<PAGE>
As Filed With the Securities and Exchange Commission on February 25, 1998
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. 12 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 14 [x]
MANAGED MUNICIPAL FUND, INC.
----------------------------
(Exact Name of Registrant as Specified in Charter)
717 Fifth Avenue
New York, New York 10022
---------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (410) 727-1700
Edward J. Veilleux
One South 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, 1998 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on [Date] pursuant to paragraph (a)(2) of Rule 485.
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<PAGE>
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
February 25, 1998
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 and 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........................................ **
- ---------------
* Information required by Item 5A is contained in Registrant's 1997 Annual Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Part B - Information Required in a Statement of Additional Information
- ------
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 and Accounting
Services; Independent
Accountants
Item 17. Brokerage Allocation............................................. Portfolio Transactions
Item 18. Capital Stock and Other Securities............................... Capital Shares; Semi-
Annual 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
Part C - Other Information
Part C contains the information required by the items
contained therein under the items set forth in the form.
</TABLE>
<PAGE>
[GRAPHIC OMITTED]
FLAG INVESTORS
MANAGED MUNICIPAL FUND CLASS A SHARES
(A Class of Managed Municipal Fund, Inc.)
Prospectus & Application -- March 1, 1998
- --------------------------------------------------------------------------------
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 your securities dealer or the Fund's transfer agent. (See "How to
Invest in the Fund.")
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated March 1, 1998 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.
TABLE OF CONTENTS
Fund Expenses ..................... 1
Financial Highlights .............. 2
Investment Program ................ 3
Investment Restrictions ........... 5
How to Invest in the Fund ......... 5
How to Redeem Shares .............. 8
Telephone Transactions ............ 8
Dividends and Taxes ............... 9
Management of the Fund ............ 10
Investment Advisor ................ 10
Administrator ..................... 10
Distributor ....................... 11
Custodian, Transfer Agent and
Accounting Services .......... 11
Performance Information ........... 11
General Information ............... 12
Application ....................... A-1
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.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
FUND EXPENSES
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends ......................... None
Maximum Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) .................................... 0.50%*
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees (net of fee waivers) ......................................... 0.27%**
12b-1 Fees ................................................................... 0.25%
Other Expenses (net of fee waivers) .......................................... 0.38%
-------
Total Fund Operating Expenses (net of fee waivers) ........................... 0.90%**
=======
</TABLE>
- -----------
*If you purchase $1 million or more of Class A Shares, you will not have to
pay an initial sales charge. You may, however, be required to pay a contingent
deferred sales charge when you redeem your shares. (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 0.90% of the Fund's average daily net
assets. Absent fee waivers, Management Fees would be 0.40%, Other Expenses
(including administration fees) would be 0.45%, and Total Fund Operating
Expenses would be 1.10%, respectively, of the Fund's average daily net assets.
<TABLE>
<S> <C> <C> <C> <C>
Example: 1 year 3 years 5 years 10 years
- -------- -------- --------- --------- ---------
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period:* ...................... $54 $72 $93 $151
</TABLE>
- -----------
* Absent fee waivers, expenses would be higher.
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and
expenses that you will bear directly and indirectly when you invest in the
Fund. If you purchase Class A Shares through a financial institution, you may
be charged separate fees by the financial institution.
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, you may qualify for reduced sales charges or no sales charge at all.
(See "How to Invest in the Fund -- Offering Price".) Due to the continuous
nature of Rule 12b-1 fees, you may pay more than the equivalent of the maximum
front-end sales charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. if you hold your shares for a long
time.
1
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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, 1997 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, 1997, which can be
obtained at no charge by calling the Fund at (800) 767-FLAG.
(For a Share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......... $ 10.58 $ 10.65 $ 9.81
-------- -------- --------
Income from Investment
Operations:
Net investment income .......................... 0.52 0.48 0.48
Net realized and unrealized gain/(loss)
on investments ............................... 0.24 -- 0.98
-------- --------- --------
Total from Investment Operations ............... 0.76 0.48 1.46
-------- --------- --------
Less Distributions:
Distributions from net investment
income and net realized short-term
gains ........................................ ( 0.52) ( 0.54) ( 0.54)
Distributions from net realized mid-
term and long-term gains ..................... ( 0.03) ( 0.01) ( 0.08)
--------- --------- ---------
Total distributions ............................ ( 0.55) ( 0.55) ( 0.62)
--------- --------- ---------
Net asset value at end of period ............... $ 10.79 $ 10.58 $ 10.65
========= ========= =========
Total Return:(1)................................. 7.43% 4.67% 15.42%
Ratios to Average Daily Net Assets:
Expenses(3)..................................... 0.90% 0.90% 0.90%
Net investment income(5)........................ 4.46% 4.48% 4.72%
Supplemental Data:
Net assets at end of period (000):
Flag Investors Class A Shares ................ $ 38,390 $ 41,193 $ 45,980
ISI Class Shares ............................. $ 79,003 $ 84,712 $ 86,292
Portfolio turnover rate ........................ 26% 32% 55%
<PAGE>
<CAPTION>
February 26,
1990
Year Ended October 31, through
------------------------------------------------------ October 31,
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......... $ 11.10 $ 10.31 $ 10.36 $ 9.99 $ 10.00
--------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income .......................... 0.46 0.50 0.50 0.57 0.38
Net realized and unrealized gain/(loss)
on investments ............................... ( 1.15) 0.94 0.22 0.49 ( 0.02)
--------- -------- -------- -------- ---------
Total from Investment Operations ............... ( 0.69) 1.44 0.72 1.06 0.36
--------- -------- -------- -------- ---------
Less Distributions:
Distributions from net investment
income and net realized short-term
gains ........................................ ( 0.56) ( 0.61) ( 0.65) ( 0.69) ( 0.37)
Distributions from net realized mid-
term and long-term gains ..................... ( 0.04) ( 0.04) ( 0.12) -- --
--------- --------- --------- --------- ---------
Total distributions ............................ ( 0.60) ( 0.65) ( 0.77) ( 0.69) ( 0.37)
--------- --------- --------- --------- ---------
Net asset value at end of period ............... $ 9.81 $ 11.10 $ 10.31 $ 10.36 $ 9.99
========= ========= ========= ========= =========
Total Return:(1) ................................ ( 6.49)% 14.36% 6.06% 10.85% 1.21%(2)
Ratios to Average Daily Net Assets:
Expenses(3)..................................... 0.90% 0.90% 0.90% 0.90% 0.90%(4)
Net investment income(5)........................ 4.37% 4.38% 4.78% 5.57% 6.12%(4)
Supplemental Data:
Net assets at end of period (000):
Flag Investors Class A Shares ................ $ 49,903 $ 53,486 $ 45,536 $ 38,491 $ 5,698
ISI Class Shares ............................. $ 83,607 $ 88,378 $ 51,420 $ 20,053 $ 17,290
Portfolio turnover rate ........................ 37% 68% 95% 86% 99%
</TABLE>
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1 Total return excludes the effect of sales charge.
2 Flag Investors Class A Shares commenced operations on October 23, 1990.
3 Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been 1.10%, 1.13%, 1.10%,
1.11%, 1.14%, 1.27%, 1.47% and 1.92% for the periods ended October 31,
1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively.
4 Annualized.
5 Without the waiver of advisory and administration fees, the ratio of net
investment income to average daily net assets would have been 4.26%, 4.25%,
4.52%, 4.16%, 4.14%, 4.41%, 4.99% and 5.11% for the periods ended October
31, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively.
2
<PAGE>
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. 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. 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, A-1 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
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.
Selection of Investments
The Fund's investment advisor (the "Advisor" -- see "Investment Advisor")
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.") The
Advisor 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 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.
3
<PAGE>
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 or
other liquid 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. 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 to limit the effects of adverse market
action. The value of when-issued securities is subject to market fluctuation.
The Fund will ordinarily invest no more than 40% of its net assets at any time
in when-issued securities.
Acquisition of 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.
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.
Purchase of 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. Each demand note and bond
purchased by the Fund will meet the quality criteria established for the
purchase of other Municipal Obligations. 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.
Investments in 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 or increase in the
contract's value.
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")
permit the use of futures transactions for bona fide hedging purposes without
regard to the percentage of assets committed to futures
4
<PAGE>
margin and options premiums. CFTC regulations allow funds to employ futures
transactions for other "non-hedging" purposes to the extent that aggregate
initial futures margins and options premiums do not exceed 5% of total assets.
The Fund will not enter into Futures Contracts if obligations under all Futures
Contracts would amount to more than 30% of its total assets.
Investments in Repurchase Agreements
The Fund may agree to purchase U.S. Treasury Securities from creditworthy
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 are direct obligations of the U.S. Government
and are supported by the full faith and credit of the United States. Default by
or bankruptcy proceedings with respect to 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.
Taxable Investments
From time to time, the Fund may invest 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 you. (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.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions recited below are matters of fundamental
policy and may not be changed without shareholder approval. 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); or
3) 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.
HOW TO INVEST IN THE FUND
- --------------------------------------------------------------------------------
You may purchase Class A Shares through your securities dealer or through
any financial institution that is authorized to service shareholder accounts
("Shareholder Servicing Agents"). You may also purchase Class A Shares by
completing the Application Form attached to this Prospectus and returning it,
together with payment of the purchase price, to the address shown on the
Application Form.
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
5
<PAGE>
o If you are a shareholder of any other Flag Investors fund, your initial
investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be as low as $250. Subsequent investments may
be as low as $100 if made monthly, but must be $250 if done quarterly.
(See "Purchases Through Automatic Investing Plan" below).
You may purchase Class A Shares on any day on which the New York Stock
Exchange is open for business (a "Business Day"). Your purchase order will be
executed at a per share purchase price equal to the net asset value next
determined after it is received plus any applicable front-end sales charge (the
"Offering Price"). If your purchase is made by mail, it must be accompanied by
payment of the Offering Price. Purchases made through your securities dealer or
Shareholder Servicing Agent must be in accordance with their payment
procedures.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
The net asset value per share is determined 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 its
share of the Fund's assets, deducting all liabilities attributable to that
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 which is normally based on current prices but which may be
determined according to "fair value" procedures approved by the Fund's Board of
Directors.
