assets. ISI and
22
<PAGE>
the Fund's administrator, have voluntarily agreed to reduce proportionately
their respective annual fees if necessary, so that the Fund's annual expenses
do not exceed .90% of its average daily net assets. (See "Fund Expenses.")
The address of the Advisor is 717 Fifth Avenue, New York, New York 10022.
..............................................................................
PORTFOLIO MANAGERS
Edward S. Hyman, Chairman of ISI and the Fund, and R. Alan Medaugh, President
of ISI and President and a Director of the Fund, have shared direct portfolio
management responsibility for the Fund since its inception. Mr. Hyman is
responsible for developing the economic analysis upon which the Fund's selection
of investments is based. (See "Investment Program.") Before joining ISI, Mr.
Hyman was a vice chairman and member of the Board of C.J. Lawrence Inc. and
prior thereto, an economic consultant at Data Resources. He writes a variety of
international and domestic economic research reports which follow trends that
may determine the direction of interest rates. These international and domestic
reports are sent to ISI's private institutional clients in the United States and
overseas. The periodical Institutional Investor, which rates analysts and
economists on an annual basis has rated Mr. Hyman as its "first team" economist,
which is its highest rating, in each of the last sixteen years.
Mr. Medaugh is responsible for day-to-day portfolio management. Prior to
joining ISI, Mr. Medaugh was Managing Director of C.J. Lawrence Fixed Income
Management and prior thereto Senior Vice President and bond portfolio manager
at Fiduciary Trust International. While at Fiduciary Trust International, Mr.
Medaugh led their Fixed-Income Department which managed $5 billion of
international fixed income portfolios for institutional clients. Mr. Medaugh
also had prior experience as a bond portfolio manager at both Putnam
Management Company and Fidelity Management and Research.
- -----------------------------------------------------------------------------
11. Administrator
Investment Company Capital Corp. ("ICC"), 135 East Baltimore Street,
Baltimore, Maryland 21202, a wholly-owned subsidiary of Alex. Brown, provides
administration services to the Fund.
23
<PAGE>
ICC supervises the day-to-day operations of the Fund, including the
preparation of registration statements, proxy materials, shareholder reports,
compliance with all requirements of securities laws in the states in which
the shares are distributed and oversight of the relationship between the Fund
and its other service providers. For its services as administrator of the
Fund for the fiscal year ended October 31, 1995, ICC received a fee (net of
fee waivers) equal to .13% of the Fund's average daily net assets. ICC and
ISI have voluntarily agreed to reduce proportionately their respective annual
fees if necessary, so that the Fund's annual expenses do not exceed .90% of
its average daily net assets. (See "Fund Expenses.")
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent,
Accounting Services.")
- -----------------------------------------------------------------------------
12. Distributor
Alex. Brown acts as distributor of the Class A Shares. Alex. Brown is an
investment banking firm which offers a broad range of investment services to
individual, institutional, corporate and municipal clients. It is a
wholly-owned subsidiary of Alex. Brown Incorporated which has engaged
directly and through subsidiaries and affiliates in the investment business
since 1800. Alex. Brown is a member of the New York Stock Exchange and other
leading securities exchanges. Headquartered in Baltimore, Maryland, Alex.
Brown has offices throughout the United States and, through subsidiaries,
maintains offices in London, England, Geneva, Switzerland and Tokyo, Japan.
The Fund has adopted a Distribution Plan for the Class A Shares pursuant
to Rule 12b-1 under the Investment Company Act (the "Plan"). As compensation
for its services for the fiscal year ended October 31, 1995, Alex. Brown
received a fee equal to .25% of the Class A Shares' average daily net assets.
Alex. Brown expects to allocate on a proportional basis most of its annual
fee to its investment representatives or up to all of its fee to selected
Participating Dealers as compensation for their ongoing shareholder services,
including processing redemption and sale requests and responding to
shareholder inquiries.
In addition, the Fund may enter into Shareholder Servicing Agreements with
certain financial institutions, such as banks, to act as Shareholder
Servicing Agents, pursuant to which Alex. Brown will allocate on a
proportional basis up to all of its distribution fee as compensation for such
24
<PAGE>
financial institutions' ongoing shareholder services. Such financial
institutions may impose separate fees in connection with these services and
investors should review this Prospectus in conjunction with any such
institution's fee schedule. Amounts allocated to Participating Dealers and
Shareholder Servicing Agents may not exceed amounts payable to Alex. Brown
under the Plan.
Payments under the Plan are made as described above regardless of Alex.
Brown's actual cost of providing distribution services and may be used to pay
Alex. Brown's overhead expenses. If the cost of providing distribution
services to the Fund in connection with the sale of the Class A Shares is
less than .25% of the average daily net assets invested in Class A Shares for
any period, the unexpended portion of the distribution fee may be retained by
Alex. Brown. Alex. Brown will from time to time and from its own resources
pay or allow additional discounts or promotional incentives in the form of
cash or other compensation (including merchandise or travel) to Participating
Dealers.
- -----------------------------------------------------------------------------
13. Custodian, Transfer Agent,
Accounting Services
PNC Bank, National Association ("PNC Bank"), a national banking
association with offices at Airport Business Park, 200 Stevens Drive, Lester,
Pennsylvania 19113, acts as custodian of the Fund's assets. Investment
Company Capital Corp., 135 East Baltimore Street, Baltimore, Maryland 21202
(telephone: (800) 553-8080) is the Fund's transfer and dividend disbursing
agent and provides accounting services to the Fund. As compensation for
providing accounting services for the fiscal year ended October 31, 1995, ICC
received from the Fund a fee equal to .05% of the Fund's average daily net
assets. (See the Statement of Additional Information.) ICC also serves as the
Fund's administrator.
- -----------------------------------------------------------------------------
14. Performance Information
From time to time, the Fund may advertise its performance, including
comparisons with other mutual funds with similar investment objectives and to
relevant indices. All such advertisements will show the average annual total
return, net of the Fund's maximum sales charge, over one, five and ten year
periods or, if such periods have not yet elapsed, shorter periods
corresponding to the life of the Fund. Such total return quotations will be
computed by finding the average annual compounded rates of return over such
periods that would equate an assumed initial investment of $1,000 to the
ending redeemable value, net of the maximum sales charge and other fees,
25
<PAGE>
according to the required standardized calculation. The standardized
calculation is required by the SEC to provide consistency and comparability in
investment company advertising and is not equivalent to a yield calculation.
The Fund may also advertise yield and tax-equivalent yield quotations. Any
yield quotation of the Fund is based on the annualized net investment income
per share of the Fund over a 30 day period. The yield for the Fund is
calculated by dividing the net investment income per share of the Fund earned
during the period by the maximum offering price per share of the Fund on the
last day of that period. The resulting figure is then annualized. The Fund's
yield calculations assume a maximum sales charge of 4.50% for the Class A
Shares. The Fund's taxable-equivalent yield is calculated by determining the
rate of return that would have to be achieved on a fully taxable investment
to produce the after tax equivalent of the Fund's yield. In calculating
taxable-equivalent yield, the Fund assumes certain tax brackets for
shareholders.
If the Fund compares its performance to other funds or to relevant
indices, its performance will be stated in the same terms in which such
comparative data and indices are stated.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services which monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Lehman Brothers Municipal
Bond Index, the Consumer Price Index, the return on 90 day U.S. Treasury
Bills, long-term U.S. Treasury bonds, bank certificates of deposit, the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average. The
Fund may also use total return performance data as reported in the following
national financial and industry publications that monitor the performance of
mutual funds: Money Magazine, Forbes, Business Week, Barron's, Investor's
Daily, IBC/Donoghue's Money Fund Report and The Wall Street Journal. For
these purposes, the performance of the Fund, as well as the performance of
such indices, may not reflect sales charges, the inclusion of which would
reduce performance results.
Performance will fluctuate, and any statement of performance should not be
considered as representative of the future performance of the Fund.
Shareholders should remember that performance is generally a function of the
type and quality of investments held by the Fund, operating expenses and
market conditions. Any fees charged by banks with respect to customer
accounts through which Class A Shares may be purchased, although not included
in calculations of performance, will reduce performance results.
26
<PAGE>
- ----------------------------------------------------------------------------
15. General Information
............................................................................
CAPITAL SHARES
The Fund is a Maryland corporation, authorized to issue forty million
shares of capital stock, with a par value of $.001 per share. Shares of the
Fund have equal rights with respect to voting. Voting rights are not
cumulative, so the holders of more than 50% of the outstanding shares of
capital stock voting together for election of Directors may elect all the
members of the Board of Directors of the Fund. In the event of liquidation or
dissolution of the Fund, each share is entitled to its portion of the Fund's
assets after all debts and expenses have been paid. The fiscal year end of
the Fund is October 31.
The Board of Directors of the Fund is authorized to establish additional
"series" of shares of capital stock, each of which would evidence interests
in a separate portfolio of securities, and separate classes of each series of
the Fund. The shares offered by this Prospectus have been designated "Flag
Investors Managed Municipal Fund Class A Shares." The Board has no present
intention of establishing any additional series of the Fund but the Fund does
have another class of shares in addition to the shares offered hereby, "ISI
Managed Municipal Fund Shares." Shares of that class are sold through
broker-dealers and have similar 12b-1 fees and front-end sales charges as the
Class A Shares. Different classes of the Fund may be offered to certain
investors and holders of such shares may be entitled to certain exchange
privileges not offered to Class A Shares. All classes of the Fund share a
common investment objective, portfolio and advisory fee, but the classes may
have different distribution expenses and sales charges and, accordingly,
performance may differ.
............................................................................
ANNUAL MEETINGS
The Fund does not expect to hold annual meetings of shareholders but
special meetings of shareholders may be held under certain circumstances.
Shareholders of the Fund retain the right, under certain circumstances, to
request that a meeting of shareholders be held for the purpose of considering
the removal of a Director from office, and if such a request is made, the
Fund will assist with shareholder communications in connection with the
meeting.
27
<PAGE>
.............................................................................
REPORTS
The Fund furnishes shareholders with semi-annual and annual reports
containing information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
financial statements are audited by the Fund's independent accountants,
Coopers & Lybrand L.L.P.
.............................................................................
FUND COUNSEL
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
.............................................................................
SHAREHOLDERS INQUIRIES
Shareholders with inquiries concerning their shares should contact the
Transfer Agent at (800) 553-8080, Alex. Brown at (800) 767-FLAG, or a
Participating Dealer or Shareholder Servicing Agent, as appropriate.
28
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND CLASS A SHARES
NEW ACCOUNT APPLICATION
- -----------------------------------------------------------------------------
Make check payable to "Flag Investors Managed Municipal
Fund Class A Shares" and mail with this application to:
Alex. Brown & Sons Incorporated/Flag Investors Funds
P.O. Box 419426
Kansas City, MO 64141-6426
Attn: Flag Investors Managed Municipal Fund Class A Shares
For assistance in completing this application please call:
1-800-553-8080 8:30 a.m. to 5:30 p.m., Eastern Time, Monday-Friday.
To open an IRA account, call 1-800-767-3524 to request an IRA
application.
I enclose a check for $_______ payable to "Flag Investors Managed
Municipal Fund Class A Shares" for the purchase of Flag Investors
Managed Municipal Fund Class A Shares. The minimum initial purchase is
$2,000, except that the minimum initial purchase for shareholders of
any other Flag Investors Fund or class is $500 and the minimum initial
purchase for participants in the Fund's Automatic Investing Plan is
$250. Each subsequent purchase requires a $100 minimum, except that
the minimum subsequent purchase under the Fund's Automatic Investing
Plan is $250 for quarterly purchases and $100 for monthly purchases.
The Fund reserves the right not to accept checks for more than $50,000
that are not certified or bank checks.
YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
Existing Account No., if any:_______________________
INDIVIDUAL OR JOINT TENANT
- -----------------------------------------------------------------------------
First Name Initial Last Name
- -----------------------------------------------------------------------------
Social Security Number
- -----------------------------------------------------------------------------
Joint Tenant Initial Last Name
CORPORATIONS, TRUSTS, PARTNERSHIPS, ETC.
- -----------------------------------------------------------------------------
Name of Corporation, Trust or Partnership
- --------------------------------- --------------------------------------
Tax ID Number Date of Trust
- -----------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
- -----------------------------------------------------------------------------
For the Benefit of
GIFTS TO MINORS
- -----------------------------------------------------------------------------
Custodian's Name (only one allowed by law)
- -----------------------------------------------------------------------------
Minor's Name (only one)
- -----------------------------------------------------------------------------
Social Security Number of Minor
under the _______________________Uniform Gifts to Minors Act
State of Residence
MAILING ADDRESS
- -----------------------------------------------------------------------------
Street
- -----------------------------------------------------------------------------
City State Zip
( )
- -----------------------------------------------------------------------------
Daytime Phone
<PAGE>
LETTER OF INTENT (OPTIONAL)
[ ] I agree to the Letter of Intent and Escrow Agreement set forth in the
accompanying prospectus. Although I am not obligated to do so, I intend to
invest over a 13-month period in Flag Investors Managed Municipal Fund Class
A Shares, as shown below, in an aggregate amount at least equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
- -----------------------------------------------------------------------------
RIGHT OF ACCUMULATION (OPTIONAL)
[ ] I already own shares of the Flag Investors Fund(s) (except Class B Shares)
set forth below to be applied for a reduced sales charge. List the Account
numbers of other Flag Investors Funds that you or your immediate family (spouse
and children under 21) already own that qualify for reduced sales charges.
Fund Name Account No. Owner's Name Relationship
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
DISTRIBUTION OPTIONS
Please check appropriate boxes. If none of the options is selected, all
distributions will be reinvested in additional Class A Shares of the Fund at
no sales charge.
Income Dividends
[ ] Reinvested in additional shares
[ ] Paid in Cash
Capital Gains
[ ] Reinvested in additional shares
[ ] Paid in Cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
- -----------------------------------------------------------------------------
AUTOMATIC INVESTING PLAN (OPTIONAL)
[ ] I authorize you as Agent for the Automatic Investing Plan to
automatically invest $_____ for me, on a monthly or quarterly basis, on or
about the 20th of each month or if quarterly, the 20th of January, April,
July and October, and to draw a bank draft in payment of the investment
against my checking account. (Bank drafts may be drawn on commercial banks
only.)
Minimum Initial Investment: $250
Subsequent Investments (check one):
[ ] Monthly ($100 minimum)
[ ] Quarterly ($250 minimum)
- -----------------------------------------------------------------------------
Bank Name
- -----------------------------------------------------------------------------
Existing Flag Investors Fund Account No., if any
Please attach a voided check.
- -----------------------------------------------------------------------------
Depositor's Signature Date
- -----------------------------------------------------------------------------
Depositor's Signature Date
(if joint acct., both must sign)
<PAGE>
- -----------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
[ ] Beginning the month of _____________ , 19__ please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of $______,
from Class A Shares that I own, payable to the account registration address
as shown above. (Participation requires minimum account value of $10,000.)
Frequency (check one):
[ ] Monthly
[ ] Quarterly (January, April, July and October)
- -----------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect
to other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/we do not want
[ ] Telephone redemption privileges
[ ] Telephone exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a pre-designated bank account, please
provide the following information:
- -----------------------------------------------------------------------------
Bank:
- -----------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------
Account No:
- -----------------------------------------------------------------------------
Bank Account Name:
- -----------------------------------------------------------------------------
<PAGE>
SIGNATURE AND TAXPAYER
CERTIFICATION
I have received a copy of the Fund's prospectus dated March 1, 1996. Unless
the box below is checked, I certify under penalties of perjury, (1) that the
number shown on this form is my correct taxpayer identification number and
(2) that I am not subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. [ ] Check here
if you are subject to backup withholding.
If a non-resident alien, please indicate country of residence:
- -----------------------------------------------------------------------------
I acknowledge that the telephone redemption and exchange privileges are
automatic and will be effected as described in the Fund's current prospectus
(see "Telephone Transactions"). I also acknowledge that I may bear the risk
of loss in the event of fraudulent use of such privileges. If I do not want
telephone redemption or exchange privileges, I have so indicated on this
Application.
- -----------------------------------------------------------------------------
Signature Date
- -----------------------------------------------------------------------------
Signature (if joint acct., both must sign) Date
For Dealer Use Only
Dealer's Name:____________________________________________ Dealer Code:________
Dealer's Address:_________________________________________ Branch Code:________
Representative:___________________________________________ Rep. No.: __________
<PAGE>
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
February 26, 1996
Cross Reference Sheet
<TABLE>
<CAPTION>
Registration
Statement
Items Required by Form N-1A Heading
- --------------------------- ------------
Part A - Information Required in a Prospectus
- --------
<S> <C> <C>
Item 1. Cover Page....................................................... Cover Page
Item 2. Synopsis......................................................... Fund Expenses
Item 3. Condensed Financial Information.................................. Financial Highlights
Item 4. General Description of Registrant................................ Investment Program;
Investment Restrictions;
General Information
Item 5. Management of the Fund........................................... Management of the Fund;
Investment Advisor;
Administrator;
Distributor; Custodian,
Transfer Agent,
Accounting Services
Item 5A. Management's Discussion of Fund Performance...................... *
Item 6. Capital Stock and Other Securities............................... Cover Page; Dividends
and Taxes; General
Information
Item 7. Purchase of Securities Being Offered............................. How to Invest in
the Fund; Distributor
Item 8. Redemption or Repurchase......................................... How to Redeem Shares
Item 9. Pending Legal Proceedings........................................ **
</TABLE>
- ---------------
* Information required by Item 5A is contained in Registrant's 1995 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
<TABLE>
<CAPTION>
Part B - Information Required in a Statement of Additional Information
- --------
<S> <C> <C>
Item 10. Cover Page....................................................... Cover Page
Item 11. Table of Contents................................................ Table of Contents
Item 12. General Information and History.................................. General Information
and History
Item 13. Investment Objectives and Policies............................... Investment Objectives
and Policies
Item 14. Management of the Fund........................................... Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities....................................................... Control Persons and
Principal Holders of
Securities
Item 16. Investment Advisory and Other Services........................... Investment Advisory
and Other Services;
Custodian, Transfer
Agent, Accounting
Services; Independent
Accountants
Item 17. Brokerage Allocation............................................. Portfolio Transactions
Item 18. Capital Stock and Other Securities............................... Capital Shares;
Reports
Item 19. Purchase, Redemption and Pricing of Securities Being
Offered.......................................................... Valuation of Shares
and Redemption
Item 20. Tax Status....................................................... Federal Tax Treatment
of Dividends and
Distributions
Item 21. Underwriters..................................................... Distribution of
Fund Shares
Item 22. Calculation of Performance Data.................................. Performance and
Yield Computations
Item 23. Financial Statements............................................. Financial Statements
</TABLE>
Part C - Other Information
- --------
Part C contains the information required by the items
contained therein under the items set forth in the form.
<PAGE>
ISI MANAGED MUNICIPAL FUND SHARES
(A Class of Managed Municipal Fund, Inc.)
717 Fifth Avenue
New York, NY 10022
For information call (800) 955-7175
The investment objective of this mutual fund (the "Fund") is a high level
of total return with relative stability of principal and, secondarily, high
current income through investment in a portfolio consisting primarily of
municipal obligations the interest on which is exempt from federal income
tax. To achieve this objective, the Fund invests primarily in municipal
obligations rated within the three highest rating categories of Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group.
Shares of the ISI class of the Fund ("Shares") are available through
Armata Financial Corp., the distributor of the Shares, as well as
Participating Dealers and Shareholder Servicing Agents. (See "How to Invest
in the Fund.") This Prospectus sets forth basic information that investors
should know about the Fund prior to investing and should be retained for
future reference. A Statement of Additional Information dated March 1, 1996,
has been filed with the Securities and Exchange Commission (the "SEC") and is
hereby incorporated by reference. It is available upon request and without
charge by contacting the Fund at the above address or telephone number.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK. THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is March 1, 1996
<PAGE>
1. FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES:
(as a percentage of offering price)
<S> <C>
Maximum Sales Charge Imposed on Purchases .............. 4.45%
Maximum Sales Charge Imposed on Reinvested Dividends ... None
Deferred Sales Charge .................................. None
Annual Fund Operating Expenses (net of fee waivers):
(as a percentage of average net assets)
Management Fees (net of fee waivers) ................... .27%*
12b-1 Fees ............................................. .25%
Other Expenses (net of fee waivers) .................... .38%*
---------
Total Fund Operating Expenses (net of fee waivers) ..... .90%*
</TABLE>
- ------
*The Fund's investment advisor and administrator intend, but are not
obligated, to waive their fees proportionately to the extent required so
that Total Fund Operating Expenses do not exceed .90% of the Fund's average
net assets. Absent fee waivers, Management Fees would be .40%. Other
Expenses (including administration fees) would be .45% and Total Fund
Operating Expenses would be 1.10%, respectively, of the Fund's average net
assets.
EXAMPLE:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:* $53 $72 $93 $155
- ------
*The example is based on Total Fund Operating Expenses, net of fee waivers.
Absent fee waivers, expenses would be higher.
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table is to describe the various costs and expenses
that an investor in the Fund will bear directly and indirectly. A person who
purchases Shares through a financial institution may be charged separate fees by
the financial institution. (For more complete descriptions of the various costs
and expenses, see "How to Invest in the Fund -- Offering Price", "Investment
Advisor", "Administrator" and "Distributor.") The Expenses and Example appearing
in the table above are based on the Fund's expenses for the fiscal year ended
October 31, 1995 which, net of fee waivers, were .90% of its average net assets.
The rules of the SEC require that the maximum sales charge (in the Shares' case,
4.45% of the offering price) be reflected in the above table. However, certain
investors may qualify for reduced sales charges (see "How to Invest in the Fund
- -- Offering Price"). Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders of the Fund may pay more than the equivalent of the maximum
front-end sales charges permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
2
<PAGE>
2. FINANCIAL HIGHLIGHTS
The Fund was organized as a corporation under the laws of the State of
Maryland on January 5, 1990 and commenced operations on February 26, 1990.
The financial highlights included in this table are a part of the Fund's
financial statements for the periods indicated and have been audited by
Coopers & Lybrand L.L.P., the Fund's independent accountants. The financial
statements and financial highlights for the fiscal year ended October 31,
1995 and the report thereon of Coopers & Lybrand L.L.P. are included in the
Statement of Additional Information. Additional performance information is
contained in the Fund's Annual Report for the fiscal year ended October 31,
1995, which is available at no cost by calling the Fund at (800) 955-7175.
(For a Share outstanding throughout each period)
<TABLE>
<CAPTION>
February 26, 1990
Year Ended October 31, (commencement of
---------------------------------------------------------- operations) through
1995 1994 1993 1992 1991 October 31, 1990
--------- --------- --------- --------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period $ 9.81 $ 11.10 $ 10.31 $ 10.36 $ 9.99 $ 10.00
------- ------- ------- ------- ------- --------
Income from Investment Operations:
Net investment income .................. 0.48 0.46 0.50 0.50 0.57 0.38
Net realized and unrealized gain/(loss)
on investments ..................... 0.98 (1.15) 0.94 0.22 0.49 (0.02)
------- ------- ------- ------- ------- --------
Total from Investment Operations ...... 1.46 (0.69) 1.44 0.72 1.06 0.36
------- ------- ------- ------- ------- --------
Less Distributions:
Dividends from net investment income
and net realized short-term gains .. (0.54) (0.56) (0.61) (0.65) (0.69) (0.37)
Distributions from net realized
long-term gains .................... (0.08) (0.04) (0.04) (0.12) -- --
------- ------- ------- ------- ------- --------
Total distributions ................... (0.62) (0.60) (0.65) (0.77) (0.69) (0.37)
------- ------- ------- ------- ------- --------
Net asset value at end of period ...... $ 10.65 $ 9.81 $ 11.10 $ 10.31 $ 10.36 $ 9.99
======= ======= ======= ======= ======= ========
Total Return:*
ISI Class Shares ...................... 15.42% (6.49)% 14.36% 6.06% 10.85% 3.78%
Flag Investors Class A Shares ......... 15.42% (6.49)% 14.36% 6.06% 10.85% 1.21%**
Ratios to Average Net Assets:
Expenses(2) ........................... 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%(1)
Net investment income(3) .............. 4.72% 4.37% 4.38% 4.78% 5.57% 6.12%(1)
Supplemental Data:
Net assets at end of period (000):
ISI Class Shares ................... $86,292 $83,607 $88,378 $51,420 $20,053 $17,290
Flag Investors Class A Shares ...... $45,980 $49,903 $53,486 $45,536 $38,491 $5,698
Portfolio turnover rate ............... 55% 37% 68% 95% 86% 99%
</TABLE>
- ------
* Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges.
** Flag Investors Class A Shares commenced operations on October 23, 1990.
(1) Annualized.
(2) Without the waiver of advisory and administration fees, the ratio of
expenses to average net assets would have been 1.10%, 1.11%, 1.14%,
1.27%, 1.47% and 1.92% for the periods ended October 31, 1995, 1994,
1993, 1992, 1991 and 1990, respectively.
(3) Without the waiver of advisory and administration fees, the ratio of net
investment income to average net assets would have been 4.52%, 4.16%, 4.14%,
4.41%, 4.99% and 5.11% for the periods ended October 31, 1995, 1994, 1993,
1992, 1991 and 1990, respectively.
3
<PAGE>
3. INVESTMENT PROGRAM
INVESTMENT OBJECTIVE, POLICIES AND RISK
CONSIDERATIONS
The investment objective of the Fund is a high level of total return, with
relative stability of principal, and secondarily, high current income,
through an investment in a portfolio consisting primarily of municipal
obligations the interest on which is exempt from federal income tax
("Municipal Obligations"). Municipal Obligations include securities of
states, territories and possessions of the United States and the District of
Columbia, and their political subdivisions, agencies and instrumentalities,
the interest on which is exempt from federal income tax in the opinion of
bond counsel for the issuer. Under normal market conditions, the Fund will
invest at least 80% of its net assets in Municipal Obligations. This policy
is fundamental and may be changed only by a majority vote of shareholders.
The Fund does not currently intend to acquire Municipal Obligations that are
subject to alternative minimum tax but may so invest up to 20% of its net
assets. Any capital gains from investments in Municipal Obligations will not
be exempt from federal income tax. (See "Dividends and Taxes--Tax Treatment
of Dividends and Distributions.") There can be no assurance that the Fund
will achieve its investment objective.
The Fund will invest at least 75% of its portfolio of Municipal Obligations
in securities rated, on the date of investment, A1 or higher (in the case of
municipal bonds) and higher than MIG 3 (in the case of municipal notes) by
Moody's Investors Service, Inc. ("Moody's") or rated A+ or higher (in the
case of municipal bonds) and higher than SP-2 (in the case of municipal
notes) by Standard & Poor's Ratings Group ("S&P") or, if unrated, of
comparable quality as determined by the Fund's investment advisor under
criteria approved by the Board of Directors. The Fund may invest up to 25% of
its portfolio of Municipal Obligations in securities rated A (in the case of
municipal bonds) or MIG 3 (in the case of municipal notes) by Moody's or
rated A (in the case of municipal bonds) or SP-2 (in the case of municipal
notes) by S&P or, if unrated, of comparable quality as determined by the
investment advisor under criteria approved by the Board of Directors.
Even under normal circumstances the Fund may invest to a limited extent in
taxable obligations depending on market conditions. These obligations may
include U.S. Government and agency, bank and corporate securities and
<PAGE>
repurchase agreements collateralized by such securities. For temporary
defensive purposes, the Fund may invest without limit in short-term
obligations of these types. The Fund may also invest in financial futures,
"when-issued" securities, standby commitments of brokers, dealers or banks
and variable and floating rate demand obligations. These investment
practices, which may involve certain special risks, are described below. The
Fund's investment objective may be changed only by the affirmative vote of a
majority of the outstanding shares of all classes of the Fund.
SELECTION OF INVESTMENTS
The Fund's investment advisor is International Strategy and Investment Inc.
("ISI" or the "Advisor"--see "Investment Advisor"). ISI buys and sells
securities for the Fund's portfolio with a view toward, first, a high level
of total return with relative stability of principal and, second, high
current income that is federally tax exempt. Therefore, in addition to yield,
the potential for capital gains and appreciation resulting from possible
changes in interest rates will be a consideration in selecting investments.
While income distributions to shareholders will generally be tax exempt,
distributions of capital gains will be taxable. Accordingly, to the extent
the Fund achieves its investment objective, a larger portion of its
distributions will be taxable than would be the case if the Fund placed a
greater emphasis on earning tax exempt income. (See "Investment
Program--Taxable Investments" and "Dividends and Taxes--Tax Treatment of
Dividends and Distributions.")
ISI will be free to take full advantage of the entire range of maturities
offered by Municipal Obligations and may adjust the average maturity of the
Fund's portfolio from time to time, depending on its assessment of the
relative yields available on securities of different maturities and its
expectations of future changes in interest rates. Thus, at certain times the
average maturity of the portfolio may be relatively short (under five years,
for example) and at other times may be relatively long (in the 20-30 year
range, for example). In determining which direction interest rates are likely
to move, the Advisor relies on the economic analysis made by its chairman,
Edward S. Hyman. There is no assurance that such economic analysis will
accurately predict interest rate trends or that the portfolio strategies
based on Mr. Hyman's economic analysis will be effective.
4
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SPECIAL RISK CONSIDERATIONS
As with other debt securities, the value of Municipal Obligations changes as
interest rates fluctuate. Changes in the value of portfolio securities will
not affect interest income from those securities but will be reflected in the
Fund's net asset value. Thus, a decrease in interest rates will generally
result in an increase in the value of the Shares. Conversely, during periods
of rising interest rates, the value of the Shares will generally decline. The
magnitude of these fluctuations will generally be greater at times when the
average maturity of the Fund's portfolio securities is longer.
PURCHASE OF WHEN-ISSUED SECURITIES
New issues of Municipal Obligations are usually offered on a when-issued
basis, which means that delivery and payment for such Municipal Obligations
normally take place within 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will be received
on a when-issued security are fixed at the time the purchase commitment is
entered into, although no interest on such security accrues to the Fund prior
to payment and delivery. A segregated account of the Fund consisting of cash,
cash equivalents or U.S. Government securities or other high quality liquid
debt securities equal at all times to the amount of the when-issued
commitments will be established and maintained by the Fund at the Fund's
custodian. Additional cash or liquid debt securities will be added to the
account when necessary. While the Fund will purchase securities on a
when-issued basis only with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date if it is deemed
advisable to limit the effects of adverse market action. The securities so
purchased or sold are subject to market fluctuation so, at the time of
delivery of the securities, their value may be more or less than the purchase
or sale price. The Fund will ordinarily invest no more than 40% of its net
assets at any time in Municipal Obligations purchased on a when-issued
basis.
STAND-BY COMMITMENTS
The Fund may acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, a broker,
dealer or bank is obligated to repurchase, at the Fund's option, specified
securities in the Fund's portfolio at a specified price. In this respect,
stand-by commitments are comparable to put options and thus the Fund's
<PAGE>
ability to enforce such obligations is subject to the risk that the seller of
the commitment may default on its obligations. The Fund will acquire stand-by
commitments as a means of changing the average maturity of its portfolio in
response to expected changes in market interest rates.
The Fund anticipates that stand-by commitments will generally be available
from brokers, dealers and banks without the payment of any direct or indirect
consideration, but the Fund may have to pay for stand-by commitments, thus
increasing the cost of acquiring and holding the underlying security and
similarly decreasing such security's yield. Gains realized in connection with
stand-by commitments will be taxable.
VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS
The Fund may purchase floating and variable rate demand notes and bonds,
which are tax-exempt obligations normally having stated maturities in excess
of one year, but which permit the holder to demand payment of principal
either at any time or at specified intervals. The interest rates on these
obligations fluctuate from time to time in response to changes in the market
interest rates. Frequently, such obligations are secured by letters of credit
or other credit support arrangements provided by banks. Where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem will be dependent on the ability of
the borrower to pay principal and interest on demand. Each demand note and
bond purchased by the Fund will meet the quality criteria established for the
purchase of other Municipal Obligations. The Advisor, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations in the Fund's portfolio.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. The Fund will not
invest more than 10% of its net assets in floating or variable rate demand
obligations as to which the Fund cannot exercise the demand feature on less
than seven days' notice if there is no secondary market available for these
obligations.
FUTURES CONTRACTS
The Fund may purchase and sell U.S. exchange traded futures contracts on bond
indices ("Futures Contracts"). At the same time a Futures Contract is purchased
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or sold, the Fund must allocate cash or securities as a deposit payment
("initial deposit"). The initial deposit varies but may be as low as 5% or less
of the value of the contract. Daily thereafter, the Futures Contract is valued
and the payment of "variation margin" may be required, so each day the Fund
would provide or receive cash that reflects any decline or increase in the
contract's value. A Futures Contract based on a municipal bond index provides
for a cash payment equal to the amount, if any, by which the value of the index
at maturity is above or below the value of the index at the time the contract
was entered into times a fixed index "multiplier." The index underlying such a
Futures Contract is generally a broad based index of securities designed to
reflect movements in the relevant market as a whole. The index assigns weighted
values to the securities included in the index, and its composition is changed
periodically.
These instruments will be used only to protect against anticipated future
changes in interest rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date. Should
interest rates move in an unexpected manner, the Fund may not achieve the
anticipated benefits of the Futures Contract and may realize a loss on the
Futures Contract in excess of any corresponding gain in the hedged portfolio
positions. Futures transactions involve other risks as well. For example, a
lack of correlation between the index and the assets being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and could result in losses on the Futures Contract in excess of
any corresponding gain in the hedged portfolio positions. In addition, there
can be no assurance that a liquid secondary market will exist for any Futures
Contract purchased or sold, and the Fund may be required to maintain a
position until exercise or expiration, which could result in losses on the
Futures Contract in excess of any corresponding gain in the hedged portfolio
positions.
Regulations of the Commodity Futures Trading Commission (the "CFTC") require
that the Fund enter into transactions in Futures Contracts for hedging
purposes only, or that in the case of long positions in Futures Contracts, an
alternative test be satisfied, in order to assure that the Fund will not be
deemed to be a "commodity pool" as defined in CFTC regulations. In addition,
<PAGE>
under CFTC rules the Fund may not purchase or sell such instruments if,
immediately thereafter, the sum of the amount of initial margin deposits on
existing Futures Contracts would exceed 5% of the Fund's total assets. In
addition, the Fund will not enter into Futures Contracts if obligations under
all Futures Contracts would amount to more than 30% of its total assets.
Gains recognized from futures transactions engaged in by the Fund are taxable
income to shareholders. The Fund reserves the right to invest in other types
of financial futures without obtaining prior shareholder approval.
REPURCHASE AGREEMENTS
The Fund may agree to purchase U.S. Treasury Securities from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase the securities at an established time and price. U.S.
Treasury Securities include Treasury bills, Treasury notes, Treasury bonds
and Separate Trading of Registered Interest and Principal of Securities
("STRIPS"), all of which are direct obligations of the U.S. Government and
are supported by the full faith and credit of the United States. The Fund
will enter into repurchase agreements only with banks and broker-dealers that
have been determined to be creditworthy by the Fund's Board of Directors
under criteria established with the assistance of the Advisor. Default by the
seller may, however, expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the Fund may be delayed or limited in
its ability to sell the collateral.
TAXABLE INVESTMENTS
Although the Fund intends, to the extent feasible but subject to market
conditions, to invest up to 100% of its assets in tax exempt Municipal
Obligations, it may invest, from time to time, in securities, the interest on
which is subject to federal income tax. The Fund may make such investments (a)
pending investment of proceeds from sales of Shares or portfolio securities in
tax-exempt securities, (b) pending settlement of purchases of portfolio
securities, (c) to maintain liquidity for meeting anticipated redemptions, or
(d) when in the Advisor's opinion it is advisable because of adverse conditions
affecting the market for Municipal Obligations. The taxable investments in which
the Fund may invest consist of U.S. Treasury Securities and repurchase
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<PAGE>
agreements fully collateralized by U.S. Treasury Securities (collectively, the
"Taxable Investments"). The Fund may invest up to 20% of its net assets in
Taxable Investments. The Fund may earn taxable income from other sources.
Dividends paid by the Fund that are attributable to interest earned from Taxable
Investments and to taxable income from other investments will be taxable to
investors. (See "Dividends and Taxes -- Tax Treatment of Dividends and
Distributions.")
SIZE OF FUND
The Fund currently intends to limit the size of the Fund and to accept share
purchases only from existing shareholders at such time as the assets of the
Fund are in excess of $200 million but less than $250 million, and thereafter
not to accept any share purchases other than dividend reinvestments.
4. INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of restrictions which
reflect both self-imposed standards and federal and state regulatory
limitations. The investment restrictions recited below are matters of
fundamental policy and may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. Accordingly, the Fund will
not:
1) Concentrate 25% or more of its total assets in securities of issuers in
any one industry (for this purpose the U.S. Government or any state or
local government or their agencies and instrumentalities are not
considered to be an industry);
2) With respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any single issuer (for this purpose, the U.S.
Government or its agencies and instrumentalities are not considered to be
an issuer and, in the case of Municipal Obligations, the public or private
entity ultimately responsible for payment of principal and interest on the
security is considered to be the issuer);
3) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only from banks and in an amount not exceeding 10% of
the value of the total assets of the Fund at the time of such borrowing,
provided that, while borrowings by the Fund equalling 5% or more of the
Fund's total assets are outstanding, the Fund will not purchase
securities; or
<PAGE>
4) Invest more than 10% of its total assets in illiquid securities, including
repurchase agreements with maturities of greater than seven days and
floating or variable rate demand obligations as to which the Fund cannot
exercise the demand feature on less than seven days' notice if there is no
secondary market available for these obligations.
The Fund is subject to further investment restrictions that are set forth in
the Statement of Additional Information.
5. HOW TO INVEST IN THE FUND
Shares may be purchased from Armata Financial Corp. ("Armata"), P.O. Box 515,
Baltimore, Maryland 21203, or through any securities dealer which has entered
into a dealer agreement with Armata ("Participating Dealers") or through any
financial institution which has entered into a shareholder servicing
agreement with the Fund ("Shareholder Servicing Agents"). Shares may also be
purchased by completing the Application Form attached to this Prospectus and
returning it, together with payment of the purchase price (including any
applicable front-end sales charge), to the address shown on the Application
Form. As used herein, the "Fund" refers to Managed Municipal Fund, Inc.,
whereas references to the "Shares" shall mean ISI Managed Municipal Fund
Shares which is a class of shares of the Fund.
The minimum initial investment is $5,000, except that the minimum initial
investment for participants in the Fund's Automatic Investing Plan is $250. Each
subsequent investment must be at least $250, except that the minimum subsequent
investment for participants in the Fund's Automatic Investing Plan is $100 for
monthly investments and $250 for quarterly investments. (See "Purchases through
Automatic Investing Plan" below.) Orders for purchases of Shares are accepted on
any day on which the New York Stock Exchange is open for business ("Business
Day"). The Fund reserves the right to suspend the sale of Shares at any time at
the discretion of Armata. Purchase orders for Shares will be executed at a per
Share purchase price equal to the net asset value next determined after receipt
of the purchase order plus any applicable front-end sales charge (the "Offering
Price") on the date such net asset value is determined (the "Purchase Date").
Purchases made by mail must be accompanied by payment of the Offering Price.
Purchases made through Armata or a Participating Dealer or Shareholder Servicing
7
<PAGE>
Agent must be in accordance with such entity's payment procedures. Armata may,
in its sole discretion, refuse to accept any purchase order.
The net asset value per Share is determined once daily as of the close of the
New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on
each Business Day. Net asset value per share of a class is calculated by
valuing all assets held by the Fund, deducting all liabilities, including
liabilities attributable to that specific class, and dividing the resulting
amount by the number of then outstanding shares of the class. For this
purpose, portfolio securities will be given their market value where feasible
based on quotations furnished by a pricing service approved by the Board of
Directors. Options and futures are valued at the settlement price, or if no
sales are reported, at the average of the last reported bid and asked prices.
Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established from time to time and monitored by the Fund's Board of
Directors. Debt obligations with maturities of 60 days or less are valued at
amortized cost which constitutes fair value as determined by the Fund's Board
of Directors.
OFFERING PRICE
Shares may be purchased from Armata, Participating Dealers or Shareholder
Servicing Agents at the Offering Price which includes a sales charge which is
calculated as a percentage of the Offering Price and decreases as the amount
of purchase increases as shown below:
<TABLE>
<CAPTION>
Sales Charge as
Sales Charge as Percentage of Dealer Retention
Percentage of Net Amount as Percentage of
Amount of Purchase Offering Price Invested Offering Price*
----------------------- --------------- -------------- ----------------
<S> <C> <C> <C>
Less than $ 50,000 ..... 4.45% 4.66% 4.00%
$50,000 - $ 99,999 ..... 3.50% 3.63% 3.00%
$100,000 - $ 249,999 ..... 2.50% 2.56% 2.00%
$250,000 - $ 499,999 ..... 2.00% 2.04% 1.50%
$500,000 - $ 999,999 ..... 1.50% 1.52% 1.25%
$1,000,000 - $1,999,999 ... 0.75% 0.76% 0.75%
$2,000,000 - $2,999,999 ... 0.50% 0.50% 0.50%
$3,000,000 and over ....... None None None
</TABLE>
- ------
* Armata may from time to time reallow to Participating Dealers up to 100% of
the sales charge included in the Offering Price of Shares. Dealers that
receive a reallowance of 100% of the sales charge may be considered
underwriters for purposes of the federal securities laws.
<PAGE>
A shareholder who purchases additional Shares may obtain reduced sales
charges as set forth in the table above through a right of accumulation. In
addition, an investor may obtain reduced sales charges as set forth above
through a right of accumulation of purchases of Shares and purchases of
shares of other mutual funds in the ISI family of funds. The applicable sales
charge will be determined based on the total of (a) the investor's current
purchase plus (b) an amount equal to the then current net asset value or
cost, whichever is higher, of all Shares and of all shares of such other
mutual funds in the ISI family of funds held by the shareholder. To obtain
the reduced sales charge through a right of accumulation, the shareholder
must provide Armata, either directly or through a Participating Dealer or
Shareholder Servicing Agent, as applicable, with sufficient information to
verify that the shareholder has such a right. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases. The term
"purchase" refers to an individual purchase by a single purchaser, or to
concurrent purchases, which will be aggregated, by a purchaser, the
purchaser's spouse and their children under the age of 21 years purchasing
Shares for their own account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of Intent which states the investor's intention to
invest at least $50,000 within a 13-month period in Shares. Each purchase of
Shares under a Letter of Intent will be made at the Offering Price applicable
at the time of such purchase to the full amount indicated on the Letter of
Intent. A Letter of Intent is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of the full amount. Shares purchased with the first 5%
of the full amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales charge applicable
to the Shares actually purchased if the full amount indicated is not
invested. Such escrowed Shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. When the full amount indicated has
been purchased, the escrowed Shares will be released. An investor who wishes
to enter into a Letter of Intent in conjunction with an investment in Shares
may do so by completing the appropriate section of the Application Form
attached to this Prospectus.
The Fund may sell Shares at net asset value (without sales charge) to the
following: (i) banks, bank trust departments, registered investment advisory
companies, financial planners and broker-dealers purchasing Shares on behalf of
their fiduciary and advisory clients, provided such clients have paid an account
8
<PAGE>
management fee for these services; (ii) investors who have redeemed Shares, or
shares of any other mutual fund in the ISI family of funds that have similar
sales charges, in an amount that is not more than the total redemption proceeds,
provided that the purchase is within six months after the redemption and the
amount of the purchase is at least $5,000; and (iii) current or retired
Directors of the Fund, directors and employees (and their immediate families) of
ISI, the Fund's administrator, and their respective affiliates, and employees of
Participating Dealers. In addition, investors who have redeemed shares of funds
in the ISI family of funds that have lower sales charges may purchase Shares at
net asset value in an amount that is not more than the total redemption
proceeds, provided that they held the shares of such funds for more than 24
months prior to the redemption, the purchase is within six months after the
redemption and the amount of the purchase is at least $5,000.
PURCHASES BY EXCHANGE
As permitted pursuant to any rule, regulation or order promulgated by the
SEC, shareholders of other mutual funds in the ISI family of funds that have
similar sales charges may exchange their shares of those funds for an equal
dollar amount of Shares. Shares issued pursuant to this offer will not be
subject to the sales charges described above or any other charge. In
addition, shareholders of funds in the ISI family of funds that have lower
sales charges may exchange into other funds in the family upon payment of the
difference in sales charges, except that the exchange will be made at net
asset value if the shares have been held for at least 24 months. The net
asset value of shares purchased and redeemed in an exchange request received
on a Business Day will be determined on the same day, provided that the
exchange request is received prior to 4:00 p.m. (Eastern Time). Exchange
requests received after 4:00 p.m. (Eastern Time) will be effected on the next
Business Day.
The exchange privilege may be exercised only in those states where the class
of shares of such other funds may legally be sold. Investors should receive
and read the applicable prospectus prior to tendering shares for exchange.
Until February 28, 1997, shareholders of any other mutual fund who have paid
a sales charge on their shares of such fund, and shareholders of any
closed-end fund, may exchange shares of such funds for an equal dollar amount
<PAGE>
of Shares by submitting to Armata or a Participating Dealer, the proceeds of
the redemption or sale of shares of such funds, together with evidence of the
payment of a sales charge (for mutual funds only) and the source of such
proceeds. Shares issued pursuant to this offer will not be subject to the
sales charges described above or any other charge.
The Fund may modify or terminate these offers of exchange at any time and
will provide shareholders with 60 days' written notice prior to any such
modification or termination. The exchange privilege with respect to other ISI
funds may also be exercised by telephone. (See "Telephone Transactions"
below.)
