To the Board of Directors of
The Flag Investors Funds,
Total Return U.S. Treasury Fund,
Managed Municipal Fund, and
Alex. Brown Cash Reserve Fund
We have examined the accompanying description of the methodology and
procedures as of November 30, 1995 of The Flag Investors Funds, Total Return
U.S. Treasury Fund, Managed Municipal Fund, and Alex. Brown Cash Reserve Fund
(the "Funds") used in the multi-class distribution for allocation of
income, expenses, realized and unrealized gains and losses and calculation of
the net asset value and dividends and distributions with respect to the
various classes of shares for each of the funds listed on Exhibit I (the
Funds). Our examination included procedures to obtain reasonable assurance
about whether (1) the accompanying description presents fairly, in all
material respects, the policies and procedures that may be relevant to a
user fund's internal control structure, (2) the control structure policies and
procedures included in the description are suitably designed to achieve
the control objectives specified in the description, if those policies
and procedures are complied with satisfactorily, and (3) such policies and
procedures had been placed in operation as of November 30, 1995. The control
objectives were specified by the Funds. Our examination was performed in
accordance with standards established by the American Institute of Certified
Public Accountants and included those procedures we considered necessary in
the circumstances to obtain a reasonable basis for rendering our opinion.
In our opinion, the accompanying description of the aforementioned
application presents fairly, in all material respects, the relevant aspects
of the funds' policies and procedures that had been placed in operation as
of November 30, 1995. Also, in our opinion, the control structure policies and
procedures, as described, are suitably designed to provide reasonable
assurance that the specified control objectives would be achieved if the
described control structure policies and procedures were complied with
satisfactorily.
In addition to the procedures we considered necessary to render our
opinion as expressed in the previous paragraph, we applied tests to specific
policies and procedures, described in Exhibit II, to obtain evidence
about their effectiveness in meeting the control objectives, described in
Exhibit III, during the period from December 1, 1994 to November 30, 1995. In
our opinion the policies and procedures that were tested, as described in
Exhibits II and III, were operating with sufficient effectiveness to provide
reasonable, but not absolute, assurance that the control objectives were
achieved during the period from December 1, 1994 to November 30, 1995. However,
the scope of our engagement did not include tests to determine whether control
<PAGE>
objectives, described in Exhibit III, and not tested in Exhibit II were
achieved; accordingly, we express no opinion on the achievement of control
objectives listed in Exhibit III and not tested in Exhibit II.
The description of policies and procedures for the multi-class
distribution for the funds is as of November 30, 1995, and information
about tests of the operating effectiveness of specified policies and
procedures covers the period from December 1, 1994 to November 30, 1995. Any
projection of such information to the future is subject to the risk that,
because of change, the description may no longer portray the system in
existence. The potential effectiveness of specified policies and procedures
is subject to inherent limitations and, accordingly, errors or
irregularities may occur and not be detected. Furthermore, the projection
of any conclusions, based on our findings, to future periods is subject to the
risk that changes may alter the validity of such conclusions.
This report is intended solely for use by management of the Funds and
for the Securities and Exchange Commission and should not be used for any other
purpose.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
February 2, 1996
<PAGE>
EXHIBIT I
ALEX. BROWN CASH RESERVE FUND, INC.
FLAG INVESTORS TELEPHONE INCOME FUND, INC.
FLAG INVESTORS INTERNATIONAL FUND, INC.
TOTAL RETURN U.S. TREASURY FUND, INC.
FLAG INVESTORS EMERGING GROWTH FUND, INC.
MANAGED MUNICIPAL 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.
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
<PAGE>
EXHIBIT II
TESTING COMPLIANCE WITH METHODOLOGY AND CONTROL PROCEDURES
RELATING TO FLAG INVESTORS FUNDS, TOTAL RETURN U.S. TREASURY
FUND, MANAGED MUNICIPAL FUND, AND ALEX. BROWN CASH RESERVE FUND
MULTI-CLASS DAILY NET INCOME DISTRIBUTION WORKSHEETS
FOR THE PERIOD FROM DECEMBER 1, 1994 TO NOVEMBER 30, 1995
Audit Procedures
The following procedures were performed with respect to the Daily Net Income
Distribution Worksheets. For selected days during the period December 1, 1994
to November 30, 1995 compliance with the control procedures was tested. Our
performance of the following audit procedures did not include any exceptions.
(bullet) Agreed the prior days' total net assets for each class to the previous
days' worksheets for all funds
(bullet) Agreed outstanding shares to the Portfolio Accounting System for each
class of shares
(bullet) Recalculated the current day's adjusted net assets (which is the
basis for determining allocation percentage for each class of
shares) by adding the capital share activity for the day to the prior
day's total net assets
(bullet) Recalculated the percentage of net assets by class for each class of
shares by dividing the respective class's ending net assets by the
total fund's ending net assets
(bullet) Recalculated the allocation of gross income, expenses, realized and
unrealized gains and losses for each class of shares and traced and
agreed allocations to class level trial balances
(bullet) Recalculated the distribution fee based on a percentage of net assets
as specified in the prospectus
(bullet) Recalculated dividends and distributions for each class of shares for
each of the funds tested
(bullet) Reviewed overall fund expense ratios for reasonableness by class of
shares
<PAGE>
EXHIBIT III
II. The Methodology and Control Procedures for Calculating the Net Asset
Value, Dividends and Distributions Payable of the Various Classes of
Shares and the Allocation of Investment Income, Expenses and Realized
and Unrealized Capital Gains (Losses) Among the Various Classes of:
ALEX. BROWN CASH RESERVE FUND, INC.
FLAG INVESTORS TELEPHONE INCOME FUND, INC.
FLAG INVESTORS INTERNATIONAL FUND, INC.
TOTAL RETURN U.S. TREASURY FUND, INC.
FLAG INVESTORS EMERGING GROWTH FUND, INC.
MANAGED MUNICIPAL 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.
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