Offering Price
Your share purchase is made 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 Dealer
as Percentage of
------------------------- Compensation
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>
* If you purchase $1 million or more of Class A Shares, you will not have to
pay an initial sales charge. You may, however, be subject to a contingent
deferred sales charge when you redeem your shares (See below.) The Fund's
distributor may make payments to your securities dealer or Shareholder
Servicing Agent in an amount up to 0.50% of the Offering Price.
<PAGE>
You may obtain reduced sales charges as set forth in the table above by
accumulating purchase orders for, and existing investments in, Class A Shares of
this Fund and Class A or Class D shares of any other Flag Investors fund. The
applicable sales charge will be determined based on the total value of your
current purchases plus the value of your existing investments. (For this
purpose existing investments will be valued at the higher of cost or current
value.) You may combine your purchases and investments with those of your
spouse and your children under the age of 21 for this purpose.
To obtain the reduced sales charge through this right of accumulation,
you must provide your securities dealer or Shareholder Servicing Agent with
sufficient information to verify that you have such a right. The Fund may amend
or terminate this right of accumulation at any time as to subsequent purchases.
You may also obtain the reduced sales charges shown above by executing a
written Letter of Intent that states your 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 does not require that you 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 your name) to secure payment of the
higher sales charge applicable to the Class A Shares actually purchased if you
do not purchase the full amount. Such escrowed shares will be redeemed to pay
the additional sales charge, if necessary. When the full amount indicated has
been purchased, the escrowed shares will be released. If you wish to enter into
a Letter of Intent in conjunction with an investment in Class A Shares, you may
do so by completing the appropriate section of the Application Form attached to
this Prospectus.
You will not be charged a sales charge on purchases of $1 million or more
of Class A Shares. You may, however, be required to pay a contingent deferred
sales charge if you redeem the purchased shares within 24 months. The charge
will be made at the rate of 0.50% 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 if your securities
dealer has agreed to return to the Fund's distributor (the
6
<PAGE>
"Distributor") any payments received on the sale of such shares. In determining
whether a contingent deferred sales 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.
You may purchase Class A Shares at net asset value (without sales charge)
under any of the following circumstances:
1) If you are purchasing shares in any of the following types of accounts:
(i) A fiduciary or advisory account with a bank, bank trust department,
registered investment advisory company, financial planner or
securities dealer purchasing shares on your behalf. To qualify for
this provision you must be paying an account management fee for the
fiduciary or advisory services. You may be charged an additional fee
by your broker or agent if you purchase shares in this manner;
(ii) A qualified retirement plan;
(iii) A Flag Investors fund payroll savings plan program.
2) If you are reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the last 90 days.
3) If you are exchanging an investment in another Flag Investors fund for an
investment in this Fund (see "Purchases by Exchange" for a full
description of the conditions).
4) If you are a current or retired Director of the Fund, a director, an
employee or a member of the immediate family of an employee of any of the
following or their respective affiliates: the Distributor, the Advisor,
the Fund's administrator, and any broker-dealer authorized to sell Class A
Shares.
You may also purchase Class A Shares through a Systematic Purchase Plan.
Contact your securities dealer or Shareholder Servicing Agent for details.
Purchases by Exchange
You may exchange Class A Shares of any other Flag Investors fund with the
same sales charge structure for an equal dollar amount of Class A Shares without
payment of the sales charges described above or any other charge. In addition,
you may exchange Class A Shares of any Flag Investors fund with a lower sales
charge (with the exception of Flag Investors Cash Reserve Prime Class A Shares)
for an equal dollar amount of Class A Shares if you have owned the shares you
are redeeming for at least 24 months. If you have owned them for less than 24
months, you may exchange them for Class A Shares if you pay the difference in
sales charges. You may enter both your redemption and purchase orders on the
same Business Day or, if you have already redeemed the shares of the other fund,
you may enter your purchase order within 90 days of the redemption.
When you acquire Class A Shares through an exchange from another fund in
the Flag Investors family of funds, the period for which the original shares
were held prior to the exchange will be combined with the holding period of the
shares acquired in the exchange for purposes of determining what, if any,
contingent deferred sales charge is applicable when those shares are redeemed.
The net asset value of shares purchased and redeemed in an exchange
request received on the same Business Day will be determined on that day,
provided that the exchange request is received prior to 4:00 p.m. (Eastern Time)
or the close of the New York Stock Exchange, whichever is earlier. Exchange
requests received after 4:00 p.m. (Eastern Time) will be effected on the next
Business Day.
You may exercise this exchange privilege by telephone. (See "Telephone
Transactions" below.)
The Fund may modify or terminate this offer of exchange at any time upon
60 days' prior written notice.
<PAGE>
Purchases Through Automatic Investing Plan
You may elect to have a specified amount invested monthly or quarterly in
Class A Shares. The amount specified will be withdrawn from your checking
account using a 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 you or the Fund upon 30 days' prior written notice to
the other party. If you wish to enroll in the Automatic Investing Plan or if
you wish to obtain additional information, complete the appropriate section of
the Application Form attached to this Prospectus.
Purchases Through Dividend Reinvestment
Unless you elect otherwise, all income dividends and net capital gains
distributions will be reinvested in additional Class A Shares at net asset
value. You may elect to receive your distributions in cash or to terminate
automatic reinvestment by completing the appropriate section of the attached
Application Form or by giving written notice to the Fund's transfer agent (the
"Transfer Agent") at the address listed on the inside back cover of this
Prospectus, either directly or
7
<PAGE>
through your securities dealer or Shareholder Servicing Agent, at least five
days before the next date on which dividends or distributions will be paid.
You may also have your distributions invested in shares of other funds in
the Flag Investors family of funds. Call your securities dealer or the Transfer
Agent for additional information.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem all or part of your investment on any Business Day
through your securities dealer, your Shareholder Servicing Agent or the Transfer
Agent. You may redeem up to $50,000 worth of Class A Shares by telephone. (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 your order (or, if stock certificates have been
issued for the Class A Shares to be redeemed, after you tender the stock
certificates for redemption). Redemption orders received after 4:00 p.m.
(Eastern Time) or the close of the New York Stock Exchange, whichever is
earlier, will be effected at the net asset value next determined on the
following Business Day. You will be paid for redeemed shares by check which will
be mailed within seven days after your redemption order is received in proper
form.
The Transfer Agent, your securities dealer or your Shareholder Servicing
Agent may require the following documents in order to redeem your shares:
1) A letter of instructions, specifying your account number 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 the account is maintained;
2) For redemptions in excess of $50,000, a guarantee of your signature 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 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 your
account have been redeemed on a dividend payable date, the dividend will be
remitted to you by check.
The Fund has the power, under its Articles of Incorporation, to redeem
your account upon 60 days' written notice if its value falls below $500 due to
your redemptions.
Systematic Withdrawal Plan
If you hold Class A Shares having a value of $10,000 or more you may
arrange to have a portion of your 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, your account may eventually be exhausted. Because Class A
Share purchases include a sales charge that you will not recover at the time of
redemption, you should not have a withdrawal plan in effect at the same time you
are making recurring purchases. If you wish to participate in the Fund's
Systematic Withdrawal Plan, complete the appropriate section of the Application
Form attached to this Prospectus.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
You may redeem Class A Shares in amounts up to $50,000 or exchange
Class A Shares in any amount, by notifying the Transfer Agent by telephone on
any Business Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time).
Telephone transaction privileges are automatic unless you specifically request
that no telephone redemptions or exchanges be accepted for your account. 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
8
<PAGE>
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) next determined on the following 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 you to provide certain personal identification
information at the time your account is opened and prior to effecting each
transaction requested by telephone. You may be required to provide additional
telecopied instructions. 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. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may
experience difficulty in effecting telephone transactions. In such event,
requests should be made by 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.")
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.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences
affecting the Fund and its shareholders is based on current tax laws and
regulations, which may be changed by legislative, judicial, or administrative
action. No attempt has been made to present a detailed explanation of the
federal, state or local tax treatment of the Fund or the shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Accordingly, you are advised to consult with your tax advisor regarding any
specific questions.
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.
<PAGE>
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 your gross income 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 you if you are a
"substantial user" of facilities financed with industrial development bonds or
private activity bonds (or a related party to a "substantial user"). (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.
You will be taxed on distributions from the Fund out of net investment
income that is not tax-exempt interest and out of net short-term capital gains
as ordinary income, whether such distributions are paid to you in cash or in
additional Class A Shares.
You will be taxed on distributions from the Fund out of net capital gains
as gains from the sale or exchange of a capital asset held for more than one
year, whether paid to you in cash or additional Class A Shares, and regardless
of how long you have held the shares. You will be advised annually as to the
federal income tax status of distributions made during the year.
Ordinarily, you should include all dividends 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 you and paid by the Fund in the year
in which the dividends were declared.
9
<PAGE>
The sale, exchange or redemption of Class A Shares is a taxable event for
you.
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.
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, distributors, administrator, custodian
and transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to its distributors, to the Advisor and to the Fund's
administrator. A majority of the Directors of the Fund have no affiliation with
the Distributor, the Advisor or the Fund's administrator.
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
International Strategy & Investment Inc. ("ISI" or the "Advisor"), 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, 1997, the Advisor had approximately $510 million under
management representing both tax-free and taxable accounts. The Advisor also
acts as investment advisor to Total Return U.S. Treasury Fund, Inc., North
American Government Bond Fund, Inc. and ISI Strategy Fund, Inc., open-end
management investment companies with approximately $358 million of aggregate
net assets as of December 31, 1997.
As compensation for its services for the fiscal year ended October 31,
1997, the Advisor received a fee (net of fee waivers) equal to 0.27% of the
Fund's average daily net assets. The Advisor and 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 0.90% of its average
daily net assets. (See "Fund Expenses.")
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 eighteen
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.
ADMINISTRATOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of
Bankers Trust New York Corporation, provides administration services to the
Fund. 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. As compensation for these services for the fiscal
year ended October 31, 1997, ICC received a fee (net of fee waivers) equal to
0.14% of the
10
<PAGE>
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 0.90% 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. An affiliate of ICC provides custody
services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
DISTRIBUTOR
- --------------------------------------------------------------------------------
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has
served as distributor of the Class A Shares since August 31, 1997. ICC
Distributors is a registered broker-dealer that offers distribution services to
a variety of registered investment companies including other funds in the Flag
Investors family of funds and BT Alex. Brown Cash Reserve Fund, Inc. ICC
Distributors is not affiliated with the Fund's administrator.
The Fund has adopted a Distribution Plan for the Class A Shares (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. As compensation for its services for the period from August 31, 1997
through October 31, 1997, the Distributor received a fee equal to 0.25%
(annualized) of the Class A Shares' average daily net assets. The Distributor
may allocate on a proportional basis up to all of its fee to selected
securities 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, including certain banks and BT Alex. Brown
Incorporated, to provide shareholder services, pursuant to which the
Distributor may 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 charge you separately for these
services.
Payments under the Plan are made as described above regardless of the
Distributor's actual cost of providing distribution services and may be used to
pay the Distributor's overhead expenses. If the cost of providing distribution
services is less than the payments received, the Distributor will retain the
unexpended portion of the distribution fee. The Distributor or the Fund's
administrator, and their respective affiliates, may make payments from their
own resources to securities dealers or Shareholder Servicing Agents. Payments
by the Distributor will include additional discounts or promotional incentives
in the form of cash or other compensation (including merchandise or travel).
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp., 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, 1997,
ICC received from the Fund a fee equal to 0.05% of the Fund's average daily net
assets. Bankers Trust Company, a subsidiary of Bankers Trust New York
Corporation, acts as custodian of the Funds' assets. (See the Statement of
Additional Information.)
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
11
<PAGE>
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. 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 your bank with
respect to the account through which your Class A Shares may be purchased,
although not included in calculations of performance, will reduce your
performance results.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Capital Shares
The Fund is an open-end, diversified management investment company organized
under the laws of the State of Maryland on January 5, 1990, and is authorized to
issue 40 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. 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
Unless required by Maryland law, the Fund does not expect to hold annual
meetings of shareholders. However, 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
You will be furnished with semi-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.
Shareholders Inquiries
If you have questions concerning your shares, you should contact the
Transfer Agent at (800) 553-8080, the Fund at (800) 767-FLAG, or your securities
dealer or Shareholder Servicing Agent.
12
<PAGE>
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<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND CLASS A SHARES
(A Class of Managed Municipal Fund, Inc.)
Investment Advisor
INTERNATIONAL STRATEGY & INVESTMENT INC.
717 Fifth Avenue
New York, New York 10022
Administrator Distributor
INVESTMENT COMPANY CAPITAL CORP. ICC DISTRIBUTORS, INC.
One South Street P.O. Box 7558
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
One South Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 2000 One Logan Square
New York, New York 10006 Philadelphia, Pennsylvania 19103
<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:
Flag Investors Funds
P.O. Box 419663
Kansas City, MO 64141-6663
Attn: Flag Investors Managed Municipal Fund Class A Shares
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.
For assistance in completing this Application please call: 1-800-553-8080,
Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
To open an IRA account, please call 1-800-767-3524 to request an IRA
information kit.
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)
List the Account numbers of other Flag Investors Funds that you or your
immediate family already own that qualify for this purchase.
Fund Name Account No. Owner's Name Relationship
- --------- ----------- ------------ ------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Class A Shares of the Fund at no
sales charge.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in Cash [ ] Paid in Cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
A-1
<PAGE>
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 [ ] Monthly ($100 minimum) [ ] Quarterly
(check one): ($250 minimum)
Please attach a voided check.
_____________________________ ____________________________________
Bank Name Depositor's Signature Date
_____________________________ ____________________________________
Existing Flag Investors Depositor's Signature Date
Fund Account No., if any (if joint acct., both must sign)
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:_________________________ Account No.: __________________________
Address:_________________________ Bank Account Name: __________________________
Signature and Taxpayer Certification
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above, I
have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a
penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-553-8080.)
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes: ____________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
<PAGE>
I have received a copy of the Fund's prospectus. 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.
The Internal Revenue Service does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
- ------------------------- ---------------------------------------------------
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.: _______________________
A-2
<PAGE>
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
February 25, 1998
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 and 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........................................ **
- ---------------
* Information required by Item 5A is contained in Registrant's 1997 Annual Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Part B - Information Required in a Statement of Additional Information
- ------
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 and Accounting
Services; Independent
Accountants
Item 17. Brokerage Allocation............................................. Portfolio Transactions
Item 18. Capital Stock and Other Securities............................... Capital Shares;
Semi-Annual 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
Part C - Other Information
Part C contains the information required by the items
contained therein under the items set forth in the form.
</TABLE>
- 41 -
<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 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.
Shares of the ISI class of the Fund ("Shares") are available through
International Strategy & Investment Group Inc., (the "Distributor"), as well as
your securities dealer or shareholder servicing agent. (See "How to Invest in
the Fund.")
This Prospectus sets forth basic information that you should know about
the Fund prior to investing. You should retain it for future reference. A
Statement of Additional Information dated March 1, 1998, 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 NOR HAS THE SECURITIES
AND EXCHANGE 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, 1998.
<PAGE>
1. Fund Expenses
Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.45%
Maximum Sales Charge Imposed on Reinvested Dividends ......................... None
Maximum Deferred Sales Charge ................................................ None
</TABLE>
<TABLE>
<S> <C>
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees (net of fee waivers) ........................................ 0.27%*
12b-1 Fees .................................................................. 0.25%
Other Expenses (net of fee waivers) ......................................... 0.38%*
Total Fund Operating Expenses (net of fee waivers) .......................... 0.90%*
--------
</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 0.90% of the Fund's average daily net assets.
Absent fee waivers, Management Fees would be 0.40%, Other Expenses (including
administration fees) would be 0.45% and Total Fund Operating Expenses would be
1.10%, respectively, of the Fund's average daily 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 $92 $150
</TABLE>
- ------------------------
*Absent fee waivers, expenses would be higher.
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and expenses
that you will bear directly and indirectly when you invest in Shares. If you
purchase Shares through a financial institution, you may be charged separate
fees by the financial institution. 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, you may qualify for reduced sales
charges or no sales charge at all. (See "How to Invest in the Fund -- Offering
Price.") Due to the continuous nature of Rule 12b-1 fees, you may pay more than
the equivalent of the maximum front-end sales charges permitted by the Conduct
Rules of the National Association of Securities Dealers, Inc. if you hold your
Shares for a long time.
2
<PAGE>
2. Financial Highlights
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, 1997 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, 1997, which is
available at no cost by calling the Fund at (800) 955-7175.
(For a Share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ................................... $ 10.58 $ 10.65 $ 9.81 $ 11.10
------- ------- ------- -------
Income from Investment Operations:
Net investment income ..................... 0.52 0.48 0.48 0.46
Net realized and unrealized gain/(loss)
on investments ........................... 0.24 -- 0.98 ( 1.15)
------- ------- ------- -------
Total from Investment Operations .......... 0.76 0.48 1.46 ( 0.69)
------- ------- ------- -------
Less Distributions:
Distributions from net investment
income and net realized short-term
gains .................................... ( 0.52) ( 0.54) ( 0.54) ( 0.56)
Distributions from net realized mid-
term and long-term gains ................. ( 0.03) ( 0.01) ( 0.08) ( 0.04)
------- ------- ------- -------
Total distributions ....................... ( 0.55) ( 0.55) ( 0.62) ( 0.60)
------- ------- ------- -------
Net asset value at end of period .......... $ 10.79 $ 10.58 $ 10.65 $ 9.81
======= ======= ======= =======
Total Return:(2)............................ 7.43% 4.67% 15.42% ( 6.49)%
Ratios to Average Daily Net Assets:
Expenses(3) ............................... 0.90% 0.90% 0.90% 0.90%
Net investment income(5) .................. 4.46% 4.48% 4.72% 4.37%
Supplemental Data:
Net assets at end of period (000):
ISI Class Shares ......................... $79,003 $84,712 $86,292 $83,607
Flag Investors Class A Shares ............ $38,390 $41,193 $45,980 $49,903
Portfolio turnover rate ................... 26% 32% 55% 37%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31, February 26, 1990(1)
------------------------------------- through
1993 1992 1991 October 31, 1990
----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ................................... $ 10.31 $ 10.36 $ 9.99 $ 10.00
------- ------- ------- ---------
Income from Investment Operations:
Net investment income ..................... 0.50 0.50 0.57 0.38
Net realized and unrealized gain/(loss)
on investments ........................... 0.94 0.22 0.49 ( 0.02)
------- ------- ------- ---------
Total from Investment Operations .......... 1.44 0.72 1.06 0.36
------- ------- ------- ---------
Less Distributions:
Distributions from net investment
income and net realized short-term
gains .................................... ( 0.61) ( 0.65) ( 0.69) ( 0.37)
Distributions from net realized mid-
term and long-term gains ................. ( 0.04) ( 0.12) -- --
------- ------- ------- ---------
Total distributions ....................... ( 0.65) ( 0.77) ( 0.69) ( 0.37)
------- ------- ------- ---------
Net asset value at end of period .......... $ 11.10 $ 10.31 $ 10.36 $ 9.99
======= ======= ======= =========
Total Return:(2)............................ 14.36% 6.06% 10.85% 3.78%
Ratios to Average Daily Net Assets:
Expenses(3) ............................... 0.90% 0.90% 0.90% 0.90%(4)
Net investment income(5) .................. 4.38% 4.78% 5.57% 6.12%(4)
Supplemental Data:
Net assets at end of period (000):
ISI Class Shares ......................... $88,378 $51,420 $20,053 $ 17,290
Flag Investors Class A Shares ............ $53,486 $45,536 $38,491 $ 5,698
Portfolio turnover rate ................... 68% 95% 86% 99%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been 1.10%, 1.13%, 1.10%,
1.11%, 1.14%, 1.27%, 1.47% and 1.92% for the periods ended October 31,
1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively.