PURCHASES THROUGH AUTOMATIC INVESTING PLAN
Shareholders may purchase Shares regularly by means of an Automatic Investing
Plan with a pre-authorized check drawn on their checking accounts. Under this
plan, the shareholder may elect to have a specified amount invested monthly
or quarterly in Shares. The minimum initial investment is $250. Each
subsequent investment must be at least $100 for monthly investments and $250
for quarterly investments. The amount specified will be withdrawn from the
shareholder's checking account using the pre-authorized check and will be
invested in Shares at the applicable Offering Price determined on the date
the amount is available for investment. Participation in the Automatic
Investing Plan may be discontinued either by the Fund or the shareholder upon
30 days' prior written notice to the other party. A shareholder who wishes to
enroll in the Automatic Investing Plan may do so by completing the
appropriate section of the Application Form attached to this Prospectus.
DIVIDEND REINVESTMENT PLAN
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Shares. A shareholder
who wishes to enroll in the Dividend Reinvestment Plan should check the
appropriate box on the Application Form or call (800) 882-8585 for additional
information.
Alternately, shareholders may have their distributions invested in shares of
other funds in the ISI family of funds. Shareholders who are interested in this
option should call (800) 882-8585 for additional information.
Reinvestments of distributions will be effected without a sales charge.
9
<PAGE>
6. HOW TO REDEEM SHARES
Shareholders may redeem all or part of their investment on any Business Day
by transmitting a redemption order through Armata, a Participating Dealer, a
Shareholder Servicing Agent or by regular or express mail to the Fund's
transfer agent (the "Transfer Agent"). Shareholders may also redeem Shares by
telephone (in amounts up to $50,000). (See "Telephone Transactions" below.) A
redemption order is effected at the net asset value per Share next determined
after receipt of the order (or, if stock certificates have been issued for
the Shares to be redeemed, after the tender of the stock certificates for
redemption). Redemption orders received after 4:00 p.m. (Eastern Time) will
be effected at the net asset value next determined on the following Business
Day. Payment for redeemed Shares will be made by check and will be mailed
within seven days after receipt of a duly authorized telephone redemption
request or of a redemption order fully completed and, as applicable,
accompanied by the documents described below:
1) A letter of instructions, specifying the shareholder's account number with
a Participating Dealer or Shareholder Servicing Agent, if applicable, and
the number of Shares or dollar amount to be redeemed, signed by all owners
of the Shares in the exact names in which their account is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of each
registered owner by a member of the Federal Deposit Insurance Corporation,
a trust company, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency, or savings
association;
3) If Shares are held in certificate form, stock certificates either properly
endorsed or accompanied by a duly executed stock power for Shares to be
redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of Shares will be paid on the
next dividend payable date. If all of the Shares in a shareholder's account
have been redeemed on a dividend payable date, the dividend will be remitted
by check to the shareholder.
The Fund has the power, under its Articles of Incorporation, to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' written notice.
<PAGE>
7. TELEPHONE TRANSACTIONS
Shareholders may exercise the exchange privilege with respect to other ISI
funds, or redeem Shares in amounts up to $50,000, by notifying the Transfer
Agent by telephone at (800) 882-8585 on any Business Day between the hours of
8:30 a.m. and 5:30 p.m. (Eastern Time) or by regular or express mail at its
address listed under "Custodian, Transfer Agent, Accounting Services."
Telephone transaction privileges are automatic. Shareholders may specifically
request that no telephone redemptions or exchanges be accepted for their
accounts. This election may be made on the Application Form or at any time
thereafter by completing and returning appropriate documentation supplied by
the Transfer Agent.
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or the
close of the New York Stock Exchange, whichever is earlier, is effective that
day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be effected
at the net asset value as determined on the next Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include requiring the investor to provide certain personal identification
information at the time an account is opened and prior to effecting each
transaction requested by telephone. In addition, all telephone transaction
requests will be recorded and investors may be required to provide additional
telecopied written instructions of such transaction requests. The Fund or the
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone instructions if either of them does not employ these procedures. If
these procedures are employed, neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for following instructions
received by telephone that either of them reasonably believes to be genuine.
During periods of extreme economic or market changes, shareholders may
experience difficulty in effecting telephone transactions. In such event,
requests should be made by regular or express mail. Shares held in certificate
form may not be exchanged or redeemed by telephone. (See "How to Invest in the
Fund -- Purchases by Exchange" and "How to Redeem Shares.")
8. DIVIDENDS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute to shareholders substantially all of its net
investment income in the form of monthly dividends. The Fund may distribute to
10
<PAGE>
shareholders any net capital gains (the excess of net long-term capital gains
over net short-term capital losses) on an annual basis or, alternatively, may
elect to retain such net capital gains and pay tax thereon.
Unless the shareholder elects otherwise, all income and capital gains
distributions will be reinvested in additional Shares at net asset value.
Shareholders may elect to terminate automatic reinvestment by giving written
notice to the Transfer Agent (see "Custodian, Transfer Agent, Accounting
Services"), either directly or through their Participating Dealer or
Shareholder Servicing Agent, at least five days before the next date on which
dividends or distributions will be paid.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a general summary of certain federal tax considerations
affecting the Fund and the shareholders. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or the shareholders,
and the discussion here is not intended as a substitute for careful tax
planning.
The following summary is based on current tax laws and regulations, which may
be changed by legislative, judicial, or administrative action. The Statement
of Additional Information sets forth further information concerning taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As long as the Fund qualifies for this tax
treatment, it will be relieved of federal income tax on amounts distributed
to shareholders. The Fund also intends to make sufficient distributions prior
to the end of each calendar year to avoid liability for federal excise tax.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders, by satisfying the Code's requirements that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
consists of obligations the interest on which is exempt from federal income
tax.
As long as this and certain other requirements are met, dividends derived
from the Fund's net tax-exempt interest income will be "exempt-interest
dividends" that are excluded from the gross income of the Fund's shareholders
for federal income tax purposes. Exempt interest dividends may, however, have
<PAGE>
collateral federal income tax consequences, including alternative minimum tax
consequences. Furthermore, the Fund may not be an appropriate investment for
persons who are "substantial users" of facilities financed with industrial
development bonds or private activity bonds (or related parties to
"substantial users"). (See the Statement of Additional Information.)
Current federal tax law limits the types and volumes of bonds qualifying for
the federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities
to satisfy the Code's requirements for the payment of exempt interest
dividends.
Distributions to shareholders of net investment income of the Fund that is
not tax-exempt interest and of net short-term capital gains of the Fund will
be taxable to shareholders as ordinary income, whether such distributions are
received in cash or in additional Shares.
Distributions to shareholders of net capital gains of the Fund are taxable to
shareholders as long-term capital gains, whether received in cash or
additional Shares, and regardless of how long a shareholder has held the
Shares. Shareholders will be advised annually as to the federal income tax
status of distributions made during the year.
Ordinarily, shareholders will include all dividends declared by the Fund as
income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
The sale, exchange or redemption of Shares is a taxable event for the
shareholder.
Any gain or loss recognized on a sale, exchange or redemption of Shares of the
Fund by a shareholder who is not a dealer in securities will generally be
treated as a long-term capital gain or loss if the Shares have been held for
more than twelve months and otherwise will be treated as a short-term capital
gain or loss. Any loss recognized by a shareholder upon the sale of Shares of
the Fund held six months or less, however, will be disallowed to the extent of
any exempt-interest dividends received by the shareholder with respect to such
Shares. If Shares on which a capital gains distribution has been received are
11
<PAGE>
subsequently sold or redeemed and such Shares have been held for six months or
less, any loss recognized will be treated as long-term capital loss to the
extent of the capital gains distribution.
Interest on indebtedness incurred or continued by shareholders to purchase or
carry Shares will not be deductible for federal income tax purposes.
The Fund may not be a suitable investment for tax-exempt shareholders and
plans, because such shareholders and plans would not gain any additional
benefit from the receipt of exempt-interest dividends.
Shareholders are encouraged to consult with their tax advisors concerning the
application of the rules set forth above to their particular circumstances
and the application of state and local taxes to an investment in the Fund.
9. MANAGEMENT OF THE FUND
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, distributor, administrator, custodian
and transfer agent. The day-to-day operations of the Fund are delegated to
the Fund's officers, to Armata, as distributor of the Shares, to the Advisor
and to the Fund's administrator. Four Directors and all of the officers of
the Fund are officers or employees of Armata, ISI or the Fund's
administrator. The other Directors of the Fund have no affiliation with
Armata, ISI or the Fund's administrator.
The Fund's Directors and officers are as follows:
*Edward S. Hyman Chairman
*W. James Price Vice Chairman
*Richard T. Hale Vice Chairman
*R. Alan Medaugh Director and President
James J. Cunnane Director
John F. Kroeger Director
Louis E. Levy Director
Eugene J. McDonald Director
Harry Woolf Director
Edward J. Veilleux Vice President
Brian C. Nelson Vice President and Secretary
Nancy Lazar Vice President
Carrie L. Butler Vice President
Joseph A. Finelli Treasurer
Denice De Florio Assistant Vice President
Laurie D. DePrine Assistant Secretary
- ------
* Messrs. Hyman, Price, Hale and Medaugh are "interested persons" of the Fund
within the meaning of Section 2(a)(19) under the Investment Company Act of
1940, as amended (the "Investment Company Act").
<PAGE>
10. INVESTMENT ADVISOR
ISI, a registered investment advisor, serves as investment advisor to the Fund
pursuant to an investment advisory agreement dated as of April 1, 1991. ISI
employs Messrs. Edward S. Hyman and R. Alan Medaugh. Due to their stock
ownership, Messrs. Hyman and Medaugh may be deemed to be controlling persons of
ISI. As of December 31, 1995, the Advisor had approximately $1 billion under
management representing both tax-free and taxable accounts. The Advisor also
acts as investment advisor to Total Return U.S. Treasury Fund, Inc. and North
American Government Bond Fund, Inc., open-end investment companies with
approximately $438 million of net assets as of December 31, 1995.
For the fiscal year ended October 31, 1995, the Advisor received a fee (net
of fee waivers) equal to .27% of the Fund's average daily net assets. ISI and
the Fund's administrator have voluntarily agreed to reduce their respective
annual fees proportionately, if necessary, so that the Fund's annual expenses
do not exceed .90% of it's average daily net assets. (See "Fund Expenses.")
The address of the Advisor is 717 Fifth Avenue, New York, New York 10022
(telephone: (800) 955-7175).
PORTFOLIO MANAGERS
Edward S. Hyman, Chairman of ISI and the Fund, and R. Alan Medaugh, President
of ISI and President and a Director of the Fund, have shared direct portfolio
management responsibility for the Fund since its inception. Mr. Hyman is
responsible for developing the economic analysis upon which the Fund's
selection of investments is based. (See "Investment Program.") Before joining
ISI, Mr. Hyman was a vice chairman and member of the Board of C.J. Lawrence
Inc. and prior thereto, an economic consultant at Data Resources. He writes
a variety of international and domestic economic research reports which follow
trends that may determine the direction of interest rates.
12
<PAGE>
These international and domestic reports are sent to ISI's private institutional
clients in the United States and overseas. The periodical Institutional
Investor, which rates analysts and economists on an annual basis, has rated Mr.
Hyman as its "first team" economist, which is its highest rating, in each of the
last sixteen years.
Mr. Medaugh is responsible for day-to-day portfolio management. Prior to
joining ISI, Mr. Medaugh was Managing Director of C.J. Lawrence Fixed Income
Management and prior thereto Senior Vice President and bond portfolio manager
at Fiduciary Trust International. While at Fiduciary Trust International, Mr.
Medaugh led their Fixed-Income Department which managed $5 billion of
international fixed income portfolios for institutional clients. Mr. Medaugh
also had prior experience as a bond portfolio manager at both Putnam
Management Company and Fidelity Management and Research.
11. ADMINISTRATOR
Investment Company Capital Corp. ("ICC"), 135 East Baltimore Street,
Baltimore, Maryland 21202 provides administration services to the Fund. ICC
is a wholly-owned subsidiary of Alex. Brown and an affiliate of Armata.
ICC supervises the day-to-day operations of the Fund, including the
preparation of registration statements, proxy materials, shareholder reports,
compliance with all requirements of securities laws in the states in which
the Shares are distributed and oversight of the relationship between the Fund
and its other service providers. For its services as administrator of the
Fund for the fiscal year ended October 31, 1995, ICC received a fee (net of
fee waivers) equal to .13% of the Fund's average daily assets. ICC and ISI
have voluntarily agreed to reduce their respective annual fees
proportionately, if necessary, so that the Fund's annual expenses do not
exceed .90% of it's average daily net assets. (See "Fund Expenses.")
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent,
Accounting Services.")
12. DISTRIBUTOR
Armata acts as distributor of the Shares pursuant to a Distribution Agreement
and related Plan of Distribution (the "Plan") adopted pursuant to Rule 12b-1
<PAGE>
under the Investment Company Act. Armata is a broker-dealer that was formed
in 1983 and is an affiliate of the Administrator. As compensation for its
services for the fiscal year ended October 31, 1995, Armata received a fee
equal to .25% of the Shares' average daily net assets. Armata expects to
allocate on a proportional basis up to all of its fee to selected
Participating Dealers as compensation for their ongoing shareholder services,
including processing redemption and sale requests and responding to
shareholder inquiries.
In addition, the Fund may enter into Shareholder Servicing Agreements with
certain financial institutions, such as banks, to act as Shareholder
Servicing Agents, pursuant to which Armata will allocate on a proportional
basis up to all of its distribution fee as compensation for such financial
institutions' ongoing shareholder services. Such financial institutions may
impose separate fees in connection with these services and investors should
review this Prospectus in conjunction with any such institution's fee
schedule. Amounts allocated to Participating Dealers and Shareholder Servicing
Agents may not exceed amounts payable to Armata under the Plan.
Payments under the Plan are made as described above regardless of Armata's
actual cost of providing distribution services and may be used to pay
Armata's overhead expenses. If the cost of providing distribution services to
the Fund in connection with the sale of the Shares is less than .25% of the
average daily net assets invested in Shares for any period, the unexpended
portion of the distribution fee may be retained by Armata. Armata or its
associated persons will from time to time and from its own resources pay or
allow additional discounts or promotional incentives in the form of cash or
other compensation (including merchandise or travel) to Participating
Dealers.
13. CUSTODIAN, TRANSFER AGENT, ACCOUNTING SERVICES
PNC Bank, National Association ("PNC Bank"), a national banking association
with offices at Airport Business Park, 200 Stevens Drive, Lester,
Pennsylvania 19113, acts as custodian of the Fund's assets. Investment
Company Capital Corp., 135 East Baltimore Street, Baltimore, Maryland 21202
(telephone: (800) 882-8585), is the Fund's transfer and dividend disbursing
agent and provides accounting services to the Fund. As compensation for
providing accounting services for the fiscal year ended October 31, 1995, ICC
received from the Fund a fee equal to .05% of the Fund's average daily net
assets. (See the Statement of Additional Information.) ICC also serves as the
Fund's administrator.
13
<PAGE>
14. PERFORMANCE INFORMATION
From time to time, the Fund may advertise its performance, including
comparisons with other mutual funds with similar investment objectives and to
relevant indices. All such advertisements will show the average annual total
return, net of the Fund's maximum sales charge, over one, five and ten year
periods or, if such periods have not yet elapsed, shorter periods
corresponding to the life of the Fund. Such total return quotations will be
computed by finding the average annual compounded rates of return over such
periods that would equate an assumed initial investment of $1,000 to the
ending redeemable value, net of the maximum sales charge and other fees,
according to the required standardized calculation. The standardized
calculation is required by the SEC to provide consistency and comparability
in investment company advertising and is not equivalent to a yield
calculation.
The Fund may also advertise yield and tax-equivalent yield quotations. Any
yield quotation of the Fund is based on the annualized net investment income
per share of the Fund over a 30 day period. The yield for the Fund is
calculated by dividing the net investment income per share of the Fund earned
during the period by the maximum offering price per share of the Fund on the
last day of that period. The resulting figure is then annualized. The Fund's
yield calculations assume a maximum sales charge of 4.45% for the Shares. The
Fund's taxable-equivalent yield is calculated by determining the rate of
return that would have to be achieved on a fully taxable investment to
produce the after tax equivalent of the Fund's yield. In calculating
taxable-equivalent yield, the Fund assumes certain tax brackets for
shareholders.
If the Fund compares its performance to other funds or to relevant indices,
its performance will be stated in the same terms in which such comparative
data and indices are stated.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services which monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Lehman Brothers Municipal
Bond Index, the Consumer Price Index, the return on 90 day U.S. Treasury
Bills, long-term U.S. Treasury bonds, bank certificates of deposit, the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average. The
<PAGE>
Fund may also use total return performance data as reported in the following
national financial and industry publications that monitor the performance of
mutual funds: Money Magazine, Forbes, Business Week, Barron's, Investor's
Daily, IBC/Donoghue's Money Fund Report and The Wall Street Journal. For
these purposes, the performance of the Fund, as well as the performance of
such indices, may not reflect sales charges, the inclusion of which would
reduce performance results.
Performance will fluctuate, and any statement of performance should not be
considered as representative of the future performance of the Fund.
Shareholders should remember that performance is generally a function of the
type and quality of investments held by the Fund, operating expenses and
market conditions. Any fees charged by banks with respect to customer
accounts through which Shares may be purchased, although not included in
calculations of performance, will reduce performance results.
15. GENERAL INFORMATION
CAPITAL SHARES
The Fund is a Maryland corporation, authorized to issue forty million shares
of capital stock, with a par value of $.001 per share. Shares have equal
rights with respect to voting. Voting rights are not cumulative, so the
holders of more than 50% of the outstanding Shares voting together for
election of Directors may elect all the members of the Board of Directors of
the Fund. In the event of liquidation or dissolution of the Fund, each Share
is entitled to its portion of the Fund's assets after all debts and expenses
have been paid. The fiscal year end of the Fund is October 31.
The Board of Directors of the Fund is authorized to establish additional
"series" of shares of capital stock, each of which would evidence interests in a
separate portfolio of securities, and separate classes of each series of the
Fund. The shares offered by this Prospectus have been designated "ISI Managed
Municipal Fund Shares." The Board has no present intention of establishing any
additional series of the Fund but does have another class of shares in addition
to the Shares offered hereby, "Flag Investors Managed Municipal Fund Class A
Shares." Shares of that class are sold through broker-dealers and have similar
12b-1 fees and front-end sales charges as the Shares. Different classes of the
Fund may be offered to certain investors and holders of such shares may be
entitled to certain exchange privileges not offered to Shares. All classes of
14
<PAGE>
the Fund share a common investment objective, portfolio and advisory fee, but
the classes may have different distribution expenses and sales charges and,
accordingly, performance may differ.
ANNUAL MEETINGS
The Fund does not expect to hold annual meetings of shareholders but special
meetings of shareholders may be held under certain circumstances.
Shareholders of the Fund retain the right, under certain circumstances, to
request that a meeting of shareholders be held for the purpose of considering
the removal of a Director from office, and if such a request is made, the
Fund will assist with shareholder communications in connection with the
meeting.
REPORTS
The Fund furnishes shareholders with semi-annual and annual reports
containing information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
financial statements are audited by the Fund's independent accountants,
Coopers & Lybrand L.L.P.
FUND COUNSEL
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their Shares should contact the
Transfer Agent at (800) 882-8585, Armata, ISI, a Participating Dealer or
Shareholder Servicing Agent, as appropriate.
15
<PAGE>
ISI MANAGED MUNICIPAL FUND SHARES
NEW ACCOUNT APPLICATION
- -----------------------------------------------------------------------------
Make check payable to "ISI Managed Municipal Fund Shares" and mail with this
application to:
Armata Financial Corp./ISI Mutual Funds
P.O. Box 419426
Kansas City, MO 64141-6426
For assistance in completing this form, please call the Transfer Agent at
(800) 882-8585.
The minimum initial purchase is $5,000, except that the minimum initial
purchase for participants in the Fund's Automatic Investing Plan is $250.
Each subsequent purchase requires a $250 minimum, except that the minimum
subsequent purchase under the Fund's Automatic Investing Plan is $100 for
monthly purchases and $250 for quarterly purchases. The Fund reserves the
right not to accept checks for more than $50,000 that are not certified or
bank checks.
- --------------------------------------------------------------------------------
YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
INDIVIDUAL OR JOINT TENANT
- --------------------------------------------------------
First Name Initial Last Name
- --------------------------------------------------------
Social Security Number
- --------------------------------------------------------
Joint Tenant Initial Last Name
- --------------------------------------------------------
Social Security Number
CORPORATIONS, TRUSTS, PARTNERSHIPS, ETC.
- --------------------------------------------------------
Name of Corporation, Trust or Partnership
- --------------------------------------------------------
Tax ID Number
- --------------------------------------------------------
Name of Trustees (If to be included in the Registration)
- --------------------------------------------------------
Existing Account No., if any
GIFTS TO MINORS
- --------------------------------------------------------
Custodian's Name (only one allowed by law)
- --------------------------------------------------------
Minor's Name (only one)
- --------------------------------------------------------
Social Security Number of Minor
under the __________________Uniform Gifts to Minors Act
State of Residence
MAILING ADDRESS
- --------------------------------------------------------
Street
- --------------------------------------------------------
City State Zip
( )
- --------------------------------------------------------
Daytime Phone
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INTENTION (OPTIONAL)
[ ] I agree to the Letter of Intent and Escrow Agreement set forth in the
accompanying prospectus. I intend to invest over a 13-month period in shares
of ISI Managed Municipal Fund Shares in an aggregate amount at least equal
to:
_$50,000 __$100,000 __$250,000 __$500,000 __$1,000,000 __$2,000,000 __$3,000,000
- --------------------------------------------------------------------------------
RIGHT OF ACCUMULATION (OPTIONAL)
[ ] I already own shares of the ISI Fund(s) set forth below to be applied for
a reduced sales charge. List the Account numbers of other ISI Funds that you
or your immediate family (spouse and children under 21) already own that
qualify for reduced sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
<PAGE>
DISTRIBUTION OPTIONS
Please check appropriate boxes. There is no sales charge for reinvested
dividends. If none of the options is selected, all distributions will be
reinvested.
Income Dividends
[ ] Reinvested in additional shares
[ ] Paid in Cash
Capital Gains
[ ] Reinvested in additional shares
[ ] Paid in Cash
Call (800) 882-8585 for information about reinvesting your dividends in other
funds in the ISI Family of Funds.
- --------------------------------------------------------------------------------
AUTOMATIC INVESTING PLAN (OPTIONAL)
[ ] I authorize you as Agent for the Automatic Investing Plan to
automatically invest $______ for me, on a monthly or quarterly basis, on or
about the 20th of each month or if quarterly, the 20th of January, April,
July and October, and to draw a bank draft in payment of the investment
against my checking account. (Bank drafts may be drawn on commercial banks
only.)
Minimum Initial Investment: $250
Subsequent Investments (check one):
[ ] Monthly ($100 minimum)
[ ] Quarterly ($250 minimum)
- -----------------------------------------------------------------------------
Bank Name
- -----------------------------------------------------------------------------
Existing ISI Managed Municipal Fund Account No., if any
Please attach a voided check.
- -----------------------------------------------------------------------------
Depositor's Signature Date
- -----------------------------------------------------------------------------
Depositor's Signature Date
(if joint acct., both must sign)
- -----------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect
to other ISI Funds) unless I mark one or both of the boxes below.
No, I/We do not want
[ ] Telephone redemption privileges
[ ] Telephone exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a pre-designated bank account, please
provide the following information:
Bank: __________ Bank Account No: __________
Address: __________ Bank Account Name: __________
__________
- --------------------------------------------------------------------------------
<PAGE>
SIGNATURE AND TAXPAYER CERTIFICATION
I have received a copy of the Fund's prospectus dated March 1, 1996. Under
penalties of perjury, I certify (1) that the number shown on this form is my
correct taxpayer identification number and (2) that I am not subject to
backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding. (Strike out the language in (2) if it
is not correct.)
If a non-resident alien, please indicate country of residence: _______________
I acknowledge that the telephone redemption and exchange privileges are
automatic and will be effected as described in the Fund's current prospectus
(see "Telephone Transactions"). I also acknowledge that I may bear the risk
of loss in the event of fraudulent use of such privileges. If I do not want
telephone redemption or exchange privileges, I have so indicated on this
Application.
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature (if a joint acct., both must sign) Date
- --------------------------------------------------------------------------------
FOR DEALER USE ONLY
Dealer's Name: ___________________________ Dealer Code: __________________
Dealer's Address: ___________________________ Branch Code: __________________
___________________________
Representative: ___________________________ Rep. No. __________________
<PAGE>
ISI
MANAGED
MUNICIPAL FUND
SHARES
(A Class of Managed
Municipal Fund, Inc.)
No person has been authorized to give any information or to make representations
not contained in this Prospectus and, if given or made, such information must
not be relied upon as having been authorized by the Fund or its distributor.
This Prospectus does not constitute an offering by the Fund or by its
distributor in any jurisdiction in which such offering may not lawfully be made.
Shares may be offered only to residents of those states in which such shares are
eligible for purchase.
TABLE OF CONTENTS
PAGE
----
1. Fund Expenses .................................................... 2
2. Financial Highlights ............................................. 3
3. Investment Program ............................................... 4
4. Investment Restrictions .......................................... 7
5. How to Invest in the Fund ........................................ 7
6. How to Redeem Shares ............................................. 10
7. Telephone Transactions ........................................... 10
8. Dividends and Taxes .............................................. 10
9. Management of the Fund ........................................... 12
10. Investment Advisor ............................................... 12
11. Administrator .................................................... 13
12. Distributor ...................................................... 13
13. Custodian, Transfer Agent,
Accounting Services ............................................... 13
14. Performance Information .......................................... 14
15. General Information .............................................. 14
LOGO
ISI
MANAGED
MUNICIPAL FUND
SHARES
(A Class of Managed
Municipal Fund, Inc.)
A mutual fund with the investment objective of a high level of total
return with relative stability of principal and secondarily, high current
income through investment in a portfolio consisting primarily of municipal
obligations the interest on which is exempt from federal income tax.
MARCH 1, 1996
PROSPECTUS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------------------------
MANAGED MUNICIPAL FUND, INC.
135 East Baltimore Street
Baltimore, Maryland 21202
----------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH A
PROSPECTUS, WHICH MAY BE OBTAINED FROM YOUR PARTICIPATING
DEALER OR SHAREHOLDER SERVICING AGENT OR BY WRITING OR
CALLING ALEX. BROWN & SONS INCORPORATED, 135 EAST BALTIMORE
ST., BALTIMORE, MARYLAND 21202, (800) 767-FLAG (FOR THE FLAG
INVESTORS SHARES CLASS) OR BY WRITING OR CALLING ARMATA
FINANCIAL CORP., P.O. BOX 515, MARYLAND 21203, (410)
727-1700 (FOR THE ISI SHARES CLASS).
Statement of Additional Information Dated: March 1, 1996
Relating to Prospectuses Dated: March 1, 1996
of
Flag Investors Managed Municipal Fund Class A Shares
and
ISI Managed Municipal Fund Shares
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
1. General Information and History .............................................................1
2. Investment Objective and Policies ...........................................................1
3. Valuation of Shares and Redemption...........................................................7
4. Federal Tax Treatment of Dividends
and Distributions............................................................................7
5. Management of the Fund......................................................................11
6. Investment Advisory and Other Services......................................................15
7. Administration..............................................................................16
8. Distribution of Fund Shares ................................................................17
9. Portfolio Transactions......................................................................20
10. Capital Stock ..............................................................................21
11. Reports.....................................................................................22
12. Custodian, Transfer Agent and Accounting Services ..........................................22
13. Independent Accountants ....................................................................23
14. Performance Information ....................................................................23
15. Control Persons and Principal Holders of
Securities ................................................................................25
16. Financial Statements ....................................................................25
</TABLE>
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Managed Municipal Fund, Inc. (the "Fund") is an open-end
management investment company. Under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), all mutual funds are required
to furnish prospective investors with certain information concerning the
activities of the company being considered for investment. The Fund currently
offers two classes of shares: Flag Investors Managed Municipal Fund Class A
Shares, (the "Flag Investors Shares Class") and ISI Managed Municipal Fund
Shares (the "ISI Shares Class"). There are two separate prospectuses for the
Fund's shares: one for the Flag Investors Shares Class and one for the ISI
Shares Class. Each prospectus contains important information concerning the
classes of shares offered thereby and the Fund, and may be obtained without
charge from Alex. Brown & Sons Incorporated ("Alex. Brown"), 135 East
Baltimore Street, Baltimore, Maryland 21202 (telephone: (800) 767-FLAG), or
Armata Financial Corp. ("Armata"), P.O. Box 515, Baltimore, Maryland 21203
(telephone: (410) 727-1700) or from Participating Dealers which offer shares
of the respective classes of the Fund ("Shares") to prospective investors. As
used herein the term "Prospectus" describes information common to the
prospectuses of the two classes of the Fund's shares. Otherwise the term
"Prospectus" will be modified by the appropriate class designation. As used
herein, the "Fund" refers to Managed Municipal Fund, Inc. and specific
references to any class of the Fund's shares will be made by using the name of
such class. Prospectuses may also be obtained from Shareholder Servicing
Agents. Some of the information required to be in this Statement of Additional
Information is also included in the Fund's current Prospectuses. To avoid
unnecessary repetition, references are made to related sections of the
Prospectuses. In addition, the Prospectuses and this Statement of Additional
Information omit certain information about the Fund and its business that is
contained in the Registration Statement respecting the Fund and its Shares
filed with the SEC. Copies of the Registration Statement as filed, including
such omitted items, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations.
The Fund was incorporated under the laws of the State of
Maryland on January 5, 1990. The Fund filed a registration statement with the
SEC registering itself as an open-end diversified management investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act") and its Shares under the Securities Act of 1933, and commenced
operations on February 26, 1990. The Fund has offered the Flag Investors
Managed Municipal Fund Class A Shares since October 23, 1990.
For the period from November 9, 1992 through February 27,
1994, the Fund offered another class of shares: Flag Investors Managed
Municipal Fund Class B Shares. Shares of that class were renamed the Flag
Investors Managed Municipal Fund Class D Shares and are no longer being
offered.
Under a License Agreement dated October 23, 1990, between
the Fund and Alex. Brown Incorporated, Alex. Brown Incorporated licenses to
the Fund the "Flag Investors" name and logo, but retains rights to that name
and logo, including the right to permit other investment companies to use
them.
2. INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is a high level of total
return with relative stability of principal, and secondarily, a high level of
current income exempt from federal income tax through investing in a portfolio
consisting primarily of municipal obligations ("Municipal Obligations"). There
can be no assurance that the Fund will achieve its investment objective.
-1-
<PAGE>
Municipal Obligations include debt securities issued by or
on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which is exempt from federal income tax.
For a discussion of quality, maturity and other criteria the Fund applies in
investing in Municipal Obligations, see "Investment Objective and Policies" in
the Prospectus.
Municipal Obligations can be classified into three principal
categories: "general obligation bonds", "revenue bonds" and "notes". General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power of the issuer.
Revenue bonds include, in most cases, "tax exempt industrial development
bonds", i.e., bonds issued by or on behalf of public authorities to obtain
funds for privately-operated facilities. Tax-exempt industrial development
bonds do not generally carry the pledge of the credit of the issuing
municipality, but are generally guaranteed by the corporate entity on whose
behalf they are issued. Notes are short-term instruments used to provide for
short-term capital needs. They are obligations of the issuing municipalities
or agencies and are sold in anticipation of a bond sale, collection of taxes
or receipt of other revenues.
At least 75% of the Fund's portfolio of Municipal
Obligations will be invested in securities rated, at the time of purchase,
higher than A by Moody's or S&P or municipal notes rated at the time of
purchase, MIG-1 or MIG-2 by Moody's or SP-1 by S&P. The ratings of Moody's for
tax-exempt bonds in which the Fund may invest are Aaa, Aa1, Aa, and A1. Bonds
rated Aaa are judged by Moody's to be of the "best quality". The rating of Aa
is assigned by Moody's to bonds which are of "high quality by all standards"
but as to which margins of protection or other elements make long-term risks
appear somewhat larger than Aaa rated bonds. The Aaa and Aa rated bonds
comprise what are generally known as "high grade bonds". Bonds rated A by
Moody's possess many favorable investment attributes and are considered as
upper-medium-grade obligations. The numerical modifier 1, in the generic
rating classifications of A and Aa indicates that the obligation ranks in the
higher end of its generic rating category. The ratings of S&P for tax-exempt
bonds in which the Fund may invest are AAA, AA+, AA, AA-, and A+. Bonds rated
AAA bear the highest rating assigned by S&P to a debt obligation. Such rating
is intended to indicate an extremely strong capacity to repay principal and
pay interest. Bonds rated AA by S&P are also intended to qualify as
high-quality debt obligations. Such rating is intended to indicate a very
strong capacity to repay principal and pay interest, and in the majority of
instances bonds with such rating differ from AAA issues to a small degree.
Bonds rated A by S&P have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in the higher
rated categories. The addition of a plus or minus sign to the A or AA
categories shows relative standing within these rating categories. The two
highest rating categories by Moody's for tax-exempt notes are MIG 1 and MIG 2.
Notes bearing the designation MIG 1 are judged by Moody's to be of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancings. Notes bearing the designation MIG 2 are judged by Moody's to be
of high quality, with margins of protection ample although not so large as in
the preceding group. The highest S&P rating for municipal notes issued on or
after July 29, 1984 is "SP-1". Prior to July 29, 1984, municipal notes carried
the same symbols as municipal bonds. The designation "SP-1" is intended to
indicate a very strong capacity to pay principal and interest. A "+" is added
for those issues determined by S&P to possess very strong characteristics.
Only municipal note issues with a rating by S&P of SP-1 or higher will qualify
for the 75% requirement.
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The Fund may invest up to 25% of its portfolio of Municipal
Obligations in municipal bonds rated A by Moody's or S&P or in municipal notes
bearing the designation MIG 3 by Moody's or SP-2 by S&P. Notes bearing the MIG
3 are judged by Moody's to be of favorable quality, with all security elements
accounted for but lacking the undeniable strength of the preceding grades.
Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established. S&P grants a rating of SP-2
to a note when it believes the issuer has a satisfactory capacity to pay
principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.
The ratings of Moody's and S&P represent each service's
opinion as to the quality of the municipal bonds or notes rated. It should be
emphasized that ratings are general and are not absolute standards of quality
or guarantees as to the creditworthiness of an issuer. Subsequent to its
purchase by the Fund, an issue of municipal bonds or notes may cease to be
rated, or its ratings may be reduced. Neither event requires the elimination
of that obligation from the Fund's portfolio, but will be a factor in
determining whether the Fund should continue to hold that issue in its
portfolio.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on Municipal Obligations. See "Federal Tax Treatment of
Dividends and Distributions" for the effect of current federal tax law on this
exemption.
"When-Issued" Securities: The Fund may purchase securities
on a "when-issued" basis. When the Fund commits to purchase a security on a
"when-issued" basis, it will set up procedures consistent with the General
Statement of Policy of the SEC concerning such purchases. Since that policy
currently recommends that an amount of the Fund's assets equal to the amount
of the purchase be held aside or segregated to be used to pay for the
commitment, the Fund will always have cash, cash equivalents or U.S.
Government securities or other high quality debt securities sufficient to
cover any commitments or to limit any potential risk. However, although the
Fund does not intend to make such purchases for speculative purposes and
intends to adhere to the provisions of the SEC policy, purchases of securities
on such basis may involve more risks than other types of purchases. For
example, the Fund may have to sell assets which have been set aside in order
to meet redemptions. Also, if the Fund determines it is necessary to sell the
"when-issued" securities before delivery, the Fund may incur a loss because of
market fluctuations since the time the commitment to purchase such securities
was made and any gain would not be tax-exempt. At the time the Fund makes the
commitment to purchase or sell securities on a "when-issued" basis, it will
record the transaction and thereafter reflect the value of such security
purchased in determining its net asset value. At the time of delivery of the
securities, their value may be more or less than the purchase or sale price.
Futures Contracts: The Fund may enter into futures contracts based on
municipal bond indices ("Futures Contracts"). A Futures Contract based on a
municipal bond index provides for a cash payment, equal to the amount, if any,
by which the value of the index at maturity is above or below the value of the
index at the time the contract was entered into, times a fixed index
"multiplier". The index underlying such a Futures Contract is generally a
broad based index of securities designed to reflect movements in the relevant
market as a whole. The index assigns weighted values to the securities
included in the index, and its composition is changed periodically. Futures
Contracts have been designed by exchanges which have been designated as
"contract markets" by the Commodity Futures Trading Commission (the "CFTC"),
and must be executed through a futures commission merchant, or brokerage firm,
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which is a member of the relevant contract market. The exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
At the same time a Futures Contract is purchased or sold,
the Fund must allocate cash or securities as a deposit payment ("initial
deposit"). The initial deposit varies but may be as low as 5% or less of the
value of the contract. Daily thereafter, the Futures Contract is valued and
the payment of "variation margin" may be required since each day the Fund
would provide or receive cash that reflect any decline or increase in the
contract's value.
Although Futures Contracts call for the making or acceptance
of a cash settlement at a specified future time, the contractual obligation is
usually fulfilled before such date by buying or selling, as the case may be,
on a commodities exchange, an identical Futures Contract calling for
settlement in the same month, subject to the availability of a liquid
secondary market. The Fund incurs brokerage fees when it purchases and sells
Futures Contracts. The purpose of the acquisition or sale of a Futures
Contract, in the case of a portfolio such as that of the Fund which holds or
intends to acquire long-term fixed income securities, is to attempt to protect
the Fund from fluctuations in interest rates without actually buying or
selling long-term fixed income securities. For example, if the Fund owns
long-term bonds and interest rates were expected to increase, the Fund might
sell index Futures Contracts. Such a sale would have much the same effect as
selling an equivalent value of the long-term bonds owned by the Fund. If
interest rates did increase, the value of the debt securities in the portfolio
would decline but the value of the Futures Contracts would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. The Fund could accomplish
similar results by selling bonds with long maturities and investing in bonds
with short maturities when interest rates are expected to increase. However,
the use of Futures Contracts as an investment technique allows the Fund to
maintain a hedging position without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may
decline, Futures Contracts may be purchased to attempt to hedge against
anticipated purchases of long-term bonds at higher prices. Since the
fluctuations in the value of Futures Contracts should be similar to that of
long-term bonds, the Fund could take advantage of the anticipated rise in the
value of long-term bonds without actually buying them until the market had
stabilized. At that time, the Futures Contracts could be liquidated and the
Fund could then buy long-term bonds on the cash market. To the extent the Fund
enters into Futures Contracts for this purpose, the assets in the segregated
asset account maintained to cover the Fund's obligations with respect to such
Futures Contracts will consist of cash, cash equivalents or liquid securities
from its portfolio in an amount equal to the difference between the
fluctuating market value of such Futures Contracts and the aggregate value of
the initial and variation margin payments made by the Fund with respect to
such Futures Contracts.
Although the Fund will invest in Futures Contracts for
hedging purposes, Futures Contracts entail risks. Although the Fund believes
that use of such contracts will benefit the Fund, if the investment judgment
of the Fund's investment advisor, International Strategy and Investment Inc.
("ISI" or the "Advisor") about the general direction of interest rates is
incorrect, the Fund's overall performance would be poorer than if it had not
entered into any such contract. For example, if the Fund has hedged against
the possibility of an increase in interest rates which would adversely affect
the price of bonds held in its portfolio and interest rates decrease instead,
the Fund will lose part or all of the benefit of the increased value of its
bonds which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell bonds from its portfolio to meet daily
variation margin requirements. Such sales of bonds may be, but will not
necessarily be, at increased prices
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which reflect the rising market. The Fund may have to sell securities at a
time when it may be disadvantageous to do so.
Various additional risks exist with respect to the trading
of futures. For example, the Fund's ability effectively to hedge all or a
portion of its portfolio through transactions in such instruments will depend
on the degree to which price movements in the underlying index correlate with
price movements in the relevant portion of the Fund's portfolio. The trading
of futures entails the additional risk of imperfect correlation between
movements in the futures price and the price of the underlying index. The
Fund's ability to engage in futures strategies will also depend on the
availability of liquid markets in such instruments. Transactions in these
instruments are also subject to the risk of brokerage firm or clearing house
insolvencies. The liquidity of a secondary market in a Futures Contract may be
adversely affected by "daily price fluctuation limits", established by
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limit. In
addition, the exchanges on which futures are traded may impose limitations
governing the maximum number of positions on the same side of the market and
involving the same underlying instrument which may be held by a single
investor, whether acting alone or in concert with others (regardless of
whether such contracts are held on the same or different exchanges or held or
written in one or more accounts or through one or more brokers). In addition,
the ordinary spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out Futures Contracts through
offsetting transactions which could distort the normal relationship between
the cash and futures markets. Second, from the point of view of speculators,
the margin deposit requirements in the futures market are less onerous than
margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct forecast of
general interest rate trends by the Advisor may still not result in a
successful transaction.
Repurchase Agreements: The Fund may agree to purchase
securities issued by the United States Treasury ("U.S. Treasury Securities")
from financial institutions, such as banks and broker-dealers, subject to the
seller's agreement to repurchase the securities at an established time and
price. Such repurchase agreements will be fully collateralized and the Fund
will enter into such agreements only with banks and broker-dealers which are
judged creditworthy by the Fund's Board of Directors. The Fund's procedures
regarding repurchase agreements are discussed in greater detail in the Fund's
Prospectus. The collateral for these repurchase agreements will be held by the
Fund's custodian or by a duly appointed sub-custodian. The Fund will enter
into repurchase agreements only with banks and broker-dealers that have been
determined to be creditworthy by the Fund's Board of Directors under criteria
established with the assistance of the Advisor. The list of approved banks and
broker-dealers will be monitored regularly by the Advisor and reviewed at
least quarterly by the Fund's Board of Directors. The seller under a
repurchase agreement may be required to maintain the value of the securities
subject to the repurchase agreement at not less than the repurchase price.
Default by the seller would, however, expose the Fund to possible loss because
of adverse market action or delay in connection with the disposition of the
underlying obligations. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, the Fund may be delayed or limited
in its ability to sell the collateral.
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Investment Restrictions
The Fund's investment program is subject to a number of
investment restrictions which reflect self-imposed standards as well as
federal and state regulatory limitations. The investment restrictions recited
below are in addition to those described in the Fund's Prospectus, and are
matters of fundamental policy and may not be changed without the affirmative
vote of a majority of the outstanding Shares. Accordingly, the Fund will not:
1. Invest in real estate or mortgages on real estate,
provided that the Fund may purchase securities secured or otherwise supported
by interests in real estate;
2. Purchase or sell commodities or commodities contracts,
provided that for purposes of this restriction financial futures contracts are
not considered commodities or commodities contracts.
3. Act as an underwriter of securities within the meaning
of the U.S. federal securities laws except insofar as it might be deemed to be
an underwriter upon disposition of certain portfolio securities acquired
within the limitation on purchases of restricted securities;
4. Issue senior securities, provided that investments in
financial futures contracts and when-issued securities shall not be deemed to
involve issuance of a senior security;
5. Make loans, except that the Fund may purchase or hold
debt instruments in accordance with its investment objectives and policies;
6. Effect short sales of securities;
7. Purchase securities on margin except that the Fund may
obtain such short-term credits as may be necessary for the clearance of
transactions;
8. Purchase participations or other direct interests in
oil, gas or other mineral exploration or development programs or leases; or
9. Invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days.
The following are investment restrictions that may be
changed by a vote of a majority of the Board of Directors. The Fund will not:
1. Purchase any securities of unseasoned issuers which have
been in operation directly or through predecessors for less than three years;
2. Invest in shares of any other investment company
registered under the Investment Company Act, other than in connection with a
merger, consolidation, reorganization or acquisition of assets;
3. Purchase or retain the securities of any issuer if to
the knowledge of the Fund any officer or Director of the Fund or its
investment advisor owns beneficially more than .5% of the outstanding
securities of such issuer and together they own beneficially more than 5% of
the securities of such issuer;
4. Invest in companies for the purpose of exercising
management or control;
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<PAGE>
5. Invest in puts or calls or any combination thereof,
provided that the Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio; or
6. Purchase warrants.
3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined once daily as of
4:00 p.m. (Eastern Time) each day on which the New York Stock Exchange is open
for business (a "Business Day"). The New York Stock Exchange is open for
business on all weekdays except for the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net asset value per share of a class is calculated by
valuing all assets held by the Fund, deducting liabilities attributable to all
shares and any liabilities attributable to the specific class, and dividing
the resulting amount by the number of then outstanding shares of the class.
For this purpose, portfolio securities will be given their market value where
feasible. Debt securities (other than short-term obligations), including
listed issues, are valued on the basis of valuations furnished by a pricing
service which utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institution-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices,
because such valuations are believed to reflect more accurately the fair value
of such securities. Use of the pricing service has been approved by the Board
of Directors. Short-term obligations (i.e., those with maturities of 60 days
of less) are valued at amortized cost, which constitutes fair value as
determined by the Board of Directors. Futures Contracts will normally be
valued at the settlement price on the exchange on which they are primarily
traded. Portfolio securities for which there are no such valuations are valued
at fair value as determined in good faith by or at the direction of the Board
of Directors.
Redemption
Under normal circumstances, the Fund will redeem Shares by
check as described in the Prospectus. However, if the Board of Directors
determines that it would be in the best interests of the remaining
shareholders to make payment of the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of the Fund in lieu of
cash, in conformity with applicable rules of the SEC, the Fund will make such
distributions in kind. If Shares are redeemed in kind, the redeeming
shareholder will incur brokerage costs in later converting the assets into
cash. The method of valuing portfolio securities is described under "Valuation
of Shares" and such valuation will be made as of the same time the redemption
price is determined. The Fund has elected to be governed by Rule 18f-1 under
the Investment Company Act pursuant to which the Fund is obligated to redeem
Shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund during any 90-day period for any one shareholder.