(4) Annualized.
(5) Without the waiver of advisory and administration fees, the ratio of net
investment income to average daily net assets would have been 4.26%,
4.25%, 4.52%, 4.16%, 4.14%, 4.41%, 4.99% and 5.11% for the periods ended
October 31, 1997, 1996, 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 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. 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. 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, A-1 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
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.
Selection of Investments
The Fund's investment advisor (the "Advisor"--see "Investment Advisor") 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.")
The Advisor 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 will not
affect interest income
4
<PAGE>
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 or other liquid
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. 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 to limit the effects of adverse market action. The value of
when-issued securities is subject to market fluctuation. The Fund will
ordinarily invest no more than 40% of its net assets at any time in when-issued
securities.
Acquisition of 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.
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.
Purchase of 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. Each demand note and bond
purchased by the Fund will meet the quality criteria established for the
purchase of other Municipal Obligations. 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.
Investments in 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 or increase in the
contract's value.
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
5
<PAGE>
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") permit the
use of futures transactions for bona fide hedging purposes without regard to
the percentage of assets committed to futures margin and options premiums. CFTC
regulations also allow funds to employ futures transactions for other
"non-hedging" purposes to the extent that aggregate initial futures margins and
options premiums do not exceed 5% of total assets. The Fund will not enter into
Futures Contracts if obligations under all Futures Contracts would amount to
more than 30% of its total assets.
Investments in Repurchase Agreements
The Fund may agree to purchase U.S. Treasury Securities from creditworthy
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 are direct obligations of the U.S. Government
and are supported by the full faith and credit of the United States. Default by
or bankruptcy proceedings with respect to 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.
Taxable Investments
From time to time, the Fund may invest 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
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 you. (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 investment restrictions recited below are matters of fundamental policy and
may not be changed without shareholder approval. 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); or
3) Invest more than 10% of its total assets in illiquid securities, including
repurchase agreements with maturities
6
<PAGE>
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
You may purchase Shares through your securities dealer or through any financial
institution that is authorized to service shareholder accounts ("Shareholder
Servicing Agents"). You may also purchase Shares by completing the Application
Form attached to this Prospectus and returning it, together with payment of the
purchase price 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.
Your initial investment must be at least $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.) You may purchase Shares on
any day on which the New York Stock Exchange is open for business (a "Business
Day"). Your purchase order will be executed at a per Share purchase price equal
to the net asset value next determined after it is received plus any applicable
front-end sales charge (the "Offering Price"). If your purchase is made by
mail, it must be accompanied by payment of the Offering Price. Purchases made
through your securities dealer or Shareholder Servicing Agent must be in
accordance with their payment procedures. Your purchase order may not be
accepted if the sale of Fund shares has been suspended or if it is determined
that your purchase would be detrimental to the interests of the Fund's
shareholders.
The net asset value per share is determined 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 its
share of the Fund's assets, deducting all liabilities attributable to that
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 which is normally based on current prices but which may be
determined according to "fair value" procedures approved by the Fund's Board of
Directors.
Offering Price
Your Share purchase is made 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:
<PAGE>
<TABLE>
<CAPTION>
Sales Sales Dealer
Charge as Charge as Compen-
Percentage Percentage sation as
of of Net Percentage
Offering Amount of Offering
Amount of Purchase Price Invested 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>
- ------------------------
* The Distributor may make payments of up to 100% of the sales charge to your
securities dealer. Dealers that receive a reallowance of 100% of the sales
charge may be considered underwriters for purposes of the federal
securities laws.
You may obtain reduced sales charges as set forth in the table above by
accumulating purchase orders for, and existing investments in, Shares of this
Fund and any other fund in the ISI family of funds. The applicable sales charge
will be determined based on the total value of your current purchases plus the
value of your existing investments. (For this purpose, existing investments will
be valued at the higher of cost or current value.) You may combine your
purchases and investments with those of your spouse and your children under the
age of 21 for this purpose.
To obtain the reduced sales charge through this right of accumulation, you must
provide your securities dealer or Shareholder Servicing Agent with sufficient
information to verify that you have such a right. The Fund may amend or
terminate this right of accumulation at any time as to subsequent purchases.
7
<PAGE>
You may also obtain the reduced sales charges shown above by executing a
written Letter of Intent that states your 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 does not require that you 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 your name) to secure payment of the higher sales
charge applicable to the Shares actually purchased if you do not purchase the
full amount. Such escrowed Shares will be redeemed to pay the additional sales
charge, if necessary. When the full amount indicated has been purchased, the
escrowed Shares will be released. If you wish to enter into a Letter of Intent
in conjunction with an investment in Shares you may do so by completing the
appropriate section of the Application Form attached to this Prospectus.
You may purchase Shares at net asset value (without sales charge) under the
following circumstances:
1) If you are purchasing Shares in a fiduciary or advisory account with a bank,
bank trust department, registered investment advisory company, financial
planner or securities dealer purchasing Shares on your behalf. To qualify
for this provision, you must be paying an account management fee for the
fiduciary or advisory services. You may be charged an additional fee by
your broker or agent if you purchase Shares in this manner.
2) If you are reinvesting some or all of the proceeds of a redemption of Shares
made within the last six months provided that the amount you are
reinvesting is at least $5,000.
3) If you are exchanging an investment in another ISI fund for an investment in
this Fund (see "Purchases by Exchange" for a full description of the
conditions).
4) If you are a current or retired Director of the Fund, a director, employee
or a member of the immediate family of an employee of any of the following
or their respective affiliates: the Advisor, the Fund's administrator, and
any broker-dealer authorized to sell Shares.
Purchases by Exchange
You may exchange shares of any other fund in the ISI family of funds with the
same sales charge structure for an equal dollar amount of Shares without payment
of the sales charges described above or any other charge. In addition, you may
exchange shares of any fund in the ISI family of funds with a lower sales charge
structure, or that were have purchased through a special offer, for an equal
dollar amount of Shares if you have owned the shares you are redeeming for at
least 24 months. If you have owned them for less than 24 months, you may
exchange them for Shares if you pay the difference in sales charges. You may
enter both your redemption and purchase orders on the same Business Day or, if
you have already redeemed the shares of the other fund, you may enter your
purchase order within six months of the redemption, provided the amount of the
purchase order is at least $5,000.
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) or the close
of the New York Stock Exchange, whichever is earlier. Exchange requests
received after 4:00 p.m. (Eastern Time) will be effected on the next Business
Day.
Until February 28, 1999, you may exchange shares of any other mutual fund on
which you have paid a sales charge or shares of any closed-end fund, for an
equal dollar amount of Shares by submitting to the Distributor or to your
securities 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.
You may exercise the exchange privilege with respect to other ISI funds by
telephone. (See "Telephone Transactions" below.)
The Fund may modify or terminate these offers of exchange at any time upon 60
days' written notice.
Purchases Through Automatic Investing Plan
You may elect to have a specified amount invested monthly or quarterly in
Shares. The amount specified will be withdrawn from your checking account using
a 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
8
<PAGE>
you or the Fund upon 30 days' prior written notice to the other party. If you
wish to enroll in the Automatic Investing Plan or if you wish to obtain
additional information, complete the appropriate section of the Application
Form attached to this Prospectus.
Purchases Through Dividend Reinvestment
Unless you elect otherwise, all income dividends and capital gains
distributions will be reinvested in additional Shares at net asset value. You
may elect to receive your distributions in cash or to terminate automatic
reinvestment by completing the appropriate section of the attached Application
Form or by giving written notice to the Fund's transfer agent (the "Transfer
Agent") at the address listed on the inside back cover of this Prospectus,
either directly or through your securities dealer or Shareholder Servicing
Agent, at least five days before the next date on which dividends or
distributions will be paid.
You may also have your distributions invested in shares of other funds in the
ISI family of funds. Call your securities dealer or the Transfer Agent for
additional information.
6. How to Redeem Shares
You may redeem all or part of your investment on any Business Day through your
securities dealer, your Shareholder Servicing Agent or the Transfer Agent. You
may redeem up to $50,000 worth of Shares by telephone. (See "Telephone
Transactions" below.) A redemption order is effected at the net asset value per
share next determined after receipt of your order (or, if stock certificates
have been issued for the Shares to be redeemed, after you tender the stock
certificates for redemption). Redemption orders received after 4:00 p.m.
(Eastern Time) or the close of the New York Stock Exchange, whichever is
earlier, will be effected at the net asset value next determined on the
following Business Day. You will be paid for redeemed Shares by check which
will be mailed within seven days after your redemption order is received in
proper form.
The Transfer Agent, your securities dealer or your Shareholder Servicing Agent
may require the following documents in order to redeem your Shares:
1) A letter of instructions, specifying your account number 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 your signature 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 your account have been
redeemed on a dividend payable date, the dividend will be remitted to you by
check.
The Fund has the power, under its Articles of Incorporation, to redeem your
account upon 60 days' written notice if its value falls below $500 due to your
redemptions.
7. Telephone Transactions
You may redeem Shares in amounts up to $50,000 or exchange Shares in any
amount, by notifying the Transfer Agent by telephone on any Business Day
between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). Telephone
transaction privileges are automatic unless you specifically request that no
telephone redemptions or exchanges be accepted for your account. 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 next determined on the following 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 you to provide certain personal identification information at
the time your account is opened and prior to effecting each transaction
requested by telephone. You may be
9
<PAGE>
required to provide additional telecopied instructions. 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. Your telephone
transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in effecting telephone transactions. In such event, requests should
be made by 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
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.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences affecting the
Fund and its shareholders is based on current tax laws and regulations, which
may be changed by legislative, judicial, or administrative action. No attempt
has been made to present a detailed explanation of the federal, state or local
tax treatment of the Fund or the shareholders, and the discussion here is not
intended as a substitute for careful tax planning. Accordingly, you are advised
to consult with your tax advisor regarding any specific questions.