The Fund may suspend the right of redemption or postpone the
date of payment during any period when (a) trading on the New York Stock
Exchange is restricted by applicable rules and regulations of the SEC; (b) the
New York Stock Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC so that valuation of the net assets
of the Fund is not reasonably practicable.
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4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional
federal tax considerations generally affecting the Fund and its shareholders
that are not described in the Fund's Prospectus. No attempt is made to present
a detailed explanation of the tax treatment of the Fund or its shareholders,
and the discussion here and in the Fund's Prospectus is not intended as a
substitute for careful tax planning.
The following discussion of federal income tax consequences
is based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein,
and may have a retroactive effect with respect to the transactions
contemplated herein.
Qualification as a Regulated Investment Company
The Fund intends to be taxed as a regulated investment
company (a "RIC") under Subchapter M of the Code. In order to qualify as a RIC
for any taxable year, the Fund must (1) derive at least 90% of its gross
income from dividends, interest, gains from the sale or other disposition of
stocks or securities, and other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect to its
business in investing in such stocks or securities (the "Income Requirement"),
and (2) derive less than 30% of its gross income from gains on the sale or
other disposition of stocks or securities held for less than three months
("Short-Short Gain Test").
In addition, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its assets must consist of cash and
cash items, U.S. government securities, securities of other RICs, and
securities of other issuers (as to which the Fund has not invested more than
5% of the value of its total assets in securities of any one issuer and as to
which the Fund does not hold more than 10% of the outstanding voting
securities of any one issuer). In addition, at the close of each quarter of
the Fund's taxable year, no more than 25% of the value of its total assets may
be invested in the securities (other than U.S. government securities and
securities of other RICs), of any one issuer or of two or more issuers which
the Fund controls and which are engaged in the same or similar trades or
businesses or related trades or businesses (the "Asset Diversification Test").
The Fund will not lose its status as a RIC if it fails to meet the Asset
Diversification Test solely as a result of a fluctuation in value of portfolio
assets not attributable to a purchase.
Under Subchapter M, the Fund is exempt from federal income
tax on its net investment income and net capital gains (the excess of net
long-term capital gains over net short-term capital losses) which it
distributes to shareholders, provided that it distributes each year at least
90% of its investment company taxable income (net investment income and the
excess of net short-term capital gains over net long-term capital losses) and
90% of its net tax-exempt interest income (the "Distribution Requirement"),
and complies with certain other requirements of the Code. The Distribution
Requirement for any year may be waived if the Fund establishes to the
satisfaction of the Internal Revenue Service that it is unable to satisfy the
Distribution Requirement by reason of distributions previously made for the
purpose of avoiding liability for federal excise tax (discussed below).
Although the Fund intends to distribute substantially all of
its net investment income and capital gains for any taxable (i.e. fiscal)
year, the Fund will be subject to federal income taxation to the extent any
such income or gains are not distributed.
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<PAGE>
Fund Distributions
Distributions of investment company taxable income will
generally be taxable to shareholders as ordinary income, regardless of whether
such distributions are paid in cash or are reinvested in Shares.
As noted in the Prospectus, exempt-interest dividends are
excludable from a shareholder's gross income for regular federal income tax
purposes. Exempt-interest dividends may nevertheless be subject to the
alternative minimum tax imposed by Section 55 of the Code (the "Alternative
Minimum Tax") or the environmental tax imposed by Section 59A of the Code (the
"Environmental Tax"). The Alternative Minimum Tax is imposed at a rate of up
to 28% in the case of non-corporate taxpayers and at the rate of 20% in the
case of corporate taxpayers, to the extent it exceeds the taxpayer's regular
tax liability. The Environmental Tax is imposed at the rate of 0.12% and
applies only to corporate taxpayers. The Alternative Minimum Tax and the
Environmental Tax may be affected by the receipt of exempt-interest dividends
in two circumstances. First, exempt-interest dividends derived from certain
"private activity bonds" issued after August 7, 1986, will generally be an
item of tax preference and therefore potentially subject to the Alternative
Minimum Tax and the Environmental Tax. The Fund intends, when possible, to
avoid investing in private activity bonds. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined
in Section 56(g) of the Code, in calculating the corporation's alternative
minimum taxable income for purposes of determining the Alternative Minimum Tax
and the Environmental Tax.
The percentage of income that constitutes "exempt-interest
dividends" will be determined for each year for the Fund and will be applied
uniformly to all dividends declared with respect to the Fund during that year.
This percentage may differ from the actual percentage for any particular day.
The Fund may either retain or distribute to shareholders its
excess of net long-term capital gains over net short-term capital losses ("net
capital gains"). If such gains are distributed as a capital gains
distribution, they are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has held Fund Shares.
Conversely, if the Fund elects to retain its net capital gains, it will be
taxed thereon at the applicable corporate tax rate. In this event, it is
expected that the Fund also will elect to have shareholders treated as having
received a distribution of such gains, with the result that they will be
required to report such gains on their returns as long-term capital gains,
will receive a refundable tax credit for their allocable share of federal
income tax paid by the Fund on the gains, and will increase the tax basis for
their Shares by an amount equal to 65% of the deemed distribution.
Generally, gain or loss on the sale, exchange or redemption
of a Share will be capital gain or loss which will be long-term if the Share
has been held for more than one year and otherwise will be short-term.
However, if a shareholder recognizes a loss on the sale, exchange or
redemption of a Share held for six months or less, such loss will be treated
as a long-term capital loss to the extent that any capital gains distributions
have been paid with respect to such Share (or any undistributed net capital
gains of the Fund with respect to such Share is included in determining the
shareholder's long-term capital gains). Similarly, any loss recognized by a
shareholder with respect to Shares held for six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholder with respect to such Shares. In addition, any loss recognized on a
sale or other disposition of Shares will be disallowed to the extent an
investor repurchases (or enters into a contract or option to repurchase)
Shares within a period of 61 days (beginning 30 days before and ending 30 days
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<PAGE>
after the disposition of the Shares). Investors should particularly note that
this loss disallowance rule will apply to Shares received through the
reinvestment of dividends during the 61-day period.
Investors should be careful to consider the tax implications
of purchasing Shares just prior to the ex-dividend date of any ordinary income
dividend or capital gains distribution. Those purchasing just prior to an
ordinary income dividend or capital gains distribution will be taxable on the
entire amount of the dividend or distribution received, even though the net
asset value per Share on the date of such purchase may have reflected the
amount of such forthcoming dividend or distribution.
If for any taxable year the Fund does not qualify as a RIC,
all of its taxable income will be subject to tax at regular corporate rates
without any deduction for distributions to shareholders, and such
distributions will be taxable to shareholders as ordinary dividends to the
extent of the Fund's current and accumulated earnings and profits. Such
distributions will generally be eligible for the 70% dividends received
deduction in the case of corporate shareholders.
The Fund will be required in certain cases to withhold and
remit to the United States Treasury 31% of distributions payable to any
shareholder who (1) has provided either an incorrect tax identification number
or no number at all, (2) who is subject to backup withholding by the Internal
Revenue Service for failure to properly report payments of interest or
dividends, or (3) who has failed to certify to the Fund that such shareholder
is not subject to backup withholding.
The Fund will provide a statement annually to shareholders
as to the federal tax status of distributions paid (or deemed to be paid) by
the Fund during the year.
Federal Excise Tax; Miscellaneous Considerations
The Code imposes a nondeductible 4% federal excise tax on
RICs that do not distribute in each calendar year an amount equal to 98% of
their ordinary income for the calendar year plus 98% of their capital gains
net income for the one-year period ending on October 31 of such calendar year.
The excise tax is imposed on the undistributed part of this required
distribution. In addition, the balance of such income must be distributed
during the next calendar year to avoid liability for the excise tax in that
year. For the foregoing purposes, a company is treated as having distributed
any amount on which it is subject to income tax for any taxable year ending in
such calendar year. For this purpose, in determining its capital gain net
income for the one-year period ending on October 31 of such calendar year, the
Fund must reduce its capital gain net income by the amount of any net ordinary
loss for the calendar year (but not below the net capital gains for the
one-year period ending on October 31). Because the Fund intends to distribute
all of its income currently (or to retain at most its "net capital gains" and
pay tax thereon), the Fund does not anticipate incurring any liability for
this excise tax. However, investors should note that the Fund may in certain
circumstances be required to liquidate portfolio investments in order to make
sufficient distributions to avoid excise tax liability and, in addition, that
the liquidation of such investments in such circumstances may affect the
ability of the Fund to satisfy the Short-Short Gain Test.
Interest on indebtedness incurred or continued by
shareholders to purchase or carry Shares of the Fund will not be deductible
for federal income tax purposes. The deduction otherwise allowable to property
and casualty insurance companies for "losses incurred" will be reduced by an
amount equal to a portion of exempt-interest dividends received or accrued
during any taxable year. Foreign corporations engaged in a trade or business
in the United States will be subject to a "branch profits tax" on their
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<PAGE>
"dividend equivalent amount" for the taxable year, which will include
exempt-interest dividends. Certain Subchapter S corporations may also be
subject to taxes on their "passive investment income," which could include
exempt-interest dividends. Up to 85% of the Social Security benefits or
railroad retirement benefits received by an individual during any taxable year
will be included in the gross income of such individual if the individual's
"modified adjusted gross income" (which includes exempt-interest dividends)
plus one-half of the Social Security benefits or railroad retirement benefits
received by such individual during that taxable year exceeds the base amount
described in Section 86 of the Code.
Entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by industrial
development bonds or private activity bonds should consult their tax advisors
before purchasing Shares. "Substantial user" is defined generally as including
a "non-exempt person" who regularly uses in trade or business a part of such a
facility.
Issuers of bonds purchased by the Fund (or the beneficiary
of such bonds) may have made certain representations or covenants in
connection with the issuance of such bonds to satisfy certain requirements of
the Code that must be satisfied subsequent to the issuance of such bonds.
Investors should be aware that exempt-interest dividends derived from such
bonds may become subject to federal income taxation retroactively to the date
thereof if such representations are determined to have been inaccurate or if
the issuer of such bonds (or the beneficiary of such bonds) fails to comply
with such covenants.
Rules of state and local taxation of distributions from
regulated investment companies often differ from the rules for federal income
taxation described above. Shareholders of the Fund should consult with their
tax advisors regarding the application of the rules set forth above to their
particular circumstances and also regarding the application of state and local
tax laws to an investment in the Fund.
5. MANAGEMENT OF THE FUND
Directors and Officers
The Directors and executive officers of the Fund, their
respective dates of birth and their principal occupations during the last five
years are set forth below. Unless otherwise indicated, the address of each
Director and executive officer is 717 Fifth Avenue, New York, New York 10022.
*EDWARD S. HYMAN, Chairman and Director (4/8/45)
Chairman, International Strategy and Investment Inc.,
1991-Present; Formerly, Vice Chairman and Member of the
Board of Directors, C.J. Lawrence Inc. (money manager),
1972-1991.
*R. ALAN MEDAUGH, Director and President (8/20/43)
President, International Strategy and Investment Inc.;
Formerly, Managing Director, C.J. Lawrence Fixed Income
Management (money manager).
*W. JAMES PRICE, Vice Chairman and Director (10/6/24)
6885 North Ocean Boulevard, Apartment 306, Ocean Ridge,
Florida 33435-3342. Director, Boca Research, Inc. (computer
peripherals). Managing Director Emeritus, Alex. Brown &
Sons Incorporated; Formerly, Director, CSX Corporation
- 11 -
<PAGE>
(transportation and natural resources company) and PHH
Corporation (business services).
*RICHARD T. HALE, Vice Chairman and Director (7/17/45)
Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, MD 21202. Managing Director, Alex. Brown & Sons
Incorporated; Chartered Financial Analyst.
JAMES J. CUNNANE, Director (3/11/38)
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri
63141. Managing Director, CBC Capital (merchant banking),
1993-Present; Formerly, Senior Vice President and Chief
Financial Officer, General Dynamics Corporation (defense),
1989-1993 and Director, The Arch Fund (mutual fund).
JOHN F. KROEGER, Director (8/11/24)
P.O. Box 464, 24875 Swan Road-Martingham, St. Michaels,
Maryland 21663. Director/Trustee, AIM Funds (registered
investment companies); Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm); General
Manager, Shell Oil Company.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director,
Kimberly-Clark Corporation (personal consumer products) and
Household International (finance and banking); Chairman of
the Quality Control Inquiry Committee, American Institute
of Certified Public Accountants; Formerly, Trustee, Merrill
Lynch Funds for Institutions, 1991-1993; Adjunct Professor,
Columbia University-Graduate School of Business, 1991-1992;
Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200
West Main Street, Durham, North Carolina 27705. President,
Duke Management Company (investments); Executive Vice
President, Duke University (education, research and
healthcare).
HARRY WOOLF, Director (8/12/23)
Institute for Advanced Study, South Olden Lane, Princeton,
New Jersey 08540. Professor-at-Large Emeritus, Institute
for Advanced Study; Director, ATL and Spacelabs Medical
Corp. (medical equipment) and Family Health International
(non-profit research and education); Trustee, Reed College
(education); Director, Research America (non-profit medical
research); Formerly, Trustee, Rockefeller Foundation; and
Director, Merrill Lynch Cluster C Funds (registered
investment companies).
EDWARD J. VEILLEUX, Vice President (8/26/43)
Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, MD 21202. Principal, Alex. Brown & Sons
Incorporated; President, Investment Company Capital Corp.
(registered investment advisor); Vice President, Armata
Financial Corp. (registered broker-dealer).
- 12 -
<PAGE>
NANCY LAZAR, Vice President (8/1/57)
Executive Vice President and Secretary, International
Strategy and Investment Inc., 1991-Present; Formerly, Vice
President, C.J. Lawrence Inc. (money manager), 1981-1991.
BRIAN C. NELSON, Vice President and Secretary (7/31/59)
Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, MD 21202. Vice President, Alex. Brown & Sons
Incorporated, Investment Company Capital Corp. (registered
investment advisor) and Armata Financial Corp. (registered
broker-dealer); Assistant Secretary, The Glenmede Fund,
Inc. and The Glenmede Portfolios (mutual funds).
CARRIE L. BUTLER, Vice President (5/1/67)
Vice President, International Strategy and Investment Inc.;
Formerly, Mutual Fund Sales Assistant, C.J. Lawrence Fixed
Income Management (money manager), 1989-1991.
JOSEPH A. FINELLI, Treasurer (1/24/57)
Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, MD 21202. Vice President, Alex. Brown & Sons
Incorporated, September 1995-Present; Treasurer, The
Glenmede Fund, Inc. and The Glenmede Portfolios (mutual
funds), December 1995-Present; Formerly, Vice President and
Treasurer, The Delaware Group of Funds (mutual funds) and
Vice President, Delaware Management Company Inc.,
1980-August 1995.
DENICE DE FLORIO, Assistant Vice President (4/23/69)
Assistant Vice President, International Strategy and
Investment Inc., March 1995-Present; Formerly, Assistant
Portfolio Manager, Smith Barney's Municipal Money Market
Funds and Taxable Money Market Funds, February
1993-February 1995 and Portfolio Administrator, Offitbank,
September 1991-February 1995.
LAURIE D. DePRINE, Assistant Secretary (1/1/66)
Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, MD 21202. Asset Management Department, Alex.
Brown & Sons Incorporated, 1991 to Present; Formerly,
Student, 1989-1991.
- --------
* A Director who is an "interested person" as defined in the Investment
Company Act.
Directors and officers of the Fund are also directors or
officers of some or all of the other investment companies advised,
distributed, administered or managed by Alex. Brown, Armata Financial Corp.,
or by any of their respective affiliates. There are currently 12 funds in the
Flag Investors/ISI Funds and Alex. Brown Cash Reserve Fund, Inc. fund complex
(the "Fund Complex"). Mr. Hyman serves as a Director of three funds in the
Fund Complex. Mr. Medaugh serves as Director and President of one fund and as
President of two other funds in the Fund Complex. Mr. Hale serves as President
and Director of one fund, Vice President of one fund and as a Director of 10
other funds in the Fund Complex. Mr. Price serves as a Director of seven funds
in the Fund Complex. Messrs. Cunnane, Kroeger, Levy, McDonald and Woolf serve
as Directors of each fund in the Fund Complex. Ms. Lazar and Ms. Butler serve
as Vice Presidents and Ms. De Florio serves as an Assistant Vice President of
three funds in the Fund Complex. Mr. Veilleux serves as Executive Vice
President of one fund and as Vice President of each of the other funds in the
Fund Complex. Mr. Nelson serves as Vice President and Secretary, Mr. Finelli
- 13 -
<PAGE>
serves as Treasurer and Ms. DePrine serve as Assistant Secretary,
respectively, of each of the funds in the Fund Complex.
Officers of the Fund receive no direct remuneration in such
capacity from the Fund. Officers and Directors of the Fund who are officers or
directors of Alex. Brown, Armata Financial Corp., ISI or the Fund's
administrator may be considered to have received remuneration indirectly. As
compensation from the Fund, each Director who is not an "interested person" of
the Fund (as defined in the Investment Company Act) (a "Non-Interested
Director") receives an aggregate annual fee (plus reimbursement for reasonable
out-of-pocket expenses incurred in connection with his attendance at Board and
committee meetings) from all Flag Investors/ISI Funds and Alex. Brown Cash
Reserve Fund, Inc. for which he serves. In addition, the Chairman of the Fund
Complex's Audit Committee receives an aggregate annual fee from the Fund
Complex. Payment of such fees and expenses is allocated among all such funds
described above in direct proportion to their relative net assets. For the
fiscal year ended October 31, 1995, Non-Interested Directors' fees
attributable to the assets of the Fund totalled $7,501. The following table
shows aggregate compensation paid to each of the Fund's Directors by the Fund
and the Fund Complex, respectively, in the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Compensation From Total Compensation From the
Position the Fund for the Fiscal Year Fund and Fund Complex Paid
Ended October 31, 1995 to Directors for the Fiscal Year
Ended October 31, 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Edward S. Hyman $0 $0
Chairman
*R. Alan Medaugh $0 $0
Director & President
*Richard T. Hale $0 $0
Vice Chairman
*W. James Price $0 $0
Vice Chairman
James J. Cunnane $932(1) $29,250 for service on
Director 13 Boards in Fund Complex(2)
N. Bruce Hannay** $1,260(1) $39,000 for service on
Director 13 Boards in Fund Complex(2)
John F. Kroeger $1,386(1) $42,900 for service on
Director 13 Boards in Fund Complex(2)
Louis E. Levy $1,260(1) $39,000 for service on
Director 13 Boards in Fund Complex(2)
Eugene J. McDonald $1,260(1) $39,000 for service on
Director 13 Boards in Fund Complex(2)
Harry Woolf $1,260(1) $39,000 for service on
Director 13 Boards in Fund Complex(2)
</TABLE>
- ------------
* A Director who is an "interested person" as defined in the Investment
Company Act.
** Retired, effective January 31, 1996.
- 14 -
<PAGE>
(1) Of the amounts paid to Messrs. Cunnane, Hannay, Kroeger, Levy, McDonald
and Woolf, $932, $919, $0, $0, $1,260 and $1,260, respectively, was
deferred pursuant to a deferred compensation plan.
(2) One of these funds ceased operations on May 17, 1995.
The Fund Complex has adopted a Retirement Plan (the
"Retirement Plan") for Directors who are not employees of the Fund, the Fund's
Advisor or their respective affiliates (the "Participants"). After completion
of five years of service, each Participant will be entitled to receive an
annual retirement benefit equal to a percentage of the fee earned by him in
his last year of service. Upon retirement, each Participant will receive
annually 10% of such fee for each year that he served after completion of the
first five years, up to a maximum annual benefit of 50% of the fee earned by
him in his last year of service. The fee will be paid quarterly, for life, by
each Fund for which he serves. The Retirement Plan is unfunded and unvested.
Messrs. Kroeger and Woolf have qualified but have not yet received benefits.
The Fund has two Participants, a Director who retired effective December 31,
1994 and a Director who retired effective January 31, 1996, each of whom has
qualified for the Retirement Plan and will be paid a quarterly fee of $4,875
by the Fund Complex for the rest of his life. Such fee is allocated to each
fund in the Fund Complex based upon the relative net assets of such fund to
the Fund Complex.
Beginning in December, 1994, any Director who receives fees
from the Fund is permitted to defer a minimum of 50%, or up to all, of his
annual compensation pursuant to a Deferred Compensation Plan.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of Ethics
pursuant to Rule 17j-1 under the Investment Company Act (the "Code of
Ethics"). The Code of Ethics significantly restricts the personal investing
activities of all employees of the Advisor and the directors and officers of
the Fund's distributors. As described below, the Code of Ethics imposes
additional, more onerous, restrictions on the Fund's investment personnel,
including the portfolio managers and employees who execute or help execute a
portfolio manager's decisions or who obtain contemporaneous information
regarding the purchase or sale of a security by the Fund.
The Code of Ethics requires that all employees of the Advisor, any
director or officer of the Fund's distributors, and all Non-Interested
Directors, preclear any personal securities investments (with limited
exceptions, such as non-volitional purchases or purchases which are part of an
automatic dividend reinvestment plan). The preclearance requirement and
associated procedures are designed to identify any substantive prohibition or
limitation applicable to the proposed investment. The substantive restrictions
applicable to investment personnel include a ban on acquiring any securities
in an initial public offering, a prohibition from profiting on short-term
trading in securities and preclearance of the acquisition of securities in
private placements. Furthermore, the Code of Ethics provides for trading
"blackout periods" that prohibit trading by investment personnel and certain
other employees within periods of trading by the Fund in the same security.
6. INVESTMENT ADVISORY AND OTHER SERVICES
ISI serves as the Fund's investment advisor pursuant to an
investment advisory agreement dated as of April 1, 1991 (the "Investment
Advisory Agreement"). ISI is a registered investment advisor that was formed
in January, 1991. ISI employs Messrs. Edward S. Hyman, the Fund's Chairman and
R. Alan Medaugh, the Fund's President. ISI is also the investment advisor to
Total Return U.S. Treasury Fund, Inc. and North American Government Bond Fund,
Inc.
- 15 -
<PAGE>
Under the Investment Advisory Agreement, the Advisor
obtains and evaluates economic, statistical and financial information to
formulate and implement investment policies for the Fund. Any investment
program undertaken by the Advisor will at all times be subject to policies and
control of the Fund's Board of Directors. The Advisor will provide the Fund
with office space for managing its affairs, with the services of required
executive personnel and with certain clerical and bookkeeping services and
facilities. These services are provided by the Advisor without reimbursement
by the Fund for any costs. The Advisor shall not be liable to the Fund or its
shareholders for any act or omission by the Advisor or any losses sustained by
the Fund or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty. As compensation for
its services, the Advisor is entitled to receive an annual fee from the Fund,
payable monthly, at the annual rate of .40% of the Fund's average daily net
assets. The Advisor and the Administrator have voluntarily agreed to reduce
proportionately their respective annual fees, if necessary, so that the Fund's
annual expenses do not exceed .90% of the respective average net assets of the
Flag Investors Shares and the ISI Shares Classes. The services of the Advisor
to the Fund are not exclusive and the Advisor is free to render similar
services to others.
In addition, the Advisor has agreed to reduce its aggregate
fees on a monthly basis for any fiscal year to the extent required so that the
amount of the ordinary expenses of the Fund (excluding brokerage commissions,
interest, taxes and extraordinary expenses such as legal claims, liabilities,
litigation costs and indemnification related thereto) paid or incurred by the
Fund for such fiscal year does not exceed the expense limitations applicable
to the Fund imposed by the securities laws or regulations of the states in
which the Shares are registered or qualified for sale, as such limitations may
be raised or lowered from time to time. Currently, the most restrictive of
such expense limitations requires the Advisor to reduce its fees to the extent
required so that ordinary expenses of the Fund (excluding brokerage
commissions, interest, taxes and extraordinary expenses such as legal claims,
liabilities, litigation costs and indemnification related thereto) do not
exceed 2.5% of the first $30 million of the Fund's average daily net assets,
2.0% of the next $70 million of the Fund's average daily net assets and 1.5%
of the Fund's average daily net assets in excess of $100 million. In addition,
if required to do so by any applicable state securities laws or regulations,
the Advisor will reimburse the Fund to the extent required to prevent the
expense limitations of any state law or regulation from being exceeded.
The Advisor is responsible for decisions to buy and sell
securities for the Fund, for broker-dealer selection, and for negotiation of
commission rates under standards established and periodically reviewed by the
Board of Directors. Because purchases and sales of securities by the Fund will
usually be principal transactions, the Fund will incur little, if any,
brokerage commission expense. The Advisor's primary consideration in effecting
securities transactions will be to obtain best price and execution. To the
extent that the execution and prices of more than one dealer are comparable,
the Advisor may, in its discretion, effect transactions with dealers that
furnish statistical research or other information or services that may benefit
the Fund's investment program.
The Investment Advisory Agreement will continue in effect
from year to year after its initial two year term if such continuance is
specifically approved at least annually by the Fund's Board of Directors,
including a majority of the Non-Interested Directors who have no direct or
indirect financial interest in such agreements, by votes cast in person at a
meeting called for such purpose, and by a vote of a majority of the
outstanding Shares (as defined under "Capital Stock"). The Investment Advisory
Agreement was most recently approved by the Board of Directors in the
foregoing manner on September 25, 1995. The Fund or the Advisor may terminate
the Investment Advisory Agreement on 60 days' written notice without penalty.
- 16 -
<PAGE>
The Investment Advisory Agreement will terminate automatically in the event of
assignment (as defined in the Investment Company Act). For the fiscal years
ended October 31, 1995, October 31, 1994 and October 31, 1993, ISI received
fees from the Fund of $531,628, $563,840 and $485,646, respectively and from
such amounts waived fees of $177,885, $191,665 and $192,586, respectively.
7. ADMINISTRATION
Investment Company Capital Corp. ("ICC" or the
"Administrator"), 135 East Baltimore Street, Baltimore, Maryland 21202
provides administration services to the Fund including: monitoring the Fund's
regulatory compliance, supervising all aspects of the Fund's service
providers, arranging, but not paying for, the printing and mailing of
prospectuses, proxy materials and shareholder reports, preparing and filing
all documents required by the securities laws of any state in which the Shares
are sold, establishing the Fund's budgets, monitoring the Fund's distribution
plan, preparing the Fund's financial information and shareholder reports,
calculating dividend and distribution payments and arranging for the
preparation of state and federal tax returns.
As compensation for providing administration services to the
Fund, the Administrator is entitled to receive an annual fee, calculated daily
and paid monthly, at the annual rate of .20% of the Fund's average daily net
assets. The Administrator and the Advisor have voluntarily agreed to reduce
proportionately their respective fees, if necessary, so that the annual
expenses for the Flag Investors Shares and the ISI Shares Classes do not
exceed .90% of such classes' respective average daily net assets. For the
fiscal year ended October 31, 1995 and for the period from January 1, 1994
through October 31, 1994, ICC received fees of $265,814 and $234,666,
respectively, and from such amounts waived fees of $88,942 and $80,446,
respectively. Prior to January 1, 1994, Alex. Brown provided administration
services to the Fund. For the period from November 1, 1993 through December
31, 1993 and for the fiscal year ended October 31, 1993, Alex. Brown received
fees (net of fee waivers) of $31,868 and $150,530, respectively.
ICC also serves as the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. (See
"Custodian, Transfer Agent and Accounting Services.") ICC is a wholly-owned
subsidiary of Alex. Brown and an affiliate of Armata.
8. DISTRIBUTION OF FUND SHARES
The Flag Investors Managed Municipal Fund Class A Shares
Distribution Agreement provides that Alex. Brown has the exclusive right to
distribute the Flag Investors Managed Municipal Fund Class A Shares either
directly or through other broker-dealers. The ISI Managed Municipal Fund
Shares Distribution Agreement provides that Armata has the exclusive right to
distribute ISI Managed Municipal Fund Shares, either directly or through other
broker-dealers. Armata is a broker-dealer that was formed in 1983 and is an
affiliate of Alex. Brown and ICC. (The ISI Managed Municipal Fund Shares
Distribution Agreement and the Flag Investors Managed Municipal Fund Class A
Shares Distribution Agreement are herein collectively referred to as the
"Distribution Agreements"). The Distribution Agreements further provide that
the distributors on behalf of the relevant class, will: solicit and receive
orders for the purchase of Shares; accept or reject such orders on behalf of
the Fund in accordance with the Fund's currently effective Prospectus and
transmit such orders as are accepted to the Fund's transfer agent as promptly
as possible; receive requests for redemptions and transmit such redemption
requests to the Fund's transfer agent as promptly as possible; and respond to
inquiries from shareholders concerning the status of their accounts and the
- 17 -
<PAGE>
operations of the Fund. Neither Alex. Brown nor Armata have undertaken to sell
any specific number of Shares. The Distribution Agreements further provide
that, in connection with the distribution of Shares, Alex. Brown and Armata
will be responsible for all of their respective promotional expenses. The
services provided by Alex. Brown and Armata to the Fund are not exclusive, and
they are free to provide similar services to others. Alex. Brown and Armata
shall not be liable to the Fund or its shareholders for any act or omission by
them or any losses sustained by the Fund or its shareholders except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of duty.
Alex. Brown and Armata have entered into Sub-Distribution
Agreements with certain broker-dealers ("Participating Dealers") under which
the Participating Dealers have agreed to process investor purchase and
redemption orders and respond to inquiries from shareholders concerning the
status of their accounts and the operations of the Fund.
As compensation for providing distribution services as
described above, Alex. Brown and Armata each receive an annual fee, paid
monthly, equal to .25% of the average daily net assets of the Flag Investors
Shares and the ISI Class Shares, respectively. Alex. Brown and Armata expect
to allocate most of their annual fees to investment representatives and up to
all of their fees to Participating Dealers who enter into Sub-Distribution
Agreements with Alex. Brown or Armata, respectively.
Pursuant to Rule 12b-1 under the Investment Company Act,
which provides that investment companies may pay distribution expenses,
directly or indirectly, only pursuant to a plan adopted by the investment
company's board of directors and approved by its shareholders, the Fund has
adopted a Plan of Distribution for each of its classes of shares (the
"Plans"). Under the Plans, the Fund pays a fee to Alex. Brown and Armata for
distribution and other shareholder servicing assistance as set forth in the
Distribution Agreements, and Alex. Brown and Armata are authorized to make
payments out of the fee to their investment representatives and to
Participating Dealers. The Distribution Agreements, including the Distribution
Plans and forms of Sub-Distribution Agreement, were most recently approved by
the Fund's Board of Directors, including a majority of the Non-Interested
Directors on September 25, 1995. The Distribution Agreements and the Plans
encompassed therein will remain in effect from year to year as specifically
approved at least annually by the Fund's Board of Directors and by the
affirmative vote of a majority of the Non-Interested Directors by votes cast
in person at a meeting called for such purpose.
In approving the Plans, the Directors concluded, in the
exercise of reasonable business judgment, that there was a reasonable
likelihood that the Plans would benefit the Fund and its shareholders. The
Plans will be renewed only if the Directors make a similar determination in
each subsequent year. The Plans may not be amended to increase materially the
fee to be paid pursuant to the Distribution Agreement without the approval of
the shareholders of the Fund. The Plans may be terminated at any time and the
Distribution Agreements may be terminated at any time upon 60 days' notice, in
either case without penalty, by the vote of a majority of the Fund's
Non-Interested Directors or by a vote of a majority of the outstanding Shares
(as defined under "Capital Stock"). Any Sub-Distribution Agreement may be
terminated in the same manner at any time. The Distribution Agreements and any
Sub-Distribution Agreement shall automatically terminate in the event of
assignment.
During the continuance of the Plans, the Fund's Board of
Directors will be provided for their review, at least quarterly, a written
report concerning the payments made under the Plans to Alex. Brown and Armata
pursuant to the Distribution Agreements and to broker-dealers pursuant to
- 18 -
<PAGE>
Sub-Distribution Agreements. Such reports shall be made by the persons
authorized to make such payments. In addition, during the continuance of the
Plans, the selection and nomination of the Fund's Non-Interested Directors
shall be committed to the discretion of the Non-Interested Directors then in
office.
In addition, the Fund may enter into Shareholder Servicing
Agreements with certain financial institutions, such as banks, to act as
Shareholder Servicing Agents, pursuant to which Alex. Brown and Armata will
allocate a portion of their respective distribution fees as compensation for
such financial institutions' ongoing shareholder services. Although banking
laws and regulations prohibit banks from distributing shares of open-end
investment companies such as the Fund, according to interpretations from
various bank regulatory authorities, financial institutions are not prohibited
from acting in other capacities for investment companies, such as the
Shareholder Servicing capacities described above. Should future legislative,
judicial or administrative action prohibit or restrict the activities of the
Shareholder Servicing Agents in connection with the Shareholder Servicing
Agreements, the Fund may be required to alter materially or discontinue its
arrangements with the Shareholder Servicing Agents. Such financial
institutions may impose separate fees in connection with these services and
investors should review this Prospectus in conjunction with any such
institution's fee schedule. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein, and banks
and financial institutions may be required to register as dealers pursuant to
state law.
Under the Plans, amounts allocated to Participating Dealers
and Shareholder Servicing Agents may not exceed amounts payable to Alex. Brown
and Armata under the Plans. Payments under the Plans are made as described
above regardless of Alex. Brown's or Armata's actual cost of providing
distribution services and may be used to pay Alex. Brown's and Armata's
overhead expenses. If the cost of providing distribution services to the Fund
in connection with the sale of the Flag Investors Shares or the ISI Shares is
less than .25% of the respective classes' average daily net assets for any
period, the unexpended portion of the distribution fee may be retained by
Alex. Brown and Armata, as appropriate. The Plans do not provide for any
charges to the Fund for excess amounts expended by Alex. Brown and Armata and,
if the Plans are terminated in accordance with their terms, the obligation of
the Fund to make payments to Alex. Brown and Armata pursuant to the Plans will
cease and the Fund will not be required to make any payments past the date the
related Distribution Agreement terminates.
For the fiscal years ended October 31, 1995, October 31,
1994 and October 31, 1993, Armata received 12b-1 fees from the Fund of
$212,053, $217,473 and $173,304, respectively, for distribution of the ISI
Class Shares. During the same periods, Armata paid $202,553, $205,956 and
$167,726, respectively, to Participating Dealers and financial institutions.
Armata received no brokerage commissions from the Fund during these periods.
In addition, for the fiscal year ended October 31, 1995, Armata incurred
expenses of $6,792 for advertising and $5,811 for printing and mailing
prospectuses to prospective investors. For the fiscal years ended October 31,
1995, October 31, 1994 and October 31, 1993, Alex. Brown received 12b-1 fees
of $120,214, $130,687 and $125,492, respectively from the Fund for
distribution of the Flag Investors Class A Shares. During the same periods
Alex. Brown paid $110,093, $119,258 and $71,559, respectively, to its
investment representatives and paid $9,238, $5,277 and $4,099, respectively,
to Participating Dealers and financial institutions. Alex. Brown received no
brokerage commissions from the Fund during these periods. In addition, for the
fiscal year ended October 31, 1995, Alex. Brown incurred expenses of $0 for
advertising and $11,365 for printing and mailing prospectuses to prospective
investors. For the period from November 9, 1992 through February 28, 1994,
Alex. Brown was also distributor for the Flag Investors Class D Shares (known
at such time as the Flag Investors Class B Shares) pursuant to a Plan of
- 19 -
<PAGE>
Distribution in effect for such class. For distribution services for such
shares for the period from November 1, 1993 through October 19, 1994 and for
the period from November 9, 1992 through October 31, 1993, Alex. Brown
received from the Fund 12b-1 fees of $10,173 and $11,359, respectively, and
paid $0 to its investment representatives and $0 to Participating Dealers.
For the fiscal years ended October 31, 1995, October 31,
1994 and October 31, 1993, Alex. Brown received sales commissions on the Flag
Investors Class A Shares of $63,394, $128,141 and $220,671, and from such
amounts retained $62,002, $125,181 and $217,701 in each such year,
respectively. For the fiscal years ended October 31, 1995, October 31, 1994
and October 31, 1993, Armata received sales commissions on the ISI Class
Shares of $353,850, $184,450 and $862,747 and from such amounts retained
$18,641, $28,864 and $122,125 in each such year, respectively.
The Fund has paid all costs associated with its organization
and registration under the Securities Act of 1933 and the Investment Company
Act. Except as described elsewhere, the Fund pays or causes to be paid all
continuing expenses of the Fund, including, without limitation: investment
advisory and distribution fees; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing Shares; all costs and expenses in connection with
the registration and maintenance of registration of the Fund and its Shares
with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting and distributing prospectuses and statements
of additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Directors and Director members of any advisory
board or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; fees and
expenses of legal counsel, including counsel to the Non-Interested Directors,
and of independent public accountants, in connection with any matter relating
to the Fund; a portion of membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification related thereto);
and all other charges and costs of the Fund's operation unless otherwise
explicitly assumed by Alex. Brown, ICC or Armata. Absent fee waivers for the
fiscal year ended October 31, 1995, the Fund's Total Operating Expenses were
1.10% of its average net assets.
9. PORTFOLIO TRANSACTIONS
The Advisor is responsible for decisions to buy and sell
securities for the Fund, for broker-dealer selection and for negotiation of
commission rates. The Advisor may direct purchase and sale orders to any
broker-dealer.
Municipal obligations and other debt securities are traded
principally in the over-the-counter market on a net basis through dealers
acting for their own account and not as brokers. The cost of securities
purchased from underwriters includes an underwriter's commission or
- 20 -
<PAGE>
concession, and the prices at which securities are purchased and sold from and
to dealers include a dealer's mark-up or mark-down. The Advisor attempts to
negotiate with underwriters to decrease the commission or concession for the
benefit of the Fund. The Advisor normally seeks to deal directly with the
primary market makers unless, in its opinion, better prices are available
elsewhere. Securities firms or futures commission merchants may receive
brokerage commissions on transactions involving Futures Contracts. On
occasion, certain money market instruments may be purchased directly from an
issuer without payment of a commission or concession.
The Advisor's primary consideration in effecting securities
transactions is to obtain best price and execution of orders on an overall
basis. As described below, however, the Advisor may, in its discretion, effect
transactions with broker-dealers that furnish statistical, research or other
information or services which are deemed by the Advisor to be beneficial to
the Fund's investment program. Certain research services furnished by
broker-dealers may be useful to the Advisor with clients other than the Fund.
Similarly, any research services received by the Advisor
through placement of portfolio transactions of other clients may be of value
to the Advisor in fulfilling its obligations to the Fund. No specific value
can be determined for research and statistical services furnished without cost
to the Advisor by a broker-dealer. The Advisor is of the opinion that because
the material must be analyzed and reviewed by its staff, its receipt does not
tend to reduce expenses, but may be beneficial in supplementing the Advisor's
research and analysis. Therefore, it may tend to benefit the Fund by improving
the Advisor's investment advice. The Advisor's policy is to pay a
broker-dealer higher commissions for particular brokerage transactions, if
any, than might be charged if a different broker-dealer had been chosen when,
in the Advisor's opinion, this policy furthers the overall objective of
obtaining best price and execution. Subject to periodic review by the Fund's
Board of Directors, the Advisor is also authorized to pay broker-dealers
higher commissions on brokerage transactions for the Fund in order to secure
research and investment services described above. The allocation of orders
among broker-dealers and the commission rates paid by the Fund will be
reviewed periodically by the Board. During the fiscal years ended October 31,
1995, October 31, 1994 and October 31, 1993 no brokerage commissions were paid
by the Fund for research services.
The Fund is required to identify any securities of its
"regular brokers or dealers" (as such term is defined in the Investment
Company Act) which the Fund has acquired during its most recent fiscal year.
As of October 31, 1995, the Fund held a 5.75% repurchase agreement issued by
Goldman Sachs & Co. valued at $12,982,000. Goldman Sachs & Co. is a "regular
broker or dealer" of the Fund.
The Advisor manages other investment accounts. It is
possible that, at times, identical securities will be acceptable for the Fund
and one or more of such other accounts; however, the position of each account
in the securities of the same issuer may vary and the length of time that each
account may choose to hold its investment in such securities may likewise
vary. The timing and amount of purchase by each account will also be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more of these
accounts is considered at or about the same time, transactions in such
securities will be allocated among the accounts in a manner deemed equitable
by the Advisor. The Advisor may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and
most favorable execution. Such simultaneous transactions, however, could
adversely affect the ability of the Fund to obtain or dispose of the full
amount of a security which it seeks to purchase or sell.
- 21 -
<PAGE>
10. CAPITAL STOCK
The Fund is authorized to issue forty million Shares of
common stock, par value $.001 per Share. The Board of Directors may increase
or decrease the number of authorized Shares without shareholder approval.
The Fund's Articles of Incorporation provide for the
establishment of separate series and separate classes of shares by the
Directors at any time without shareholder approval. The Fund has created four
classes of Shares: ISI Managed Municipal Fund Shares, Flag Investors Managed
Municipal Fund Class A Shares (formerly known as Flag Investors Managed
Municipal Fund Shares), Flag Investors Managed Municipal Fund Class B Shares
and Flag Investors Managed Municipal Fund Class D Shares. The Flag Investors
Managed Municipal Fund Class B Shares and the Flag Investors Managed Municipal
Fund Class D Shares are not currently being offered. All Shares of the Fund
regardless of class would have equal rights with respect to voting, except
that with respect to any matter affecting the rights of the holders of a
particular series or class, the holders of each series would vote separately.
Any such series would be a separately managed portfolio and shareholders of
each series would have an undivided interest in the net assets of that series.
For tax purposes, the series would be treated as separate entities. Generally,
each class of shares issued by a particular series will be identical to every
other class and expenses of the Fund (other than 12b-1 fees) are prorated
among all classes of a series based upon the relative net assets of each
class. Any matters affecting any class exclusively would be voted on by the
holders of such class.
Shareholders of the Fund do not have cumulative voting
rights, and therefore the holders of more than 50% of the outstanding Shares
voting together for election of Directors may elect all the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund. There are no
preemptive, conversion or exchange rights applicable to any of the Shares. The
issued and outstanding Shares are fully paid and non-assessable. In the event
of liquidation or dissolution of the Fund, each Share is entitled to its
portion of the Fund's assets (or the assets allocated to a separate series of
shares if there is more than one series) after all debts and expenses have
been paid.
As used in this Statement of Additional Information, the
term "majority of the outstanding Shares" means the vote of the lesser of (i)
67% or more of the Shares present at a meeting, if the holders of more than
50% of the outstanding Shares are present or represented by proxy, or (ii)
more than 50% of the outstanding Shares.
11. REPORTS
The Fund furnishes shareholders with semi-annual and annual
reports containing information about the Fund and its operations, including a
list of investments held in the Fund's portfolio and financial statements. The
annual financial statements are audited by the Fund's independent accountants.
12. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
PNC Bank, National Association ("PNC Bank"), Airport
Business Park, 200 Stevens Drive, Lester, Pennsylvania 19113, a subsidiary of
PNC Bank Corp. has been retained to act as custodian of the Fund's
investments. PNC Bank receives such compensation from the Fund for its
services as custodian as may be agreed to from time to time by PNC Bank and
the Fund. Investment Company Capital Corp., 135 East Baltimore Street,
Baltimore, Maryland 21202 (telephone: (800) 553-8080 for the Flag Investors
- 22 -
<PAGE>
Shares Class and (800) 882-8585 for the ISI Shares Class) has been retained to
act as the Fund's transfer and dividend disbursing agent. As compensation for
these services, ICC receives up to $10.62 per account per year plus
reimbursement for out-of-pocket expenses incurred in connection therewith. For
the fiscal year ended October 31, 1995, such fees totalled $81,033.
ICC also provides accounting services to the Fund. As
compensation for providing accounting services, ICC is entitled to receive an
annual fee, calculated daily and paid monthly as shown below.
Average Net Assets Incremental Annual Accounting Fee
------------------ ---------------------------------
$ 0 - $ 10,000,000 $13,000 (fixed fee)
$ 10,000,001 - $ 20,000,000 .100%
$ 20,000,001 - $ 30,000,000 .080%
$ 30,000,001 - $ 40,000,000 .060%
$ 40,000,001 - $ 50,000,000 .050%
$ 50,000,001 - $ 60,000,000 .040%
$ 60,000,001 - $ 70,000,000 .030%
$ 70,000,001 - $ 99,999,999 .020%
$100,000,001 - $ 500,000,000 .015%
$500,000,001 - $1,000,000,000 .005%
over $1,000,000,000 .001%
In addition, the Fund will reimburse ICC for the following
out-of-pocket expenses incurred in connection with ICC's provision of
accounting services: express delivery service, independent pricing and
storage. As compensation for providing accounting services for the fiscal year
ended October 31, 1995, ICC received fees of $59,938.
ICC also serves as the Fund's administrator.
13. INDEPENDENT ACCOUNTANTS
The annual financial statements of the Fund are audited by
Coopers & Lybrand L.L.P. whose report thereon appears elsewhere herein, and
has been included herein in reliance upon the report of such firm of
accountants given on their authority as experts in accounting and auditing.
Coopers & Lybrand L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103.
14. PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the
Fund to that of other open-end diversified management investment companies and
to stock or other relevant indices in advertisements or in certain reports to
shareholders, performance will be stated in terms of total return rather than
in terms of yield. The total return quotations, under the rules of the SEC,
must be calculated according to the following formula:
n
P(1 + T) = ERV
- 23 -
<PAGE>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of
the 1, 5, or 10 year periods (or
fractional portion thereof) of a
hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in
advertising will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertising for
publication, and will cover one, five, and ten year periods or a shorter
period dating from the effectiveness of the Fund's registration statement or
the date the Fund (or a series) commenced operations (provided such date is
subsequent to the date the registration statement became effective). During
its first year of operation the Fund may, in lieu of annualizing its total
return, use an aggregate total return calculated in the same manner. In
calculating the ending redeemable value, the maximum sales load is deducted
from the initial $1,000 payment and all dividends and distributions by the
Fund are assumed to have been reinvested at net asset value as described in
the prospectus on the reinvestment dates during the period. "T" in the formula
above is calculated by finding the average annual compounded rate of return
over the period that would equate an assumed initial payment of $1,000 to the
ending redeemable value. Any sales loads that might in the future be made
applicable at the time to reinvestments would be included as would any
recurring account charges that might be imposed by the Fund.