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 your gross income 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 you if you are a "substantial
user" of facilities financed with industrial development bonds or private
activity bonds (or a related party to a "substantial user"). (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.
You will be taxed on distributions from the Fund out of net investment income
that is not tax-exempt interest and out of net short-term capital gains as
ordinary income, whether such distributions are paid to you in cash or in
additional Shares.
You will be taxed on distributions from the Fund out of net capital gains as
gains from the sale or exchange of a capital asset held for more than one year
whether paid to you in cash or additional Shares, and regardless of how long
you have held the Shares. You will be advised annually as to the federal income
tax status of distributions made during the year.
Ordinarily, you should include all dividends 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 you 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 you.
10
<PAGE>
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.
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, distributors, administrator, custodian
and transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to its distributors, to the Advisor and to the Fund's
administrator. A majority of the Directors of the Fund have no affiliation with
the Distributor, the Advisor or the Fund's administrator.
The Fund's Directors and officers are as follows:
Edward S. Hyman 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
Nancy Lazar Vice President
Carrie L. Butler Vice President
Margaret M. Beeler Assistant Vice President
Keith C. Reilly Assistant Vice President
Joseph A. Finelli Treasurer
Amy M. Olmert Secretary
Scott J. Liotta Assistant Secretary
10. Investment Advisor
International Strategy & Investment Inc. ("ISI" or the "Advisor"), 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,
1997, the Advisor had approximately $510 million under management representing
both tax-free and taxable accounts. The Advisor also acts as investment advisor
to Total Return U.S. Treasury Fund, Inc., North American Government Bond Fund,
Inc. and ISI Strategy Fund, Inc., open-end management investment companies with
approximately $358 million of aggregate net assets as of December 31, 1997.
As compensation for its services for the fiscal year ended October 31, 1997,
the Advisor received a fee (net of fee waivers) equal to 0.27% of the Fund's
average daily net assets. ISI and 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 0.90% of its average daily net
assets. (See "Fund Expenses.")
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 eighteen
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"), an indirect subsidiary of Bankers
Trust New York Corporation, provides administration services to the Fund.
11
<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. As compensated for these services for the fiscal year ended
October 31, 1997, ICC received a fee (net of fee waivers) equal to 0.14% 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. An affiliate of ICC provides custody
services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
12. Distributor
International Strategy & Investment Group Inc. ("ISI Group" or the
"Distributor") has served as distributor of the Shares since April 1, 1997
pursuant to a Distribution Agreement and related Plan of Distribution (the
"Plan") adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended. ISI Group is a broker-dealer that was formed in 1991 and is
an affiliate of the Advisor. ISI Group employs Mr. Edward S. Hyman and Ms.
Nancy Lazar. Due to their stock ownership, Mr. Hyman and Ms. Lazar may be
deemed to be controlling persons of ISI Group. As compensation for its services
for the period from April 1, 1997 through October 31, 1997, the Distributor
received a fee equal to 0.25% (annualized) of the Shares' average daily net
assets. The Distributor may allocate on a proportional basis up to all of its
fee to selected securities dealers as compensation for their ongoing
shareholder services, including processing redemption and sale requests and
responding to your inquiries.
In addition, the Fund may enter into Shareholder Servicing Agreements with
certain financial institutions, such as banks to provide shareholder services,
pursuant to which the Distributor may 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 charge you separately for
these services.
Payments under the Plan are made as described above regardless of the
Distributor's actual cost of providing distribution services and may be used to
pay the Distributor's overhead expenses. If the cost of providing distribution
services is less than the payments received, the Distributor may retain the
unexpended portion of the distribution fee. The Distributor 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).
13. Custodian, Transfer Agent and Accounting Services
Investment Company Capital Corp. 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, 1997, ICC
received from the Fund a fee equal to 0.05% of the Fund's average daily net
assets. Bankers Trust Company, a subsidiary of Bankers Trust New York
Corporation, acts as custodian of the Fund's assets. (See the Statement of
Additional Information.)
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.
12
<PAGE>
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 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. 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 your bank
with respect to the account through which your Shares may be purchased,
although not included in calculations of performance, will reduce your
performance results.
15. General Information
Capital Shares
The Fund is an open-end, diversified management investment company organized
under the laws of the State of Maryland on January 5, 1990 and is authorized to
issue 40 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 the Fund 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.
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 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
Unless required by Maryland law, the Fund does not expect to hold annual
meetings of shareholders but special meetings of shareholders may be held under
certain circumstances. However, 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
You will be furnished with semi-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.
13
<PAGE>
Shareholder Inquiries
If you have questions concerning your Shares, you should contact the Transfer
Agent at (800) 882-8585, the Fund at (800) 955-7175, your securities dealer or
Shareholder Servicing Agent.
14
<PAGE>
ISI MANAGED MUNICIPAL FUND SHARES
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "ISI Managed Municipal Fund Shares" and mail with this
Application to:
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.
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
_________________________________________
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)
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
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)
List the Account numbers of other ISI Funds that you or your immediate family
already own that qualify for this purchase.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Distribution Options
Please check appropriate boxes. There is no sales charge for reinvested
dividends. If none of the options are selected, all distributions will be
reinvested.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in Cash [ ] Paid in Cash
Call (800) 882-8585 for information about reinvesting your dividends in other
funds in the ISI Family of Funds.
<PAGE>
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)
Please attach a voided check.
_____________________________________ ______________________________________
Bank Name Depositor's Signature Date
_____________________________________ ______________________________________
Existing ISI Managed Municipal Fund Depositor's Signature Date
Account No., if any (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: ________________________
__________________________
Signature and Taxpayer Certification
- --------------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above, I
have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer
Agent within 60 days of the date of this Application or if I fail to
furnish my correct Social Security Number or Tax ID Number, I may be
subject to a penalty and a 31% backup withholding on distributions and
redemption proceeds. (Please provide either number on IRS Form W-9.
You may request such form by calling the Transfer Agent at
800-882-8585.)
<PAGE>
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes: _________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or resident
and I am an exempt foreign person as defined by the Internal Revenue Service.
- --------------------------------------------------------------------------------
I have received a copy of the Fund's prospectus. 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.
- --------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- --------------------------------------------------------------------------------
__________________________________ __________________________________________
Signature Date Signature (if a joint account, Date
both must sign)
- --------------------------------------------------------------------------------
For Dealer Use Only
Dealer's Name: _____________________ Dealer Code: ________________________
Dealer's Address: _____________________ Branch Code: ________________________
_____________________
Representative: _____________________ Rep. No.: ________________________
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ISI MANAGED MUNICIPAL FUND SHARES
(A Class of Managed Municipal Fund, Inc.)
Investment Advisor
INTERNATIONAL STRATEGY & INVESTMENT INC.
717 Fifth Avenue
New York, New York 10022
1-800-955-7175
Administrator Distributor
INVESTMENT COMPANY CAPITAL CORP. INTERNATIONAL STRATEGY &
One South Street INVESTMENT GROUP INC.
Baltimore, Maryland 21202 717 Fifth Avenue
New York, New York 10022
Transfer Agent Independent Auditors
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
One South Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19013
1-800-882-8585
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 2000 One Logan Square
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
ISI
MANAGED
MUNICIPAL FUND
SHARES
(A Class of Managed
Municipal Fund, Inc.)
TABLE OF CONTENTS
Page
----
1. Fund Expenses ..................................................... 2
2. Financial Highlights .............................................. 3
3. Investment Program ................................................ 4
4. Investment Restrictions ........................................... 6
5. How to Invest in the Fund ......................................... 7
6. How to Redeem Shares .............................................. 9
7. Telephone Transactions ............................................ 9
8. Dividends and Taxes ............................................... 10
9. Management of the Fund ............................................ 11
10. Investment Advisor ................................................ 11
11. Administrator ..................................................... 11
12. Distributor ....................................................... 12
13. Custodian, Transfer Agent and Accounting Services ................ 12
14. Performance Information ........................................... 12
15. General Information ............................................... 13
ISI
INTERNATIONAL STRATEGY AND INVESTMENT
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 exempt from federal income tax through investment in a portfolio
consisting primarily of tax-free municipal obligations.
March 1, 1998
PROSPECTUS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------------------------
MANAGED MUNICIPAL FUND, INC.
One South 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 CALLING THE FUND AT (800) 767-FLAG (FOR
THE FLAG INVESTORS CLASS A SHARES CLASS) OR (800) 955-7175
(FOR THE ISI SHARES).
Statement of Additional Information Dated: March 1, 1998
Relating to Prospectuses
of
Flag Investors Managed Municipal Fund Class A Shares Dated: March 1, 1998
and
ISI Managed Municipal Fund Shares Dated: March 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. General Information and History ..................................1
2. Investment Objective and Policies ................................1
3. Valuation of Shares and Redemption................................6
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...........................................21
10. Capital Stock ...................................................22
11. Semi-Annual Reports..............................................23
12. Custodian, Transfer Agent and Accounting Services .............. 23
13. Independent Accountants .........................................24
14. Performance Information .........................................24
15. Control Persons and Principal Holders of
Securities .....................................................26
16. Financial Statements .........................................26
<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 Class A Shares") and ISI Managed Municipal Fund Shares (the "ISI
Shares"). There are two separate prospectuses for the Fund's shares: one for the
Flag Investors Class A Shares and one for the ISI Shares. Each prospectus
contains important information concerning the classes of shares offered thereby
and the Fund, and may be obtained without charge from the Fund by calling at
(800) 767-FLAG)(for a Prospectus for the Flag Investors Class A Shares) or (800)
955-7175) (for a prospectus for the ISI Shares), 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.
Prospectuses may also be obtained from Shareholder Servicing Agents. 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 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 (now BT Alex. Brown Incorporated), BT 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.
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
- 2 -
<PAGE>
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"). Each such Futures Contract
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, which is a member of the relevant
contract market. The exchanges guarantee performance of the contracts as between
the clearing members of the exchange.