The Fund may also from time to time include in such
advertising total return figures that are not calculated according to the
formula set forth above in order to compare more accurately the Fund's
performance with other measures of investment return. For example, in
comparing the Fund's total return with data published by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. or Morningstar, Inc., with
the performance of the Lehman Brothers Municipal Bond Index, the Consumer
Price Index, the return on 90 day U.S. Treasury bills, the Standard and Poor's
500 Stock Index or the Dow Jones Industrial Average, the Fund calculates its
aggregate and average annual total return for the specified periods of time by
assuming the investment of $10,000 in Shares and assuming the reinvestment of
each dividend or other distribution at net asset value on the reinvestment
date. For the purpose of other comparisons, the Fund performs a second
alternative computation for its aggregate and average annual total return by
assuming the investment of $10,000 in Shares and assuming no reinvestment of
dividends or other distributions.
For these alternative computations, the Fund assumes that
the $10,000 invested in Shares is net of all sales charges (as distinguished
from the computation required by the SEC where the $1,000 payment is reduced
by sales charges before being invested in Shares). The Fund will, however,
disclose the maximum sales charges and will also disclose that the performance
data do not reflect sales charges and that inclusion of sales charges would
reduce the performance quoted. Such alternative total return information will
be given no greater prominence in such advertising than the information
prescribed under SEC rules, and all advertisements containing performance data
will include a legend disclosing that such performance data represent past
performance and that the investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
- 24 -
<PAGE>
Calculated according to SEC rules, for the one year period
ended September 30, 1995, the ending redeemable value of a hypothetical $1,000
payment for ISI Managed Municipal Fund Shares was $1,060, resulting in a total
return for such Shares equal to 5.95%. For the five year period ended
September 30, 1995, the ending redeemable value of a hypothetical $1,000
payment for ISI Managed Municipal Fund Shares was $1,468, resulting in an
average annual total return for such Shares equal to 7.97%. For the period from
February 26, 1990 (effectiveness of the Fund's registration statement) through
the end of the Fund's most recent calendar quarter on September 30, 1995, the
ending redeemable value of a hypothetical $1,000 payment for ISI Managed
Municipal Fund Shares was $1,481, resulting in an average annual total return
for such Shares equal to 7.27%.
Calculated according to SEC rules for the one year period
ended September 30, 1995, the ending redeemable value of a hypothetical $1,000
payment for Flag Investors Managed Municipal Fund Class A Shares was $1,059,
resulting in an annual return for such Shares equal to 5.90%. For the period
from October 23, 1990 (initial public offering of the Flag Investors Managed
Municipal Fund Class A Shares) through the end of the Fund's most recent
calendar quarter on September 30, 1995, the ending redeemable value of a
hypothetical $1,000 payment for Flag Investors Managed Municipal Fund Class A
Shares was $1,376, resulting in an average annual total return for such Shares
equal to 6.67%.
Calculated according to the first alternative computation,
which assumes no sales charge and reinvestment of all distributions, for the
one year period ended October 31, 1995, the ending redeemable value of a
hypothetical $10,000 investment in either ISI Managed Municipal Fund Shares or
Flag Investors Managed Municipal Fund Class A Shares was $11,542, resulting in
an average total return equal to 15.42%. For the five year period ended
October 31, 1995, the ending redeemable value of a hypothetical $10,000
investment in either ISI Managed Municipal Fund Shares or Flag Investors
Managed Municipal Fund Class A Shares was $14,510, resulting in an average
annual total return equal to 7.7%. For the period from February 26, 1990
(effectiveness of the Fund's registration statement) through the end of the
Fund's most recent fiscal year on October 31, 1995, the ending redeemable
value of a hypothetical $10,000 investment in ISI Managed Municipal Fund
Shares was $15,606, resulting in an average annual total return for such
Shares equal to 8.2%. For the period from October 23, 1990 (initial public
offering of the Flag Investors Managed Municipal Fund Class A Shares) through
the end of the Fund's most recent fiscal year on October 31, 1995, the ending
redeemable value of a hypothetical $10,000 investment in Flag Investors
Managed Municipal Fund Class A Shares was $15,220, resulting in an average
annual total return for such Shares equal to 8.0%.
Any yield quotation of the Fund is based on the annualized
net investment income per share of the Fund over a 30 day period. The yield
for the Fund is calculated by dividing the net investment income per share of
the Fund earned during the period by the maximum offering price per share of
the Fund on the last day of that period. The resulting figure is then
annualized. Net investment income per share is determined by dividing (i) the
dividends and interest earned by the Fund during the period, minus accrued
expenses for the period, by (ii) the average number of Fund shares entitled to
receive dividends during the period multiplied by the maximum offering price
per share on the last day of the period. The Fund's yield calculations assume
a maximum sales charge of 4.45% for the ISI Managed Municipal Fund Shares and
4.50% for the Flag Investors Managed Municipal Fund Class A Shares. The Fund's
taxable-equivalent yield is calculated by determining the rate of return that
- 25 -
<PAGE>
would have to be achieved on a fully taxable investment to produce the
after-tax equivalent on the Fund's yield. In calculating taxable-equivalent
yield, the Fund assumes certain brackets for shareholders.
For the 30 day period ended October 31, 1995, the yield for
the ISI Managed Municipal Fund Shares was 4.34% and the yield for the Flag
Investors Managed Municipal Fund Class A Shares was 4.34%. For the same 30 day
period, the taxable-equivalent yield (for an investor in the 31% tax bracket)
was 6.29% for the ISI Managed Municipal Fund Shares and 6.29% for the Flag
Investors Managed Municipal Fund Class A Shares.
The Fund's annual portfolio turnover rate (the lesser of
the value of the purchases or sales for the year divided by the average
monthly market value of the portfolio during the year, excluding U.S.
Government securities and securities with maturities of one year or less) may
vary from year to year, as well as within a year, depending on market
conditions. For the fiscal years ended October 31, 1995 and October 31, 1994,
the Fund's portfolio turnover rate was 55% and 37%, respectively.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 8, 1996, to Fund management's knowledge, the
following persons owned of record or beneficially 5% or more of the Fund's
outstanding Shares.
Flag Investors Shares
Alex. Brown & Sons Incorporated 5.59%
FBO 201-57665-18
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons Incorporated 86.10%*
135 East Baltimore Street
Baltimore, MD 21202
*Alex. Brown owns beneficially less than 1% of such shares
As of such date directors and officers, as a group, owned
beneficially and of record less than 1% of the Fund's outstanding Shares of
either class.
16. FINANCIAL STATEMENTS.
See next page.
- 26 -
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets October 31, 1995
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR VALUE
ISSUER S&P) (000) (NOTE A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--89.2%
GENERAL OBLIGATION--49.3%
Charlotte, NC:
5.00%, 2007................................................. Aaa/AAA $ 2,000 $ 2,016,980
5.00%, 2008................................................. Aaa/AAA 1,500 1,499,880
5.30%, 2011................................................. Aaa/AAA 1,590 1,594,913
5.30%, 2012................................................. Aaa/AAA 1,120 1,118,734
5.30%, 2012................................................. Aaa/AAA 2,325 2,322,373
5.80%, 2016................................................. Aaa/AAA 2,500 2,589,375
DuPage County Jail Project, IL, 5.60%, 2021................... Aa/AAA 1,600 1,576,512
Florida Board of Education, Refunding Public Education:
5.00%, 2008................................................. Aa/AA 2,000 1,981,500
6.125%, 2012 ............................................... Aa/AA 2,250 2,341,778
6.50%, 2012................................................. Aa/AA 2,500 2,688,250
5.75%, 2019................................................. Aa/AA 3,500 3,477,460
5.125%, 2022 ............................................... Aa/AA 5,000 4,608,600
Franklin County, OH:
5.45%, 2009................................................. Aaa/AAA 1,500 1,523,190
5.50%, 2013................................................. Aaa/AAA 1,000 999,950
Henrico County, VA:
5.20%, 2007................................................. Aaa/AAA 1,300 1,323,699
5.20%, 2008................................................. Aaa/AAA 1,200 1,213,032
5.25%, 2009................................................. Aaa/AAA 1,000 1,005,720
Maryland State & Local Facilities, Second Series,
5.125%, 2010................................................ Aaa/AAA 3,000 2,955,300
Missouri State Building, Series "A", 5.00%, 2010.............. Aaa/AAA 2,000 1,954,960
Montgomery County, MD:
5.60%, 2004................................................. Aaa/AAA 1,000 1,067,060
5.00%, 2009................................................. Aaa/AAA 1,500 1,469,025
5.00%, 2010................................................. Aaa/AAA 1,500 1,452,435
Plano, TX--Independent School District, 5.00%, 2011........... Aaa/AAA 3,000 2,837,100
South Carolina Capital Improvement:
5.00%, 2006................................................. Aaa/AA+ 2,090 2,112,363
5.25%, 2007................................................. Aaa/AA+ 1,000 1,023,970
State of Georgia, Series "D":
5.25%, 2009................................................. Aaa/AA+ 1,580 1,592,198
5.00%, 2010................................................. Aaa/AA+ 2,000 1,944,940
</TABLE>
[LOGO]
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (CONTINUED) October 31, 1995
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR VALUE
ISSUER S&P) (000) (NOTE A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
GENERAL OBLIGATION (CONTINUED)
State of Tennessee:
5.50%, 2009................................................. Aaa/AA+ $ 1,535 $ 1,572,008
5.55%, 2010................................................. Aaa/AA+ 1,000 1,020,350
State of Texas:
5.25%, 2013................................................. Aa/AA 3,250 3,154,385
6.00%, 2014................................................. Aa/AA 2,000 2,051,940
Wake County, NC, 4.80%, 2010.................................. Aaa/AAA 3,500 3,317,160
Washington Suburban Sanitary District, MD, 5.375%, 2010....... Aa1/AA 1,810 1,817,312
-------------
65,224,452
-------------
ELECTRIC AND GAS UTILITY REVENUE--15.2%
Jacksonville Electric Authority Revenue, FL,
St. John's River Power:
5.20%, 2013................................................. Aa1/AA 2,000 1,919,760
5.25%, 2028................................................. Aa1/AA 2,000 1,864,020
Omaha Public Power District Electric Revenue, NE:
Series "A", 5.25%, 2004..................................... Aa/AA 2,000 2,066,060
Series "D", 5.10%, 2008..................................... Aa/AA 1,000 990,940
Series "D", 5.25%, 2013..................................... Aa/AA 2,000 1,942,400
Series "A", 5.50%, 2017..................................... Aa/AA 1,500 1,470,405
Salt River Agricultural Project, AZ:
5.20%, 2008................................................. Aa/AA 1,000 1,002,610
5.75%, 2019................................................. Aa/AA 4,000 3,964,240
San Antonio Electric and Gas Revenue, TX:
Series "A", 4.90%, 2008..................................... Aa1/AA 4,000 3,867,680
Series "A", 6.50%, 2012..................................... Aa1/AA 1,000 1,048,250
-------------
20,136,365
-------------
TRANSPORTATION REVENUE--10.1%
Florida Transportation Revenue, 5.80%, 2018................... Aa/AA 2,000 1,999,820
Kansas Transportation Revenue:
5.40%, 2009................................................. Aa/AA 2,000 2,026,180
Series "A", 5.40%, 2009..................................... Aa/AA 2,500 2,532,725
Maryland State Department of Transportation, 5.375%, 2006..... Aa/AA 1,500 1,548,030
Portland, OR, Metro, 5.25%, 2007.............................. Aa/AA+ 1,500 1,524,075
State of South Carolina, 5.00%, 2009.......................... Aaa/AA+ 2,700 2,655,990
Virginia State Transportation Authority, 6.00%, 2010.......... Aa/AA 1,000 1,037,360
-------------
13,324,180
-------------
</TABLE>
[LOGO]
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (CONTINUED) October 31, 1995
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR VALUE
ISSUER S&P) (000) (NOTE A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
WATER AND SEWER UTILITY REVENUE--5.1%
Chicago, IL, 6.30%, 2009...................................... Aa/AA $ 1,000 $ 1,074,850
DuPage Water Commission, IL, 5.25%, 2011...................... Aa/AA 2,500 2,410,125
Orlando Utility Commission, FL, 5.125%, 2019.................. Aa1/AA 3,500 3,230,255
-------------
6,715,230
-------------
PREREFUNDED ISSUES--6.7%
Jacksonville, FL, Electric Authority Revenue, Scherer 4-1-A,
6.75%, 2021................................................. Aaa/AA 1,000 1,119,190
Lower Colorado River Authority, Jr Lien, 4th Supply,
5.25%, 2015................................................. Aaa/AAA 2,000 1,904,660
State of Hawaii, General Obligation:
7.00%, 2006................................................. NR/AA 750 830,760
6.125%, 2010 ............................................... Aaa/AA 1,000 1,083,560
Washington Suburban, Water Supply, MD, 5.10%, 2005............ Aa1/AA 2,000 2,050,220
Washington Suburban, Administration Building Construction, MD,
5.00%, 2005................................................. Aa1/AA 1,850 1,882,357
-------------
8,870,747
-------------
OTHER REVENUE--2.8%
Indianapolis Local Public Import Board, IN, 6.00%, 2018....... Aaa/AA+ 1,500 1,526,340
University of Texas, TX, 6.50%, 2011.......................... Aaa/AA+ 2,000 2,137,580
-------------
3,663,920
-------------
TOTAL MUNICIPAL BONDS
(Cost $115,885,052)......................................... 117,934,894
-------------
REPURCHASE AGREEMENT--9.8%
GOLDMAN SACHS & CO., 5.75%
Dated 10/31/95, to be repurchased on 11/1/95, collateralized
by U.S. Treasury Notes with a market value of $13,242,384.
(Cost $12,982,000).......................................... 12,982 12,982,000
-------------
</TABLE>
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<PAGE>
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MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (CONCLUDED) October 31, 1995
<TABLE>
<CAPTION>
VALUE
(NOTE A)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT IN SECURITIES--99.0%
(Cost $128,867,052)**............................................................... $ 130,916,894
OTHER ASSETS IN EXCESS OF LIABILITIES, NET--1.0%...................................... 1,355,190
-------------
NET ASSETS--100.0%.................................................................... $ 132,272,084
-------------
-------------
NET ASSET VALUE AND REDEMPTION PRICE PER:
FLAG INVESTORS CLASS A SHARE
($45,979,713 DIVIDED BY 4,316,870 shares outstanding).............................. $10.65
-------------
-------------
ISI CLASS SHARE
($86,292,371 DIVIDED BY 8,103,509 shares outstanding).............................. $10.65
-------------
-------------
MAXIMUM OFFERING PRICE PER:
FLAG INVESTORS CLASS A SHARE
($10.65 DIVIDED BY .955)........................................................... $11.15
-------------
-------------
ISI CLASS SHARE
($10.65 DIVIDED BY .9555).......................................................... $11.15
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
*The Moody's and Standard & Poor's ratings indicated are believed to be the
most recent ratings available as of October 31, 1995. Ratings of issues have
not been audited by Coopers & Lybrand L.L.P.
**Also aggregate cost for federal tax purposes.
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME (NOTE A):
Interest................................................................................... $ 7,465,269
------------
EXPENSES:
Investment advisory fee (Note B)........................................................... 531,628
Distribution fee (Note B).................................................................. 332,267
Administration fees (Note B)............................................................... 265,814
Transfer agent fees (Note B)............................................................... 81,033
Accounting fee (Note B).................................................................... 59,938
Printing and postage....................................................................... 49,148
Custodian fees............................................................................. 29,009
Registration fees (Note A)................................................................. 28,066
Legal...................................................................................... 27,564
Audit...................................................................................... 26,474
Miscellaneous.............................................................................. 11,255
Organizational expense (Note A)............................................................ 7,878
Directors' fees............................................................................ 7,501
Insurance.................................................................................. 5,619
------------
Total expenses........................................................................... 1,463,194
Less: Fees waived (Note B)................................................................. (266,827)
------------
Net expenses............................................................................. 1,196,367
------------
Net investment income...................................................................... 6,268,902
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain from security transactions............................................... 599,805
Change in unrealized appreciation/(depreciation) of investments............................ 12,223,598
------------
Net gain on investments.................................................................... 12,823,403
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................... $ 19,092,305
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31,
--------------------------------
1995 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income......................................................... $ 6,268,902 $ 6,148,504
Net realized gain from security transactions.................................. 599,805 1,853,758
Change in appreciation/(depreciation) of investments.......................... 12,223,598 (17,711,072)
--------------- ---------------
Net increase/(decrease) in net assets resulting from operations............... 19,092,305 (9,708,810)
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Flag Investors Class A Shares............................................... (2,270,726) (2,282,670)
Flag Investors Class B Shares............................................... -- (66,885)
ISI Class Shares............................................................ (3,998,176) (3,798,949)
Net realized short-term gains:
Flag Investors Class A Shares............................................... (267,415) (480,259)
Flag Investors Class B Shares............................................... -- (23,856)
ISI Class Shares............................................................ (471,717) (799,441)
Net realized long-term gains:
Flag Investors Class A Shares............................................... (418,234) (188,158)
Flag Investors Class B Shares............................................... -- (8,131)
ISI Class Shares............................................................ (691,139) (304,477)
--------------- ---------------
Total distributions........................................................... (8,117,407) (7,952,826)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS (NOTE C):
Proceeds from sale of shares.................................................. 11,188,171 25,859,047
Value of shares issued in reinvestment of dividends........................... 4,794,976 4,783,791
Cost of shares repurchased.................................................... (28,195,599) (23,600,871)
--------------- ---------------
Increase/(decrease) in net assets derived from
capital share transactions................................................... (12,212,452) 7,041,967
--------------- ---------------
Total decrease in net assets.................................................. (1,237,554) (10,619,669)
NET ASSETS:
Beginning of year............................................................. 133,509,638 144,129,307
--------------- ---------------
End of year................................................................... $ 132,272,084 $ 133,509,638
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
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MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Flag Investors Class A and ISI Class Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)*
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year................... $ 9.81 $ 11.10 $ 10.31 $ 10.36 $ 9.99
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.48 0.46 0.50 0.50 0.57
Net realized and unrealized
gain/(loss) on investments.......................... 0.98 (1.15) 0.94 0.22 0.49
--------- --------- --------- --------- ---------
Total from Investment Operations...................... 1.46 (0.69) 1.44 0.72 1.06
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income
and net realized short-term gains................... (0.54) (0.56) (0.61) (0.65) (0.69)
Distributions from net realized
long-term gains..................................... (0.08) (0.04) (0.04) (0.12) --
--------- --------- --------- --------- ---------
Total distributions................................... (0.62) (0.60) (0.65) (0.77) (0.69)
--------- --------- --------- --------- ---------
Net asset value at end of year........................ $ 10.65 $ 9.81 $ 11.10 $ 10.31 $ 10.36
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN:
Flag Investors Class A Shares......................... 15.42% (6.49)% 14.36% 6.06% 10.85%
ISI Class Shares...................................... 15.42% (6.49)% 14.36% 6.06% 10.85%
RATIOS TO AVERAGE NET ASSETS:
Expenses1............................................. 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income2................................ 4.72% 4.37% 4.38% 4.78% 5.57%
SUPPLEMENTAL DATA:
Net assets at end of period:
Flag Investors Class A Shares....................... $ 45,980 $ 49,903 $ 53,486 $ 45,536 $ 38,491
ISI Class Shares.................................... $ 86,292 $ 83,607 $ 88,378 $ 51,420 $ 20,053
Portfolio turnover rate............................... 55% 37% 68% 95% 86%
</TABLE>
- --------------------------------------------------------------------------------
* Computed based upon average shares outstanding.
1 Without the waiver of advisory and administration fees (Note B), the ratio of
expenses to average net assets would have been 1.10%, 1.11%, 1.14%, 1.27% and
1.47% for the years ended October 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
2 Without the waiver of advisory and administration fees (Note B), the ratio of
net investment income to average net assets would have been 4.52%, 4.16%,
4.14%, 4.41% and 4.99% for the years ended October 31, 1995, 1994, 1993, 1992
and 1991, respectively.
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES - Managed
Municipal Fund, Inc. (the "Fund") was organized as a Maryland Corporation on
January 15, 1990 and commenced operations February 26, 1990. The Fund is
registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. At October 31, 1995, the Fund
consisted of two classes of shares: ISI Managed Municipal Fund Shares ("ISI
Class") and Flag Investors Managed Municipal Fund Class A Shares ("Flag
Investors Class A"). As of March 1, 1994, the previously offered Flag
Investors Managed Municipal Fund Class B Shares ("Flag Investors Class B")
were no longer issuing new shares. All Class B Shares not exchanged into
Class A Shares or previously redeemed were redeemed as of October 19, 1994.
Significant accounting policies are as follows:
SECURITY VALUATION - Municipal bonds are valued on the basis of quotations
provided by a pricing service that uses information with respect to
transactions on bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining value. Securities or other assets for which market quotations are
not readily available are valued at their face value so determined in good
faith by the Investment Advisor under procedures established and monitored by
the Board of Directors. Short-term obligations with maturities of 60 days or
less are valued at amortized cost which approximates market.
REPURCHASE AGREEMENTS - The Fund may agree to purchase money market
instruments subject to the seller's agreement to repurchase them at an agreed
upon date and price. The seller, under a repurchase agreement, will be
required on a daily basis to maintain the value of the securities subject to
the agreement at not less than the repurchase price. The agreement is
conditioned upon the collateral being deposited under the Federal Reserve
book-entry system.
FEDERAL INCOME TAX - No provision is made for federal income taxes as it is
the Fund's intention to continue to qualify as a regulated investment company
and to make requisite distributions to the shareholders that will be
sufficient to relieve it from all or substantially all federal income and
excise taxes. The Fund's policy is to distribute to shareholders
substantially all of its taxable net investment income and net realized
capital gains.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly,
periodic reclassifications are made within the Fund's capital accounts to
reflect income and capital gains available for distribution under income tax
regulations.
OTHER - Security transactions are accounted for on the trade date and the
cost of investments sold or redeemed is determined by use of the specific
identification method for both financial reporting and income tax purposes.
Interest income is recorded on an accrual basis.
Costs incurred by the Fund in connection with its organization, registration
and the initial public offering of shares have been deferred and are being
amortized on the straight-line method over a five-year period beginning on
the date on which the Fund commenced its investment activities.
[LOGO]
<PAGE>
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MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
B. INVESTMENT ADVISORY FEES, TRANSACTIONS WITH
AFFILIATES AND OTHER FEES - International Strategy & Investment Inc. ("ISI")
serves as the Fund's advisor and Investment Company Capital Corp. ("ICC")
serves as the Fund's administrator. As compensation for its advisory
services, ISI receives from the Fund an annual fee, calculated daily and paid
monthly, at the annual rate of .40% of average daily net assets. As
compensation for its administrative services, ICC receives from the Fund an
annual fee, calculated daily and paid monthly, at the annual rate of .20% of
the average daily net assets.
ISI and ICC have agreed to reduce their respective annual fees
proportionately, if necessary, so that ordinary expenses of the Fund for any
fiscal year do not exceed .90% of the average daily net assets of Flag
Investors Class A and ISI Class Shares. For the year ended October 31, 1995,
ISI and ICC waived fees of $177,885 and $88,942, respectively.
As compensation for its accounting services, ICC receives from the Fund an
annual fee, calculated daily and paid monthly, based on the Fund's average
daily net assets. ICC received $59,938 for accounting services for the year
ended October 31, 1995.
As compensation for its transfer agent services, ICC receives from the Fund a
per account fee, calculated and paid monthly. ICC received $81,033 for
transfer agent services for the year ended October 31, 1995.
As compensation for providing distribution services, Armata Financial Corp.
receives from the Fund an annual fee, calculated daily and paid monthly, at
the annual rate equal to .25% of the average daily net assets of the ISI
Class Shares. Alex. Brown receives from the Fund an annual fee, calculated
daily and paid monthly, at an annual rate equal to .25% of the average daily
net assets of the Flag Investors Class A Shares. For the year ended October
31, 1995, distribution fees were $332,267, of which $212,053 were allocated
to ISI Class Shares and $120,214 were allocated to Flag Investors Class A
Shares.
C. CAPITAL SHARE TRANSACTIONS - The Fund is
authorized to issue up to 40 million shares of capital stock, par value $.001
per share, all of which shares are designated as common stock. Transactions
in shares of the Fund were as follows:
<TABLE>
<CAPTION>
FLAG INVESTORS CLASS A SHARES
-----------------------------
FOR THE YEAR ENDED OCTOBER
31,
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Shares sold.................. 323,698 848,807
Shares issued to shareholders
on reinvestment of
dividends.................. 161,945 151,892
Shares redeemed.............. (1,256,958) (731,595)
-------------- -------------
Net increase/(decrease) in
shares outstanding......... (771,315) 269,104
-------------- -------------
-------------- -------------
Proceeds from sale of
shares..................... $ 3,206,244 $ 9,023,622
Reinvested dividends......... 1,628,993 1,598,305
Net asset value of shares
redeemed................... (12,775,509) (7,676,030)
-------------- -------------
Net increase/(decrease) from
capital share
transactions............... $ (7,940,272) $ 2,945,897
-------------- -------------
-------------- -------------
</TABLE>
[LOGO]
<PAGE>
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MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONCLUDED)
<TABLE>
<CAPTION>
ISI CLASS SHARES
------------------------------
FOR THE YEAR
ENDED
OCTOBER 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Shares sold................. 794,506 1,571,915
Shares issued to
shareholders on
reinvestment of
dividends................. 314,194 295,003
Shares redeemed............. (1,531,414) (1,301,711)
-------------- --------------
Net increase/(decrease) in
shares outstanding........ (422,714) 565,207
-------------- --------------
-------------- --------------
Proceeds from sale of
shares.................... $ 7,981,927 $ 16,706,525
Reinvested dividends........ 3,165,983 3,097,338
Net asset value of shares
redeemed.................. (15,420,090) (13,560,159)
-------------- --------------
Net increase/(decrease) from
capital share
transactions.............. $ (4,272,180) $ 6,243,704
-------------- --------------
-------------- --------------
</TABLE>
D. INVESTMENT TRANSACTIONS - Purchases and sales
of investment securities, other than short-term obligations, aggregated
$59,189,092 and $68,868,013, respectively, for the year ended October 31,
1995.
At October 31, 1995, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost was
$2,952,974 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value was $903,132.
E. NET ASSETS - At October 31, 1995, net assets
consisted of:
<TABLE>
<S> <C>
Paid-in Capital:
Flag Investors Class A
Shares........................ $ 44,149,431
ISI Class Shares............... 85,210,662
Undistributed net realized short-
term gains from security
transactions................... 862,149
Unrealized appreciation of
investments.................... 2,049,842
-------------
$ 132,272,084
-------------
-------------
</TABLE>
[LOGO]
<PAGE>
[LOGO]
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Shareholders and Directors of
Managed Municipal Fund, Inc.
We have audited the accompanying statement of net assets of Managed
Municipal Fund, Inc. as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Managed Municipal Fund, Inc. as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and its financial highlights for the
period then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
December 1, 1995
[LOGO]
<PAGE>
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
List all financial statements and exhibits filed as part
of the Registration Statement.
(a) Financial statements:
(1) Included in Parts A and B of the Registration
Statement:
- Statement of Net Assets as of October 31, 1995
- Statement of Operations for the fiscal year ended
October 31, 1995
- Statement of Changes in Net Assets for the fiscal
years ended October 31,1995 and October 31, 1994
- Financial Highlights for the fiscal years ended
October 31, 1995, October 31, 1994, October 31,
1993, October 31, 1992, October 31, 1991 and for
the period from February 26, 1990 (commencement of
operations) through October 31, 1990
- Notes to Financial Statements
- Report of Independent Accountants
(2) All required financial statements are included in
Part B of the Registration Statement. All other
financial statements and schedules are inapplicable.
(b) Exhibits:
(1)1 (a) Articles of Incorporation.
(b) Articles Supplementary dated December 15, 1993.
(c) Articles Supplementary.
(2)1 By-Laws.
(3) None.
(4) (a)2 ISI Managed Municipal Fund Shares, Specimen
Certificate of Common Stock, $.001 par
value.
(b)3 Flag Investors Managed Municipal Fund Class
A Shares, Specimen Certificate of Common
Stock, $.001 par value.
(c)2 Flag Investors Managed Municipal Fund Class
B Shares (later renamed Class D Shares),
Specimen Certificate of Common Stock, $.001
par value.
(5)1 Investment Advisory Agreement dated April 1, 1991
between Registrant and International Strategy and
Investment Inc.
(6)1 (a) Distribution Agreement for Flag Investors Managed
Municipal Fund Class A Shares dated October 23,
1990 between Registrant and Alex. Brown & Sons
Incorporated.
C-1
<PAGE>
(b) Form of Participating Dealer Agreement for Flag
Investors Managed Municipal Fund Shares between
Alex. Brown & Sons and Participating Dealers.
(c) Form of Shareholder Servicing Agreement between
the Registrant and Shareholder Servicing Agents.
(d) Distribution Agreement for ISI Managed Municipal
Fund Shares dated November 30, 1990 between
Registrant and Armata Financial Corp.
(e) Form of Participating Dealer Agreement for ISI
Managed Municipal Fund Shares between Armata
Financial Corp. and Participating Dealers as in
effect from November 30, 1990.
(7) None.
(8)1 Custodian Agreement between Registrant and Provident
National Bank.
(9)1 (a) Master Services Agreement between Registrant and
Investment Company Capital Corp. with Appendices
for the provision of Administrative, Accounting
and Transfer Agency Services.
(b) License Agreement between Registrant and Alex.
Brown Incorporated.
(10)1 Opinion of Counsel.
(11)1 Consent of Coopers & Lybrand L.L.P.
(12) None.
(13)1 Form of Subscription Agreement re: initial $100,000
capital.
(14) None.
(15)1 (a) Distribution Plan for the ISI Managed Municipal
Fund Shares.
(b) Distribution Plan for the Flag Investors Managed
Municipal Fund Class A Shares.
(16)1 Schedule of Computation of Performance Quotations
(unaudited).
(18)1 Rule 18f-3 Plan.
(24)1 Powers of Attorney.
(27)1 Financial Data Schedule
- -------------------
1 Filed herewith.
2 Incorporated by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-32819), filed with the Securities and Exchange Commission on
February 24, 1994.
C-2
<PAGE>
3 Incorporated by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-32819), filed with the Securities and Exchange Commission on
August 24, 1990.
Item 25. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities.
--------------------------------
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders of
each class of securities of the Registrant.
Number of Record Holders
Title of Class as of January 11, 1996
- -------------- ------------------------
ISI Managed 1,609
Municipal Fund Shares
Flag Investors Managed 722
Municipal Fund Shares - Class A
<PAGE>
Item 27. Indemnification.
----------------
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Sections 1,2,3 and 4 of Article VIII of Registrant's Articles of
Incorporation, included as Exhibit 1 to this Registration Statement and
incorporated herein by reference, provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its shareholders for
damages. This limitation on liability applies to events occurring at
the time a person serves as a director or officer of the Corporation
whether or not such person is a director or officer at the time of any
proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as to its directors
and to such further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents in the
By-Laws of the Corporation or by resolution or agreement to the fullest
extent permitted by the Maryland General Corporation Law.
C-3
<PAGE>
Section 3. No provision of this Article VIII shall be
effective to 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 misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time amended. No
further amendment to the Charter of the Corporation shall decrease, but
may expand, any right of any person under this Article VIII based on
any event, omission or proceeding prior to such amendment.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event of a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person in connection with
the securities being registered) the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue. In the absence of a determination by a court
of competent jurisdiction, the determinations that indemnification against such
liabilities is proper, and advances can be made, are made by a majority of a
quorum of the disinterested, non-party directors of the Fund, or an independent
legal counsel in a written opinion, based on review of readily available facts.
Item 28. Business and Other Connections of Investment Advisor.
-----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
During the past two fiscal years: Edward S. Hyman, Jr., Chairman of the
Investment Advisor, served as Chairman and Member of the Board of Directors of
the Registrant; R. Alan Medaugh, President of the Investment Advisor, served as
President of the Registrant; Nancy Lazar, Executive Vice President and Secretary
of the Investment Advisor, served as a Vice President of the Registrant; Carrie
L. Butler, Vice President of the Investment Advisor, served as Vice President
(since March 1995) and as an Assistant Vice President (from 1991 - 1995) of the
Registrant and Denice De Florio, Assistant Vice President of the Investment
Advisor, served as Assistant Vice President of the Registrant since March 1995.
Prior thereto, Ms. De Florio served as Assistant Portfolio Manager, Smith
Barney's Municipal Money Market Funds and Taxable Money Market Funds.
<PAGE>
Item 29. Principal Underwriter.
----------------------
ALEX. BROWN
- -----------
(a) Alex. Brown & Sons Incorporated acts as distributor for Alex.
Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income
Fund, Inc., Flag Investors International Fund, Inc., Flag
Investors Emerging Growth Fund, Inc., the Flag Investors
Shares of Total Return U.S. Treasury Fund, Inc., Flag
Investors Intermediate-Term Income Fund, Inc., Flag Investors
Value Builder Fund, Inc., Flag Investors Maryland Intermediate
Tax Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc. and Flag Investors Equity Partners Fund,
Inc., all registered open-end management investment companies.
(b)
<TABLE>
<CAPTION>
Name and Principal Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
------------------ --------------------- --------------------
<S> <C> <C>
Alvin B. Krongard Chief Executive Officer, Director None
Benjamin Howell Griswold, IV Chairman, Director None
Mayo A. Shattuck III President, Director None
Beverly Wright Chief Financial Officer and Treasurer None
Robert F. Price Secretary and General Counsel None
</TABLE>
(c) Not Applicable
ARMATA FINANCIAL CORP.
- ----------------------
(a) Armata Financial Corp. acts as distributor for the
ISI Total Return U.S. Treasury Fund Shares, a
class of Total Return U.S. Treasury Fund, Inc. and
North American Government Bond Fund, Inc.,
registered open-end investment companies.
C-4
<PAGE>
<TABLE>
<CAPTION>
(b)
Position and
Offices with Position and
Name and Principal Principal Offices with
Business Address* Underwriter Registrant
- ------------------ -------------- -------------
<S> <C> <C>
Jack S. Griswold Chairman and None
Director
F. Barton Harvey, Jr. Director None
John M. Prugh President and None
Director
E. Robert Kent, Jr. Director None
Peter E. Bancroft Secretary None
Timothy M. Gisriel Treasurer None
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records.
---------------------------------
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the Rules
[17 CFR 270.31a-1 to 31a-3] promulgated thereunder, furnish the name and address
of each person maintaining physical possession of each such account, book or
other document.
C-5
<PAGE>
Investment Company Capital Corp., the Registrant's administrator,
transfer and dividend disbursing agent and accounting services provider, 135 E.
Baltimore Street, Baltimore, Maryland 21202 maintains physical possession of
each such account, book or other document of the Fund, except for those
accounts, books and documents pursuant to Rule 31a-1(b)(1) maintained by the
Registrant's investment advisor, International Strategy and Investment Inc., 717
Fifth Avenue, New York, New York 10022, and except for those accounts, books and
documents pursuant to Rule 31a-1(b)(1) maintained by the Registrant's custodian,
PNC Bank, 100 South Broad Street, Philadelphia, Pennsylvania 19103.
Item 31. Management Services.
--------------------
Furnish a summary of the substantive provisions of any management
related service contract not discussed in Part A or Part B of this Form (because
the contract was not believed to be of interest to a purchaser of securities of
the Registrant) under which services are provided to the Registrant, indicating
the parties to the contract, the total dollars paid and by whom, for the last
three fiscal years.
See Exhibit 8.
Item 32. Undertakings.
-------------
(a) Not applicable.
(b) Not applicable.
(c) A copy of the Registrant's latest Annual Report to
Shareholders is available upon request, without
charge by contacting the Registrant at (800)
767-3524 (for Flag Investors Shares) or (800)
955-7175 (for ISI Shares).
C-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 10 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to the Registration Statement to be signed on
its behalf by the undersigned thereto duly authorized in the City of Baltimore,
in the State of Maryland, on the 23rd day of February 1996.
MANAGED MUNICIPAL FUND, INC.
By: /s/ R. Alan Medaugh
--------------------------------
R. Alan Medaugh,
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities on the date(s) indicated:
*/s/ Edward S. Hyman Director February 23, 1996
- ------------------------- -----------------
Edward S. Hyman Date
/s/ R. Alan Medaugh President and February 23, 1996
- ------------------------ Director -----------------
R. Alan Medaugh Date
*/s/ Richard T. Hale Director February 23, 1996
- ------------------------- -----------------
Richard T. Hale Date
*/s/ W. James Price Director February 23, 1996
- ------------------------ -----------------
W. James Price Date
*/s/ James J. Cunnane Director February 23, 1996
- ------------------------ -----------------
James J. Cunnane Date
*/s/ John F. Kroeger Director February 23, 1996
- ------------------------ -----------------
John F. Kroeger Date
*/s/ Louis E. Levy Director February 23, 1996
- ------------------------ -----------------
Louis E. Levy Date
*/s/ Eugene J. McDonald Director February 23, 1996
- ------------------------ -----------------
Eugene J. McDonald Date
*/s/ Harry Woolf Director February 23, 1996
- ------------------------ -----------------
Harry Woolf Date
/s/ Joseph A. Finelli Chief Financial February 23, 1996
- ------------------------ and Accounting -----------------
Joseph A. Finelli Officer Date
* By: /s/ Brian C. Nelson
- ------------------------
Brian C. Nelson
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EDGAR
Exhibit
Number
- -------
<S> <C>
EX-99.B (1) (a) Registrant's Articles of Incorporation, filed herewith.
EX-99.B (1) (b) Articles Supplementary to Registrant's Articles of Incorporation
dated December 15, 1993, filed herewith.
EX-99.B (1) (c) Articles Supplementary to Registrant's Articles of Incorporation,
filed herewith.
EX-99.B (2) Registrant's By-Laws, filed herewith.
(3) None.
(4) (a) ISI Managed Municipal Fund Shares, Specimen Certificate
of Common Stock, $.001 par value is hereby incorporated
by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-32819), filed with the Securities
and Exchange Commission on February 24, 1994.
(b) Flag Investors Managed Municipal Fund Class A Shares,
Specimen Certificate of Common Stock, $.001 par value
is hereby incorporated by reference to Post-Effective
Amendment No. 1 to Registrant's Registration Statement
on Form N-1A (Registration No. 33-32819), filed with
the Securities and Exchange Commission on August 24,
1990.
(c) Flag Investors Managed Municipal Fund Class B Shares
(later renamed Class D Shares), Specimen Certificate of
Common Stock, $.001 par value is hereby incorporated by
reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-32819), filed with the Securities
and Exchange Commission on February 24, 1994.
EX-99.B (5) Investment Advisory Agreement dated April 1, 1991
between Registrant and International Strategy and
Investment Inc., filed herewith.
EX-99.B (6) (a) Distribution Agreement for Flag Investors
Managed Municipal Fund Class A Shares dated October 23,
1990 between Registrant and Alex. Brown & Sons
Incorporated, filed herewith.
EX-99.B (6) (b) Form of Participating Dealer Agreement for Flag
Investors Managed Municipal Fund Shares between Alex.
Brown & Sons and Participating Dealers, filed herewith.
<PAGE>
EX-99.B (6) (c) Form of Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents, filed
herewith.
EX-99.B (6) (d) Distribution Agreement for ISI Managed Municipal Fund
Shares dated November 30, 1990 between Registrant and
Armata Financial Corp., filed herewith.
EX-99.B (6) (e) Form of Participating Dealer Agreement for ISI
Managed Municipal Fund Shares between Armata Financial
Corp. and Participating Dealers as in effect from
November 30, 1990, filed herewith.
(7) None.
EX-99.B (8) Custodian Agreement between Registrant and Provident
National Bank, filed herewith.
EX-99.B (9) (a) Master Services Agreement between Registrant and
Investment Company Capital Corp. and Appendices for
the provision of Administration, Accounting and
Transfer Agency Services, filed herewith.
EX-99.B (9) (b) License Agreement between Registrant and Alex.
Brown Incorporated, filed herewith.
EX-99.B (10) Opinion of Counsel, filed herewith.
EX-99.B (11) Consent of Coopers & Lybrand L.L.P., filed herewith.
(12) None.
EX-99.B (13) Form of Subscription Agreement re: initial $100,000
capital, filed herewith.
(14) None.
EX-99.B (15)(a) Distribution Plan for the ISI Managed
Municipal Fund Shares, filed herewith.
EX-99.B (15)(b) Distribution Plan for the Flag Investors
Managed Municipal Fund Class A Shares, filed herewith.
EX-99.B (16) Schedule of Computation of Performance Quotations
(unaudited), filed herewith.
EX-99.B (18) Rule 18f-3 Plan, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith.
EX-27 Financial Data Schedule, filed herewith.
</TABLE>
2
<PAGE>
EX-99.B(1)(a)
ARTICLES OF INCORPORATION
OF
MANAGED MUNICIPAL FUND, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, R. Alan Medaugh, whose post office address is 1290 Avenue
of the Americas, New York, New York, 10104, being at least eighteen years of
age, does hereby act as an incorporator, under and by virtue of the General Laws
of the State of Maryland authorizing the formation of corporations and with the
intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
MANAGED MUNICIPAL FUND, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act").
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other
investments including assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration as may now or hereafter be permitted by law.
<PAGE>
(3) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
shareholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by law and by the Charter of the
Corporation.
(4) To enter into a written contract or contracts with any person or
persons providing for a delegation of the management (of all or part of this
Corporation's securities portfolios) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors of the Corporation. Any such contract or
contracts may be made with any person even though such person may be an officer,
other employee, director or shareholder of this Corporation or a corporation,
partnership, trust or association in which any such officer, other employee,
director or shareholder may be interested.
(5) To enter into a written contract or contracts appointing one or
more underwriters, distributors or agents for the sale of the shares of the
Corporation on such terms and conditions as the Board of Directors of the
Corporation may deem reasonable and proper, and to allow such person or persons
a commission on the sale of such shares. Any such contract or contracts may be
made with any person even though such person may be an officer, other employee,
director or shareholder of this Corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
shareholder may be interested.
(6) To enter into a written contract or contracts employing such
custodian or custodians for the safekeeping of the property of the Corporation
and of its shares, such dividend disbursing agent or agents, and such transfer
agent or agents and registrar or registrars for its shares, and such agent or
agents for accounting and other administrative services on such terms and
conditions as the Board of Directors of the Corporation may deem reasonable and
proper for the conduct of the affairs of the Corporation, and to pay the fees
and disbursements of such custodians, dividend disbursing agents, transfer
agents, registrars and accounting and administrative services agents out of the
income and/or any other property of the Corporation. Notwithstanding any other
provisions of the Charter or the By-Laws of the Corporation, the Board of
Directors of the Corporation may cause any or all of the property of the
Corporation to be transferred to, or to be acquired and held in the name of, a
custodian so appointed or any nominee or nominees of this Corporation or nominee
or nominees of such custodian satisfactory to the Board of Directors of the
Corporation.
(7) To employ the same person, partnership (general or limited),
association, trust or corporation in any multiple capacity under Sections
2
<PAGE>
(4), (5) and (6) of this Article, who may receive compensation from the
Corporation in as many capacities in which such person, partnership (general or
limited), association, trust or corporation shall serve the Corporation.
(8) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in the
State of Maryland is c/o Alex. Brown & Sons Incorporated, 135 East Baltimore
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is Edward J. Veilleux, a citizen of this State, who
resides there, and the post office address of the resident agent is 135 East
Baltimore Street, Baltimore, Maryland 21202.
ARTICLE VI
Section 1. The total number of shares of capital stock which the
Corporation shall have the authority to issue is twenty-five million shares, of
the par value of 1 mil ($.001) per share and of the aggregate par value of
twenty-five thousand dollars ($25,000), all of which shares are designated
Common Stock. Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end investment company under the 1940 Act, the Board of
Directors of the Corporation shall have the power and authority, without the
approval of the holders of any outstanding shares, to increase or decrease the
number of shares of capital stock, or the number of shares of capital stock of
any class or series, that the Corporation has authority to issue.
Section 2. Any fractional share shall carry proportionately all the rights
of a whole share, excepting any right to receive a certificate evidencing such
3
<PAGE>
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
Section 3. All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of the Charter and the By-Laws of the
Corporation. All shares issued pursuant to the Charter of the Corporation for
which the price or consideration fixed thereon shall have been paid shall be
deemed to be fully paid and nonassessable.
Section 4. The Board of Directors of the Corporation shall have authority
to classify and reclassify any authorized but unissued shares of capital stock
from time to time by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of the capital stock; provided that the Board of Directors of the Corporation
shall not classify or reclassify any of such shares into any class or series of
stock which is prior to any class or series of capital stock then outstanding
with respect to rights upon the liquidation, dissolution or winding up of the
affairs of, or upon any distribution of the general assets of, the corporation,
except that there may be variations so fixed and determined among different
series and classes as to investment objectives, purchase price, right of
redemption, special rights as to dividends, and in liquidation, with respect to
assets belonging to a particular series or class, voting powers and conversion
rights. Subject to the provisions of Section 7 of this Article VI and applicable
law, the power of the Board of Directors of the Corporation to classify or
reclassify any of the shares of capital stock shall include, without limitation,
authority to classify or reclassify any such stock into a class or classes of
capital stock and to divide and classify shares of any class into one or more
series of such class, by determining, fixing or altering one or more of the
following:
(A) The distinctive designation of such class or series and the number
of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such class or series, the number of
shares of any class or series may be decreased by the Board of Directors of
the Corporation in connection with any classification or reclassification
of unissued shares and the number of shares of such class or series may be
increased by the Board of Directors of the Corporation in connection with
any such classification or reclassification, and any shares of any class or
series which have been redeemed, purchased or otherwise acquired by the
Corporation shall remain part of the authorized capital stock and be
subject to classification and reclassification as provided herein.