- 3 -
<PAGE>
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 reflects 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 liquid
assets 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 (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 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
- 4 -
<PAGE>
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 creditworthy
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 under criteria established with
the assistance of the Advisor. The collateral for these repurchase agreements
will be held by the Fund's custodian or by a duly appointed sub-custodian. 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.
Investment Restrictions
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal
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. 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 equaling 5% or more of the Fund's
total assets are outstanding, the Fund will not purchase securities;
- 5 -
<PAGE>
2. 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;
3. Purchase or sell commodities or commodities contracts, provided
that for purposes of this restriction financial futures contracts are not
considered commodities or commodities contracts.
4. 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;
5. 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;
6. Make loans, except that the Fund may purchase or hold debt
instruments in accordance with its investment objectives and policies;
7. Effect short sales of securities;
8. Purchase securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions;
9. Purchase participations or other direct interests in oil, gas or
other mineral exploration or development programs or leases; or
10 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 investment restriction may be changed by a vote of a
majority of the Board of Directors. The Fund will not:
1. Invest in shares of any other investment company registered under
the Investment Company Act, except as permitted by federal law.
3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined daily as of the close of
the New York Stock Exchange, which is ordinarily 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, Martin Luther King, Jr. 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 its share
of the Fund's assets, deducting all liabilities attributable to that 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
- 6 -
<PAGE>
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 or 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.
The Fund may enter into agreements that allow a third party as agent
for the Fund, to accept orders from its customers up until the Fund's close of
business which is ordinarily 4:00 p.m. (Eastern Time). So long as a third party
receives an order prior to the Fund's close of business, the order is deemed to
have been received by the Fund and, accordingly, may receive the net asset value
computed at the close of business that day. These "late day" agreements are
intended to permit shareholders placing orders with third parties to place
orders up to the same time as other shareholders.
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.
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
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<PAGE>
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 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").
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).
The Fund will be subject to federal income taxation to the extent any
income or gains are not distributed.
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. Fund distributions
will not be eligible for the corporate dividends received deduction.
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
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<PAGE>
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 alterna tive 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 gain from the sale of a capital asset held for more
than twelve months 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 Shares
will be capital gain or loss which will be long-term if the Shares have been
held for more than eighteen months, mid-term if the Shares have been held for
more than twelve, but not more than eighteen months, and otherwise will be
short-term. However, if a shareholder recognizes a loss on the sale, exchange or
redemption of Shares held for six months or less, such loss will be treated as a
capital loss to the extent that any capital gains distributions have been paid
with respect to such Shares (or any undistributed net capital gains of the Fund
with respect to such Shares 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 after the disposition of the Shares). 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.
- 9 -
<PAGE>
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. In this event, such distributions
will generally be eligible for the dividends received deduction in the case of
corporate shareholders.
The Fund generally will be required in certain cases to withhold and
remit to the United States Treasury 31% of distributions payable to any
shareholder (1) who 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 report the receipt of interest or dividend income
properly, 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.
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 "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.
- 10 -
<PAGE>
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 & Investment Inc. (registered investment advisor), Chairman,
ISI Inc. (investments) and Chairman and President, International
Strategy & Investment Group Inc. (registered investment advisor and
registered broker-dealer).
*R. ALAN MEDAUGH, Director and President (8/20/43) President, International
Strategy & Investment Inc. (registered investment advisor).
*RICHARD T. HALE, Vice Chairman and Director (7/17/45) BT Alex. Brown
Incorporated, One South Street, Baltimore, MD 21202. Managing Director,
BT Alex. Brown Incorporated; Director and President, Investment Company
Capital Corp. (registered investment advisor); 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 (registered investment company).
JOHN F. KROEGER, Director (8/11/24) 37 Pippins Way, Morristown, New Jersey
07960. Director/Trustee, AIM Funds (registered investment companies);
Formerly, Consultant, Wendell & Stockel Associates, Inc. (consulting
firm) and 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
- 11 -
<PAGE>
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);
Director, Central Carolina Bank & Trust (banking), Key Funds (registered
investment companies) and DP Mann Holdings (insurance); Formerly,
Director, AMBAC Treasurers Trust (registered investment company).
NANCY LAZAR, Vice President (8/1/57) Executive Vice President and Secretary,
International Strategy and Investment Inc. (registered investment
advisor).
CARRIE L. BUTLER, Vice President (5/1/67) Assistant Vice President,
International Strategy and Investment Inc. (registered investment
advisor).
MARGARET M. BEELER, Assistant Vice President (3/1/67) Assistant Vice President,
International Strategy & Investment Inc., May 1996- Present. Formerly,
Marketing Representative, U.S. Healthcare, Inc., 1995-1996; Sales
Manager, Donna Maione, Inc., 1994-1995; Sales Manager, Deborah Wiley
California, 1989-1994.
KEITH C. REILLY, Assistant Vice President (6/22/66) Assistant Vice President,
International Strategy & Investment Inc., May 1996-Present. Formerly,
Select Private Banking Officer, Assistant Manager, Chemical Bank,
1995-1996; Financial Consultant, Dreyfus Corporation, 1989-1995.
JOSEPH A. FINELLI, Treasurer (1/24/57) BT Alex. Brown Incorporated, One South
Street, Baltimore, MD 21202. Vice President, BT Alex. Brown Incorporated
and Vice President, Investment Company Capital Corp. (registered
investment advisor), September 1995-Present; Formerly, Vice President
and Treasurer, The Delaware Group of Funds (registered investment
companies) and Vice President, Delaware Management Company Inc.
(investments), 1980-August 1995.
AMY M. OLMERT, Secretary (5/14/63) BT Alex. Brown Incorporated, One South
Street, Baltimore, MD 21202. Vice President, BT Alex. Brown
Incorporated, June 1997-Present. Formerly, Senior Manager, Coopers &
Lybrand L.L.P., September 1988 - June 1997.
SCOTT J. LIOTTA, Assistant Secretary (3/18/65) BT Alex. Brown Incorporated,
One South Street, Baltimore, MD 21202. Assistant Vice-President, BT
Alex. Brown Incorporated, July 1996-Present; Formerly, Manager and
Foreign Markets Specialist, Putnam Investments Inc. (registered
investment companies), April 1994-July 1996; Supervisor, Brown Brothers
Harriman & Co. (domestic and global custody), August 1991-April 1994.
- ---------------------------
* 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, administered or managed
by BT Alex. Brown Incorporated ("BT
- 12 -
<PAGE>
Alex. Brown") or any of its affiliates. There are currently 13 funds in the Flag
Investors/ISI Funds and BT Alex. Brown Cash Reserve Fund, Inc. fund complex (the
"Fund Complex"). Mr. Hyman serves as a Chairman of four funds in the Fund
Complex. Mr. Medaugh serves as Director and President of two funds and as
President of two other funds in the Fund Complex. Mr. Hale serves as Chairman of
four funds and as a director of eight other funds in the Fund Complex. Messrs.
Cunnane, Kroeger, Levy and McDonald serve as Directors of each of the funds in
the Fund Complex. Ms. Lazar and Ms. Butler serve as Vice Presidents and Ms.
Beeler and Mr. Reilly serve as Assistant Vice Presidents of four funds in the
Fund Complex. Ms. Olmert serves as Secretary, Mr. Finelli serves as Treasurer
and Mr. Liotta serves 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 the Advisor 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)
(an "Independent 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 BT 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, 1997, Independent Directors' fees attributable to
the assets of the Fund totaled $3,504. The following table shows aggregate
compensation payable to each of the Fund's Directors by the Fund and the Fund
Complex, respectively, and pension or retirement benefits accrued as part of
Fund expenses in the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Compensation Pension or Total Compensation From the
Position From the Fund for the Retirement Benefits Fund and Fund Complex Payable
Fiscal Year Ended Accrued as Part of to Directors for the Fiscal Year
October 31, 1997 Fund Expenses Ended October 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Edward S. Hyman(1) $0 $0 $0
Chairman
R. Alan Medaugh(1) $0 $0 $0
Director & President
Richard T. Hale(1) $0 $0 $0
Vice Chairman
W. James Price(1,2) $0 $0 $0
Vice Chairman
James J. Cunnane $773(3) (4) $39,000 for service on
Director 13 Boards in Fund Complex
John F. Kroeger $972(3) (4) $49,000 for service on
Director 13 Boards in Fund Complex
Louis E. Levy $773(3) (4) $39,000 for service on
Director 13 Boards in Fund Complex
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Compensation Pension or Total Compensation From the
Position From the Fund for the Retirement Benefits Fund and Fund Complex Payable
Fiscal Year Ended Accrued as Part of to Directors for the Fiscal Year
October 31, 1997 Fund Expenses Ended October 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Eugene J. McDonald $773(3) (4) $39,000 for service on
Director 13 Boards in Fund Complex
Harry Woolf(2) $213(3) (4) $9,750 for service on
Director 12 Boards in Fund Complex
</TABLE>
- ----------
(1) A Director who is an "interested person" as defined in the Investment
Company Act.
(2) Retired, effective December 31, 1996. Mr. Woolf was appointed President
of certain funds in the Fund Complex. For serving as President, Mr.
Woolf receives compensation from such funds, in addition to his
retirement benefits.
(3) Of the amounts payable to Messrs. Cunnane, Kroeger, Levy, McDonald and
Woolf, $773, $0, $0, $773 and $213, respectively, was deferred pursuant
to a deferred compensation plan.
(4) The Fund Complex has adopted a retirement plan for eligible Directors,
as described below. The actuarially computed pension expense allocated
to the Fund for the fiscal year ended October 31, 1997 was
approximately $6,920.
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 six 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. Mr. Kroeger has qualified
but has not received benefits. The Fund has two Participants, a Director who
retired effective December 31, 1994 and a Director who retired effective
December 31, 1996, each of whom has qualified for the Retirement Plan by serving
thirteen years and fourteen years, respectively, as Directors in the Fund
Complex and who 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.
Set forth in the table below are the estimated annual benefits payable
to a Participant upon retirement assuming various years of service and payment
of a percentage of the fee earned by such Participant in his last year of
service, as described above. The approximate credited years of service at
December 31, 1997 are as follows: for Mr. Cunnane, 3 years; for Mr. Kroeger, 15
years; for Mr. Levy, 3 years; and for Mr. McDonald, 5 years.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- -----------------------------------------------------------------
Chairman of Audit Committee Other Participants
--------------------------- ------------------
<S> <C> <C>
6 years $4,900 $3,900
7 years $9,800 $7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>
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. Messrs. Cunnane, Levy and McDonald have each executed a
Deferred Compensation Agreement.
- 14 -
<PAGE>
Currently, the deferring Directors may select from among various Flag Investors
funds and BT Alex. Brown Cash Reserve Fund, Inc. in which all or part of their
deferral account shall be deemed to be invested. Distributions from the
deferring Directors deferral accounts will be paid in cash, in generally equal
quarterly installments over a period of ten years.
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 applies to the personal investing activities of directors and
officers of the Fund, as well as to designated officers, directors and employees
of the Advisor and the Distributors. As described below, the Code of Ethics
imposes significant restrictions on the Advisor'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 any officer, director or employee of
the Fund, ISI Group, or the Advisor, preclear any personal securities
investments (with certain exceptions, such as non-volitional purchases or
purchases which are part of an automatic dividend reinvestment plan). The
foregoing would also apply to any officer, director or employee of ICC
Distributors that is an access person. 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 special 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.
Officers, directors and employees of the Advisor and the Distributors may comply
with codes of ethics instituted by those entities so long as they contain
similar requirements and restrictions.
6. INVESTMENT ADVISORY AND OTHER SERVICES
International Strategy & Investment Inc. ("ISI" or the "Advisor")
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.; North American Government Bond Fund, Inc. and ISI Strategy Fund,
Inc.
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 average
- 15 -
<PAGE>
daily net assets of either the Flag Investors Shares or 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.
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 Independent 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 16,
1997. The Fund or the Advisor may terminate the Investment Advisory Agreement on
60 days' written notice without penalty. The Investment Advisory Agreement will
terminate automatically in the event of assignment (as defined in the Investment
Company Act).
Advisory fees paid by the Fund to ISI for the last three fiscal years
were as follows:
Year Ended October 31,
----------------------
1997 1996 1995
---- ---- ----
$ 323,888(1) $ 323,403(2) $353,743(3)
- ----------
(1) Net of fee waivers of $157,087.
(2) Net of fee waivers of $192,777.
(3) Net of fee waivers of $177,885.
7. ADMINISTRATION
Investment Company Capital Corp. ("ICC" or the "Administrator")
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.
- 16 -
<PAGE>
Administration fees paid by the Fund to ICC for the last three fiscal
years were as follows:
Year Ended October 31,
----------------------
1997 1996 1995
---- ---- ----
$ 164,190(1) $ 159,950(2) $176,872(3)
- ----------
(1) Net of fee waivers of $76,298.
(2) Net of fee waivers of $98,140.
(3) Net of fee waivers of $88,942.
ICC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Fund. An affiliate of ICC serves as the
Fund's custodian. (See "Custodian, Transfer Agent and Accounting Services.") ICC
is an indirect subsidiary of Bankers Trust New York Corporation.
8. DISTRIBUTION OF FUND SHARES
International Strategy & Investment Group Inc. ("ISI Group") serves as
Distributor for the ISI Shares pursuant to a Distribution Agreement effective
April 1, 1997 ("ISI Distribution Agreement"). Prior to April 1, 1997, Armata
Financial Corp. served as Distributor for the ISI Shares for the same rate of
compensation and on substantially the same terms as the ISI Distribution
Agreement. ICC Distributors Inc. ("ICC Distributors") serves as Distributor for
the Flag Investors Shares pursuant to an agreement effective August 31, 1997
("Flag Distribution Agreement"). Prior to August 31, 1997, Alex. Brown & Sons
Incorporated ("Alex. Brown") served as Distributor for the Flag Investors Shares
for the same rate of compensation and on substantially the same terms as the
Flag Distribution Agreement. The Distribution Agreements provide that ICC
Distributors (in the case of the Flag Investors Shares) or ISI Group (in the
case of the ISI Shares) has the exclusive right to distribute the related class
of Shares either directly or through other broker-dealers.
The ISI Distribution Agreement provides that ISI Group on behalf of the
ISI Shares (i) will solicit and receive orders for the purchase of ISI Shares
(ii) 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 (iii) receive requests for
redemption and transmit such redemption requests to the Fund's transfer agent as
promptly as possible (iv) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund; (v) provide the Fund's
Board of Directors for their review with quarterly reports required by Rule
12b-1; (vi) maintain such accounts, books and records as may be required by law
or be deemed appropriate by the Fund's Board of Directors; and (vii) take all
actions deemed necessary to carry into effect the distribution of the Shares.
Pursuant to the ISI Distribution Agreement, ISI has not undertaken to sell any
specific number of ISI Shares. The ISI Distribution Agreement further provides
that, in connection with the distribution of Shares, ISI Group will be
responsible for all promotional expenses. The services by ISI Group to the Fund
are not exclusive, and ISI Group shall not be liable to the Fund or its
shareholders for any act or omission by ISI Group 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.
The Flag Distribution Agreement provides that ICC Distributors shall;
(i) use reasonable efforts to sell Flag Investors Shares upon the terms and
conditions contained in the Flag Distribution Agreement and the Fund's then
current Prospectus; (ii) use its best efforts to conform
- 17 -
<PAGE>
with the requirements of all federal and state laws relating to the sale of the
Flag Investors Shares; (iii) adopt and follow procedures as may be necessary to
comply with the requirements of the National Association of Securities Dealers,
Inc. and any other applicable self-regulatory organization; (iv) perform its
duties under the supervision of and in accordance with the directives of the
Fund's Board of Directors and the Fund's Articles of Incorporation and By-Laws;
and (v) provide the Fund's Board of Directors with a written report of the
amounts expended in connection with the Flag Distribution Agreement. Pursuant to
the Flag Distribution Agreement, ICC Distributors shall devote reasonable time
and effort to effect sales of Flag Investors Shares but shall not be obligated
to sell any specific number of Shares. The services of ICC Distributors are not
exclusive and ICC Distributors shall not be liable to the Fund or its
shareholders for any error of judgment or mistake of law, for any losses arising
out of any investment, or for any action or inaction of the ICC Distributors in
the absence of bad faith, willful misfeasance or gross negligence in the
performance of ICC Distributors' duties or obligations under the Flag
Distribution Agreement or by reason of ICC Distributors' reckless disregard of
its duties and obligations under the Flag Distribution Agreement. The Flag
Distribution Agreement further provides that the Fund and ICC Distributors will
mutually indemnify each other for losses relating to disclosures in the Fund's
registration statement.
The Distribution Agreements may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock") or
upon 60 days' written notice by the Distributor and shall automatically
terminate in the event of an assignment. The Flag Distribution Agreement has an
initial term of one year from the date of effectiveness. It shall continue in
effect from year to year with respect to each class of the Fund provided that it
is approved at least annually by (i) a vote of a majority of the outstanding
voting securities of the related class of the Fund or (ii) a vote of a majority
of the Fund's Board of Directors including a majority of the Independent
Directors and, with respect to each Flag Investors' class of the Fund for which
there is a plan of distribution, so long as such plan of distribution is
approved at least annually by the Independent Directors in person at a meeting
called for the purpose of voting on such approval (see below). The ISI
Distribution Agreement has an initial term of two years and will remain in
effect from year to year provided that it is specifically approved (a) at least
annually by the Fund's Board of Directors and (b) by the affirmative vote of a
majority of the Independent Directors by votes cast in person at a meeting
specifically called for such purpose. The Flag Distribution Agreement, including
the form of Sub-Distribution Agreement, was initially approved by the Board of
Directors, including a majority of the Independent Directors, on August 4, 1997.
The ISI Distribution Agreement, including the form of Sub-Distribution
Agreement, was most recently approved by the Board of Directors, including a
majority of the Independent Directors, including the form of Sub-Distribution
Agreement, on September 16, 1997.
ICC Distributors and ISI Group have entered into Sub-Distribution
Agreements with Participating Dealers ("Participating dealers") under which such
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. Any Sub-Distribution Agreement may be
terminated in the same manner as the Distribution Agreements at any time and
shall automatically terminate in the event of an assignment.
In addition, the Fund may enter into Shareholder Servicing Agreements
with certain financial institutions, such as BT Alex. Brown and certain banks,
to act as Shareholder Servicing Agents, pursuant to which ICC Distributors and
ISI Group will allocate a portion of their respective distribution fees as
compensation for such financial institutions' ongoing shareholder services. The
Fund may also enter into Shareholder Servicing Agreements pursuant to which the
Distributors or the Fund's administrator or their respective affiliates will
provide compensation out of its own resources for ongoing shareholder services.
Although banking laws and regulations prohibit banks
- 18 -
<PAGE>
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.
As compensation for providing distribution and related administrative
services as described above, the Fund will pay ICC Distributors for the Flag
Investors Class A Shares and ISI Group for the ISI Shares, on a monthly basis,
an annual fee, equal to .25% of the average daily net assets of the respective
class of Shares. The Distributors expect to allocate up to all of their fees to
Participating Dealers and Shareholder Servicing Agents.
As compensation for providing distribution and shareholder services to
the Fund for the last three fiscal years, the Fund's distributors received fees
in the following amounts:
- --------------------------------------------------------------------------------
Fiscal Year Ended October 31,
Class 1997 1996 1995
- --------------------------------------------------------------------------------
Flag Investors Class A 12b-1 $ 98,275(1) $ 109,247(3) $120,214(3)
- --------------------------------------------------------------------------------
ISI Shares 12b-1 $ 202,335(2) $ 213,366(4) $212,053(4)
- --------------------------------------------------------------------------------
- ------------
(1) Of this amount, Alex. Brown, the Flag Investors Shares' distributor
prior to August 31, 1997, received $82,194 and ICC Distributors, the
Flag Investors Shares' distributor effective August 31, 1997, received
$16,081.