4
<PAGE>
(B) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of
such class or series.
(C) Whether or not shares of such class or series shall have voting
rights in addition to any general voting rights provided by law and the
Charter of the Corporation and, if so, the terms of such additional voting
rights.
(D) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs, or upon any
distribution of the assets, of the Corporation.
(E) Any other rights, restrictions, including restrictions on
transferability, and qualifications of shares of such class or series, not
inconsistent with law and the Charter of the Corporation.
Section 5. The Board of Directors of the Corporation shall have authority
to issue from time to time shares of capital stock, whether now or hereafter
authorized, for such consideration as the Board of Directors of the Corporation
may deem advisable, subject to such limitations as may be set forth in the
Charter or the By-Laws of the Corporation or in the Maryland General Corporation
Law.
Section 6. No holder of stock of the Corporation shall, as such holder,
have any preemptive right to purchase or subscribe for any shares of the capital
stock of the Corporation or any other security of the Corporation which it may
issue or sell (whether out of the number of shares authorized by the Charter of
the Corporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors of the Corporation, in its discretion, may
determine.
Section 7. Shares of Common Stock of the Corporation shall have the
following preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption:
(A) Assets Belonging to a Class. All consideration received by the
Corporation for the issue or sale of stock of any class of Common Stock,
together with all assets in which such consideration is invested and
reinvested, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the class of
5
<PAGE>
shares of Common Stock with respect to which such assets, payments or funds
were received by the Corporation for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of account of
the Corporation. Such consideration, assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of such
proceeds in whatever form, are herein referred to as 'assets belonging to'
such class. Any assets, income, earnings, profits, and proceeds thereof,
funds or payments which are not readily attributable to any particular
class shall be allocable among any one or more of the classes in such
manner and on such basis as the Board of Directors of the Corporation, in
its sole discretion, shall deem fair and equitable.
(B) Liabilities Belonging to a Class. The assets belonging to any
class of Common Stock shall be charged with the liabilities in respect of
such class, and shall also be charged with such class's share of the
general liabilities of the Corporation determined as hereinafter provided.
The determination of the Board of Directors of the Corporation shall be
conclusive as to the amount of such liabilities, including the amount of
accrued expenses and reserves; as to any allocation of the same to a given
class; and as to whether the same are allocable to one or more classes. The
liabilities so allocated to a class are herein referred to as 'liabilities
belonging to' such class. Any liabilities which are not readily
attributable to any particular class shall be allocable among any one or
more of the classes in such manner and on such basis as the Board of
Directors of the Corporation, in its sole discretion, shall deem fair and
equitable.
(C) Dividends and Distributions. Shares of each class of Common Stock
shall be entitled to such dividends and distributions, in stock or in cash
or both, as may be declared from time to time by the Board of Directors of
the Corporation, acting in its sole discretion, with respect to such class,
provided, however, that dividends and distributions on shares of a class of
Common Stock shall be paid only out of the lawfully available "assets
belonging to such class" as such phrase is defined in Section 7(A) of this
Article VI.
(D) Liquidating Dividends and Distributions. In the event of the
liquidation or dissolution of the Corporation, shareholders of each class
of Common Stock shall be entitled to receive, as a class, out of the assets
of the Corporation available for distribution to shareholders, but other
than general assets not belonging to any particular class of stock, the
6
<PAGE>
assets belonging to such class; and the assets so distributable to the
shareholders of any class of Common Stock shall be distributed among such
shareholders in proportion to the number of shares of such class held by
them and recorded on the books of the Corporation. In the event that there
are any general assets not belonging to any particular class of stock and
available for distribution, such distribution shall be made to the holders
of stock of all classes of Common Stock in proportion to the asset value of
the respective classes of Common Stock determined as hereinafter provided.
(E) Voting. Each shareholder of each class of Common Stock shall be
entitled to one vote for each share of Common Stock, irrespective of the
class, then standing in his name on the books of the Corporation, and on
any matter submitted to a vote of shareholders, all shares of Common Stock
then issued and outstanding and entitled to vote shall be voted in the
aggregate and not by class except that: (i) when expressly required by law,
shares of Common Stock shall be voted by individual class and (ii) only
shares of Common Stock of the respective class or classes affected by a
matter shall be entitled to vote on such matter. At all meetings of the
shareholders, the holders of one-third of the shares of stock of the
Corporation entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum for the transaction of any business, except as
otherwise provided by statute or by the Charter of the Corporation. In the
absence of a quorum, no business may be transacted, except that the holders
of a majority of the shares of stock present in person or by proxy and
entitled to vote may adjourn the meeting from time to time, without notice
other than announcement at the meeting, except as otherwise required by the
By-Laws of the Corporation, until the holders of the requisite amount of
shares of stock shall be so present. At any such adjourned meeting at which
a quorum may be present, any business may be transacted which might have
been transacted at the meeting as originally called. The absence from any
meeting, in person or by proxy, of holders of the number of shares of stock
of the Corporation in excess of a majority thereof which may be required by
the laws of the State of Maryland, the 1940 Act, or any other applicable
statute, the Charter or the By-Laws of the Corporation, for action upon any
given matter shall not prevent action at such meeting upon any other matter
or matters which may properly come before the meeting, if there shall be
present at the meeting, in person or by proxy, holders of the number of
shares of stock of the Corporation required for action in respect of such
other matter or matters.
(F) Redemption. To the extent the Corporation has funds or other
property legally available therefor, each holder of shares of Common Stock
7
<PAGE>
of the Corporation shall be entitled to require the Corporation to redeem
all or any part of the shares of Common Stock of the Corporation standing
in the name of such holder on the books of the Corporation, and all shares
of Common Stock issued by the Corporation shall be subject to redemption by
the Corporation, at the redemption price of such shares as in effect from
time to time as may be determined by the Board of Directors of the
Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of
redemption of shares of Common Stock of the Corporation or postpone the
date of payment of such redemption price in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the
right at any time to redeem the shares owned by any holder of Common Stock
of the Corporation (i) if such redemption is, in the opinion of the Board
of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a personal holding company, within the
meaning of the Internal Revenue Code, as now or hereafter in force, (ii) if
the value of such shares in the account maintained by the Corporation or
its transfer agent for any class of Common Stock is less than Five Hundred
Dollars ($500.00) provided, however, that each shareholder shall be
notified that the value of his account is less than Five Hundred Dollars
($500.00) and allowed sixty (60) days to make additional purchases of
shares before such redemption is processed by the Corporation or (iii) if
the net income with respect to any particular class of Common Stock should
be negative or it should otherwise be appropriate to carry out the
Corporation's responsibilities under the 1940 Act, in each case subject to
such further terms and conditions as the Board of Directors of the
Corporation may from time to time adopt. The redemption price of shares of
Common Stock of the Corporation shall, except as otherwise provided in this
Section 7(F), be the net asset value thereof as determined by the Board of
Directors of the Corporation from time to time in accordance with the
provisions of applicable law, less such redemption fee or other charge, if
any, as may be fixed by resolution of the Board of Directors of the
Corporation. Payment of the redemption price shall be made in cash by the
Corporation at such time and in such manner as may be determined from time
to time by the Board of Directors of the Corporation unless, in the opinion
of the Board of Directors of the Corporation, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable;
in such event the Corporation may make payment wholly or partly by
securities or other property included in the assets belonging or allocable
8
<PAGE>
to the class of the shares redemption of which is being sought, the value
of which shall be determined as provided herein.
(G) Conversion or Exchange. Each holder of any class of Common Stock
of the Corporation, who either surrenders his share certificate in good
delivery form to the Corporation or, if the shares in question are not
represented by certificates, delivers to the Corporation a written request
in good order signed by the shareholder, shall, subject to such procedures
as may be established by the Board of Directors of the Corporation, be
entitled to convert or exchange the shares in question on the basis
hereinafter set forth, into shares of stock of any other class of the
Corporation. The Corporation shall determine the net asset value, as
provided herein, of the shares to be converted and may deduct therefrom a
conversion or exchange cost, in an amount determined within the discretion
of the Board of Directors of the Corporation. Within five (5) business days
after such surrender and payment of any conversion or exchange cost, the
Corporation shall issue to the shareholder such number of shares of stock
of the class desired as, taken at the net asset value thereof determined as
provided herein in the same manner and at the same time as that of the
shares surrendered, shall equal the net asset value of the shares
surrendered, less any conversion or exchange cost as aforesaid. Any amount
representing a fraction of a share may be paid in cash at the option of the
Corporation. Any conversion or exchange cost may be paid and/or assigned by
the Corporation to the underwriter and/or to any other entity, as it may
elect.
(H) Restrictions on Transferability. If, in the opinion of the Board
of Directors of the Corporation, concentration in the ownership of shares
of Common Stock might cause the Corporation to be deemed a personal holding
company within the meaning of the Internal Revenue Code, as now or
hereafter in force, the Corporation may at any time and from time to time
refuse to give effect on the books of the Corporation to any transfer or
transfers of any share or shares of Common Stock in an effort to prevent
such personal holding company status.
ARTICLE VII
The number of directors of the Corporation shall be seven (7), which number
may be increased or decreased pursuant to the By-Laws of the Corporation but
shall never be less than three (3) except for any period during which shares of
the Corporation are held by less than three shareholders. The name of the
director who shall act until the directors are elected by the
9
<PAGE>
Corporation's shareholders or until his successor is duly elected and qualify
is:
R. Alan Medaugh
ARTICLE VIII
Section 1. To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its shareholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as to its directors and to such further extent as is consistent with
law. The Board of Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents in the By-Laws of
the Corporation or by resolution or agreement to the fullest extent permitted by
the Maryland General Corporation Law.
Section 3. No provision of this Article VIII shall be effective to 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 misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law in this
Article VIII are to such law as from time to time amended. No further amendment
to the Charter of the Corporation shall decrease, but may expand, any right of
any person under this Article VIII based on any event, omission or proceeding
prior to such amendment.
ARTICLE IX
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practices by or pursuant
10
<PAGE>
to the direction of the Board of Directors of the Corporation, 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 owned by the Corporation 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
Corporation, and any reasonable determination made in good faith by the Board of
Directors of the Corporation as to whether any transaction constitutes a
purchase of securities on "margin", a sale of securities "short", or an
underwriting of the sale of, or a participation in any underwriting or selling
group in connection with the public distribution of, any securities, 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 the 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, that any and all such determinations shall be binding as
aforesaid. No provision of the Charter of the Corporation shall be effective (i)
to 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 (ii) to 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 misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE X
The duration of this Corporation shall be perpetual.
ARTICLE XI
Section 1. The Corporation reserves the right from time to time to make any
amendments to its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its Charter, of any of its outstanding stock by classification,
reclassification or otherwise, but no such amendment which changes such terms or
contract rights of any of its outstanding stock shall be valid unless such
amendment shall have been authorized by not less than a majority of the
aggregate number of the votes entitled to be cast thereon by a vote at a meeting
or by the unanimous written consent of the Directors of the Corporation as
provided in the Corporation's By-Laws.
11
<PAGE>
Section 2. Notwithstanding any provision of the General Laws of the State
of Maryland requiring any action to be taken or authorized by the affirmative
vote of a greater proportion than the majority of the total number of shares of
any class of stock of the Corporation, such action shall be effective and valid
if taken or authorized by the affirmative vote of the holders of a majority of
the total number of shares outstanding of that class of stock entitled to vote
thereon, except as otherwise provided in the Charter of the Corporation.
Section 3. So long as permitted by Maryland law, the books of the
Corporation may be kept outside of the State of Maryland at such place or places
as may be designated from time to time by the Board of Directors of the
Corporation or in the By-Laws of the Corporation.
Section 4. In furtherance, and not in limitation, of the powers conferred
by the laws of the State of Maryland, the Board of Directors of the Corporation
is expressly authorized:
(A) To make, alter or repeal the By-Laws of the Corporation, except
where such power is reserved by the By-Laws of the Corporation to the
shareholders, and except as otherwise required by the 1940 Act.
(B) From time to time to determine whether and to what extent and at
what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the shareholders, and no
shareholder shall have any right to inspect any account or book or document
of the Corporation, except as conferred by law or authorized by resolution
of the Board of Directors or of the shareholders of the Corporation.
(C) Without the assent or vote of the shareholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, for such consideration as
the Board of Directors of the Corporation may deem advisable.
(D) Without the assent or vote of the shareholders, to authorize and
issue obligations of the Corporation, secured and unsecured, as the Board
of Directors may determine, and to authorize and cause to be executed
mortgages and liens upon the property of the Corporation, real and
personal.
12
<PAGE>
(E) Notwithstanding anything in the Charter of the Corporation to the
contrary, to establish in its absolute discretion the basis or method for
determining the value of the assets belonging to any class, and the net
asset value of each share of any class of the Corporation for purposes of
sales, redemptions, repurchases of shares or otherwise.
(F) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings, surplus or
net assets in excess of capital, and to determine what accounting periods
shall be used by the Corporation for any purpose, whether annual or any
other period, including daily; (i) to set apart out of any funds of the
Corporation such reserves for such purposes as it shall determine and to
abolish the same; (ii) to declare and pay any dividends and distributions
in cash, securities or other property from surplus or any funds legally
available therefor, at such intervals (which may be as frequently as daily)
or on such other periodic basis, as it shall determine; (iii) to declare
such dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; (iv) to establish payment dates for
dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations thereof;
and (v) to provide for the payment of declared dividends on a date earlier
or later than the specified payment date in the case of shareholders of the
Corporation redeeming their entire ownership of shares of any class of the
Corporation.
(G) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors of the
Corporation is authorized to exercise all such powers and do all such acts
and things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of Maryland law, the Charter and the
By-Laws of the Corporation.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator of MANAGED MUNICIPAL FUND,
INC. hereby executes the foregoing Charter and acknowledges the same to be his
act on the 4th day of January, 1990.
/s/ R. Alan Medaugh
--------------------------------
R. Alan Medaugh
Incorporator
WITNESS:
- --------------------------------
14
<PAGE>
EX-99.B(1)(b)
MANAGED MUNICIPAL FUND, INC.
ARTICLES SUPPLEMENTARY
MANAGED MUNICIPAL FUND, INC. having its principal office in
the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in
accordance with Section 2-105(c) of the Maryland General
Corporation Law has adopted a resolution increasing the
total number of shares of common stock which the Corporation
shall have the authority to issue from twenty-five million
(25,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of $25,000.00,
designated Common Stock, to forty million (40,000,000)
shares of Common Stock, par value $.001 per share, having an
aggregate par value of $40,000.00, of which fifteen million
(15,000,000) shares are designated "Flag Investors Managed
Municipal Fund Class A Shares" (the "Class A Shares"), two
million (2,000,000) shares are designated "Flag Investors
Managed Municipal Fund Class B Shares" (the "Class B
Shares"), twenty million (20,000,000) shares are designated
"ISI Managed Municipal Fund Shares" (the "ISI Shares"), and
three million (3,000,000) shares remain undesignated.
SECOND: Immediately before the increase in authorized
shares and the designation of the Class A Shares, Class B
Shares and ISI Shares pursuant to these Articles
<PAGE>
Supplementary, the Corporation was authorized to issue
twenty-five million (25,000,000) shares of Common Stock, par
value $.001 per share, having an aggregate par value of
$25,000.00, of which twenty-five million (25,000,000) shares
were designated Common Stock in the Corporation's Articles
of Incorporation, but which, out of authorized but unissued
shares, had been designated (i) Flag Investors Managed
Municipal Fund Shares and renamed Flag Investors Managed
Municipal Fund Class A Shares; (ii) Flag Investors Managed
Municipal Fund Class B Shares; and (iii) C.J. Lawrence
Managed Municipal Fund Shares and renamed ISI Managed
Municipal Fund Shares, respectively, by the Corporation's
Board of Directors as authorized in the Corporation's
Articles of Incorporation.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940,
as amended.
<PAGE>
IN WITNESS WHEREOF, Managed Municipal Fund, Inc. has
caused these Articles Supplementary to be executed by one of its
Vice-Presidents and its corporate seal to be affixed and attested
by its Secretary on this 15th day of December 1993.
[CORPORATE SEAL]
MANAGED MUNICIPAL FUND, INC.
By: /s/ Edward J. Veilleux
----------------------------
Vice-President
Attest: /s/ Brian C. Nelson
-----------------------
Secretary
The undersigned, Vice President of MANAGED MUNICIPAL
FUND, INC., who executed on behalf of said corporation the
foregoing Articles Supplementary to the Articles of Incorporation
of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing
Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to
the best of his knowledge, information and belief, the matters
and facts set forth therein with respect to the approval thereof
are true in all material respects, under the penalties of
perjury.
/s/ Edward J. Veilleux
------------------------------
Edward J. Veilleux
<PAGE>
EX-99.B(1)(c)
MANAGED MUNICIPAL FUND, INC.
ARTICLES SUPPLEMENTARY
MANAGED MUNICIPAL FUND, INC. (the "Corporation") having its
principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in
accordance with Section 2-105(c) of the Maryland General
Corporation Law has adopted a resolution designating the
Corporation's classified forty million (40,000,000) shares of
Common Stock, par value $.001 per share, having an aggregate
value of $40,000.00, as follows: fifteen million (15,000,000)
shares are designated "Flag Investors Managed Municipal Fund
Class A Shares" (the "Class A Shares"), two million, five hundred
thousand (2,500,000) shares are designated "Flag Investors
Managed Municipal Fund Class B Shares" (the "Class B Shares"),
twenty million (20,000,000) shares are designated "ISI Managed
Municipal Fund Shares" (the "ISI Shares"), five hundred thousand
(500,000) shares are designated "Flag Investors Managed Municipal
Fund Class D Shares" (the "Class D Shares") and two million
(2,000,000) shares remain undesignated.
SECOND: Immediately before the designation of the
Class D Shares pursuant to these Articles Supplementary, the
Corporation was authorized to issue forty million (40,000,000)
shares of Common Stock, par value $.001 per share, having an
aggregate par value of $40,000.00, of which fifteen million
(15,000,000) shares were designated "Flag Investors Managed
Municipal Fund Class A Shares", two million (2,000,000) shares
were designated "Flag Investors Managed Municipal Fund Class B
Shares" and renamed "Flag Investors Managed Municipal Fund Class
D Shares" by the Corporation's Board of Directors as authorized
in the Corporation's Articles of Incorporation, twenty million
(20,000,000) shares were designated "ISI Managed Municipal Fund
Shares" and three million (3,000,000) shares remained
undesignated.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as
amended.
<PAGE>
IN WITNESS WHEREOF, Managed Municipal Fund, Inc. has
caused these Articles Supplementary to be executed by one of its
Vice Presidents and its corporate seal to be affixed and attested
by its Secretary on this 31st day of December, 1994.
[CORPORATE SEAL]
MANAGED MUNICIPAL FUND, INC.
By: /s/ Edward J. Veilleux
----------------------------------
Vice President
Attest: /s/ Brian C. Nelson
----------------------------------
Secretary
The undersigned, Vice President of MANAGED MUNICIPAL
FUND, INC., who executed on behalf of said corporation the
foregoing Articles Supplementary to the Articles of Incorporation
of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing
Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to
the best of his knowledge, information and belief, the matters
and facts set forth therein with respect to the approval thereof
are true in all material respects, under the penalties of
perjury.
/s/ Edward J. Veilleux
----------------------------------
Edward J. Veilleux
<PAGE>
EX-99.B(2)
BY-LAWS
OF
MANAGED MUNICIPAL FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation shall
be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive office of
the Corporation shall be in the City of Baltimore, State of Maryland.
Section 3. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Shareholder Meetings. The Corporation may, but shall not be
required to, hold a regular meeting of shareholders in any year in which the
Corporation is not required, under the Investment Company Act of 1940, as
amended (the "1940 Act"), to submit for shareholder approval the election of
director(s). If shareholder approval is required for the purpose set forth
above, the regular meeting shall be held, at which shareholders shall vote on
the proposal necessitating such meeting and shall transact any other business as
may properly be brought before the meeting. Regular meetings of shareholders, if
any, shall be held on such day during the month of June and at such time as
shall be designated by the Board of Directors and stated in the notice of the
meeting.
Section 2. Special Meetings. Special meetings of the shareholders, unless
otherwise provided by law or by the Charter or the Corporation may be called for
any purpose or purposes by a majority of the Board of Directors or the
President, and shall be called by the President or Secretary on the written
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<PAGE>
request of the shareholders as provided by the Maryland General Corporation Law.
Such request shall state the purpose or purposes of the proposed meeting and the
matters proposed to be acted on at it; provided, however, that unless requested
by shareholders entitled to cast a majority of all the votes entitled to be cast
at the meeting, a special meeting need not be called to consider any matter
which is substantially the same as a matter voted on at any special meeting of
the shareholders held during the preceding twelve (12) months.
Section 3. Place of Meetings. The regular meeting, if any, and any special
meeting of the shareholders shall be held at such place within the United States
as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice,, Shareholder List. (a)
Notice of the place, date and time of the holding of each regular and special
meeting of the shareholders and the purpose or purposes of the meeting shall be
given personally or by mail, not less than ten nor more than ninety days before
the date of such meeting, to each shareholder entitled to vote at such meeting
and to each other shareholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the shareholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. The notice of every meeting of
shareholders may be accompanied by a form of proxy approved by the Board of
Directors in favor of such actions or persons as the Board of Directors may
select.
(b) Notice of any meeting of shareholders shall be deemed waived by
any shareholder who shall attend such meeting in person or by proxy, or who
shall, either before or after the meeting, submit a signed waiver of notice
which is filed with the records of the meeting. A meeting of shareholders
convened on the date for which it was called may be adjourned from time to time
without further notice to a date not more than 120 days after the original
record date.
(c) At least five (5) days prior to each meeting of shareholders, the
officer or agent having charge of the share transfer books of the Corporation
shall make a complete list of shareholders entitled to vote at such meeting, in
alphabetical order with the address of and the number of shares held by each
shareholder.
Section 5. Organization. At each meeting of the shareholders, the Chairman
of the Board (if one has been designated by the Board), or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, or in the absence or
the inability to act of the Chairman of the Board, the President and all
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<PAGE>
the Vice Presidents, a chairman chosen by the shareholders shall act as chairman
of the meeting. The Secretary, or in his absence or inability to act, any person
appointed by the chairman of the meeting, shall act as secretary of the meeting
and keep the minutes thereof.
Section 6. Voting. (a) Except as otherwise provided by statute or the
Charter of the Corporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any meeting
of shareholders may authorize another person or persons to act for him by a
proxy signed by such shareholder or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is permitted by law.
Except as otherwise provided by statute, the Charter or the Corporation or these
By-Laws, any corporate action to be taken by vote of the shareholders shall be
authorized by a majority of the total votes cast at a meeting of shareholders at
which a quorum is present by the holders of shares present in person or
represented by proxy and entitled to vote on such action, except that a
plurality of all the votes cast at a meeting at which a quorum is present is
sufficient to elect a director.
(c) If a vote shall be taken on any question other
than the election of directors, which shall be by written ballot, then unless
required by statute or these By-Laws, or determined by the chairman of the
meeting to be advisable, any such vote need not be by ballot. On a vote by
ballot, each ballot shall be signed by the shareholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
Section 7. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
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<PAGE>
request of any shareholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except as otherwise
provided by statute any action required to be taken at any regular or special
meeting of shareholders, or any action which may be taken at any annual or
special meeting of shareholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
shareholders' meetings: (i) a unanimous written consent which sets forth the
action and is signed by each shareholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each shareholder entitled to
notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Charter of
the Corporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the shareholders by law or by the Charter of the Corporation
or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (except for any period during which shares
of the corporation are held by fewer than three shareholders) nor more
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<PAGE>
than fifteen. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be shareholders.
Section 3. Election and Term of Directors. Directors shall be elected by
majority vote of a quorum cast by written ballot at the regular meeting of
shareholders, if any, or at a special meeting held for that purpose. The term of
office of each director shall be from the time of his election and qualification
and until his successor shall have been elected and shall have qualified, or
until his death, or until he shall have resigned, or have been removed as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Charter of the Corporation.
Section 4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be
removed by the shareholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. The shareholders may elect a successor to fill a
vacancy on the Board of Directors which results from the removal of a Director.
A majority of the remaining Directors, whether or not sufficient to constitute a
quorum, may fill a vacancy on the Board of Directors which results from any
cause except an increase in the number of directors, and a majority of the
entire Board of Directors may fill a vacancy which results from an increase in
the number or Directors; provided, however, that no vacancies shall be filled by
action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the shareholders of the Corporation. In the event that at any
time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the shareholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
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<PAGE>
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of shareholders and until his successor is elected and qualifies. A
Director elected by the shareholders of the Corporation to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 7. Regular Meetings. Regular meetings of the Board may be held with
notice at such times and places as may be determined by the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board may be called by
the Chairman of the Board, the President, or by a majority of the directors
either in writing or by vote at a meeting, and may be held at any place in or
out of the State of Maryland as the Board may from time to time determine.
Section 9. Notice of Special Meetings. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or by
commercial delivery services addressed to him at his residence or usual place of
business, at least three days before the day on which such meeting is to be
held.
Section 10. Waiver of Notice of Special Meetings. Notice of any special
meeting need not be given to any Director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of the
meeting or who shall attend such meeting. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice of any meeting need not
state the purposes of such meeting.
Section 11. Quorum and voting. One-third, but not fewer than three members,
of the members of the entire Board shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and except as otherwise expressly required by statute, the Charter
of the Corporation, these By-Laws, the 1940 Act or other applicable statute, the
act of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board; provided, however, that the approval of
any contract with an investment adviser or principal underwriter, as such terms
are defined in the 1940 Act, which the Corporation enters into or any renewal or
amendment thereof, the approval of the fidelity bond required by the 1940 Act,
and the selection of the Corporation's independent public accountants shall each
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require the affirmative vote of a majority of the Directors who are not
interested persons (as defined in the 1940 Act) of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the Directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the Directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other Directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time appoint one of
its members as Chairman of the Board, who shall serve at the pleasure of the
Board and who shall perform and execute such duties and powers as may be
conferred upon or assigned to him by the Board or these By-Laws, but who shall
not by reason of performing and executing these duties and powers be deemed an
officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of Directors, the
Chairman of the Board, if one has been selected and is present, shall preside.
In the absence or inability of the Chairman of the Board to preside at a
meeting, the President, or, in his absence or inability to act, another director
chosen by a majority of the directors present, shall act as chairman of the
meeting and preside at it. The Secretary (or, in his absence or inability to
act, any person appointed by the Chairman) shall act as secretary of the meeting
and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting. Any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 15. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time.
Section 16. Compensation. Any Director, whether or not he is a salaried
officer, employee or agent of the Corporation, may be compensated for his
services as director or as a member of a committee, or as Chairman of the Board
or chairman of a committee, and in addition may be reimbursed for
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transportation and other expenses, all in such manner and amounts as the
directors may from time to time determine.
Section 17. Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the shareholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by resolution adopted by
a majority of the entire Board, designate an Executive Committee, Compensation
Committee, Audit Committee and Nomination Committee, each of which shall consist
of two or more of the directors of the Corporation, which committee shall have
and may exercise all the powers and authority of the Board with respect to all
matters other than as set forth in Section 3 of this Article IV.
Section 2. Other Committees of the Board. The Board of Directors may from
time to time, by resolution adopted by a majority of the whole Board, designate
one or more other committees of the Board, each such committee to consist of two
or more directors and to have such powers and duties as the Board of Directors
may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No
committee of the Board shall have power or authority to:
(a) recommend to shareholders any action requiring authorization of
shareholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an investment adviser or
principal underwriter, as such terms are defined in the 1940 Act, or take any
other action required to be taken by the Board of Directors by the 1940 Act;
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<PAGE>
(c) amend or repeal these By-Laws or adopt new By-Laws;
(d) declare dividends or other distributions or issue capital stock of
the Corporation; and
(e) approve any merger or share exchange which does not require
shareholder approval.
Section 4. General. (a) One-third, but not less than two members, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence or disqualification of
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
(b) All committees shall keep written minutes of their proceedings and
shall report such minutes to the Board. All such proceedings shall be subject to
revision or alteration by the Board; provided, however, that third parties shall
not be prejudiced by such revision or alteration.
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the Corporation shall
be a President, a Secretary and a Treasurer, each of whom shall be elected by
the Board of Directors. The Board of Directors may elect or appoint one or more
Vice Presidents and may also appoint such other officers, agents and employees
as it may deem necessary or proper. Any two or more offices may be held by the
same person, except the offices of President and Vice President, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity.
The Board may from time to time elect or appoint, or delegate to the President
the power to appoint, such other officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
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Secretaries) and such agents, as may be necessary or desirable for the business
of the Corporation. Such other officers and agents shall have such duties and
shall hold their offices for such terms as may be prescribed by the Board or by
the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board, the Chairman of
the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3. Removal of Office, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
Section 6. Bonds or other Security. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
Section 7. President. The President shall be the chief executive officer of
the Corporation. In the absence of the Chairman of the Board (or if there be
none), he shall preside at all meetings of the shareholders and of the Board of
Directors. He shall have, subject to the control of the Board of Directors,
general charge of the business and affairs of the Corporation. He may employ and
discharge employees and agents of the Corporation, except such as shall be
appointed by the Board, and he may delegate these powers.
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Section 8. The Vice Presidents. In the absence or disability of the
President, or when so directed by the President, any Vice President designated
by the Board of Directors may perform any or all of the duties of the President,
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President; provided, however, that no Vice President
shall act as a member of or as chairman of any committee of which the President
is a member or chairman by designation of ex officio, except when designated by
the Board. Each Vice President shall perform such other duties as from time to
time may be conferred upon or assigned to him by the Board or the President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation, except those which the Corporation has placed
in the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934)
pursuant to a written agreement designating such bank or trust company or member
of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit
of the Corporation;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment
of its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability of the
Treasurer, or when so directed by the Treasurer, any Assistant Treasurer may
perform any or all of the duties of the Treasurer, and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
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Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the shareholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 12. Assistant Secretaries. In the absence or disability of the
Secretary, or when so directed by the Secretary, any Assistant Secretary may
perform any or all of the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
Each Assistant Secretary shall perform such other duties as from time to time
may be conferred upon or assigned to him by the Board of Directors, the
President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any Director.
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
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representing shares of stock shall be signed by the President, a Vice President,
or the Chairman of the Board, and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date of
issue.
Section 2. Rights of Inspection. There shall be kept at the principal
executive office, which shall be available for inspection during usual business
hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
shareholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been shareholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual business hours the Corporation's
books of account and stock ledger in accordance with the General Laws of the
State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of shareholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
Section 4. Transfer Agents and Registrars. The Corporation may have one or
more Transfer Agents and one or more Registrars of its stock, whose respective
duties the Board of Directors may, from time to time, define. No certificate of
stock shall be valid until countersigned by a Transfer Agent, if the Corporation
shall have a Transfer Agent or until registered by a Registrar, if the
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Corporation shall have a Registrar. The duties of Transfer Agent and Registrar
may be combined.
Section 5. Record Date and Closing of Transfer Books. The Board of
Directors may set a record date for the purpose of making any proper
determination with respect to shareholders, including which shareholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise other rights. The record date may
not be more than ninety (90) days before the date on which the action requiring
the determination will be taken; and, in the case of a meeting of shareholders,
the record date shall be at least ten (10) days before the date of the meeting.
The Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates. The holder of
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or mutilation
of such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 8. Stock Ledgers. The Corporation shall not be required to keep
original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the office(s) of the
Transfer Agent(s) of the Corporation's capital stock.
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ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing the name of
the Corporation, which shall be in the charge of the secretary. The Board of
Directors may authorize one or more duplicate seals and provide for the custody
thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the last day of October in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safekeeping of the
securities and investments of the Corporation shall contain provisions complying
with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks Notes, Drafts. etc. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
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be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Money market instruments, bonds
or other securities at any time owned by the Corporation may be held on behalf
of the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws, and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a Vice President or the Treasurer or pursuant
to any procedure approved by the Board of Directors, subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or certify the
financial statements of the Corporation which are filed with the Securities and
Exchange Commission shall be selected annually by the Board of Directors and
ratified by the Board of Directors or the shareholders in accordance with the
provisions of the 1940 Act.
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by an independent
firm of public accountants at the close of each annual period of the Corporation
and at such other times as may be directed by the Board. A report to the
shareholders based upon each such examination shall be mailed to each
shareholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
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ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify its directors
to the fullest extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall indemnify its officers
to the same extent as its Directors and to such further extent as is consistent
with law. The Corporation shall indemnify its Directors and officers who while
serving as Directors or officers also serve at the request of the Corporation as
a director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan to the fullest extent consistent with law. This Article XIII shall
not protect any such person against any liability to the Corporation or any
shareholder thereof to which such person 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.
Section 2. Advances. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article XIII shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with proceedings to which he is a party
in the manner and to the full extent permissible under the Maryland General
Corporation Law and the 1940 Act, as such statutes are now or hereafter in
force.
Section 3. Procedure. On the request of any current or former director or
officer requesting indemnification or an advance under this Article XIII, the
Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law and the 1940 Act, as such
statutes are now or hereafter in force, whether the standards required by this
Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this Article XIII
shall not be deemed exclusive of any other right, in respect of indemnification
or otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of shareholders or disinterested
directors or otherwise, both as to action by a Director or officer of the
Corporation in his official capacity and as to action by such person in another
capacity while holding such office or position, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
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Section 5. Maryland Law. References to the Maryland General Corporation Law
in this Article XIII are to such law as from time to time amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the shareholders or at any special meeting of the shareholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
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EX-99.B(5)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 1st day of April, 1991
by and between MANAGED MUNICIPAL FUND, INC., a Maryland corporation (the "Fund")
and INTERNATIONAL STRATEGY & INVESTMENT INC., a Delaware corporation (the
"Advisor"), with respect to the following recital of fact:
R E C I T A L
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Fund and the Advisor desire to enter an agreement to provide
investment advisory services for the Fund on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund hereby appoints the Advisor to manage the Fund's
affairs and supervise all aspects of the Fund's operations, including the
investment and reinvestment of the cash, securities or other properties
comprising the Fund's assets (the "Portfolio"), subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor hereby
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. The Fund has furnished the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, filed with the Secretary of
State of Maryland on January 5, 1990 and all amendments thereto;
(b) The Fund's By-laws and all amendments thereto (such By-laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-laws", the By-laws and the Articles of Incorporation are
sometimes collectively referred to herein as the "Charter");
(c) Resolutions of the Fund's Board of Directors and shareholders
authorizing the appointment of the Advisor and approving this Agreement;
(d) The Fund's Registration Statement on Form N-1A under the
Securities of 1933, as amended (the "1933 Act") (File No. 33-32819) and under
the 1940 Act as filed with the Securities and Exchange Commission (the "SEC") on
January 8, 1990 relating to the shares of the Fund, and all amendments thereto;
and
(e) The Fund's most recent prospectus (such prospectus, as presently
in effect and all amendments and supplements thereto are herein called
"Prospectus").
<PAGE>
The Fund will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. The Advisor shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Advisor. In carrying out its obligations under paragraph 1 hereof, the
Advisor shall:
(a) formulate and implement continuing programs for the purchases and
sales of securities consistent with the Prospectus and regularly report thereon
to the Fund's Board of Directors; and
(b) determine what securities shall be represented in the Portfolio
and in what proportion and regularly report them to the Fund's Board of
Directors; and
(c) provide the Board of Directors of the Fund on a regular basis with
financial reports with respect to the Portfolio, investments and analyses of the
Fund's operations and the operations of comparable investment companies; and
(d) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Portfolio of the Fund,
and whether concerning the individual issuers whose securities are included in
the Portfolio or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Portfolio;
and
(e) take, on behalf of the Fund, all actions which appear to the Fund
necessary to carry into effect such purchase and sale programs and supervisory
functions as aforesaid, including the placing of orders for the purchase and
sale of portfolio securities; and
(f) maintain such books and records, in cooperation with the Fund's
administrator and the Fund's distributors, as may be required by law or deemed
advisable by the Board of Directors.
4. Portfolio Transactions. The Advisor shall be responsible for decisions
to buy and sell securities for the Portfolio, selection of broker-dealers and
negotiation of commission rates. Portfolio securities may be purchased or sold
by the Fund in principal transactions. The Advisor may also purchase securities
from underwriters at prices which include a commission paid by the issuer to the
underwriter. The purchase price paid to dealers serving as market makers may
include a spread between the bid and asked prices.
The Advisor's primary consideration in effecting a security transaction
shall be to obtain the best net price and the most favorable execution of the
order. To the extent that the execution and prices offered by more than one
dealer are comparable, the Advisor may, in its discretion, effect transactions
with dealers that furnish statistical, research or other information or services
which the Advisor deems to be beneficial to the Portfolio's investment program.
Such research services supplement the Advisor's own research. Research services
may include the following: statistical and background information on the U.S.
economy; forecasts and interpretations with respect to the U.S. money market
fixed income markets; information on federal, state, local and foreign political
developments; portfolio management strategies; performance information on
securities, indices and investment accounts; information concerning prices of
securities; the providing of equipment used to communicate research information;
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and the providing of access to consultants who supply research information.
Certain research services furnished by dealers may be useful to the Advisor with
clients other than the Fund. Similarly, any research services received by the
Advisor through placement of portfolio transactions of other clients may be of
value to the Advisor in fulfilling its obligations to the Fund. The Advisor is
of the opinion that the material received is beneficial in supplementing its
research and analysis; and therefore, it may benefit the Fund and the Portfolio
by improving the quality of the Advisor's investment advice. The advisory fee
paid by the Fund shall not be reduced because the Advisor receives such services
as the Advisor must evaluate information received as a result of such services,
and thus receipt of such services does not reduce the Advisor's workload.
5. Control by Board of Directors. Any management or supervisory activities
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund.
6. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder as amended; and
(b) the provisions of the Registration Statement of the Fund under the
1933 Act and the 1940 Act; and
(c) the provisions of the Fund's Charter; and
(d) any other applicable provisions of state and federal law and
applicable rules of any registered national securities organization.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost to the
Fund (except as provided in paragraph 8 hereof), the services of such officers
and employees as may be required by the Fund for the proper conduct of its
affairs; travel expenses of employees and officers of the Advisor; office space,
equipment, research services and supplies; expenses of maintaining accounts,
books, and records, except to the extent such services are provided by a third
party pursuant to a contract with the Fund.
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: the fees of the Advisor and
the Fund's distributor and administrator; the charges and expenses of any
registrar, any custodian appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions, if any,
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing shares of the Fund; all costs and expenses in
connection with maintenance of registration of the Fund and its shares with the
SEC and various states and other jurisdictions (including filing fees and legal
fees and disbursements of counsel); the expenses of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements
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and reports to shareholders; fees and travel expenses of directors or members of
any advisory board or committee other than such directors or members who are
"interested persons" of the Fund (as defined in Section 2(a)(19) of the 1940
Act), all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's shares; charges and expenses
of legal counsel, including counsel to the directors of the Fund who are not
"interested persons" of the Fund (as defined in Section 2(a)(19) of the 1940
Act) and of independent accountants, in connection with any matter relating to
the Fund; a portion of membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and directors) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
8. Delegation of Responsibilities. The Advisor may, but shall be under no
duty to, perform services on behalf of the Fund which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Fund and the Advisor's charge in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not required to pay or assume under this Agreement
shall not relieve the Advisor of any of its obligations to the Fund nor obligate
the Advisor to pay or assume any similar Fund expense on any subsequent
occasions.
9. Compensation. (a) For the services to be rendered and the expenses
assumed by the Advisor, the Fund shall pay to the Advisor as compensation an
annual amount, calculated daily and paid monthly, equal to .40% of the Fund's
average daily net assets.
<PAGE>
(b) Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for the part of the month during which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Advisor's compensation for the preceding month shall
be made as promptly as possible after completion of the computations
contemplated by this paragraph 9.
(c) In the event the operating expenses of the Fund, including all
investment advisory and administrative and distribution fees, for any fiscal
year ending on a date on which this Agreement is in effect exceed the expense
limitations applicable to the Fund imposed by the securities laws or regulations
thereunder of any state in which the Fund's shares are qualified for sale, as
such limitations may be raised or lowered from time to time, the Advisor shall
reduce its fee to the extent of such excess expenses and, if required pursuant
to any such laws or regulations, will reimburse the Fund for annual operating
expenses in excess of any expense limitation that may be applicable; provided,
however, there shall be excluded from such expenses the amount of any interest,
taxes, brokerage commissions, extraordinary expenses (including but not limited
to legal claims and liabilities and litigation costs and any indemnification
related thereto) and any other amount not includable in calculating such expense
limitation, paid or payable by the Fund. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall be
based upon the expense limitation applicable to the Fund as at the end of the
last business day of the month. That expense limitation which results in the
largest reduction shall be applicable.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to be
deemed to be exclusive, and the Advisor shall be free to render investment
advisory and other services to others (including other investment companies)
-4-
<PAGE>
and to engage in other activities, so long as its services under this Agreement
are not impaired thereby. It is understood and agreed that officers or directors
of the Advisor may serve as officers or directors of the Fund, and that officers
or directors of the Fund may serve as officers or directors of the Advisor to
the extent permitted by law; and that the officers and directors of the Advisor
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies.
11. Term and Approval. This Agreement shall become effective at the close
of business on the date hereof and shall continue in force and effect until
___________, 199__ and thereafter from year to year, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act); and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of a party to this Agreement (other than as directors
of the Fund), by votes cast in person at a meeting specifically called for such
purpose.
12. Termination. This Agreement may be terminated at any time, on sixty
(60) days' written notice to the other party, without the payment of any
penalty, (i) by vote of the Fund's Board of Directors or (ii) by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act) or (iii) by the Advisor. The notice provided for
herein may be waived by either party. This Agreement shall automatically
terminate in the event of its assignment (as defined in Section 2(a)(4) of the
1940 Act.)
13. Liability. In the performance of its duties hereunder, the Advisor
shall be obligated to exercise care and diligence and to act in good faith and
to use its best efforts within reasonable limits in performing all services
provided for under this Agreement, but the Advisor shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of the Advisor or its officers, directors or
employees, or reckless disregard by the Advisor of its duties under this
Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
of the Advisor shall be 717 Fifth Avenue, New York, NY 10022.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day and year first
above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest: /s/ Sharon H. Marhaush By /s/ Edward J. Veilleux
--------------------- ----------------------
[SEAL] INTERNATIONAL STRATEGY & INVESTMENT INC.
Attest: /s/ Joel P. Fein By /s/ R. Alan Medaugh
--------------------- ----------------------
-6-
<PAGE>
EX-99.B(6)(a)
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 23rd day of October, 1990, by and between MANAGED
MUNICIPAL FUND, INC., a Maryland corporation (the "Fund"), and Alex. Brown &
Sons Incorporated, a Maryland corporation ("Alex. Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the exclusive
distributor of the class of shares of the Fund known as the Flag Investors
Managed Municipal Fund Shares (the "Shares") and Alex. Brown wishes to become
the distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the payments
contemplated by paragraph 9 constitute the financing of activities intended to
result in the sale of Shares, and this Agreement is entered into pursuant to a
"written plan" pursuant to Rule 12b-1 under the Act (the "Plan") allowing the
Fund to make such payments.
NOW, THEREFORE, in consideration of the premises, and of other good and
valuable consideration by each of the parties hereto to the other party paid,
and of the agreements, covenants and obligations herein contained, the parties
hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as the exclusive distributor
of the Shares for the period and on the terms set forth in this Agreement. Alex.
Brown accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown with copies,
properly certified or authenticated, of each of the following:
<PAGE>
(a) The Fund's Articles of Incorporation, filed with the Secretary of
State of Maryland on January 5, 1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors authorizing the
appointment of Alex. Brown as the Fund's Distributor of the Shares and approving
this Agreement;
(d) The Fund's Notification of Registration filed pursuant to Section
8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with the
Securities and Exchange Commission (the "SEC") on January 8, 1990;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-32819) and
under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on January 8, 1990 relating to the Fund and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such prospectus
and all amendments and supplements thereto are herein called "Prospectus").
The Fund will furnish Alex. Brown from time to time with copies, properly
certified or authenticated, of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. Alex. Brown agrees that all solicitations for
subscriptions for Shares shall be made in accordance with Fund's Articles of
Incorporation and By-Laws, and its then current Registration Statement,
Prospectus and Statement of Additional Information, and shall not at any time or
in any manner violate any provisions of the laws of the United States or of any
state or other jurisdiction which solicitations are then being made. In carrying
out its obligations hereunder, Alex. Brown shall undertake the following actions
and responsibilities:
(a) receive orders for purchase of Shares, accept or reject such
orders on behalf of the Fund in accordance with the currently effective
Prospectus for the Shares and the Fund's Statement of Additional Information and
transmit such orders as are so accepted to the Fund's transfer agent as promptly
as possible;
-2-
<PAGE>
(b) receive requests for redemption from holders of Shares and
transmit such redemption requests to the Fund's transfer agent as promptly as
possible;
(c) respond to inquiries from the Fund's shareholders concerning the
status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least quarterly, a written
report of the amounts expended in connection with all distribution services
rendered pursuant to this Agreement, including an explanation of the purposes
for which such expenditures were made; and
(e) take, on behalf of the Fund, all actions which appear to the Fund
necessary to carry into effect the distribution of the Shares and perform such
other administrative duties with respect to the Shares as the Fund's Board of
Directors may require.
4. Distribution of Shares. Alex. Brown shall be the exclusive distributor
of the Shares. It is mutually understood and agreed that Alex. Brown does not
undertake to sell all or any specific portion of the Shares. The Fund shall not
sell any of the Shares except through Alex. Brown and securities dealers who
have valid Sub-Distribution Agreements with Alex. Brown. Notwithstanding the
provisions of the foregoing sentence the Fund may issue its Shares at their net
asset value to any shareholder of the Fund purchasing such Shares with dividends
or other cash distributions received from the Fund pursuant to an offer made to
all shareholders.
5. Control by Board of Directors. Any distribution activities undertaken by
Alex. Brown pursuant to this Agreement, as well as any other activities
undertaken by Alex. Brown on behalf of the Fund pursuant hereto, shall at all
times be subject to any directives of the Board of Directors of the Fund. The
Board of Directors may agree, on behalf of the Fund, to amendments to this
Agreement, provided that any such amendment that would provide for a material
increase in the amount expended by the Fund must be approved by the shareholders
of the Fund before becoming effective.
6. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder as amended;
-3-
<PAGE>
(b) the provisions of the Registration Statement of the Fund under the
1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of state and federal laws.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and without cost to the
Fund, the services of personnel to the extent that such services are required to
carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any promotional or sales
literature used by Alex. Brown or furnished by Alex. Brown to purchasers or
dealers in connection with the public offering of the Shares, the expenses of
advertising in connection with such public offering;
(c) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: the fees of the Fund's
investment advisor; the charges and expenses of any registrar, any custodian or
depositary appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any stock transfer, dividend or accounting
agent or agents appointed by the Fund; brokers' commissions chargeable to the
Fund in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Fund to federal, state or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the expenses of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
-4-
<PAGE>
expenses of directors or members of any advisory board or committee other than
such directors or member who are "interested persons" of the Fund (as defined in
Section 2(a)(19) of the 1940 Act); all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in Shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
Shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not "interested persons" of the Fund (as defined
in Section 2(a)(19) of the 1940 Act), and of independent accountants, in
connection with any matter relating to the Fund; a portion of membership dues of
industry associations; interest payable on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and directors) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
8. Delegation of Responsibilities. Alex. Brown may, but shall be under no
duty to, perform services on behalf of the Fund which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Fund and Alex. Brown's charges in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by Alex. Brown of any Fund
expense that Alex. Brown is not required to pay or assume under this Agreement
shall not relieve Alex. Brown to pay or assume any similar Fund expense on any
subsequent occasions.
9. Compensation. For the services to be rendered and the expenses assumed
by Alex. Brown, the Fund shall pay to Alex. Brown, compensation at the annual
rate of .25% of the average daily net assets of the Shares of the Fund. Except
as hereinafter set forth, continuing compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month compensation for the
part of the month during which this Agreement is in effect shall be prorated in
a manner consistent with the calculations of the fees as set forth above.
10. Compensation for Servicing Shareholder Accounts. The Fund acknowledges
that Alex. Brown may compensate its investment representatives for opening
accounts, processing investor letters of transmittals and applications and
withdrawal and redemption orders, responding to inquiries from Fund shareholders
concerning the status of their accounts and the operations of the Fund,
-5-
<PAGE>
and communicating with the Fund and its transfer agent on behalf of the Fund
shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into
sub-distribution agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing or the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Brown to the Fund are not to be
deemed exclusive and Alex. Brown shall be free to render distribution or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers or directors of Alex.
Brown may serve as officers of directors of the Fund, and that officers or
directors of Alex. Brown are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers or directors of any other firm or corporation, including
other investment companies.
13. Term and Approval. This Agreement shall become effective at the close
of business on the date hereof and shall remain in force and effect for an
initial term of two years and from year to year thereafter, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
"interested persons" of the Fund (as defined in Section 2(a)(19) of the 1940
Act) and who do not have a financial interest in the operation of this
Agreement, by votes cast in person at a meeting specifically called for such
purpose.
14. Termination. This Agreement may be terminated at any time, on sixty
(60) days' written notice to the other party without the payment of any penalty,
-6-
<PAGE>
(i) by vote of the Fund's Board of Directors, (ii) by vote of a majority of the
directors who are not "interests persons" of the Fund (as defined in Section
2(a)(19) of the 1940 Act) and who do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act)
or (iv) by Alex. Brown. The notice provided for herein may be waived by each
party. This Agreement shall automatically terminate in the event of its
assignment as defined in Section 2(a)(4) of the 1940 Act.
15. Liability. In the performance of its duties hereunder, Alex. Brown
shall be obligated to exercise care and diligence and to act in good faith and
to use its best efforts within reasonable limits in performing all services
provided for under this Agreement, but shall not be liable for any act or
omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other parties at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other parties, the addresses of the Fund and Alex. Brown
are as follows:
If to Alex. Brown
Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, MD 21202
If to the Fund:
Managed Municipal Fund, Inc.
1290 Avenue of the Americas
New York, NY 10104
17. Questions of Interpretation. Any questions of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective
officers as of the day and year first above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest: /s/ Sharon G. Marhaush By /s/ Edward J. Veilleux
--------------------------- -------------------------
Vice President
[SEAL] ALEX. BROWN & SONS
INCORPORATED
Attest:/s/ Nancy Palmer By /s/ Richard T. Hale
--------------------------- -------------------------
-8-
<PAGE>
EX-99.B(6)(b)
EXHIBIT A
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland corporation,
serves as distributor (the "Distributor") of the Flag Investors Funds
(collectively, the "Funds", individually a "Fund"). The Funds are open-end
investment companies registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" used herein refers to the
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating Dealer
and as such are authorized (i) to accept orders for the purchase of Shares and
to transmit to the Funds such orders and the payment made therefore, (ii) to
accept orders for the redemption of Shares and to transmit to the Funds such
orders and all additional material, including any certificates for Shares, as
may be required to complete the redemption and (iii) to assist shareholders with
the foregoing and other matters relating to their investments in each Fund, in
each case subject to the terms and conditions set forth in the Prospectus of
each Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will look solely to
the Distributor, and you acknowledge that the Funds shall have no direct
responsibility for any compensation. In addition to any sales charge payable to
you by your customer pursuant to a Prospectus, the Distributor will pay you no
less often than annually a shareholder processing and service fee (as we may
determine from time to time in writing) computed as a percentage of the average
daily net assets maintained with each Fund during the preceding period by
shareholders who purchase their shares through you or with your assistance,
<PAGE>
provided that said assets are at least $250,000 for each Fund for which you are
to be compensated, and provided that in all cases your name is transmitted with
each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD, including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares under
the Securities Act. The Funds intend to register or qualify in certain states
where registration or qualification is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares have been qualified
for sale under, or are exempt from the requirements of, the respective
securities laws of such states. You agree that you will offer Shares to your
customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full authority to take
such action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to be
kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
<PAGE>
10. Termination. This Agreement may be terminated by either party, without
penalty, upon ten days' notice to the other party and shall automatically
terminate in the event of its assignment (as defined in the Investment Company
Act). This Agreement may also be terminated at any time for any particular Fund
without penalty by the vote of a majority of the members of the Board of
Directors or Trustees of such Fund who are not "interested persons" (as defined
in the Investment Company Act) and who have no direct or indirect financial
interest in the operation of the Distribution Agreement between such Fund and
the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to the above
address. Any notice to you shall be duly given if mailed or telegraphed to you
at the address specified by you below.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
______________________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
<PAGE>
EX-99.B(6)(c)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SHAREHOLDER SERVICING AGREEMENT
_________________, 19__
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you
concerning the provision of support services to your clients and customers
("Customers") who may from time to time beneficially own shares of our common
stock ("Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. (a) You agree to provide the following services to Customers who
may from time to time beneficially own Shares: (i) aggregating and processing
purchase and redemption requests for Shares from Customers and placing net
purchase and redemption orders with our distributor; (ii) processing dividend
payments from us on behalf of Customers; (iii) providing information
periodically to Customers showing their positions in Shares; (iv) arranging for
bank wires; (v) responding to Customer inquiries relating to the services
performed by you; (vi) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to Customers; and (viii) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. You will provide to Customers a schedule of any
fees that you may charge directly to them for such services. You hereby
represent that such fees are not unreasonable or excessive. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records required by law
relating to transactions in Shares and, upon our request, promptly make such of
these records available to us as we may reasonably request in connection with
our operations, and (ii) promptly notify us if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be a part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
Section 3. Neither you nor any of your officers, employees, agents or
assignees are authorized to make any representations concerning us or Shares
except those contained in our then current prospectus for such Shares, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
<PAGE>
Section 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter or in any respect. You may, upon prior written notice to us, delegate
your responsibilities hereunder to another person or persons; provided, however,
that notwithstanding any such delegation, you will remain responsible for the
performance of all of your responsibilities under this Agreement. By your
written acceptance of this Agreement, you agree to and do release, indemnify and
hold us harmless from and against any and all direct or indirect liabilities or
losses resulting from requests, directions, actions or inactions of or by you or
your officers, employees, agents or assignees regarding your responsibilities
hereunder or the purchase, redemption, transfer or registration of Shares by or
on behalf of Customers. You and your employees will, upon request, be available
during normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by you
hereunder, we will cause our distributor pay to you, and you will accept as full
payment therefor, a fee (as we may determine from time to time in writing)
computed as a percentage of the average daily net assets of the Customers'
Shares held of record by you from time to time, which fee will be computed daily
and payable no less often than annually. For purposes of determining the fees
payable under this Section 5, the average daily net assets of the Customers'
Shares will be computed in the manner specified in our registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by us or by
our distributor, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Shares, including
the sale of such shares to you for the account of any Customer or Customers.
Section 6. You will furnish us or our designees with such information
relating to your performance under this Agreement as we or they may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and shall otherwise
cooperate with us and our designees (including, without limitation, any auditors
designated by us), in connection with the preparation of reports to our Board of
Directors concerning this Agreement and the monies paid or payable by us
pursuant hereto, as well as any other reports or filings that may be required by
law.
Section 7. We may enter into other similar services agreements with any
other person or persons without your consent.
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our distributor, and is
terminable, without penalty, at any time by us or by you upon ten days' notice
to the other party hereto and shall automatically terminate in the event of its
assignment, as that term is defined in the Investment Company Act of 1940, as
amended.
Section 9. This Agreement will be construed in accordance with the laws of
the State of Maryland.
Section 10. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device, if to us at the address below, and if to you, at the
address specified by you after your signature below:
Flag Investors Family of Funds
135 East Baltimore Street
Baltimore, Maryland 21202
Attention: Edward J. Veilleux
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<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, at the address set forth in Section 10 above.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
Date:__________________ By:______________________________________
Confirmed and Accepted:
Firm Name: _______________________________
By: _______________________________
Address: _______________________________
_______________________________
Date: _______________________________
-3-
<PAGE>
EX-99.B(6)(d)
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 30th day of November, 1990, by and between MANAGED
MUNICIPAL FUND, INC., a Maryland corporation (the "Fund"), and ARMATA FINANCIAL
CORP., a Maryland corporation ("AFC").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to appoint AFC as the exclusive distributor of the
class of shares of the Fund known as the ISI Managed Municipal Fund Shares (the
"Shares") and AFC wishes to become the distributor of the Shares; and
WHEREAS, the compensation to AFC hereunder and the payments contemplated by
paragraph 9 constitute the financing of activities intended to result in the
sale of Shares, this Agreement is entered into pursuant to a "written plan"
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") owing the Fund to make
such payments.
NOW, THEREFORE, in consideration of the premises, and of other good and
valuable consideration by each of the parties hereto to the other party paid,
and of the agreements, covenants and obligations herein contained, the parties
hereto agree as follows:
1. Appointment. The Fund appoints AFC as the exclusive distributor of the
Shares for the period and on the terms set forth in this Agreement. AFC accepts
such appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Fund has furnished AFC with copies, properly
certified or authenticated, of each of the following:
<PAGE>
(a) The Fund's Articles of Incorporation, filed with the Secretary of
State of Maryland on January 5, 1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors authorizing the
appointment of AFC as the Fund's Distributor of the Shares and approving this
Agreement;
(d) The Fund's Notification of Registration filed pursuant to Section
8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with the
Securities and Exchange Commission (the "SEC") on January 8, 1990;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-32819) and
under the 1940 Act as filed with the SEC on January 8, 1990 relating to the Fund
and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such prospectus
and all amendments and supplements thereto are herein called "Prospectus").
The Fund will furnish AFC from time to time with copies, properly certified
or authenticated, of all amendments or supplements to the foregoing, if any, and
all documents, notices and reports filed with the SEC.
3. Duties as Distributor. AFC agrees that all solicitations for
subscriptions for Shares shall be made in accordance with the Fund's Articles of
Incorporation and By-Laws, and its then current Registration Statement,
Prospectus and Statement of Additional Information, and shall not at any time or
in any manner violate any provisions of the laws of the United States or of any
state or other jurisdiction in which solicitations are then being made. In
carrying out its obligations hereunder, AFC shall undertake the following
actions and responsibilities:
(a) receive orders for purchase of Shares, accept or reject such
orders on behalf of the Fund in accordance with the currently effective
Prospectus for the Shares and the Fund's Statement of Additional Information and
transmit such orders as are so accepted to the Fund's transfer agent as promptly
as possible;
(b) receive requests for redemption from holders of Shares and
transmit such redemption requests to the Fund's transfer agent as promptly as
possible;
-2-
<PAGE>
(c) respond to inquiries from the Fund's shareholders concerning the
status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least quarterly, a written
report of the amounts expended in connection with all distribution services
rendered pursuant to this Agreement, including an explanation of the purposes
for which such expenditures were made; and
(e) take, on behalf of the Fund, all actions which appear to the Fund
necessary to carry into effect the distribution of the Shares and perform such
other administrative duties with respect to the Shares as the Fund's Board of
Directors may require.
4. Distribution of Shares. AFC shall be the exclusive distributor of the
Shares. It is mutually understood and agreed that AFC does not undertake to sell
all or any specific portion of the Shares. The Fund shall not sell any of the
Shares except through AFC and securities dealers who have valid Agency
Distribution Agreements with AFC. Notwithstanding the provisions of the
foregoing sentence the Fund may issue its Shares at their net asset value to any
shareholder of the Fund purchasing such Shares with dividends or other cash
distributions received from the Fund pursuant to an offer made to all
shareholders.
5. Control by Board of Directors. Any distribution activities undertaken by
AFC pursuant to this Agreement, as well as any other activities undertaken by
AFC on behalf of the Fund pursuant hereto, shall at all times be subject to any
directives of the Board of Directors of the Fund. The Board of Directors may
agree, on behalf of the Fund, to amendments to this Agreement, provided that any
such amendment that would provide for a material increase in the amount expended
by the Fund must be approved by the shareholders of the Fund before becoming
effective.
6. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, AFC shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement to the Fund under the
1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation of the Fund;
-3-
<PAGE>
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of state and federal law.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and AFC as follows:
(a) AFC shall furnish, at its expense and without cost to the Fund,
the services of personnel to the extent that such services are required to carry
out their obligations under this Agreement;
(b) AFC shall bear the expenses of any promotional or sales literature
used by AFC or furnished by AFC to purchasers or dealers in connection with the
public offering of the Shares and the expenses of advertising in connection with
such public offering;
(c) the Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: the fees of the Fund's
investment advisor; the charges and expenses of any registrar, any custodian or
depositary appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any stock transfer, dividend or accounting
agent or agents appointed by the Fund; brokers' commissions chargeable to the
Fund in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Fund to federal, state or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the expenses of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of directors or members of any advisory board or committee other than
such directors or member who are "interested persons" of the Fund (as defined in
Section 2(a)(19) of the 1940 Act); all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in Shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
-4-
<PAGE>
Shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not "interested persons" of the Fund (as defined
in Section 2(a)(19) of the 1940 Act), and of independent accountants, in
connection with any matter relating to the Fund; a portion of membership dues of
industry associations; interest payable on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and directors) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
8. Delegation of Responsibilities. AFC may, but shall be under no duty to,
perform services on behalf of the Fund which are not required by this Agreement
upon the request of the Fund's Board of Directors. Such services will be
performed on behalf of the Fund and AFC's charges in rendering such services may
be billed monthly to the Fund, subject to examination by the Fund's independent
accountants. Payment or assumption by AFC of any Fund expense that AFC is not
required to pay or assume under this Agreement shall not relieve AFC of any of
its obligations to the Fund or obligate AFC to pay or assume any similar Fund
expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the expenses assumed
by AFC, the Fund shall pay to AFC, compensation at the annual rate of .25% of
the average daily net assets of the Shares of the Fund. Except as hereinafter
set forth, continuing compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly. If
this Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month compensation for the part of the month
during which this Agreement is in effect shall be prorated in a manner
consistent with the calculations of the fees as set forth above.
10. Compensation for Service Shareholder Accounts. The Fund acknowledges
that AFC may compensate its investment representatives for opening accounts,
processing investor letters of transmittals and applications and withdrawal and
redemption orders, responding to inquiries from Fund shareholders concerning the
status of their accounts and the operations of the Fund, and communicating with
the Fund and its transfer agent on behalf of the Fund shareholders.
11. Agency Distribution Agreements. AFC may enter into agency distribution
agreements (the "Agency Distribution Agreements") with any securities dealer who
is registered under the Securities Exchange Act of 1934 and a member in good
standing of the NASD, who may wish to act as a transmitting broker in connection
-5-
<PAGE>
with the proposed offering. All Agency Distribution Agreements shall be in
substantially the form of the agreement attached hereto as Exhibit "A". For
processing Fund shareholders' redemption orders, responding to the inquiries
from Fund shareholders concerning the status of their accounts and the
operations of the Fund and communicating with the Fund, its transfer agent and
AFC, AFC may pay each such transmitting broker an amount not to exceed that
portion of the compensation paid to AFC hereunder that is attributable to
accounts of Fund shareholders who are customers of such transmitting broker.
12. Non-Exclusivity. The services of AFC to the Fund are not to be deemed
exclusive and AFC shall be free to render distribution or other services to
others (including other investment companies) and to engage in other activities.
It is understood and agreed that officers or directors of AFC may serve as
officers or directors of the Fund, and that officers or directors of the Fund
may serve as officers or directors of AFC to the extent permitted by law; and
that officers or directors of AFC are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies.
13. Term and Approval. This Agreement shall become effective at the close
of business on the date hereof and shall remain in force and effect for an
initial term of two years and from year to year thereafter, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
"interested persons" of the Fund (as defined in Section 2(a)(19) of the 1940
Act) and who do not have a financial interest in the operation of this
Agreement, by votes cast in person at a meeting specifically called for such
purpose.
14. Termination. This Agreement may be terminated at any time, on
sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in Section 2(a)(19) of the 1940 Act) and who do not have a financial
interest in the operation of this Agreement, (iii) by vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the 1940
Act) or (iv) by AFC. The notice provided for herein may be waived by each party.
-6-
<PAGE>
This Agreement shall automatically terminate in the event of its assignment as
defined in Section 2(a)(4) of the 1940 Act.
15. Liability. In the performance of its duties hereunder, AFC shall
be obligated to exercise care and diligence and to act in good faith and to use
its best efforts within reasonable limits in performing all services provided
for under this Agreement, but shall not be liable for any act or omission which
does not constitute willful misfeasance, bad faith or gross negligence on the
part of AFC or reckless disregard by AFC of its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other parties at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other parties, the addresses of the Fund and AFC are as
follows:
If to AFC:
Armata Financial Corp.
135 East Baltimore Street
Baltimore, Maryland 21202
If to the Fund:
Managed Municipal Fund, Inc.
1290 Avenue of the Americas
New York, New York 10104
17. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers as of the day and year
first above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest: /s/ David C. Volley By /s/ Brian C. Nelson
--------------------- -----------------------------------
Vice President and Secretary
[SEAL] ARMATA FINANCIAL CORP.
Attest: /s/ David C. Volley By /s/ Edward J. Veilleux
--------------------- -----------------------------------
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<PAGE>
EX-99.B(6)(e)
Exhibit A
ISI FAMILY OF FUNDS
717 Fifth Avenue
New York, New York 10022
AGENCY DISTRIBUTION AGREEMENT
_______________________, 19___
Gentlemen:
Armata Financial Corp. ("Armata"), a Maryland corporation, serves as
distributor (the "Distributor") of the ISI Family of Mutual Funds (collectively,
the "Funds", individually a "Fund"). The Funds are open-end investment companies
registered under the "Investment Company Act of 1940, as amended (the
"Investment Company Act"). The Funds offer their shares ("Shares") to the public
in accordance with the terms and conditions contained in the Prospectus of each
Fund. The term "Prospectus" used herein refers to the prospectus on file with
the Securities and Exchange Commission which is part of the registration
statement of each Fund under the Securities Act of 1933 (the "Securities Act").
In connection with the foregoing you may serve as a participating dealer (and,
therefore, accept orders for the purchase or redemption of Shares, respond to
shareholder inquiries and perform other related functions) on the following
terms and conditions:
1. Transmitting Broker. You are hereby designated as a Broker and as such
are authorized (i) to accept orders for the purchase of Shares and to transmit
to the Funds such orders and payment made therefore, (ii) to accept orders for
the redemption of Shares and to transmit to the Funds such orders and all
additional material, including any certificates for Shares, as may be required
to complete the redemption and (iii) to assist shareholders with the foregoing
and other matters relating to their investments in each Fund, in each case
subject to the terms and conditions set forth in the Prospectus of each Fund.
You are to review each Share purchase or redemption order submitted through you
or with your assistance for completeness and accuracy. You further agree to
undertake from time to time certain shareholder servicing activities for
customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
Shares.
<PAGE>
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will look solely to
the Distributor, and you acknowledge that the Funds shall have no direct
responsibility for any compensation. In addition to any sales charge payable to
you by your customer pursuant to a Prospectus, the Distributor will pay you no
less often than annually a shareholder processing and service fee (as we may
determine from time to time in writing) computed as a percentage of the average
daily net assets maintained with each Fund during the preceding period by
shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $250,000 for each Fund for which you are
to be compensated, and provided that in all cases your name is transmitted with
each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
<PAGE>
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares under
the Securities Act. The Funds intend to register or qualify in certain states
where registration or qualification is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares have been qualified
for sale under, or are exempt from the requirements of, the respective
securities laws of such states. You agree that you will offer Shares to your
customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full authority to take
such action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to be
kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by them hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party, without
penalty, upon ten days' notice to the other party and shall automatically
terminate in the event of its assignment (as defined in the Investment Company
Act). This Agreement may also be terminated at any time for any particular Fund
without penalty by the vote of a majority of the members of the Board of
Directors or Trustees of such Fund who are not "interested persons" (as defined
in the Investment Company Act) and who have no direct or indirect financial
interest in the operation of the Distribution Agreement between such Fund and
<PAGE>
the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to the above
address. Any notice to you shall be duly given if mailed or telegraphed to you
at the address specified by you below.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us one copy of this agreement.
ARMATA FINANCIAL CORP.
_____________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: _______________________
By: _________________________
Address: _________________________
Date: ___________________________
<PAGE>
EX-99.B(8)
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of February 26, 1990 by and between MANAGED
MUNICIPAL FUND, INC., a Maryland Corporation (the "Fund"), and PROVIDENT
NATIONAL BANK, a national banking association ("Provident").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund desires to retain Provident to serve as the Fund's
custodian and Provident is willing to serve as the Fund's custodian;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Provident to act as custodian of
the portfolio securities, cash and other property belonging to the Fund for the
period and on the terms set forth in this Agreement. Provident accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 21 of this Agreement. Provident agrees
to comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Fund may from time to time issue separate series or
classes of its shares of capital stock, $.001 par value, or classify and
reclassify shares of such series or class. Provident shall identify to each such
series or class property belonging to such series or class and in such reports,
confirmations and notices to the Fund called for under this Agreement shall
identify the series or class to which such report, confirmation or notice
pertains.
2. Delivery of Documents. The Fund has furnished Provident with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of Provident as custodian of the portfolio securities, cash and
other property belonging to the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's
officers and/or other persons authorized to issue Oral Instructions and to sign
Written Instructions, as hereinafter defined, on behalf of the Fund;
<PAGE>
(c) The Fund's Articles of Incorporation filed with the Department of
Assessments and Taxation of the State of Maryland on January 5, 1990 and all
amendments thereto (such Articles of Incorporation, as presently in effect and
as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(e) The Investment Advisory Agreement between C.J. Lawrence, Morgan
Grenfell Inc. ("C.J. Lawrence" or the "Advisor") and the Fund dated as of
February __, 1990 (the "Advisory Agreement");
(f) The Distribution Agreement between the Fund and C.J. Lawrence
dated February __, 1990 (the "Distribution Agreement");
(g) The Administration Agreement between the Fund and Alex. Brown &
Sons Incorporated (the "Administrator") dated February __, 1990 (the
"Administration Agreement");
(h) The Transfer Agency Agreement between Provident Financial
Processing Corporation (the "Transfer Agent") and the Fund dated as of February
__, 1990 (the "Transfer Agency Agreement");
(i) The Accounting Services Agreement between Provident Financial
Processing Corporation and the Fund dated as of February __, 1990 (the
"Accounting Services Agreement");
(j) The Fund's Notification of Registration filed pursuant to Section
8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on January 8, 1990;
(k) The Fund's most recent Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-32819) and
under the 1940 Act as filed with the SEC on January 8, 1990 relating to shares
of the Fund's Common Stock, $.001 par value ("Shares"), and all amendments
thereto; and
(l) The Fund's most recent prospectus or prospectuses relating to
Shares (such prospectus or prospectuses, as presently in effect and all
amendments and supplements thereto are herein called the "Prospectus").
- 2 -
<PAGE>
The Fund will furnish Provident from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the officers of the Fund and any other person,
whether or not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral and Written
Instructions on behalf of the Fund and listed on the Certificate annexed hereto
as Appendix A or any amendment thereto as may be received by Provident from time
to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by Provident from an
Authorized Person or from a person reasonably believed by Provident to be an
Authorized Person. The Fund agrees to deliver to Provident, at the time and in
the manner specified in Paragraph 8(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property which the Fund may
from time to time deposit, or cause to be deposited, with Provident or
which Provident may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or other
property;
(iii) all proceeds of the sale of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by Provident from time to time from or on behalf of
the Fund.
(e) "Written Instructions". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
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tested telegram, cable, telex or facsimile sending device, and received by
Provident and signed by an Authorized Person.
4. Delivery and Registration of the Property. The Fund will deliver or
cause to be delivered to Provident all securities and all moneys owned by it,
including cash received for the issuance of its Shares, at any time during the
period of this Agreement. Provident will not be responsible for such securities
and such moneys until actually received by it. All securities delivered to
Provident (other than in bearer form) shall be registered in the name of the
Fund or in the name of a nominee of the Fund or in the name of Provident or in
the name of any nominee of Provident (with or without indication of fiduciary
status), or in the name of any sub-custodian or any nominee of any such
sub-custodian appointed pursuant to Paragraph 6 hereof or shall be properly
endorsed and in form for transfer satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial account or
accounts in the name of the Fund, subject only to draft or order by Provident
acting pursuant to the terms of this Agreement, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it from or
for the account of the Fund. Provident shall make payments of cash to, or for
the account of, the Fund from such cash only (i) for the purchase of securities
for the Fund's portfolio as provided in Paragraph 13 hereof; (ii) upon receipt
of Written Instructions, for the payment of interest, dividends, taxes,
administration, accounting, distribution, advisory or sub-advisory fees or
expenses which are to be borne by the Fund under the terms of this Agreement,
the Advisory Agreement, the Accounting Services Agreement, the Administration
Agreement, the Transfer Agency Agreement and the Distribution Agreement; (iii)
upon receipt of Written Instructions, for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Fund and held by or to be delivered to Provident; (iv) to a sub-custodian
pursuant to Paragraph 6 hereof; (v) for the redemption of Fund Shares; (vi) for
payment of the amount of dividends received in respect of securities sold short;
or (vii) upon receipt of Written Instructions, for other proper Fund purposes.
No payment pursuant to (i) above shall be made unless Provident has received a
copy of the broker's or dealer's confirmation or the payee's invoice, as
appropriate.
(b) Provident is hereby authorized to endorse and collect all checks,
drafts, negotiable instruments or other orders for the payment of money received
as custodian for the account of the Fund.
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<PAGE>
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, Provident shall hold and
physically segregate in a separate account, identifiable at all times from those
of any other persons, firms, or corporations, all securities and non-cash
property received by it for the account of the Fund. All such securities and
non-cash property are to be held or disposed of by Provident for the Fund
pursuant to the terms of this Agreement. In the absence of Written Instructions
accompanied by a certified resolution of the Fund's Board of Directors
authorizing the transaction, Provident shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments except in accordance with the express terms provided
for in this Agreement. In no case may any Director, officer, employee or agent
of the Fund withdraw any securities. In connection with its duties under this
Paragraph 6 Provident may, at its own expense, enter into sub-Custodian
agreements with other banks or trust companies for the receipt of certain
securities and cash to be held by Provident for the account of the Fund pursuant
to this Agreement; provided that each such bank or trust company has an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than one million dollars ($1,000,000) for a Provident
subsidiary or affiliate, or of not less than twenty million dollars
($20,000,000) if such bank or trust company is not a Provident subsidiary or
affiliate and that in either case such bank or trust company agrees with
Provident to comply with all relevant provisions of the 1940 Act and applicable
rules and regulations thereunder. Provident shall remain responsible for the
performance of all of its duties under this Agreement and shall hold the Fund
harmless from the acts and omissions, under the standards of care provided for
herein, of any bank or trust company that it might choose pursuant to this
Paragraph 6.
(b) Where securities are transferred to an account of the Fund
established pursuant to Paragraph 7 hereof, Provident shall also by book-entry
or otherwise identify as belonging to the Fund the quantity of securities in a
fungible bulk of securities registered in the name of Provident (or its nominee)
or shown in Provident's account on the books of the Book-Entry System. At least
monthly and from time to time, Provident shall furnish the Fund with a detailed
statement of the Property held for the Fund under this Agreement.
7. Use of Book-Entry System. The Fund shall deliver to Provident certified
resolutions of the Board of Directors of the Fund approving, authorizing and
instructing Provident on a continuous and on-going basis until instructed to the
contrary by Oral or Written actually received by Provident (a) to deposit in the
Book-Entry System all securities belonging to the Fund eligible for deposit
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<PAGE>
therein and (b) to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. Without limiting
the generality of such use, it is agreed that the following provisions shall
apply thereto:
(a) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash controlled by
Provident in other than a fiduciary or custodian capacity but may be commingled
with other assets held in such capacities. Provident and its sub-custodian, if
any, will pay out money only upon receipt of securities and will deliver
securities only upon the receipt of money.
(b) All books and records maintained by Provident which relate to the
Fund's participation in the Book-Entry System will at all times during
Provident's regular business hours be open to the inspection of the Fund's duly
authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(c) Provident will provide the Fund with copies of any report obtained
by Provident on the system of internal accounting control of the Book-Entry
System promptly after receipt of such a report by Provident. Provident will also
provide the Fund with such reports on its own system of internal control as the
Fund may reasonably request from time to time.
8. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, Provident shall act
only upon Oral and Written Instructions. Although Provident may know of the
provisions of the Charter and By-Laws of the Fund, Provident may assume that any
Oral or Written Instructions received hereunder are not in any way inconsistent
with any provisions of such Charter or By-Laws or any vote, resolution or
proceeding of the Shareholders, or of the Board of Directors, or of any
committee thereof.
(b) Provident shall be entitled to rely upon any Oral Instructions and
any Written Instructions actually received by Provident pursuant to this
Agreement. The Fund agrees to forward to Provident Written Instructions
confirming Oral Instructions in such manner that the Written Instructions are
received by Provident by the close of business of the same day that such Oral
Instructions are given to Provident. The Fund agrees that the fact that such
confirming Written Instructions are not received by Provident shall in no way
affect the validity of the transactions or enforceability of the transactions
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<PAGE>
authorized by the Fund by giving Oral Instructions. The Fund agrees that
Provident shall incur no liability to the Fund in acting upon Oral Instructions
given to Provident hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
9. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, Provident is authorized to take the following actions:
(a) Collection of Income and Other Payments. Provident shall:
(i) collect and receive for the account of the Fund, all income
and other payments and distributions, including (without limitation) stock
dividends, rights, bond coupons, option premiums and similar items,
included or to be included in the Property, and promptly advise the Fund of
such receipt and shall credit such income, as collected, to the Fund's
custodian account;
(ii) endorse and deposit for collection, in the name of the Fund,
checks, drafts, and negotiable instruments or other orders for the payment
of money on the same day as received;
(iii) receive and hold for the account of the Fund all securities
received as a distribution on the Fund's portfolio securities as a result
of a stock dividend, share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of rights or similar
securities issued with respect to any portfolio securities belonging to the
Fund held by Provident hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or
otherwise become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts, and other
negotiable instruments as described in Paragraph 24 of this Agreement.
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<PAGE>
(b) Miscellaneous Transactions. Provident is authorized to deliver or
cause to be delivered Property against payment or other consideration or written
receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary securities
for definitive securities; and
(iii) for transfer of securities into the name of the Fund or
Provident or nominee of either, or for exchange of securities for a
different number of bonds, certificates, or other evidence,
representing the same aggregate face amount or number of units bearing
the same interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be
delivered to Provident.
10. Transactions Requiring Instructions. Upon receipt of Oral or Written
Instructions and not otherwise, Provident directly or through the use of the
Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger, consolidation or
"recapitalization" of any corporation, or the exercise of any conversion
privilege;
(c) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, "recapitalization" or sale
of assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Oral or Written Instructions to
be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
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<PAGE>
(e) release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to Provident of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, subject to
proper prior authorization, further securities may be released for that purpose;
and repay such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes evidencing the
loan;
(f) release and deliver securities owned by the Fund in connection
with any repurchase agreement entered into on behalf of the Fund, but only on
receipt of payment therefor; and pay out moneys of the Fund in connection with
such repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions.
11. Segregated Accounts.
(a) Provident shall upon receipt of Written or Oral Instructions
establish and maintain a segregated account or accounts on its records for and
on behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities in the Book-Entry System (i) for the
purposes of compliance by the Fund with the procedures required by a securities
or option exchange, providing such procedures comply with the 1940 Act and
Release No. 10666 or any subsequent release or releases of the SEC relating to
the maintenance of segregated accounts by registered investment companies, and
(ii) for other proper corporate purposes, but only, in the case of clause (ii),
upon receipt of Written Instructions.
(b) Provident may enter into separate custodial agreements with
various futures commission merchants ("FCMs") that the Fund uses (each a "FCM
Agreement"), pursuant to which the Fund's margin deposits in any transactions
involving futures contracts and options on futures contracts will be held by
Provident in accounts (each a "FCM Account") subject to the disposition by the
FCM involved in such contracts in accordance with the customer contract between
FCM and the Fund ("FCM Contract"), SEC rules governing such segregated accounts,
CFTC rules and the rules of the applicable commodities exchange. Such FCM
Agreements shall only be entered into upon receipt of Written Instructions from
the Fund which state that (i) a customer agreement between the FCM and the Fund
has been entered into; and (ii) the Fund is in compliance with all the rules and
regulations of the CFTC. Transfers of initial margin shall be made into an FCM
Account only upon Written Instructions; transfers of premium and variation
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<PAGE>
margin may be made into a FCM Account pursuant to Oral Instructions. Transfers
of funds from a FCM Account to the FCM for which Provident holds such an account
may only occur upon certification by the FCM to Provident that pursuant to the
FCM Agreement and the FCM Contract, all conditions precedent to its right to
give Provident such instruction have been satisfied.
12. Dividends and Distributions. The Fund shall furnish Provident with
appropriate evidence of action by the Fund's Board of Directors declaring and
authorizing the payment of any dividends and distributions. Upon receipt by
Provident of Written Instructions with respect to dividends and distributions
declared by the Fund's Board of Directors and payable to Shareholders who have
elected in the proper manner to receive their distributions or dividends in
cash, and in conformance with procedures mutually agreed upon by Provident, the
Fund, and the Fund's Transfer Agent, Provident shall pay to the Fund's Transfer
Agent, as agent for the Shareholders, an amount equal to the amount indicated in
said Written Instructions as payable by the Fund to such Shareholders for
distribution in cash by the Transfer Agent to such Shareholders. In lieu of
paying the Fund's Transfer Agent cash dividends and distributions, Provident may
arrange for the direct payment of cash dividends and distributions to
Shareholders by Provident in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, Provident and the
Fund's Transfer Agent.
In accordance with the Prospectus, the Internal Revenue Code and
regulations promulgated thereunder, and with such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, Provident and the
Fund's Transfer Agent, Provident shall arrange for the establishment of IRA
custodian accounts for such Shareholders holding Shares through IRA accounts.
13. Purchases of Securities. Promptly after each decision to purchase
securities by the Advisor, the Fund, through the Advisor, shall deliver to
Provident Oral Instructions specifying with respect to each such purchase: (a)
the name of the issuer and the title of the securities, (b) the number of shares
or the principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person from whom or the
broker through whom the purchase was made. Provident shall upon receipt of
securities purchased by or for the Fund pay out of the moneys held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral Instructions.
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<PAGE>
14. Sales of Securities. Promptly after each decision to sell securities by
the Advisor or exercise of an option written by the Fund, the Fund, through the
Advisor, shall deliver to Provident Oral Instructions, specifying with respect
to each such sale: (a) the name of the issuer and the title of the security, (b)
the number of shares or principal amount sold, and accrued interest, if any, (c)
the date of purchase and settlement, (d) the sale price per unit, (e) the total
amount payable to the Fund upon such sale, and (f) the name of the broker
through whom or the person to whom the sale was made. Provident shall deliver
the securities upon receipt of the total amount payable to the Fund upon such
sale, provided that the same conforms to the total amount payable as set forth
in such Oral Instructions. Subject to the foregoing, Provident may accept
payment in such form as shall be satisfactory to it, and may deliver securities
and arrange for payment in accordance with the customs prevailing among dealers
in securities.
15. Records. The books and records pertaining to the Fund which are in the
possession of Provident shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at all times during
Provident's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by Provident to the Fund
or the Fund's authorized representative at the Fund's expense.
16. Reports.
(a) Provident shall furnish the Fund the following reports:
(1) such periodic and special reports as the Fund may reasonably
request;
(2) a monthly statement summarizing all transactions and entries
for the account of the Fund, listing the portfolio securities
belonging to the Fund with the adjusted average cost of each issue and
the market value at the end of such month, and stating the cash
account of the Fund including disbursements;
(3) the reports to be furnished to the Fund pursuant to Rule
17f-4; and
(4) such other information as may be agreed upon from time to time
between the Fund and Provident.
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<PAGE>
(b) Provident shall transmit promptly to the Fund any proxy statement
proxy materials, notice of a call or conversion or similar communications
received by it as Custodian of the Property.
17. Cooperation with Accountants. Provident shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
opinion, as such may be required from time to time by the Fund.
18. Confidentiality. Provident agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present, or potential Shareholders, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where Provident may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund.
19. Right to Receive Advice.
(a) Advice to Fund. If Provident shall be in doubt as to any action to
be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If Provident shall be in doubt as to any
question of law involved in any action to be taken or omitted by Provident, it
may request advice at its own cost from counsel of its own choosing (who may be
counsel for the Advisor, the Fund or Provident, at the option of Provident).
(c) Conflicting Advice. In case of conflict between directions, advice
or Oral or Written Instructions received by Provident pursuant to subparagraph
(a) of this paragraph and advice received by Provident pursuant to subparagraph
(b) of this paragraph, Provident shall be entitled to rely on and follow the
advice received pursuant to the latter provision alone.
(d) Protection of Provident. Provident shall be protected in any
action or inaction which it takes in reliance on any directions, advice or Oral
or Written Instructions received pursuant to subparagraphs (a) or (b) of this
paragraph which Provident, after receipt of any such directions, advice or Oral
or Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this paragraph shall be construed as imposing upon Provident
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<PAGE>
any obligation (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions when received, unless, under the terms of another
provision of this Agreement, the same is a condition to Provident's properly
taking or omitting to take such action. Nothing in this subsection shall excuse
Provident when an action or omission on the part of Provident constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by
Provident of any duties or obligations under this Agreement.
20. Compliance with Governmental Rules and Regulations. Provident
undertakes to comply with all applicable requirements of the 1933 Act, the 1934
Act, the 1940 Act, the CEA, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed by
Provident hereunder.
21. Compensation. As compensation for the services rendered by Provident
during the term of this Agreement, the Fund will pay to Provident monthly fees
that shall be agreed upon from time to time in writing by Provident and the
Fund.
22. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless Provident and its nominees from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and
any state and foreign securities and blue sky laws, all as or to be amended from
time to time) and expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly (a) from the fact that securities
included in the Property are registered in the name of any such nominee or (b )
without limiting the generality of the foregoing clause (a) from any action or
thing which Provident takes or does or omits to take or do (i) at the request or
on the direction of or in reliance on the advice of the Fund or (ii) upon Oral
or Written Instructions, provided, that neither Provident nor any of its
nominees shall be indemnified against any liability to the Fund or to its
Shareholders (or any expenses incident to such liability) arising out of
Provident's or such nominee's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties or responsibilities specifically described in
this Agreement. In the event of any advance of cash for any purpose made by
Provident resulting from Oral or Written Instructions of the Fund, or in the
event that Provident or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the account of the Fund shall be security
therefor.
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<PAGE>
23. Responsibility of Provident. Provident shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by Provident in writing. In the performance of its
duties hereunder, Provident shall be obligated to exercise care and diligence
and to act in good faith and to use its best efforts within reasonable limits to
insure the accuracy and completeness of all services performed under this
Agreement. Provident shall be responsible for its own negligent failure to
perform its duties under this Agreement, but to the extent that duties,
obligations and responsibilities are not expressly set forth in this Agreement,
Provident shall not be liable for any act or omission which does not constitute
willful misfeasance, bad faith or gross negligence on the part of Provident or
reckless disregard of such duties, obligations and responsibilities. Without
limiting the generality of the foregoing or of any other provision of this
Agreement, Provident in connection with its duties under this Agreement shall
not be under any duty or obligation to inquire into and shall not be liable for
or in respect of (a) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, if any, and which Provident
reasonably believes to be genuine; (b) the validity or invalidity of the
issuance of any securities included or to be included in the Property, the
legality or illegality of the purchase of such securities, or the propriety or
impropriety of the amount paid therefor; (c) the legality or illegality of the
sale (or exchange) of any Property or the propriety or impropriety of the amount
for which such Property is sold (or exchanged); or (d) delays or errors or loss
of data occurring by reason of circumstances beyond Provident's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply, nor shall Provident be under any duty or obligation to
ascertain whether any Property at any time delivered to or held by Provident may
properly be held by or for the Fund. Provident expressly disclaims all
responsibility for consequential damages, including but not limited to any that
may result from performance or non-performance of any duty or obligation whether
express or implied in this Agreement, and also expressly disclaims any express
or implied warranty of products or services provided in connection with this
Agreement.
24. Collections. All collections of monies or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof upon
receipt by Provident) shall be at the sole risk of the Fund. In any case in
which Provident does not receive any payment due the Fund within a reasonable
time after Provident has made proper demands for the same, it shall so notify
the Fund in writing, including copies of all demand letters, any written
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<PAGE>
responses thereto, and memoranda of all oral responses thereto and to telephonic
demands, and await instructions from the Fund. Provident shall not be obliged to
take legal action for collection unless and until reasonably indemnified to its
satisfaction. Provident shall also notify the Fund as soon as reasonably
practicable whenever income due on securities is not collected in due course.
25. Duration and Termination. This Agreement shall continue until
termination by the Fund or by Provident in either case on sixty (60) days'
written notice. Upon any termination of this Agreement, pending appointment of a
successor to Provident or vote of the Shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities or other property,
Provident shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars ($20,000,000) as a
custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Provident shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties of the Fund
then held by Provident or on or against Provident and until full payment shall
have been made to Provident of all of its fees, compensation, costs and
expenses.
26. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
Provident at Provident's address, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, marked for the attention of the Custodian Services
Department (or its successor); (b) if to the Fund, at the address of the Fund;
or (c) if to neither of the foregoing, at such other address as shall have been
notified to the sender of any such Notice or other communication. If the
location of the sender of a Notice and the address of the addressee thereof are,
at the time of sending, more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given five days
after it is sent, or if sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately, and, if the
location of the sender of a Notice and the address of the addressee thereof are
at the time of sending, not more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given three days
after it is sent, or if sent by messenger, it shall be deemed to have been given
on the day it is delivered, or if sent by confirming telegram, cable, telex or
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<PAGE>
facsimile sending device, it shall be deemed to have been given immediately. All
postage, cable, telegram, telex and facsimile sending device charges arising
from the sending of a Notice hereunder shall be paid by the sender.
27. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
28. Amendments. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
29. Delegation. On thirty (30) days' prior written notice to the Fund,
Provident may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of Provident National Bank or PNC
Financial Corp, provided that (i) the delegate agrees with Provident to comply
with all relevant provisions of the 1940 Act; and (ii) Provident and such
delegate shall promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation,
including (without limitation) the capabilities of the delegate.
30. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
31. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
- 16 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on
the day and year first above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest: /s/ Brian C. Nelson By /s/ Edward J. Veilleux
----------------------------- --------------------------
Vice President
[SEAL] PROVIDENT NATIONAL BANK
Attest: /s/ John D. Silcox, Jr. By /s/ A. Plambeck
----------------------------- --------------------------
JOHN D. SILCOX, JR.
Vice President & Secretary
- 17 -
<PAGE>
INDEX
<TABLE>
<CAPTION>
Paragraph Page
--------- ----
<S> <C> <C>
1. Appointment...................................................................................... 1
2. Delivery of Documents............................................................................ 1
3. Definitions...................................................................................... 3
4. Delivery and Registration of the Property........................................................ 4
5. Receipt and Disbursement of Money................................................................ 4
6. Receipt of Securities............................................................................ 5
7. Use of Book-Entry System......................................................................... 5
8. Instructions Consistent with Charter, etc........................................................ 6
9. Transactions Not Requiring Instructions.......................................................... 7
10. Transactions Requiring Instructions.............................................................. 8
11. Segregated Accounts.............................................................................. 9
12. Dividends and Distributions...................................................................... 10
13. Purchases of Securities.......................................................................... 10
14. Sales of Securities.............................................................................. 11
15. Records.......................................................................................... 11
16. Reports.......................................................................................... 11
17. Cooperation with Accountants..................................................................... 12
18. Confidentiality.................................................................................. 12
19. Right to Receive Advice.......................................................................... 12
20. Compliance with Governmental Rules and Regulations............................................... 13
21. Compensation..................................................................................... 13
22. Indemnification.................................................................................. 13
23. Responsibility of Provident...................................................................... 14
24. Collections...................................................................................... 14
25. Duration and Termination......................................................................... 15
26. Notices.......................................................................................... 15
27. Further Actions.................................................................................. 16
28. Amendments....................................................................................... 16
29. Delegation....................................................................................... 16
30. Counterparts..................................................................................... 16
31. Miscellaneous.................................................................................... 16
</TABLE>
- 18 -
<PAGE>
EX-99.B(9)(a)
MASTER SERVICES AGREEMENT
THIS AGREEMENT is made as of the first day of January, 1994 by and
between MANAGED MUNICIPAL FUND, INC. a Maryland corporation (the "Fund"), and
INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation ("ICC").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain ICC to provide certain services on
behalf of the Fund, as set forth in the Appendices to this Agreement, and ICC is
willing so to serve.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ICC to perform such services and
to serve such functions on behalf of the Fund as set forth in the Appendices to
this Agreement, on the terms set forth in this Agreement and the Appendices
hereto. ICC accepts such appointment and agrees to furnish such services and
serve such functions. The Fund may have currently outstanding one or more series
or classes of its shares of common stock, par value $.001 per share ("Shares")
and may from time to time hereafter issue separate series or classes of its
Shares or classify and reclassify Shares of any series or class, and the
appointment effected hereby shall constitute appointment for the provision of
services with respect to all existing series and classes and any additional
series and classes unless the parties shall otherwise agree in writing.
2. Delivery of Documents. The Fund has furnished ICC with copies properly
certified or authenticated of the following documents and will furnish ICC from
time to time with copies, properly certified or authenticated, of all amendments
of or supplements thereto, if any:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of ICC to act in such capacities on behalf of the Fund as set forth
in the Appendices to this Agreement, and the entering into of this Agreement by
the Fund;
(b) The Fund's Articles of Incorporation and all amendments thereto
(the "Charter") and the Fund's By-Laws and all amendments thereto (the
"By-Laws");
(c) The Fund's most recent Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") and under the 1940 Act
as filed with the Securities and Exchange Commission (the "SEC") relating to the
Shares; and
(d) Copies of the Fund's most recent prospectus or prospectuses,
including amendments and supplements thereto (collectively, the "Prospectus").
3. Services to be Provided; Fees. During the term of this Agreement, ICC
shall perform the services and act in such capacities on behalf of the Fund as
set forth herein and in the Appendices to this Agreement. For the services
performed by ICC for the Fund, the Fund will compensate ICC in such amounts as
may be agreed to from time to time by the parties in writing.
<PAGE>
4. Records. The books and records pertaining to the Fund which are in the
possession of ICC shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during ICC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by ICC to the Fund
or the Fund's authorized representative at the Fund's expense.
5. Cooperation With Accountants. In addition to any obligations set forth
in an Appendix hereto, ICC shall cooperate with the Fund's independent
accountants and shall take all reasonable actions in the performance of its
obligations under this Agreement to ensure that the necessary information is
made available to such accountants for the expression of such accountants'
opinion of the Fund's financial statements or otherwise, as such may be required
by the Fund from time to time.
6. Compliance with Governmental Rules and Regulations. The Fund assumes
full responsibility for insuring that the Fund complies with all applicable
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act"), the 1940 Act, and any laws, rules and regulations of governmental
authorities having jurisdiction. ICC undertakes to comply with all applicable
requirements of the 1933 Act, the 1934 Act, the 1940 Act, the Commodities
Exchange Act (if applicable), and all laws, rules and regulations of
governmental authorities having jurisdiction with respect to the performance by
ICC of its duties under this Agreement, including the Appendices hereto.
7. Expenses.
(a) ICC shall bear all expenses of its employees and overhead incurred
in connection with its duties under this Agreement and shall pay all salaries
and fees of the Fund's directors and officers who are employees of ICC.
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: the fees of the Fund's
investment advisor, administrator and distributor; the charges and expenses of
any registrar, any custodian or depositary appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any stock
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and corporate fees payable by the Fund to federal,
state or other governmental agencies; the cost and expense of engraving or
printing of stock certificates representing Shares; all costs and expenses in
connection with maintenance of registration of the Fund and its Shares with the
SEC and various states and other jurisdictions (including filing fees and legal
fees and disbursements of counsel); the expenses of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of directors or members of any
advisory board or committee other than such directors or members who are
"interested persons" of the Fund (as defined in the 1940 Act); all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in Shares or in cash; charges and expenses of any outside service used
for pricing of the Shares; charges and expenses of legal counsel, including
counsel to the directors of the Fund who are not "interested persons" of the
Fund (as defined in the 1940 Act), and of independent accountants, in connection
with any matter relating to the Fund; a portion of membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
-2-
<PAGE>
8. Liability; Indemnification. Neither ICC nor any of its officers,
directors or employees shall be liable for any error of judgment or for any loss
suffered by the Fund in connection with the matters to which this Agreement,
including the Appendices hereto, relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its or their part in the
performance of, or from reckless disregard by it or them of, its or their
obligations and duties under this Agreement. The Fund agrees to indemnify and
hold harmless ICC and its nominees from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the 1933 Act, the 1934 Act, the 1940 Act, and any state and
foreign securities and blue sky laws, all as currently in existence or as
amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which ICC takes or does or omits to take or do at the request or
on the direction of or in reliance on the advice of the Fund; provided, that
neither ICC nor any of its nominees shall be indemnified against any liability
to the Fund or to its shareholders (or any expenses incident to such liability)
arising out of ICC's own willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under this Agreement.
Notwithstanding anything else in this Agreement or any Appendix hereto to the
contrary, ICC shall have no liability to the Fund for any consequential, special
or indirect losses or damages which the Fund may incur or suffer as a
consequence of ICC's performance of the services provided in this Agreement or
any Appendix hereto.
9. Responsibility of ICC. ICC shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as may be
specifically agreed to by ICC in writing. In the performance of its duties
hereunder, ICC shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits in performing
services provided for under this Agreement, but ICC shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of ICC or reckless disregard by ICC of its duties
under this Agreement. Notwithstanding anything in this Agreement to the
contrary, ICC shall have no liability to the Fund for any consequential, special
or indirect losses or damages which the Fund may incur or suffer by or as a
consequence of ICC's performance of the services provided hereunder.
10. Non-Exclusivity. The services of ICC to the Fund are not to be deemed
exclusive and ICC shall be free to render accounting or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that directors, officers or employees of ICC may serve as
directors or officers of the Fund, and that directors or officers of the Fund
may serve as directors, officers and employees of ICC to the extent permitted by
law; and that directors, officers and employees of ICC are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, directors or officers of any other firm or
corporation, including other investment companies.
11. Notice. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, to the Fund at 135 E. Baltimore Street,
Baltimore, MD 21202, Attention: Brian C. Nelson, or to ICC at 135 E. Baltimore
Street, Baltimore, Maryland 21202, Attention: Mr. Edward J. Veilleux.
12. Miscellaneous.
(a) This Agreement shall become effective as of the date first above
written and shall remain in force until terminated. This Agreement, or any
Appendix hereto, may be terminated at any time without the payment of any
penalty, by either party hereto on sixty (60) days' written notice to the other
party.
(b) This Agreement shall be construed in accordance with the laws of
the State of Maryland.
-3-
<PAGE>
(c) If any provisions of this Agreement shall be held or made invalid
in whole or in part, the other provisions of this Agreement shall remain in
force. Invalid provisions shall, in accordance with the intent and purpose of
this Agreement, be replaced by mutual consent of the parties with such valid
provisions which in their economic effect come as close as legally possible to
such invalid provisions.
(d) Except as otherwise specified in the Appendices hereto, ICC shall
be entitled to rely on any notice or communication believed by it to be genuine
and correct and to have been sent to it by or on behalf of the Fund.
(e) ICC agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
prior, present, or potential shareholders, except, after prior notification to
and approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where ICC may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
(f) Any part of this Agreement or any Appendix attached hereto may be
changed or waived only by an instrument in writing signed by both parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
MANAGED MUNICIPAL FUND, INC.
By: /s/ Brian C. Nelson
----------------------------------
Title: Vice President & Secretary
INVESTMENT COMPANY CAPITAL CORP.
By: /s/ Edward J. Veilleux
----------------------------------
Title: President
-4-
<PAGE>
Appendix I
TRANSFER AGENCY SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
Managed Municipal Fund, Inc. and
Investment Company Capital Corp.
This Appendix is hereby incorporated into and made a part of the Master
Services Agreement dated as of February 28, 1994 (the "Master Services
Agreement") between Managed Municipal Fund, Inc. and Investment Company Capital
Corp. Defined terms not otherwise defined herein shall have the meaning set
forth in the Master Services Agreement.
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall mean any
officer of the Fund and any other person, who is fully authorized by the Fund's
Board of Directors, to give Oral and Written Instructions on behalf of the Fund.
Such persons are listed in the Certificate attached hereto.
(b) "Oral Instructions". The term "Oral Instructions" shall mean oral
instructions received by ICC from an Authorized Person or from a person
reasonably believed by ICC to be an Authorized Person.
(c) "Written Instructions". The term "Written Instructions" shall mean
written instructions signed by two Authorized Persons and received by ICC. The
instructions may be delivered by hand, mail, tested telegram, cable, telex or
facsimile sending device.
2. Instructions. Unless otherwise provided in this Appendix, ICC shall act
only upon Oral and Written Instructions. ICC shall be entitled to rely upon any
Oral and Written Instruction it receives from an Authorized Person (or from a
person reasonably believed by ICC to be an Authorized Person) pursuant to this
Agreement. ICC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of the Fund's
Articles of Incorporation, the Master Services Agreement, or any Appendix
attached thereto, or of any vote, resolution or proceeding of the Fund's Board
of Directors or shareholders.
The Fund agrees to forward to ICC Written Instructions confirming Oral
Instructions so that ICC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by ICC shall in no way
invalidate the transactions or enforceability of the transactions authorized by
the Oral Instructions. The Fund further agrees that ICC shall incur no liability
to the Fund in acting upon Oral or Written Instructions provided such
instructions reasonably appear to have been received from an Authorized Person.
If ICC is in doubt as to any action it should or should not take, ICC may
request directions or advice, including Oral or Written Instructions, from the
Fund. ICC shall be protected in any action it takes or does not take in reliance
upon directions, advice or Oral or Written Instructions it receives from the
Fund or from counsel and which ICC believes, in good faith, to be consistent
with those directions, advice or Oral of Written Instructions. Notwithstanding
the foregoing, ICC shall have no obligation (i) to seek such directions, advice
or Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions unless, under the terms of
other provisions of this Appendix, the same is a condition of ICC's properly
taking or not taking such action.
<PAGE>
3. Description of Services.
(a) General Services To be Provided. ICC shall provide to the Fund the
following services on an ongoing basis:
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with shareholders, if
necessary, to complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in conjunction with
proxy solicitations; solicit and tabulate proxies; receive and
tabulate proxy cards for meetings of the Fund's shareholders;
(vi) Countersign securities;
(vii) Direct shareholder confirmation of activity;
(viii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(ix) Mail duplicate confirmation to broker-dealers of their
clients' activity, whether executed through the broker-dealer
or directly with ICC;
(x) Provide periodic shareholder lists and statistics to the Fund;
(xi) Provide detail for underwriter/broker confirmations;
(xii) Mail periodic year-end tax and statement information;
(xiii) Provide timely notification to investment advisor, accounting
agent, and custodian of Fund activity; and
(xiv) Perform other participating broker-dealer shareholder services
as may be agreed upon from time to time.
(b) Purchase of Shares. ICC shall issue and credit an account of an
investor, in the manner described in the Prospectus, once it receives: (i) a
purchase order; (ii) proper information to establish a shareholder account; and
(iii) confirmation of receipt by, or crediting of funds for such order to, the
Fund's custodian.
(c) Redemption of Shares. ICC shall redeem the Fund's shares only in
accordance with the provisions of the Prospectus and each shareholder's
individual directions. Shares shall be redeemed at such time as the shareholder
tenders his or her shares and directs the method of redemption in accordance
with the terms set forth in the Prospectus. If securities are received in proper
form, Shares shall be redeemed before the funds are provided to ICC. When the
Fund provides ICC with funds, redemption proceeds will be wired (if requested)
or a redemption check issued. All redemption checks shall be drawn to the
-2-
<PAGE>
recordholder unless third party payment authorizations have been signed by the
recordholder and delivered to ICC.
(d) Dividends and Distributions. Upon receipt of certified resolutions
of the Fund's Board of Directors authorizing the declaration and payment of
dividends and distributions, ICC shall issue the dividends and distributions in
shares, or, upon shareholder election, pay such dividends and distributions in
cash. Such issuance or payment shall be made after deduction and payment of the
required amount of funds to be withheld in accordance with any applicable tax
laws or other laws, rules or regulations. The Fund's shareholders shall receive
tax forms and other information, or permissible substitute notice, relating to
dividends and distributions, paid by the Fund as are required to be filed and
mailed by applicable law, rule or regulation. ICC shall maintain and file with
the IRS and other appropriate taxing authorities reports relating to all
dividends and distributions paid by the Fund to its shareholders as required by
tax or other law, rule or regulation.
(e) Shareholder Account Services. If authorized in the Prospectus, ICC
shall arrange for the following services, in accordance with the applicable
terms set forth in the Prospectus: (i) the issuance of Shares obtained through
any pre-authorized check plan and direct purchases through broker wire orders,
checks and applications; (ii) exchanges of shares of any fund for Shares of the
Fund with which the Fund has exchange privileges; (iii) automatic redemption
from an account where that shareholder participates in an automatic redemption
plan; and (iv) redemption of Shares from an account with a check writing
privilege.
(f) Communications to Shareholders. Upon timely Written Instructions,
ICC shall mail all communications by the Fund to its shareholders, including,
reports to shareholders, confirmations of purchases and sales of Shares, monthly
or quarterly statements, dividend and distribution notices, and proxy material.
(g) Records. ICC shall maintain records of the accounts for each
shareholder showing the following information: (i) name, address and U.S. Tax
Identification or Social Security number; (ii) number and class of Shares held
and number and class of Shares for which certificates, if any, have been issued,
including certificate numbers and denominations; (iii) historical information
regarding the account of each shareholder, including dividends and distributions
paid and the date and price for all transactions on a shareholder's account;
(iv) any stop or restraining order placed against a shareholder's account; (v)
any correspondence relating to the current maintenance of a shareholder's
account; (vi) information with respect to withholdings; and (vii) any
information required in order for ICC to perform any calculations contemplated
or required by this Appendix or the Master Services Agreement.
(h) Lost or Stolen Certificates. ICC shall place a stop notice against
any certificate reported to be lost or stolen and comply with all applicable
federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued upon: (i) the
shareholder's pledge of a lost instrument bond or such other appropriate
indemnity bond issued by a surety company approved by ICC; and (ii) completion
of a release and indemnification agreement signed by the shareholder to protect
ICC.
(i) Shareholder Inspection of Stock Records. Upon requests from Fund
shareholders to inspect stock records, ICC will notify the Fund and the Fund
shall deliver Oral or Written Instructions granting or denying each such
request. Unless ICC has acted contrary to the Fund's Instructions, the Fund
agrees to release ICC from any liability for refusal or permission for a
particular shareholder to inspect the Fund's shareholder records.
-3-
<PAGE>
(j) Withdrawal of Shares and Cancellation of Certificates. Upon
receipt of Written Instructions, ICC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
(k) Telephone Transactions. In accordance with the terms of the
Prospectus, ICC shall act upon shareholder requests made by telephone for
redemption or exchange of ISI shares; provided that (i) the shareholder has
authorized telephone transactions on the Fund's Account Application or otherwise
in writing, (ii) if the request is a redemption, the amount to be redeemed does
not exceed $10,000 and (iii) ICC has complied with the identification and other
security procedures required by the Fund in connection with telephone
transactions.
4. Fees. As compensation for the services performed by ICC for the Fund
pursuant to this Appendix, the Fund will pay to ICC such amounts as may be
agreed to from time to time by the parties in writing.
5. Delegation of Responsibilities. ICC may subcontract to any third party
all or any part of its obligations under this Appendix; provided that any such
subcontracting shall not relieve ICC of any of its obligations under this
Appendix. All subcontractors shall be paid by ICC.
-4-
<PAGE>
Appendix II
ACCOUNTING SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
MANAGED MUNICIPAL FUND, INC. and INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the Master
Services Agreement dated as of January 1, 1994 (the "Master Services
Agreement") between MANAGED MUNICIPAL FUND, INC. and INVESTMENT COMPANY CAPITAL
CORP. Defined terms not otherwise defined herein shall have the meaning set
forth in the Master Services Agreement.
1. Accounting Services to be Provided. ICC will perform the following
accounting functions if required:
(a) Journalize investment, capital share and income and expense;
(b) Verify investment buy/sell trade tickets when received from the
Fund's investment advisor and transmit trades to the Fund's custodian for proper
settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain tax lots for each security;
(e) Reconcile cash and investment balances with the custodian, and
provide the Fund's investment advisor with the beginning cash balance available
for investment purposes;
(f) Update the cash availability throughout the day as required by the
Fund's investment advisor;
(g) Post to and prepare the Fund's Statement of Net Assets and
Liabilities and the Statement of Operations;
(h) Calculate various contractual expenses (e.g., advisor and custody
fees);
(i) Monitor the expense accruals and notify Fund management of any
proposed adjustments;
(j) Control all disbursements from the Fund and authorize such
disbursements upon written instructions from the President or any other officer
of the Fund or the investment advisor;
(k) Calculate capital gains and losses;
(l) Determine the Fund's net income;
(m) Obtain security market quotes from independent pricing services
approved by the investment advisor, or if such quotes are unavailable, then
obtain such prices from the investment advisor, and in either case calculate the
market value of portfolio investments;
(n) Transmit or mail a copy of the daily portfolio valuation to the
Fund's investment advisor;
(o) Compute the Fund's net asset value;
<PAGE>
(p) As appropriate, compute the yields, total return, expense ratios,
portfolio turnover rate;
(q) Prepare a monthly financial statement, which will include the
following items:
* Schedule of Investments;
* Statement of Net Assets and Liabilities;
* Statement of Operations;
* Statement of Changes in Net Assets;
* Cash Statement;
* Schedule of Capital Gains and Losses;
(r) Assist in the preparation of:
* Federal and State Tax Returns;
* Excise Tax Returns;
* Annual, Semi-Annual and Quarterly Shareholder
Reports;
* Rules 24 (e)-2 and 24 (f)-2 Notices;
* Annual and Semi-Annual Reports on Form N-SAR;
* Monthly and Quarterly Statistical Data Information
Reports Sent to Performance Tracking Companies;
(s) Assist in the Blue Sky and Federal registration and compliance
process;
(t) Assist in the review of registration statements; and
(u) Assist in monitoring compliance with Sub-Chapter M of the Internal
Revenue Code.
2. Records. ICC shall keep the following records: (a) all books and records
with respect to the Fund's books of account; and (b) records of the Fund's
securities transactions.
3. Liaison With Accountants. In addition to ICC's obligations relating to
the Fund's independent accountants set forth in the Master Services Agreement,
ICC shall act as liaison with the Fund's independent accountants and shall
provide account analyses, fiscal year summaries, and other audit related
schedules.
4. Compensation. For services performed by ICC pursuant to this Appendix,
the Fund will pay to ICC compensation for such services as the parties may agree
to from time to time in writing.
-2-
<PAGE>
Appendix III
ADMINISTRATIVE SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
MANAGED MUNICIPAL FUND, INC. and INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the Master Services
Agreement dated as of January 1, 1994 (the "Master Services Agreement") between
MANAGED MUNICIPAL FUND, INC. and INVESTMENT COMPANY CAPITAL CORP. Defined terms
not otherwise defined herein shall have the meaning set forth in the Master
Services Agreement.
1. Services to be Provided. ICC will perform the following services on an
ongoing basis.
(a) supervise and manage all aspects of the Fund's operations, other
than portfolio management and distribution;
(b) provide the Fund with such executive, administrative, clerical and
bookkeeping services as are deemed advisable by the Fund's Board of Directors;
(c) provide the Fund with, or obtain, adequate office space and all
necessary equipment and services, including telephone service, heat, utilities,
stationery supplies and similar items for any offices as are deemed advisable by
the Fund's Board of Directors;
(d) arrange, but not pay for, the periodic updating of Prospectuses
and supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and state Blue Sky
authorities;
(e) supervise the operations of the Fund's transfer and
dividend disbursing agent; and
(f) provide the Fund with such administrative and clerical services
for the maintenance of certain shareholder records as are deemed advisable by
the Fund's Board of Directors.
2. Fees. For the service performed by ICC for the Fund pursuant to this
Appendix, the Fund will pay to ICC compensation for such services as the parties
may agree to from time to time in writing.
<PAGE>
EX-99.B(9)(b)
LICENSE AGREEMENT
THIS LICENSE AGREEMENT made as of the ___ day of _______________, 1990, by
and between ALEX. BROWN INCORPORATED, a Maryland corporation ("Licensor"), and
MANAGED MUNICIPAL FUND, INC., a Maryland corporation ("Licensee").
W I T N E S S E T H:
WHEREAS, Licensor has a proprietary interest in the name "Flag Investors"
and in the logo used on the Licensee's prospectus for the Flag Investors class
by its shares (the "Flag Logo"), which interests are recognized by Licensee; and
WHEREAS, Licensor wishes to permit use of the name "Flag Investors" and the
Flag Logo by Licensee for Flag Investors class of Licensee's shares of its
capital stock (the "Shares"), subject to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, it is hereby understood and agreed as follows:
1. Licensee acknowledges that it adopted its corporate name and logo
through the permission of Licensor which consents to the non-exclusive use by
the Licensee of the name "Flag Investors Managed Municipal Fund Shares" and the
Flag Logo only so long as Alex. Brown & Sons Incorporated serves as the
Licensee's distributor for the Shares.
2. Licensee recognizes that its right to use the name "Flag Investors" and
the Flag Logo is non-exclusive and that Licensor may from time to time permit
other entities, including entities engaged in the same or similar business as
the Licensee, to use the name "Flag Investors" or the Flag Logo.
3. Licensee covenants and agrees to protect, exonerate, defend, indemnify
and hold harmless Licensor, its partners, agents, officers and employees from
and against any and all costs, losses, claims, damages or liabilities, joint or
several, including all legal expenses, which may arise or have arisen out of
Licensee's use or misuse of the name "Flag Investors" or the Flag Logo or out of
any breach of or failure to comply with this agreement.
4. Licensee shall not distribute or circulate any prospectus, proxy
statement, sales literature, promotional material or other printed matter
required to be filed with the Securities and Exchange Commission under Section
24(b) of the Investment Company Act of 1940, as amended which contains any
<PAGE>
reference to or uses the name "Flag Investors" or the Flag Logo without the
prior approval of Licensor and shall submit all such materials in draft form,
allowing sufficient time for review by Licensor and its counsel prior to any
deadline for printing.
5. If Alex. Brown & Sons Incorporated or any successor to its business
shall cease to serve as Licensee's distributor for the Shares, Licensee:
(a) As promptly as practicable, will take all
necessary director or shareholder action to cause
its Articles of Incorporation to be amended to
accomplish a change of the name of Licensee's
class of Shares and change of logo;
(b) Within 90 days after the termination of this
agreement or such similar contractual arrangement,
shall cease to use in any other manner, including
but not limited to, use in any prospectus, sales
literature or promotional material, the name "Flag
Investors" or any name, mark or logo derived from
it or similar to it or indicating that the Fund is
advised, administered or distributed by or
otherwise associated with Licensor or Alex. Brown
& Sons Incorporated.
6. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns, including any successors to the business now
or thereafter conducted by them.
IN WITNESS WHEREOF, Licensor has caused this Agreement to be executed by an
officer, and the Licensee has caused this Agreement to be executed by a duly
authorized officer and its said affixed hereto and attested by its Secretary as
of the day and year first herein written.
ATTEST: ALEX. BROWN INCORPORATED
_________________________________ ___________________________________
ATTEST: MANAGED MUNICIPAL FUND, INC.
_________________________________ ___________________________________
-2-
<PAGE>
EX-99.B(10)
[LETTERHEAD OF MORGAN, LEWIS & BOCKIUS]
February 20, 1990
Managed Municipal Fund, Inc.
1290 Avenue of the Americas
New York, NY 10104-0101
Gentlemen:
We have acted as counsel to you in connection with the organization of
C.J. Lawrence Managed Municipal Fund, Inc. (the "Fund") and with the proposed
offering of shares of common stock of the Fund, par value $.001 per share (the
"Shares").
Having prepared the Articles of Incorporation and By-Laws of the Fund,
and having assisted in the preparation of Fund's Registration Statement on Form
N-1A (File No. 33-32819) under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, including all pre-effective
amendments thereto (the "Registration Statement"), relating to the offering of
the Shares, and having assisted in the preparation of other related documents,
we are of the opinion that:
1. The Fund is a Maryland corporation, validly organized and in good
standing under the laws of the state, authorized to issue up to 20,000,000
shares of its common stock, par value $.001 per share.
2. Upon the effectiveness of the Registration Statement, you will, in
jurisdictions where the Shares are qualified for sale, be authorized to make a
public offering of Shares pursuant to the terms of the offering as described in
the Prospectus filed as part of the Registration Statement, and the Shares, when
issued upon receipt of payment therefore as described in the Prospectus, will be
validly issued, fully paid and non-assessable by the Fund.
We have not reviewed the securities laws of any state or territory in
connection with the proposed offering of Shares and we express no opinion as to
the legality of any offer of sale of Shares under any such state or territorial
securities laws.
This opinion is intended only for your use in connection with the
offering of Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as Exhibit 10 to the
Fund's Registration Statement on Form N-1A to be filed with the Securities and
Exchange Commission.
Very truly yours,
/s/ Morgan, Lewis & Bockius
<PAGE>
EX-99.B(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our report dated December 1, 1995 on our
audit of the financial statements and financial highlights of Managed Municipal
Fund, Inc. in the Statement of Additional Information with respect to
Post-Effective Amendment No. 10 to the Registration Statement on Form N-1A (No.
33-32819) under the Securities Act of 1933 and the Investment Company Act of
1940, respectively, of Managed Municipal Fund, Inc. We also consent to the
reference to our Firm under the headings "General Information" and "Financial
Highlights" in the Prospectuses and under the heading "Independent Accountants"
in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 23, 1996
<PAGE>
EX-99.B(13)
MANAGED MUNICIPAL FUND, INC.
SUBSCRIPTION AGREEMENT
For and in conjunction of the mutual agreements here-in contained, C.J.
Lawrence, Morgan Grenfell, Inc. ("C.J. Lawrence") hereby agrees to purchase from
Managed Municipal Fund, Inc., a Maryland corporation (the "Fund"), and the Fund
agrees to sell 10,000 shares of the Fund's common stock, par value $.001 (the
"Shares"), at a price of $10.00 per share upon the terms and conditions set
forth herein.
C.J. Lawrence agrees to purchase such Shares and to pay the full
consideration therefor to the Fund upon demand.
C.J. Lawrence hereby confirms to the Fund its representations that is
purchasing such Shares for investment purposes, with no present intention of
redeeming or reselling any portion thereof, and its agreement that in the event
it should dispose of any of such Shares, such transaction will be effected by
redeeming such Shares through Shares within five years of the date on which the
Fund commences operations it will reimburse the Fund for any unamortized costs
of the Fund's organization expenses in the same proportion as the number of
Shares to be redeemed bears to the number of Shares purchased hereby.
C.J. LAWRENCE,
MORGAN GRENFELL INC.
By:_____________________
Title:
Dated: As of _____________________, 1990
Subscription Accepted:
Managed Municipal Fund, Inc.
By: _____________________________
Title:
<PAGE>
EX-99.B(15)(a)
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of the ISI Managed Municipal Fund Shares (the "Shares") of
Managed Municipal Fund, Inc. (the "Fund"). Other capitalized terms herein have
the meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) The distributor for the Shares (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the distribution agreement between the Distributor and the Fund
with respect to the Shares (the "Distribution Agreement") and to make payments
on behalf of the Fund to Shareholder Servicing Agents under Shareholder
Servicing Agreements.
(b) The Distributor may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund do
not exceed, in any fiscal year of the Fund, the amount paid to the Distributor
under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily net
assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which the Distributor is
authorized to pay or cause to be paid on its behalf and such payments shall not
be included in the limitations contained in this Plan. These expenses include:
the fees of the Fund's investment advisor; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities and other property, and any transfer, dividend
or accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and its Shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees and
legal fees and disbursements of counsel); the costs and expenses of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's Shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent certified public accountants, in connection with any matter
relating to the Fund; a portion of membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided therein.
<PAGE>
5. Other Distribution Resources. The Distributor and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. The Distributor will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor shall report
in writing at least quarterly to the Fund's Board of Directors, and the Board
shall review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii) the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons of the Fund (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect from year to year
thereafter only so long as such continuance is specifically approved at least
annually by the vote of the Fund's Board of Directors and by the vote of a
majority of the Directors of the Fund who are not interested persons of the Fund
(as defined in the 1940 Act), cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons of the Fund (as
defined in the 1940 Act) or by the vote of the holders of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). This Plan may
not be amended to increase materially the amount of payments to be made without
shareholder approval, as set forth in (ii) above, and all amendments must be
approved in the manner set forth under (i) above.
<PAGE>
EX-99.B(15)(b)
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of the Flag Investors Managed Municipal Fund Shares (the
"Shares") of Managed Municipal Fund, Inc. (the "Fund"). Other capitalized terms
herein have the meaning given to them in the Fund's prospectus for the Shares.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated ("Alex.
Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) Alex. Brown may make payments in any amount, provided that
the total amount of all payments made during a fiscal year of the Fund does not
exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown under the
Distribution Agreement with respect to distribution of the Shares which is an
annual fee, calculated on an average daily net basis and paid monthly, equal to
.25% of the daily net assets of the Shares of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which Alex. Brown as administrator
and distributor is authorized to pay or cause to be paid on its behalf and such
payments shall not be included in the limitations contained in this Plan. These
expenses include: the fees of the Fund's investment advisor and distributor of
the other class of the Fund's shares; the fees of Alex. Brown as administrator
for the Fund; the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any transfer, dividend or accounting agent or
agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing Shares; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
directors or director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not interested persons
(as defined in the 1940 Act) of the Fund and of independent public accountants,
in connection with any matter relating to the Fund; a portion of membership dues
of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided therein.
<PAGE>
5. Other Distribution Resources. Alex. Brown and Participating Dealers
may expend their own resources separate and apart from amounts payable under the
Plan to support the Fund's distribution effort. Alex. Brown will report to the
Board of Directors on any such expenditures as part of its regular reports
pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall report in
writing at least quarterly to the Fund's Board of Directors, and the Board shall
review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii) the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons of the Fund (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect until
_______________, 1992 and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the vote of the Fund's
Board of Directors and by the vote of a majority of the Directors of the Fund
who are not interested persons of the Fund (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may be terminated at any time by a vote of a majority of the Directors who
are not interested persons of the Fund (as defined in the 1940 Act) or by the
vote of the holders of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act). This Plan may not be amended to increase
materially the amount of payments to be made without shareholder approval, as
set forth in (ii) above, and all amendments must be approved in the manner set
forth under (i) above.
<PAGE>
EX-99.B(16)
Schedule of Computation of Performance Quotations
This Schedule is included to illustrate how total return and
yield will be calculated. The examples presented use actual data
for the Fund's C.J. Lawrence Managed Municipal Fund Shares class.
1. Total Return
(a) Average Annual Total Return Pursuant to SEC Rules
n
P(1+T) = ERV
P = initial payment = $1,000
ERV =
n = 7
--
12
T = average annual total return = 5.1%
(b) Aggregate Total Return Pursuant to SEC Rules
P(1+T) = ERV
P = initial payment = $1,000
7 month ERV = $964
T = aggregate total return = 3.64%
(c) Total Return Pursuant to First Non-
Standardized Computation
P(1+T) = ERV
P = initial investment = $10,000
ERV = $10,378
T = aggregate total return = 3.78%
<PAGE>
2. Yield
The examples presented use actual data from the Fund's C.J.
Lawrence Managed Municipal Fund Shares class for the 30 day
period ended October 31, 1990.
a. Yield = Divide (i) the difference of b subtracted from
a by (ii) the product of c multiplied by d. Add 1
to the result. Raise this amount to the sixth power,
subtract 1, and multiply the result by 2.
a = dividends and interest earned during the period
= $132,216
b = expenses accrued for the period (net of
reimbursements) = $15,973
c = average daily number of shares outstanding during
period that were entitled to receive dividends
= 2,184,130
d = maximum offering price per share on the last day
of the period = $10.46
Yield = 6.18%
----
b. Tax Equivalent Yield (for an investor in the 31% tax
bracket)
| x-7 |
| ---------------- |
| 1 - shareholder's tax rate | + y tax-equivalent yield
x = Fund's 30 day effective yield for period ended
October 31, 1990 = 6.18%
y = amount of portfolio's 30 day effective yield for
the period ended October 31, 1990 that is taxable
= 0%
| .0618
| ---------
| 1 - .31 = 8.96% = Tax-Equivalent Yield
-2-
<PAGE>
Managed Municipal Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A, Flag Investors Class B and ISI Class
Adopted December 13, 1995
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of Managed Municipal Fund, Inc.
(the "Fund"), including a majority of the Directors of the Fund who are not
"interested persons" of the Fund (the "Independent Directors") pursuant to Rule
18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"),
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC- 20813, IC-14695 and IC-15592, respectively) (collectively, the
"Order"). On December 13, 1995, the Fund elected to rely on Rule 18f-3 rather
than the Order, as permitted by Rule 18f-3 subject to certain conditions, and
created a multiple class distribution arrangement for three classes of shares of
the common stock of the Fund's one existing series (the "Series"). The multiple
class distribution arrangement will be effective on the date of effectiveness of
the post-effective amendment to the Fund's registration statement that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing (Flag Investors Class A, Flag Investors Class B and ISI
Class) and future classes of Fund shares. The ISI Shares have been offered since
the Fund's inception on February 26, 1990. The Flag Investors Class A Shares
have been offered since October 23, 1990. The Flag Investors Class B Shares have
not yet been offered. (A fourth class of the Fund's shares (the Flag Investors
Class D Shares) are no longer being offered.)
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
-1-
<PAGE>
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors after the date hereof. Before any
material amendment of the Plan, the Fund is required to obtain a finding by a
majority of the Board, and a majority of the Independent Directors, that the
Plan as proposed to be amended, including the expense allocations, is in the
best interests of each class individually and the Fund as a whole.
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly attributable to such class ("Class
-2-
<PAGE>
Expenses")1; and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
III. Expense Allocations
Expenses of each class created after the date hereof must be allocated
as follows: (i) distribution and shareholder servicing payments associated with
any Rule 12b-1 Plan or servicing agreement, if any, relating to each respective
class of shares (including any costs relating to implementing such plans or any
amendment thereto) will be borne exclusively by that class; (ii) any incremental
transfer agency fees relating to a particular class will be borne exclusively by
that class; and (iii) Class Expenses relating to a particular class will be
borne exclusively by that class.
The methodology and procedures for calculating the net asset value and
dividends and distributions of the various classes of shares of the Fund and the
proper allocation of income and expenses among the various classes of shares of
the Fund are required to comply with the Fund's internal control structure
pursuant to applicable auditing standards, including Statement on Auditing
Standards No. 55, and to be reviewed as part of the independent accountants'
review of such internal control structure. The independent accountants' report
on the Fund's system of internal controls required by Form N-SAR, Item 77B, is
not required to refer expressly to the procedures for calculating the classes'
net asset values.
- --------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
-3-
<PAGE>
EXHIBIT A
Approved: February 7, 1990
Resolutions of Board Creating
ISI Class of Shares (formerly known as C.J. Lawrence Class of Shares)
RESOLVED, that the proposed Distribution Agreement between the Fund and
C. J. Lawrence, Morgan Grenfell Inc. for distribution of the Fund's shares be,
and the same hereby is, approved, in substantially the form presented to this
meeting, and that the appropriate officers of the Fund be, and they hereby are,
authorized and directed to enter into and execute such Distribution Agreement
with such modifications as said officers shall deem necessary or appropriate or
as may be required to conform with the requirements of any applicable statute,
regulation or regulatory body;
FURTHER RESOLVED, that the proposed Plan of Distribution (the "Plan")
is determined to be reasonably likely to benefit the Fund and its shareholders;
FURTHER RESOLVED, that the Plan be, and the same hereby is, approved.
Approved: September 19, 1990
Resolution of Board Approving
New Distribution Agreement
With Armata Financial Corp.
RESOLVED, that the proposed Distribution Agreement, in substantially
the form presented to this meeting, between the Fund and Armata Financial Corp.,
for distribution of the Fund's C.J. Lawrence Class of Shares be, and the same
hereby is, approved and that the appropriate officers be, and they hereby are,
authorized and directed to enter into and execute the C.J. Lawrence Class
Distribution Agreement with such modifications as the officers executing the
C.J. Lawrence Class Distribution Agreement shall deem appropriate or as may be
required to conform with the requirements of any applicable statute, regulation
or regulatory body.
<PAGE>
Approved: September 19, 1990
Resolutions of Board Creating Flag Investors Class of Shares
RESOLVED, that in accordance with the authority granted to the Board of
Directors of Managed Municipal Fund, Inc. (the "Fund") pursuant to Article VI,
Section 4 of the Articles of Incorporation of the Fund, a second class of the
Fund's 25 million authorized shares of common stock, par value $.001, be, and
hereby is, classified and designated as "Flag Investors Managed Municipal Fund
Shares" (the "Flag Investors Class");
FURTHER RESOLVED, that the actions taken by the officers of the Fund in
the name and on behalf of the Fund with respect to the establishment of the Flag
Investors Class, including filing Post-Effective Amendment No. 1 under the
Securities Act of 1933 (the "1933 Act") and Amendment No. 3 under the Investment
Company Act of 1940, as amended (the "1940 Act"), to the Fund's Registration
Statement on Form N-1A (Registration No. 33-32819), and all necessary exhibits
and other instruments relating thereto (collectively the "Registration
Statement"), procuring all other necessary signatures thereon, and filing the
appropriate exhibits thereto with the Securities and Exchange Commission (the
"Commission") under the 1933 Act and the 1940 Act, be and they hereby are
ratified and approved;
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed to appear, together with legal counsel, on
behalf of the Fund before the Commission in connection with any matter relating
to the Registration Statement and to take such other actions, including Blue Sky
filings, as may be required in connection with the establishment of such class;
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed in the name and on behalf of the Fund, to
take any other action that the officer so acting may deem necessary or
appropriate in connection with the establishment and registration of the Flag
Investors Class of the Fund, the taking of any such action to establish
conclusively such officer's authority therefor and the approval and ratification
thereof of by the Fund.
<PAGE>
Approved: November 4, 1992
Resolutions of Board Renaming
Flag Investors Class of Shares
WHEREAS, the Board of Directors of Managed Municipal Fund, Inc. has
previously designated two classes of the Fund's shares: Flag Investors Managed
Municipal Fund Shares and ISI Managed Municipal Fund Shares;
NOW THEREFORE BE IT RESOLVED, that Flag Investors Managed Municipal
Fund Shares be, and they hereby are, further classified and designated as "Flag
Investors Class A Shares;
Resolutions of Board Creating Flag Investors Class B Shares
FURTHER RESOLVED, that an additional class of shares of Managed
Municipal Fund, Inc. (the "Fund") be, and hereby is, classified and designated
as the "Flag Investors Class B Shares" and that unissued shares of common stock,
par value $.001 per share of the Funds listed below be, and the same hereby are,
reclassified as follows:
<TABLE>
<CAPTION>
Total # Shares Flag Class A Flag Class B Flag Class D ISI Unclassified
<S> <C> <C> <C> <C> <C>
40,000,000 15,000,000 2,500,000 500,000 20,000,000 2,000,000
</TABLE>
<PAGE>
FURTHER RESOLVED, that the proper officers of the Fund be, and each of
them hereby is, authorized and directed to file articles supplementary to the
Fund's Articles of Incorporation and to take such other action as may be
necessary to designate and reclassify shares in the foregoing manner.
RESOLVED, that the Distribution Agreement between Managed Municipal
Fund, Inc. and Alex. Brown & Sons Incorporated for the Flag Investors Class B
Shares (the "Class B Shares") of said Fund be, and the same hereby is, approved;
FURTHER RESOLVED, that at such time as the Fund offers the Class B
Shares, the Plan of Distribution presented at this meeting shall govern the
payment of 12b-1 fees by that class;
FURTHER RESOLVED, that the Plan of Distribution for the Class B Shares
of said Fund is determined to be reasonably likely to benefit the Fund and its
shareholders; and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for similar plans;
FURTHER RESOLVED, that said Plan be, and the same hereby is, approved.
<PAGE>
BY-LAWS
OF
MANAGED MUNICIPAL FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be in the City of Baltimore, State of Maryland.
Section 3. Other Offices. The Corporation may have such other offices
in such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Shareholder Meetings. The Corporation may, but shall not be
required to, hold a regular meeting of shareholders in any year in which the
Corporation is not required, under the Investment Company Act of 1940, as
amended (the "1940 Act"), to submit for shareholder approval the election of
director(s). If shareholder approval is required for the purpose set forth
above, the regular meeting shall be held, at which shareholders shall vote on
the proposal necessitating such meeting and shall transact any other business as
may properly be brought before the meeting. Regular meetings of shareholders, if
any, shall be held on such day during the month of June and at such time as
shall be designated by the Board of Directors and stated in the notice of the
meeting.
Section 2. Special Meetings. Special meetings of the shareholders,
unless otherwise provided by law or by the Charter or the Corporation may be
called for any purpose or purposes by a majority of the Board of Directors or
the President, and shall be called by the President or Secretary on the written
request of the shareholders as provided by the Maryland General Corporation Law.
Such request shall state the purpose or purposes of the proposed meeting and the
matters proposed to be acted on at it; provided, however, that unless requested
by shareholders entitled to cast a majority of all the votes entitled to be cast
at the meeting, a special meeting need not be called to consider any matter
which is substantially the same as a matter voted on at any special meeting of
the shareholders held during the preceding twelve (12) months.
Section 3. Place of Meetings. The regular meeting, if any, and any
special meeting of the shareholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
<PAGE>
Section 4. Notice of Meetings; Waiver of Notice,, Shareholder List. (a)
Notice of the place, date and time of the holding of each regular and special
meeting of the shareholders and the purpose or purposes of the meeting shall be
given personally or by mail, not less than ten nor more than ninety days before
the date of such meeting, to each shareholder entitled to vote at such meeting
and to each other shareholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the shareholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. The notice of every meeting of
shareholders may be accompanied by a form of proxy approved by the Board of
Directors in favor of such actions or persons as the Board of Directors may
select.
(b) Notice of any meeting of shareholders shall be deemed
waived by any shareholder who shall attend such meeting in person or by proxy,
or who shall, either before or after the meeting, submit a signed waiver of
notice which is filed with the records of the meeting. A meeting of shareholders
convened on the date for which it was called may be adjourned from time to time
without further notice to a date not more than 120 days after the original
record date.
(c) At least five (5) days prior to each meeting of
shareholders, the officer or agent having charge of the share transfer books of
the Corporation shall make a complete list of shareholders entitled to vote at
such meeting, in alphabetical order with the address of and the number of shares
held by each shareholder.
Section 5. Organization. At each meeting of the shareholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the shareholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
Section 6. Voting. (a) Except as otherwise provided by statute or the
Charter of the Corporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any meeting of
shareholders may authorize another person or persons to act for him by a proxy
signed by such shareholder or his attorney-in-fact. No proxy shall be valid
after the expiration of eleven months from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
shareholder executing it, except in those cases where such proxy states that it
is irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Charter or the Corporation or these By-Laws,
any corporate action to be taken by vote of the shareholders shall be authorized
by a majority of the total votes cast at a meeting of shareholders at which a
quorum is present by the holders of shares present in person or represented by
proxy and entitled to vote on such action, except that a plurality of all the
votes cast at a meeting at which a quorum is present is sufficient to elect a
director.
(c) If a vote shall be taken on any question other than the
election of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to be
<PAGE>
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the shareholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
Section 7. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any shareholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except as
otherwise provided by statute any action required to be taken at any regular or
special meeting of shareholders, or any action which may be taken at any annual
or special meeting of shareholders, may be taken without a meeting, without
prior notice and without a vote, if the following are filed with the records of
shareholders' meetings: (i) a unanimous written consent which sets forth the
action and is signed by each shareholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each shareholder entitled to
notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Charter
of the Corporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the shareholders by law or by the Charter of the Corporation
or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (except for any period during which shares
of the corporation are held by fewer than three shareholders) nor more than
fifteen. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be shareholders.
<PAGE>
Section 3. Election and Term of Directors. Directors shall be elected
by majority vote of a quorum cast by written ballot at the regular meeting of
shareholders, if any, or at a special meeting held for that purpose. The term of
office of each director shall be from the time of his election and qualification
and until his successor shall have been elected and shall have qualified, or
until his death, or until he shall have resigned, or have been removed as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Charter of the Corporation.
Section 4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be
removed by the shareholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. The shareholders may elect a successor to fill a
vacancy on the Board of Directors which results from the removal of a Director.
A majority of the remaining Directors, whether or not sufficient to constitute a
quorum, may fill a vacancy on the Board of Directors which results from any
cause except an increase in the number of directors, and a majority of the
entire Board of Directors may fill a vacancy which results from an increase in
the number or Directors; provided, however, that no vacancies shall be filled by
action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the shareholders of the Corporation. In the event that at any
time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the shareholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of shareholders and until his successor is elected and qualifies. A
Director elected by the shareholders of the Corporation to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 7. Regular Meetings. Regular meetings of the Board may be held
with notice at such times and places as may be determined by the Board of
Directors.
Section 8. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the President, or by a majority of the
directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
Section 9. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or by
commercial delivery services addressed to him at his residence or usual place of
business, at least three days before the day on which such meeting is to be
held.
<PAGE>
Section 10. Waiver of Notice of Special Meetings. Notice of any special
meeting need not be given to any Director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of the
meeting or who shall attend such meeting. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice of any meeting need not
state the purposes of such meeting.
Section 11. Quorum and voting. One-third, but not fewer than three
members, of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter of the Corporation, these By-Laws, the 1940 Act or other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board; provided, however, that the
approval of any contract with an investment adviser or principal underwriter, as
such terms are defined in the 1940 Act, which the Corporation enters into or any
renewal or amendment thereof, the approval of the fidelity bond required by the
1940 Act, and the selection of the Corporation's independent public accountants
shall each require the affirmative vote of a majority of the Directors who are
not interested persons (as defined in the 1940 Act) of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the Directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the Directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other Directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time appoint
one of its members as Chairman of the Board, who shall serve at the pleasure of
the Board and who shall perform and execute such duties and powers as may be
conferred upon or assigned to him by the Board or these By-Laws, but who shall
not by reason of performing and executing these duties and powers be deemed an
officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if one has been selected and is present, shall
preside. In the absence or inability of the Chairman of the Board to preside at
a meeting, the President, or, in his absence or inability to act, another
director chosen by a majority of the directors present, shall act as chairman of
the meeting and preside at it. The Secretary (or, in his absence or inability to
act, any person appointed by the Chairman) shall act as secretary of the meeting
and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
Section 15. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time.
Section 16. Compensation. Any Director, whether or not he is a salaried
officer, employee or agent of the Corporation, may be compensated for his
services as director or as a member of a committee, or as Chairman of the Board
or chairman of a committee, and in addition may be reimbursed for transportation
and other expenses, all in such manner and amounts as the directors may from
time to time determine.
<PAGE>
Section 17. Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the shareholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by resolution
adopted by a majority of the entire Board, designate an Executive Committee,
Compensation Committee, Audit Committee and Nomination Committee, each of which
shall consist of two or more of the directors of the Corporation, which
committee shall have and may exercise all the powers and authority of the Board
with respect to all matters other than as set forth in Section 3 of this Article
IV.
Section 2. Other Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the Board
of Directors may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No committee of the Board
shall have power or authority to:
(a) recommend to shareholders any action requiring
authorization of shareholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an investment
adviser or principal underwriter, as such terms are defined in the 1940 Act, or
take any other action required to be taken by the Board of Directors by the 1940
Act;
(c) amend or repeal these By-Laws or adopt new By-Laws;
(d) declare dividends or other distributions or issue capital
stock of the Corporation; and
(e) approve any merger or share exchange which does not
require shareholder approval.
Section 4. General. (a) One-third, but not less than two members, of
the members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence or disqualification of
<PAGE>
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
(b) All committees shall keep written minutes of their
proceedings and shall report such minutes to the Board. All such proceedings
shall be subject to revision or alteration by the Board; provided, however, that
third parties shall not be prejudiced by such revision or alteration.
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint such other officers, agents and
employees as it may deem necessary or proper. Any two or more offices may be
held by the same person, except the offices of President and Vice President, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board may from time to time elect or appoint, or delegate to the
President the power to appoint, such other officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3. Removal of Office, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
Section 6. Bonds or other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
<PAGE>
Section 7. President. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board (or if
there be none), he shall preside at all meetings of the shareholders and of the
Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He may
employ and discharge employees and agents of the Corporation, except such as
shall be appointed by the Board, and he may delegate these powers.
Section 8. The Vice Presidents. In the absence or disability of the
President, or when so directed by the President, any Vice President designated
by the Board of Directors may perform any or all of the duties of the President,
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President; provided, however, that no Vice President
shall act as a member of or as chairman of any committee of which the President
is a member or chairman by designation of ex officio, except when designated by
the Board. Each Vice President shall perform such other duties as from time to
time may be conferred upon or assigned to him by the Board or the President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation, except those which the Corporation
has placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934) pursuant to a written agreement designating such bank or trust company or
member of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to
the credit of the Corporation;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor; and
(f) in general, perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability of the
Treasurer, or when so directed by the Treasurer, any Assistant Treasurer may
perform any or all of the duties of the Treasurer, and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided
for the purpose, the minutes of all meetings of the Board, the committees of the
Board and the shareholders;
(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;
<PAGE>
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 12. Assistant Secretaries. In the absence or disability of the
Secretary, or when so directed by the Secretary, any Assistant Secretary may
perform any or all of the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
Each Assistant Secretary shall perform such other duties as from time to time
may be conferred upon or assigned to him by the Board of Directors, the
President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem sufficient,
the Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any Director.
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by the President, a Vice President,
or the Chairman of the Board, and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date of
issue.
Section 2. Rights of Inspection. There shall be kept at the principal
executive office, which shall be available for inspection during usual business
hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
shareholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been shareholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual business hours the Corporation's
books of account and stock ledger in accordance with the General Laws of the
State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
<PAGE>
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of shareholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
Section 4. Transfer Agents and Registrars. The Corporation may have one
or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
Section 5. Record Date and Closing of Transfer Books. The Board of
Directors may set a record date for the purpose of making any proper
determination with respect to shareholders, including which shareholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise other rights. The record date may
not be more than ninety (90) days before the date on which the action requiring
the determination will be taken; and, in the case of a meeting of shareholders,
the record date shall be at least ten (10) days before the date of the meeting.
The Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or mutilation
of such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 8. Stock Ledgers. The Corporation shall not be required to keep
original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the office(s) of the
Transfer Agent(s) of the Corporation's capital stock.
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing the name
of the Corporation, which shall be in the charge of the secretary. The Board of
Directors may authorize one or more duplicate seals and provide for the custody
<PAGE>
thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the last day of October in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safekeeping of the
securities and investments of the Corporation shall contain provisions complying
with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks Notes, Drafts. etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Money market instruments,
bonds or other securities at any time owned by the Corporation may be held on
behalf of the Corporation or sold, transferred or otherwise disposed of subject
to any limits imposed by these By-Laws, and pursuant to authorization by the
Board and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Directors and
<PAGE>
ratified by the Board of Directors or the shareholders in accordance with the
provisions of the 1940 Act.
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report to
the shareholders based upon each such examination shall be mailed to each
shareholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi- annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify its
directors to the fullest extent that indemnification of directors is permitted
by the Maryland General Corporation Law. The Corporation shall indemnify its
officers to the same extent as its Directors and to such further extent as is
consistent with law. The Corporation shall indemnify its Directors and officers
who while serving as Directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent with law.
This Article XIII shall not protect any such person against any liability to the
Corporation or any shareholder thereof to which such person 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.
Section 2. Advances. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article XIII shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with proceedings to which he is a party
in the manner and to the full extent permissible under the Maryland General
Corporation Law and the 1940 Act, as such statutes are now or hereafter in
force.
Section 3. Procedure. On the request of any current or former director
or officer requesting indemnification or an advance under this Article XIII, the
Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law and the 1940 Act, as such
statutes are now or hereafter in force, whether the standards required by this
Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this Article
XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of shareholders or
<PAGE>
disinterested directors or otherwise, both as to action by a Director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Maryland Law. References to the Maryland General Corporation
Law in this Article XIII are to such law as from time to time amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the shareholders or at any special meeting of the shareholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
<PAGE>
FOR ARTICLES OF INCORPORATION AS AMENDED AND SUPPLEMENTED
TO DATE SEE EXHIBITS EX-99.B(1)(a) THROUGH EX-99.B(1)(c)
TO THIS REGISTRATION STATEMENT, AS FILED HEREWITH.
MANAGED MUNICIPAL FUND, INC.
ARTICLES SUPPLEMENTARY
MANAGED MUNICIPAL FUND, INC. (the "Corporation") having its principal
office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with Section
2-105(c) of the Maryland General Corporation Law has adopted a resolution
designating the Corporation's classified forty million (40,000,000) shares of
Common Stock, par value $.001 per share, having an aggregate value of
$40,000.00, as follows: fifteen million (15,000,000) shares are designated "Flag
Investors Managed Municipal Fund Class A Shares" (the "Class A Shares"), two
million, five hundred thousand (2,500,000) shares are designated "Flag Investors
Managed Municipal Fund Class B Shares" (the "Class B Shares"), twenty million
(20,000,000) shares are designated "ISI Managed Municipal Fund Shares" (the "ISI
Shares"), five hundred thousand (500,000) shares are designated "Flag Investors
Managed Municipal Fund Class D Shares" (the "Class D Shares") and two million
(2,000,000) shares remain undesignated.
SECOND: Immediately before the designation of the Class D Shares
pursuant to these Articles Supplementary, the Corporation was authorized to
issue forty million (40,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of $40,000.00, of which fifteen million
(15,000,000) shares were designated "Flag Investors Managed Municipal Fund Class
A Shares", two million (2,000,000) shares were designated "Flag Investors
Managed Municipal Fund Class B Shares" and renamed "Flag Investors Managed
Municipal Fund Class D Shares" by the Corporation's Board of Directors as
authorized in the Corporation's Articles of Incorporation, twenty million
(20,000,000) shares were designated "ISI Managed Municipal Fund Shares" and
three million (3,000,000) shares remained undesignated.
THIRD: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Managed Municipal Fund, Inc. has caused these
Articles Supplementary to be executed by one of its Vice Presidents and its
corporate seal to be affixed and attested by its Secretary on this 31st day of
December, 1994. [CORPORATE SEAL]
MANAGED MUNICIPAL FUND, INC.
By: /s/ Edward J. Veilleux
---------------------------------------
Vice President
Attest: /s/ Brian C. Nelson
------------------------------------
Secretary
The undersigned, Vice President of MANAGED MUNICIPAL FUND, INC., who
executed on behalf of said corporation the foregoing Articles Supplementary to
the Articles of Incorporation of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, the foregoing
Articles Supplementary to the Articles of Incorporation to be the corporate act
of said corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Edward J. Veilleux
-------------------------------------------
Edward J. Veilleux
<PAGE>
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 23rd day of October, 1990, by and between
MANAGED MUNICIPAL FUND, INC., a Maryland corporation (the "Fund"), and Alex.
Brown & Sons Incorporated, a Maryland corporation ("Alex. Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the exclusive
distributor of the class of shares of the Fund known as the Flag Investors
Managed Municipal Fund Shares (the "Shares") and Alex. Brown wishes to become
the distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the payments
contemplated by paragraph 9 constitute the financing of activities intended to
result in the sale of Shares, and this Agreement is entered into pursuant to a
"written plan" pursuant to Rule 12b-1 under the Act (the "Plan") allowing the
Fund to make such payments.
NOW, THEREFORE, in consideration of the premises, and of other good and
valuable consideration by each of the parties hereto to the other party paid,
and of the agreements, covenants and obligations herein contained, the parties
hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as the exclusive
distributor of the Shares for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown with
copies, properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on January 5, 1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors authorizing
the appointment of Alex. Brown as the Fund's Distributor of the Shares and
approving this Agreement;
<PAGE>
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with the
Securities and Exchange Commission (the "SEC") on January 8, 1990;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-32819) and
under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on January 8, 1990 relating to the Fund and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. Alex. Brown agrees that all solicitations for
subscriptions for Shares shall be made in accordance with Fund's Articles of
Incorporation and By-Laws, and its then current Registration Statement,
Prospectus and Statement of Additional Information, and shall not at any time or
in any manner violate any provisions of the laws of the United States or of any
state or other jurisdiction which solicitations are then being made. In carrying
out its obligations hereunder, Alex. Brown shall undertake the following actions
and responsibilities:
(a) receive orders for purchase of Shares, accept or reject
such orders on behalf of the Fund in accordance with the currently
effective Prospectus for the Shares and the Fund's Statement of
Additional Information and transmit such orders as are so accepted to
the Fund's transfer agent as promptly as possible;
(b) receive requests for redemption from holders of Shares and
transmit such redemption requests to the Fund's transfer agent as
promptly as possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least quarterly, a
written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including an
explanation of the purposes for which such expenditures were made; and
(e) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect the distribution of the Shares
and perform such other administrative duties with respect to the Shares
as the Fund's Board of Directors may require.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown and securities
dealers who have valid Sub-Distribution Agreements with Alex. Brown.
Notwithstanding the provisions of the foregoing sentence the Fund may issue its
Shares at their net asset value to any shareholder of the Fund purchasing such
Shares with dividends or other cash distributions received from the Fund
pursuant to an offer made to all shareholders.
<PAGE>
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund. The Board of Directors may agree, on behalf of the Fund, to amendments to
this Agreement, provided that any such amendment that would provide for a
material increase in the amount expended by the Fund must be approved by the
shareholders of the Fund before becoming effective.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation of the
Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of state and federal laws.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and without cost
to the Fund, the services of personnel to the extent that such services are
required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any promotional or
sales literature used by Alex. Brown or furnished by Alex. Brown to purchasers
or dealers in connection with the public offering of the Shares, the expenses of
advertising in connection with such public offering;
(c) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and its shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); the expenses of printing, including typesetting, and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
<PAGE>
fees and travel expenses of directors or members of any advisory board or
committee other than such directors or member who are "interested persons" of
the Fund (as defined in Section 2(a)(19) of the 1940 Act); all expenses incident
to the payment of any dividend, distribution, withdrawal or redemption, whether
in Shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's Shares; charges and expenses of legal counsel, including
counsel to the directors of the Fund who are not "interested persons" of the
Fund (as defined in Section 2(a)(19) of the 1940 Act), and of independent
accountants, in connection with any matter relating to the Fund; a portion of
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. Alex. Brown may, but shall be under
no duty to, perform services on behalf of the Fund which are not required by
this Agreement upon the request of the Fund's Board of Directors. Such services
will be performed on behalf of the Fund and Alex. Brown's charges in rendering
such services may be billed monthly to the Fund, subject to examination by the
Fund's independent accountants. Payment or assumption by Alex. Brown of any Fund
expense that Alex. Brown is not required to pay or assume under this Agreement
shall not relieve Alex. Brown to pay or assume any similar Fund expense on any
subsequent occasions.
9. Compensation. For the services to be rendered and the expenses
assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation at the
annual rate of .25% of the average daily net assets of the Shares of the Fund.
Except as hereinafter set forth, continuing compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month
compensation for the part of the month during which this Agreement is in effect
shall be prorated in a manner consistent with the calculations of the fees as
set forth above.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into
sub-distribution agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing or the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Brown to the Fund are not to
be deemed exclusive and Alex. Brown shall be free to render distribution or
other services to others (including other investment companies) and to engage in
other activities. It is understood and agreed that officers or directors of
Alex. Brown may serve as officers of directors of the Fund, and that officers or
<PAGE>
directors of Alex. Brown are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers or directors of any other firm or corporation, including
other investment companies.
13. Term and Approval. This Agreement shall become effective at the
close of business on the date hereof and shall remain in force and effect for an
initial term of two years and from year to year thereafter, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who
are not "interested persons" of the Fund (as defined in Section 2(a)(19) of the
1940 Act) and who do not have a financial interest in the operation of this
Agreement, by votes cast in person at a meeting specifically called for such
purpose.
14. Termination. This Agreement may be terminated at any time, on sixty
(60) days' written notice to the other party without the payment of any penalty,
(i) by vote of the Fund's Board of Directors, (ii) by vote of a majority of the
directors who are not "interests persons" of the Fund (as defined in Section
2(a)(19) of the 1940 Act) and who do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act)
or (iv) by Alex. Brown. The notice provided for herein may be waived by each
party. This Agreement shall automatically terminate in the event of its
assignment as defined in Section 2(a)(4) of the 1940 Act.
15. Liability. In the performance of its duties hereunder, Alex. Brown
shall be obligated to exercise care and diligence and to act in good faith and
to use its best efforts within reasonable limits in performing all services
provided for under this Agreement, but shall not be liable for any act or
omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other parties at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other parties, the addresses of the Fund and Alex. Brown
are as follows:
If to Alex. Brown
Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, MD 21202
If to the Fund:
Managed Municipal Fund, Inc.
1290 Avenue of the Americas
New York, NY 10104
17. Questions of Interpretation. Any questions of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
<PAGE>
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day and year first
above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest: /s/ Sharon G. Marhaush By /s/ Edward J. Veilleux
-------------------------- --------------------------------
Vice President
[SEAL} ALEX. BROWN & SONS
INCORPORATED
Attest:/s/ Nancy Palmer By /s/ Richard T. Hale
-------------------------- --------------------------------
<PAGE>
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 30th day of November, 1990, by and between
MANAGED MUNICIPAL FUND, INC., a Maryland corporation (the "Fund"), and ARMATA
FINANCIAL CORP., a Maryland corporation ("AFC").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to appoint AFC as the exclusive distributor of
the class of shares of the Fund known as the ISI Managed Municipal Fund Shares
(the "Shares") and AFC wishes to become the distributor of the Shares; and
WHEREAS, the compensation to AFC hereunder and the payments
contemplated by paragraph 9 constitute the financing of activities intended to
result in the sale of Shares, this Agreement is entered into pursuant to a
"written plan" pursuant to Rule 12b-1 under the 1940 Act (the "Plan") owing the
Fund to make such payments.
NOW, THEREFORE, in consideration of the premises, and of other good and
valuable consideration by each of the parties hereto to the other party paid,
and of the agreements, covenants and obligations herein contained, the parties
hereto agree as follows:
1. Appointment. The Fund appoints AFC as the exclusive distributor of
the Shares for the period and on the terms set forth in this Agreement. AFC
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. The Fund has furnished AFC with copies,
properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on January 5, 1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors authorizing
the appointment of AFC as the Fund's Distributor of the Shares and approving
this Agreement;
<PAGE>
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with the
Securities and Exchange Commission (the "SEC") on January 8, 1990;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-32819) and
under the 1940 Act as filed with the SEC on January 8, 1990 relating to the Fund
and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish AFC from time to time with copies, properly
certified or authenticated, of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. AFC agrees that all solicitations for
subscriptions for Shares shall be made in accordance with the Fund's Articles of
Incorporation and By-Laws, and its then current Registration Statement,
Prospectus and Statement of Additional Information, and shall not at any time or
in any manner violate any provisions of the laws of the United States or of any
state or other jurisdiction in which solicitations are then being made. In
carrying out its obligations hereunder, AFC shall undertake the following
actions and responsibilities:
(a) receive orders for purchase of Shares, accept or reject
such orders on behalf of the Fund in accordance with the currently effective
Prospectus for the Shares and the Fund's Statement of Additional Information and
transmit such orders as are so accepted to the Fund's transfer agent as promptly
as possible;
(b) receive requests for redemption from holders of Shares and
transmit such redemption requests to the Fund's transfer agent as promptly as
possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least quarterly, a
written report of the amounts expended in connection with all distribution
services rendered pursuant to this Agreement, including an explanation of the
purposes for which such expenditures were made; and
(e) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect the distribution of the Shares and
perform such other administrative duties with respect to the Shares as the
Fund's Board of Directors may require.
4. Distribution of Shares. AFC shall be the exclusive distributor of
the Shares. It is mutually understood and agreed that AFC does not undertake to
sell all or any specific portion of the Shares. The Fund shall not sell any of
the Shares except through AFC and securities dealers who have valid Agency
Distribution Agreements with AFC. Notwithstanding the provisions of the
foregoing sentence the Fund may issue its Shares at their net asset value to any
shareholder of the Fund purchasing such Shares with dividends or other cash
distributions received from the Fund pursuant to an offer made to all
shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by AFC pursuant to this Agreement, as well as any other activities
undertaken by AFC on behalf of the Fund pursuant hereto, shall at all times be
subject to any directives of the Board of Directors of the Fund. The Board of
<PAGE>
Directors may agree, on behalf of the Fund, to amendments to this Agreement,
provided that any such amendment that would provide for a material increase in
the amount expended by the Fund must be approved by the shareholders of the Fund
before becoming effective.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, AFC shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement to the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation of the
Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of state and federal law.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and AFC as follows:
(a) AFC shall furnish, at its expense and without cost to the
Fund, the services of personnel to the extent that such services are required to
carry out their obligations under this Agreement;
(b) AFC shall bear the expenses of any promotional or sales
literature used by AFC or furnished by AFC to purchasers or dealers in
connection with the public offering of the Shares and the expenses of
advertising in connection with such public offering;
(c) the Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and its shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); the expenses of printing, including typesetting, and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or members of any advisory board or
committee other than such directors or member who are "interested persons" of
the Fund (as defined in Section 2(a)(19) of the 1940 Act); all expenses incident
to the payment of any dividend, distribution, withdrawal or redemption, whether
in Shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's Shares; charges and expenses of legal counsel, including
<PAGE>
counsel to the directors of the Fund who are not "interested persons" of the
Fund (as defined in Section 2(a)(19) of the 1940 Act), and of independent
accountants, in connection with any matter relating to the Fund; a portion of
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. AFC may, but shall be under no duty
to, perform services on behalf of the Fund which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Fund and AFC's charges in rendering such services
may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by AFC of any Fund expense that
AFC is not required to pay or assume under this Agreement shall not relieve AFC
of any of its obligations to the Fund or obligate AFC to pay or assume any
similar Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the expenses
assumed by AFC, the Fund shall pay to AFC, compensation at the annual rate of
.25% of the average daily net assets of the Shares of the Fund. Except as
hereinafter set forth, continuing compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month compensation for the
part of the month during which this Agreement is in effect shall be prorated in
a manner consistent with the calculations of the fees as set forth above.
10. Compensation for Service Shareholder Accounts. The Fund
acknowledges that AFC may compensate its investment representatives for opening
accounts, processing investor letters of transmittals and applications and
withdrawal and redemption orders, responding to inquiries from Fund shareholders
concerning the status of their accounts and the operations of the Fund, and
communicating with the Fund and its transfer agent on behalf of the Fund
shareholders.
11. Agency Distribution Agreements. AFC may enter into agency
distribution agreements (the "Agency Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a transmitting
broker in connection with the proposed offering. All Agency Distribution
Agreements shall be in substantially the form of the agreement attached hereto
as Exhibit "A". For processing Fund shareholders' redemption orders, responding
to the inquiries from Fund shareholders concerning the status of their accounts
and the operations of the Fund and communicating with the Fund, its transfer
agent and AFC, AFC may pay each such transmitting broker an amount not to exceed
that portion of the compensation paid to AFC hereunder that is attributable to
accounts of Fund shareholders who are customers of such transmitting broker.
12. Non-Exclusivity. The services of AFC to the Fund are not to be
deemed exclusive and AFC shall be free to render distribution or other services
to others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers or directors of AFC may
serve as officers or directors of the Fund, and that officers or directors of
the Fund may serve as officers or directors of AFC to the extent permitted by
law; and that officers or directors of AFC are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers or directors of any other firm or
corporation, including other investment companies.
<PAGE>
13. Term and Approval. This Agreement shall become effective at the
close of business on the date hereof and shall remain in force and effect for an
initial term of two years and from year to year thereafter, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who
are not "interested persons" of the Fund (as defined in Section 2(a)(19) of the
1940 Act) and who do not have a financial interest in the operation of this
Agreement, by votes cast in person at a meeting specifically called for such
purpose.
14. Termination. This Agreement may be terminated at any time, on sixty
(60) days' written notice to the other party without the payment of any penalty,
(i) by vote of the Fund's Board of Directors, (ii) by vote of a majority of the
directors who are not "interested persons" of the Fund (as defined in Section
2(a)(19) of the 1940 Act) and who do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act)
or (iv) by AFC. The notice provided for herein may be waived by each party. This
Agreement shall automatically terminate in the event of its assignment as
defined in Section 2(a)(4) of the 1940 Act.
15. Liability. In the performance of its duties hereunder, AFC shall be
obligated to exercise care and diligence and to act in good faith and to use its
best efforts within reasonable limits in performing all services provided for
under this Agreement, but shall not be liable for any act or omission which does
not constitute willful misfeasance, bad faith or gross negligence on the part of
AFC or reckless disregard by AFC of its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other parties at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other parties, the addresses of the Fund and AFC are as
follows:
If to AFC:
Armata Financial Corp.
135 East Baltimore Street
Baltimore, Maryland 21202
If to the Fund:
Managed Municipal Fund, Inc.
1290 Avenue of the Americas
New York, New York 10104
17. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
<PAGE>
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day and year first
above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest: /s/ David C. Volley By /s/ Brian C. Nelson
-------------------------- --------------------------------
Vice President and Secretary
[SEAL] ARMATA FINANCIAL CORP.
Attest: /s/ David C. Volley By /s/ Edward J. Veilleux
-------------------------- --------------------------------
<PAGE>
Exhibit A
ISI FAMILY OF FUNDS
717 Fifth Avenue
New York, New York 10022
AGENCY DISTRIBUTION AGREEMENT
_______________________, 19___
Gentlemen:
Armata Financial Corp. ("Armata"), a Maryland corporation, serves as
distributor (the "Distributor") of the ISI Family of Mutual Funds (collectively,
the "Funds", individually a "Fund"). The Funds are open-end investment companies
registered under the "Investment Company Act of 1940, as amended (the
"Investment Company Act"). The Funds offer their shares ("Shares") to the public
in accordance with the terms and conditions contained in the Prospectus of each
Fund. The term "Prospectus" used herein refers to the prospectus on file with
the Securities and Exchange Commission which is part of the registration
statement of each Fund under the Securities Act of 1933 (the "Securities Act").
In connection with the foregoing you may serve as a participating dealer (and,
therefore, accept orders for the purchase or redemption of Shares, respond to
shareholder inquiries and perform other related functions) on the following
terms and conditions:
1. Transmitting Broker. You are hereby designated as a Broker and as
such are authorized (i) to accept orders for the purchase of Shares and to
transmit to the Funds such orders and payment made therefore, (ii) to accept
orders for the redemption of Shares and to transmit to the Funds such orders and
all additional material, including any certificates for Shares, as may be
required to complete the redemption and (iii) to assist shareholders with the
foregoing and other matters relating to their investments in each Fund, in each
case subject to the terms and conditions set forth in the Prospectus of each
Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will look
solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
<PAGE>
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $250,000 for each Fund for which you are
to be compensated, and provided that in all cases your name is transmitted with
each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares
under the Securities Act. The Funds intend to register or qualify in certain
states where registration or qualification is required. We will inform you as to
the states or other jurisdictions in which we believe the Shares have been
qualified for sale under, or are exempt from the requirements of, the respective
securities laws of such states. You agree that you will offer Shares to your
customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full authority to
take such action as it deems advisable in respect of all matters pertaining to
the offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by them hereunder.
In carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
<PAGE>
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party,
without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to the
above address. Any notice to you shall be duly given if mailed or telegraphed to
you at the address specified by you below.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one copy of this agreement.
ARMATA FINANCIAL CORP.
_____________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: _______________________
By: _________________________
Address: _________________________
Date: ___________________________
<PAGE>
New Class B Shares
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS CLASS B SHARES
FORM OF
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 4th day of November, 1992, by and between
MANAGED MUNICIPAL FUND, INC., a Maryland corporation (the "Fund"), and ALEX.
BROWN & SONS INCORPORATED, a Maryland corporation ("Alex. Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the exclusive
distributor of the class of shares of the Fund known as the Flag Investors Class
B Shares (the "Shares") and Alex. Brown wishes to become the distributor of the
Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the payments
contemplated by paragraph 9 constitute the financing of activities intended to
result in the sale of Shares, and this Agreement is entered into pursuant to a
"written plan" pursuant to Rule 12b-1 under the Act (the "Plan") allowing the
Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of other
good and valuable consideration the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor for the
Shares for the period and on the terms set forth in this Agreement. The Fund may
from time to time issue separate series or classes of its shares of common
stock, or classify and reclassify shares of such series as classes, and the
appointment effected hereby shall constitute appointment for the distribution of
such additional series and classes unless the parties shall otherwise agree in
writing. Alex. Brown accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown with
copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on January 5, 1990 and all amendments thereto
(the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
<PAGE>
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with the
Securities and Exchange Commission (the "SEC") on January 8, 1990;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-32819) and
under the 1940 Act as filed with the SEC on January 8, 1990 relating to the
Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the benefit
of its best judgment, efforts and facilities in rendering its services as
Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed necessary
to carry into effect the distribution of the Shares;
(c) provide the Board of Directors of the Fund with quarterly
reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown and securities
dealers who have valid Sub-Distribution Agreements with Alex. Brown.
Notwithstanding the provisions of the foregoing sentence, the Fund may issue its
Shares at their net asset value to any shareholder of the Fund purchasing such
Shares with dividends or other cash distributions received from the Fund
pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund. The Board of Directors may agree, on behalf of the Fund, to amendments to
this Agreement, provided that the Fund must obtain prior approval of the
shareholders of the Fund to any amendment which would result in a material
increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder as amended;
<PAGE>
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act and any amendments and supplements thereto;
(c) the provisions of the Articles of Incorporation of the
Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and without cost
to the Fund, the services of personnel to the extent that such services are
required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any promotional or
sales literature used by Alex. Brown or furnished by Alex. Brown to purchasers
or dealers in connection with the public offering of the Shares, the expenses of
advertising in connection with such public offering and all legal expenses in
connection with the foregoing;
(c) the Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar, custodian
or depositary appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any stock transfer, dividend or accounting
agent or agents appointed by the Fund; brokers' commissions chargeable to the
Fund in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Fund to Federal, State or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and the Shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel) except as provided in subparagraph (a) above, the expenses of printing,
including typesetting, and distributing prospectuses of the Fund and supplements
thereto to the Fund's shareholders; all expenses of shareholders' and Directors'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of Directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) or members of any advisory
board or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; charges and
expenses of legal counsel, including counsel to the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act), and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. Alex. Brown may, but shall be under
no duty to, perform services on behalf of the Fund which are not required by
this Agreement upon the request of the Fund's Board of Directors. Such services
<PAGE>
will be performed on behalf of the Fund and Alex. Brown's charge in rendering
such services may be billed monthly to the Fund, subject to examination by the
Fund's independent accountants. Payment or assumption by Alex. Brown of any Fund
expense that Alex. Brown is not required to pay or assume under this Agreement
shall not relieve Alex. Brown of any of its obligations to the Fund or obligate
Alex. Brown to pay or assume any similar Fund expense on any subsequent
occasions.
9. Compensation. For the services to be rendered and the expenses
assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation at the
annual rate of .75% of the average daily net assets of the shares of the Fund.
Except as hereinafter set forth, continuing compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculations of the fees as set forth
above. Payment of Alex. Brown's compensation for the preceding month shall be
made as promptly as possible.
10. Service Fee. The Fund shall pay Alex. Brown a service fee (as such
term is defined in the NASD Rules of Fair Practice) equal to .25% of the average
daily net assets of the Shares of the Fund. Such fee shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly in the
manner described in paragraph 9 above.
11. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
12. Sub-Distribution Agreements. Alex. Brown may enter into
Sub-Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
13. Non-Exclusivity. The services of Alex. Brown to the Fund are not to
be deemed exclusive and Alex. Brown shall be free to render distribution or
other services to others (including other investment companies) and to engage in
other activities. It is understood and agreed that directors, officers or
employees of Alex. Brown may serve as directors or officers of the Fund, and
that directors or officers of the Fund may serve as directors, officers and
employees of Alex. Brown to the extent permitted by law; and that directors,
officers and employees of Alex. Brown are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, directors or officers of any other firm or corporation,
including other investment companies.
14. Term and Approval. This Agreement shall become effective at the
close of business on the date hereof and shall remain in force and effect for an
initial term of two years and from year to year thereafter, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities (as defined in the 1940 Act),
and
<PAGE>
(b) by the affirmative vote of a majority of the Directors who
are not "interested persons" of the Fund (as defined in the 1940 Act) and do not
have a financial interest in the operation of this Agreement, by votes cast in
person at a meeting specifically called for such purpose.
15. Termination. This Agreement may be terminated at any time, on sixty
(60) days' written notice to the other party without the payment of any penalty,
(i) by vote of the Fund's Board of Directors, (ii) by vote of a majority of the
directors who are not "interested persons" of the Fund (as defined in the 1940
Act) and do not have a financial interest in the operation of this Agreement,
(iii) by vote of a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) or (iv) by Alex. Brown. The notice provided for herein
may be waived by each party. This Agreement shall automatically terminate in the
event of its assignment (as the term is defined in the 1940 Act).
16. Liability. In the performance of its duties hereunder, Alex. Brown
shall be obligated to exercise care and diligence and to act in good faith and
to use its best efforts within reasonable limits in performing all services
provided for under this Agreement, but shall not be liable for any act or
omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
17. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other parties, it is agreed that the address of both Alex.
Brown and the Fund for this purpose shall be 135 East Baltimore Street,
Baltimore, Maryland 21202.
18. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day and year first
above written.
[SEAL] MANAGED MUNICIPAL FUND, INC.
Attest:__________________ By _____________________________________
Title:
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest:__________________ By _____________________________________
Title:
<PAGE>
Exhibit A
FLAG INVESTORS FAMILY OF FUNDS - CLASS B SHARES
135 East Baltimore Street
Baltimore, Maryland 21202
FORM OF
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor (the "Distributor") of the Flag Investors
Funds - Class B Shares (collectively, the "Funds", individually a "Fund"). The
Funds are open-end investment companies registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"). The Funds offer their
Flag Investors Class B Shares ("Shares") to the public in accordance with the
terms and conditions contained in the Prospectus of each Fund. The term
"Prospectus" used herein refers to the prospectus on file with the Securities
and Exchange Commission which is part of the registration statement of each Fund
under the Securities Act of 1933 (the "Securities Act"). In connection with the
foregoing you may serve as a participating dealer (and, therefore, accept orders
for the purchase or redemption of Shares, respond to shareholder inquiries and
perform other related functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating
Dealer and as such are authorized (i) to accept orders for the purchase of
Shares and to transmit to the Funds such orders and the payment made therefore,
(ii) to accept orders for the redemption of Shares and to transmit to the Funds
such orders and all additional material, including any certificates for Shares,
as may be required to complete the redemption and (iii) to assist shareholders
with the foregoing and other matters relating to their investments in each Fund,
in each case subject to the terms and conditions set forth in the Prospectus of
each Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will look
solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
<PAGE>
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $250,000 for each Fund for which you are
to be compensated, and provided that in all cases your name is transmitted with
each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD, including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares
under the Securities Act. The Funds intend to register or qualify in certain
states where registration or qualification is required. We will inform you as to
the states or other jurisdictions in which we believe the Shares have been
qualified for sale under, or are exempt from the requirements of, the respective
securities laws of such states. You agree that you will offer Shares to your
customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full authority to
take such action as it deems advisable in respect of all matters pertaining to
the offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by them hereunder.
In carrying out your obligations, you agree to act in good faith and without
<PAGE>
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party,
without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to the
above address. Any notice to you shall be duly given if mailed or telegraphed to
you at the address specified by you below.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
___________________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
<PAGE>
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of the ISI Managed Municipal Fund Shares (the "Shares") of
Managed Municipal Fund, Inc. (the "Fund"). Other capitalized terms herein have
the meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) The distributor for the Shares (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the distribution agreement between the Distributor and the Fund with
respect to the Shares (the "Distribution Agreement") and to make payments on
behalf of the Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) The Distributor may make payments in any amount, provided that the
total amount of all payments made during a fiscal year of the Fund do not
exceed, in any fiscal year of the Fund, the amount paid to the Distributor under
the Distribution Agreement which is an annual fee, calculated on an average
daily net basis and paid monthly, equal to .25% of the average daily net assets
of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which the Distributor is
authorized to pay or cause to be paid on its behalf and such payments shall not
be included in the limitations contained in this Plan. These expenses include:
the fees of the Fund's investment advisor; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities and other property, and any transfer, dividend
or accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and its Shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees and
legal fees and disbursements of counsel); the costs and expenses of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's Shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent certified public accountants, in connection with any matter
relating to the Fund; a portion of membership dues of industry associations;
<PAGE>
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided therein.
5. Other Distribution Resources. The Distributor and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. The Distributor will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor shall report
in writing at least quarterly to the Fund's Board of Directors, and the Board
shall review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii) the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons of the Fund (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect from year to year
thereafter only so long as such continuance is specifically approved at least
annually by the vote of the Fund's Board of Directors and by the vote of a
majority of the Directors of the Fund who are not interested persons of the Fund
(as defined in the 1940 Act), cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons of the Fund (as
defined in the 1940 Act) or by the vote of the holders of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). This Plan may
not be amended to increase materially the amount of payments to be made without
shareholder approval, as set forth in (ii) above, and all amendments must be
approved in the manner set forth under (i) above.
<PAGE>
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of the Flag Investors Managed Municipal Fund Shares (the
"Shares") of Managed Municipal Fund, Inc. (the "Fund"). Other capitalized terms
herein have the meaning given to them in the Fund's prospectus for the Shares.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated ("Alex.
Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub- Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) Alex. Brown may make payments in any amount, provided that
the total amount of all payments made during a fiscal year of the Fund does not
exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown under the
Distribution Agreement with respect to distribution of the Shares which is an
annual fee, calculated on an average daily net basis and paid monthly, equal to
.25% of the daily net assets of the Shares of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which Alex. Brown as administrator
and distributor is authorized to pay or cause to be paid on its behalf and such
payments shall not be included in the limitations contained in this Plan. These
expenses include: the fees of the Fund's investment advisor and distributor of
the other class of the Fund's shares; the fees of Alex. Brown as administrator
for the Fund; the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any transfer, dividend or accounting agent or
agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing Shares; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
directors or director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not interested persons
(as defined in the 1940 Act) of the Fund and of independent public accountants,
in connection with any matter relating to the Fund; a portion of membership dues
<PAGE>
of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided therein.
5. Other Distribution Resources. Alex. Brown and Participating Dealers
may expend their own resources separate and apart from amounts payable under the
Plan to support the Fund's distribution effort. Alex. Brown will report to the
Board of Directors on any such expenditures as part of its regular reports
pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall report in
writing at least quarterly to the Fund's Board of Directors, and the Board shall
review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii) the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons of the Fund (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect until
_______________, 1992 and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the vote of the Fund's
Board of Directors and by the vote of a majority of the Directors of the Fund
who are not interested persons of the Fund (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may be terminated at any time by a vote of a majority of the Directors who
are not interested persons of the Fund (as defined in the 1940 Act) or by the
vote of the holders of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act). This Plan may not be amended to increase
materially the amount of payments to be made without shareholder approval, as
set forth in (ii) above, and all amendments must be approved in the manner set
forth under (i) above.
<PAGE>
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of the Flag Investors Class B Shares (the "Shares") of Managed
Municipal Fund, Inc. (the "Fund"). Other capitalized terms herein have the
meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated ("Alex.
Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(a) Alex. Brown may make payments in any amount, provided that
the total amount of all payments made during a fiscal year of the Fund do not
exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown under the
Distribution Agreement with respect to distribution of the Shares which is an
annual fee, calculated on an average daily net basis and paid monthly, equal to
.75% of the average daily net assets of the Shares of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which Alex. Brown as distributor
for the Shares is authorized to pay or cause to be paid on its behalf and such
payments shall not be included in the limitations contained in this Plan. These
expenses include: the fees of the Fund's investment advisor and Alex. Brown, the
fees of the Fund's administrator; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with
maintenance of registration of the Fund and its shares with the Securities and
Exchange Commission and various states and other jurisdictions (including filing
fees and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
<PAGE>
charges and expenses of legal counsel, including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent certified public accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
5. Other Distribution Resources. Alex. Brown and Participating Dealers
may expend their own resources separate and apart from amounts payable under the
Plan to support the Fund's distribution effort. Alex. Brown will report to the
Board of Directors on any such expenditures as part of its regular reports
pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall report in
writing at least quarterly to the Fund's Board of Directors, and the Board shall
review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii) the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on this Plan;
and (ii) by a vote of holders of at least a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act). This Plan shall, unless
terminated as hereinafter provided, continue in effect from year to year only so
long as such continuance is specifically approved at least annually by the vote
of the Fund's Board of Directors and by the vote of a majority of the Directors
of the Fund who are not interested persons (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may be terminated at any time by a vote of a majority of the Directors who
are not interested persons (as defined in the 1940 Act) or by the vote of the
holders of a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act). This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above.
<PAGE>
EX-99.B(24)
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as a director of the
Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes,
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ James J. Cunnane
--------------------------
James J. Cunnane
Date: February 24, 1995
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph A. Finelli,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as Chief Financial
and Accounting Officer of the Fund such Registration Statement
and any and all such pre- and post-effective amendments filed
with the Securities and Exchange Commission under the 1933 Act
and the 1940 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all
that said attorney-in-fact and agent, or either of them or their
substitute or substitutes, shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ Joseph A. Finelli
--------------------------
Joseph A. Finelli
Date: February 22, 1996
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as a director of the
Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes,
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ Richard T. Hale
--------------------------
Richard T. Hale
Date: February 22, 1994
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Edward S. Hyman,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as Chairman and a
director of the Fund such Registration Statement and any and all
such pre- and post-effective amendments filed with the Securities
and Exchange Commission under the 1933 Act and the 1940 Act, and
any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or either of them or their substitute
or substitutes, shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ Edward S. Hyman
--------------------------
Edward S. Hyman
Date: February 22, 1994
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as a director of the
Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes,
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ John F. Kroeger
--------------------------
John F. Kroeger
Date: February 22, 1994
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as a director of the
Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes,
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ Louis E. Levy
--------------------------
Louis E. Levy
Date: February 24, 1995
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J.
McDonald, whose signature appears below, does hereby constitute
and appoint Edward J. Veilleux and Brian C. Nelson, and each of
them singly, his true and lawful attorney-in-fact and agent, with
full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may
deem necessary or advisable or which may be required to enable
Managed Municipal Fund, Inc. (the "Fund") to comply with the
Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and
any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the
Fund's Registration Statement on Form N-1A pursuant to the 1933
Act and the 1940 Act, together with any and all pre- and post-
effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority
to sign in the name and on behalf of the undersigned as a
director of the Fund such Registration Statement and any and all
such pre- and post-effective amendments filed with the Securities
and Exchange Commission under the 1933 Act and the 1940 Act, and
any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or either of them or their substitute
or substitutes, shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ Eugene J. McDonald
--------------------------
Eugene J. McDonald
Date: February 22, 1994
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, R. Alan Medaugh,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as President and a
director of the Fund such Registration Statement and any and all
such pre- and post-effective amendments filed with the Securities
and Exchange Commission under the 1933 Act and the 1940 Act, and
any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or either of them or their substitute
or substitutes, shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ R. Alan Medaugh
--------------------------
R. Alan Medaugh
Date: February 22, 1994
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, W. James Price,
whose signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as a director of the
Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes,
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ W. James Price
--------------------------
W. James Price
Date: February 22, 1994
<PAGE>
MANAGED MUNICIPAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose
signature appears below, does hereby constitute and appoint
Edward J. Veilleux and Brian C. Nelson, and each of them singly,
his true and lawful attorney-in-fact and agent, with full power
of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place
and stead, which said attorney-in-fact and agent may deem
necessary or advisable or which may be required to enable Managed
Municipal Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's
Registration Statement on Form N-1A pursuant to the 1933 Act and
the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign
in the name and on behalf of the undersigned as a director of the
Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes,
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal as of the date set forth below.
/s/ Harry Woolf
--------------------------
Harry Woolf
Date: February 22, 1994
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> MANAGED MUNICIPAL FUND, INC.
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 128867052
<INVESTMENTS-AT-VALUE> 130916894
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<ASSETS-OTHER> 35523
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<OTHER-ITEMS-LIABILITIES> 406365
<TOTAL-LIABILITIES> 406365
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<INTEREST-INCOME> 7465269
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<EXPENSES-NET> 1196367
<NET-INVESTMENT-INCOME> 6268902
<REALIZED-GAINS-CURRENT> 599805
<APPREC-INCREASE-CURRENT> 12223598
<NET-CHANGE-FROM-OPS> 19092305
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6268902
<DISTRIBUTIONS-OF-GAINS> 1848505
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<NUMBER-OF-SHARES-SOLD> 1118204
<NUMBER-OF-SHARES-REDEEMED> 2788372
<SHARES-REINVESTED> 476139
<NET-CHANGE-IN-ASSETS> (1237554)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 531628
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<GROSS-EXPENSE> 1463194
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<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .98
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</TABLE>