(2) Of this amount, Armata, the ISI Shares' distributor prior to April 1,
1997, received $85,542 and ISI Group, the ISI Shares' distributor
effective April 1, 1997, received $116,793.
(3) Fees received by Alex. Brown, the Flag Investors Shares' distributor
for the fiscal years ended October 31, 1996 and 1995.
(4) Fees received by Armata, the ISI Shares' distributor for the fiscal
years ended October 31, 1996 and October 31 1995.
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 ICC Distributors or ISI Group for distribution and other shareholder
servicing assistance as set forth in the related Distribution Agreement, and ICC
Distributors and ISI Group are authorized to make payments out of their fees to
Participating Dealers and Shareholder Servicing Agents. The Plans will remain in
effect from year to year as specifically approved (a) at least annually by the
Fund's Board of Directors and (b) by the affirmative vote of a majority of the
Independent Directors, by votes cast in person at a meeting called for such
purpose. The Plans were most recently approved by the Fund's Board of Directors,
including a majority of the Independent Directors, on September 16, 1997.
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
- 19 -
<PAGE>
subsequent year. The Plans may not be amended to increase materially the fee to
be paid pursuant to the Distribution Agreements without the approval of the
shareholders of the respective classes of the Fund. The Plans may be terminated
at any time by a vote of a majority of the Fund's Independent Directors or by a
vote of a majority of the outstanding Shares.
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 ICC Distributors or ISI Group pursuant to
the Distribution Agreements, to Participating Dealers pursuant to
Sub-Distribution Agreements and to Shareholder Servicing Agents pursuant to
Shareholder Servicing 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 Independent Directors shall be
committed to the discretion of the Independent Directors then in office.
Under the Plans, amounts allocated to Participating Dealers and
Shareholder Servicing Agents may not exceed amounts payable to ICC Distributors
or ISI Group, as appropriate, with respect to shares held by or on behalf of
customers of such entities. Payments under the Plans are made as described above
regardless of the distributor's actual cost of providing distribution services
and may be used to pay such distributor's overhead expenses. If the cost of
providing distribution services to the Fund in connection with the sale of the
Flag Investors Class A Shares or the ISI Shares is less than .25% of such
Shares' average daily net assets for any period the unexpended portion of the
distribution fee may be retained by the distributor. The Plans do not provide
for any charges to the Fund for excess amounts expended by the distributor and,
if a Plan is terminated in accordance with its terms, the obligation of the Fund
to make payments to the distributor pursuant to the Plan will cease and the Fund
will not be required to make any payments past the date the related Distribution
Agreement terminates. In return for payments received pursuant to the Plans in
the fiscal years ended October 31, 1997, October 31, 1996 and October 31, 1995,
respectively, the Fund's distributors, as appropriate, paid the
distribution-related expenses of the Fund including one or more of the
following: advertising expenses; printing and mailing of prospectuses to other
than current shareholders; compensation to dealers and sales personnel; and
interest, carrying or other financing charges.
For the last three fiscal years, the distributor for the Flag Investors
Shares received the following commissions or contingent deferred sales charges,
and from such commissions or sales charges, the distributor retained the
following amounts:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1997 1996 1995
---------------------------------------------------------------------------------------------------------------
Received Retained Received Retained Received Retained
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A $ 343,650(1) $ 325,322(3) $ 27,710(5) $ 26,210(5) $ 63,394(5) $62,002(5)
Commissions
- ------------------------------------------------------------------------------------------------------------------------------------
ISI Shares $ 182,686(2) $ 135,546(4) $ 92,720(6) $ 30,319(6) $ 353,850(6) $ 18,641(6)
Commissions
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------
(1) Of this amount, Alex. Brown, the Flag Investors Shares' distributor
prior to August 31, 1997, received ________ and ICC Distributors, the
Flag Investors Shares' distributor effective August 31, 1997, received
---------.
(2) Of this amount, Armata, the ISI Shares' distributor prior to April 1,
1997, received ________ and ISI Group, the ISI Shares' distributor
effective April 1, 1997 received _________.
- 20 -
<PAGE>
(3) Of commissions received, Alex. Brown retained _____________ and ICC
Distributors retained ______, respectively.
(4) Of commissions received, Armata retained ________ and ISI Group
retained ______, respectively
(5) By Alex. Brown, the Flag Investors Shares' distributor for the fiscal
years ended October 31, 1996 and October 31, 1995.
(6) By Armata, the ISI Shares' distributor for the fiscal years ended
October 31, 1996 and October 31, 1995.
Except as described elsewhere, the Fund pays or causes to be paid all
continuing expenses of the Fund, including, without limitation: investment
advisory, administration 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, 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 costs and expenses of engraving or printing of
certificates representing Shares; all costs and expenses in connection with the
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 of the Fund and supplements thereto to
the 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 Independent Directors and Independent 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 or 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
assumed by ISI, ICC, ISI Group or ICC Distributors.
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 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
- 21 -
<PAGE>
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 than another broker might have charged on brokerage transactions
for the Fund for brokerage or research services. 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, 1997,
October 31, 1996 and October 31, 1995 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, 1997,
the Fund held a 5.60% repurchase agreement issued by Goldman Sachs & Co. valued
at $10,140,000. 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.
10. CAPITAL STOCK
The Fund is authorized to issue 40 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
Shares, Flag Investors Class A Shares (formerly known as Flag Investors Managed
Municipal Fund Shares), Flag Investors Managed Municipal
- 22 -
<PAGE>
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. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-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
Bankers Trust Company ("Bankers Trust") has been retained to act as
custodian of the Fund's investments. Bankers Trust receives such compensation
from the Fund for its services as Custodian as may be agreed to from time to
time by Bankers Trust and the Fund. For the period from September 22, 1997
through October 31, 1997, Bankers Trust accrued custodian fees of $2,341.
Investment Company Capital Corp. 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, 1997,
such fees totaled $56,933.
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.
- 23 -
<PAGE>
Average Net Assets Incremental Annual Accounting Fee
------------------ ---------------------------------
$ 0 - $ 10,000,000 $13,000 (fixed fee)
$ 10,000,000 - $ 20,000,000 .100%
$ 20,000,000 - $ 30,000,000 .080%
$ 30,000,000 - $ 40,000,000 .060%
$ 40,000,000 - $ 50,000,000 .050%
$ 50,000,000 - $ 60,000,000 .040%
$ 60,000,000 - $ 70,000,000 .030%
$ 70,000,000 - $ 100,000,000 .020%
$100,000,000 - $ 500,000,000 .015%
$500,000,000 - $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, 1997, ICC received fees of $58,038.
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
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
- 24 -
<PAGE>
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). 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.
Calculated according to SEC rules, the ending redeemable value and
average annual total return of a hypothetical $1,000 investment for the periods
ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
One-Year Period Ended Five-Year Period Ended
October 31, 1997 October 31, 1997 Since Inception
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Ending Annual Ending Annual Ending Annual
Class Redeemable Total Redeemable Total Redeemable Total
Value Return Value Return Value Return
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Flag Investors
Class A Shares $1,025.91 2.59% $1,325.27 5.79% $1,576.94 6.70%
*October 23, 1990
- ------------------------------------------------------------------------------------------------------------------------------------
ISI Shares
*February 26, 1990 $1,026.47 2.64% $1,325.99 5.80% $1,617.93 6.46%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Inception Date
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.
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
- 25 -
<PAGE>
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 Shares and 4.50%
for the Flag Investors 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 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, 1997, the yield for the ISI
Shares was 4.05% and the yield for the Flag Investors Class A Shares was 4.05%.
For the same 30-day period, the taxable-equivalent yield (for an investor in the
31% tax bracket) was 5.87% for the ISI Shares and 5.87% for the Flag Investors
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. The Fund's portfolio
turnover rate in fiscal year 1997 was 26% and in fiscal year 1996 was 32%,
respectively.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, no shareholder owned beneficially 5% or
more of the Fund's outstanding Shares, as of February 2, 1998.
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>
AB FI MANAGED MUNICIPAL
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Statement of Net Assets October 31, 1997
<TABLE>
<CAPTION>
Rating* Par Market Value
Issuer (Moody's/S&P) (000) (Note 1)
- -----------------------------------------------------------------------------------
<S><C>
MUNICIPAL BONDS--93.5%
General Obligation--73.9%
Arlington, TX, Independent School
District, 5.75%, 2021 Aaa/NR** $5,000 $ 5,131,100
Charlotte, NC:
5.30%, 2011 Aaa/AAA 1,590 1,653,203
5.30%, 2012 Aaa/AAA 2,325 2,408,724
5.30%, 2012 Aaa/AAA 1,120 1,160,331
5.80%, 2016 Aaa/AAA 2,500 2,642,725
Chicago, IL, 6.30%, 2009 Aa2/AA 1,000 1,119,360
Dallas, TX, 5.00%, 2010 Aa1/AAA 1,750 1,764,753
Delaware State, Series "A",
5.125%, 2016 Aa1/AA+ 2,150 2,133,209
DuPage County, IL, Jail Project,
5.60%, 2021 Aaa/AAA 1,600 1,670,032
Florida Board of Education, Refunding
Public Education:
6.125%, 2012 Aa2/AA+ 2,250 2,402,730
5.50%, 2021 Aa2/AA+ 2,000 2,009,400
5.125%, 2022 Aa2/AA+ 5,000 4,833,650
Florida State Department of
Transportation, 5.80%, 2018 Aa2/AA+ 2,000 2,085,540
Franklin County, OH:
5.45%, 2009 Aaa/AAA 1,500 1,569,330
5.50%, 2013 Aaa/AAA 1,000 1,025,510
Georgia State, Series "D":
5.25%, 2009 Aaa/AAA 1,580 1,653,296
5.00%, 2010 Aaa/AAA 2,000 2,031,940
Grand Prairie, TX, School District,
5.20%, 2018 Aaa/AAA 2,000 1,980,060
Henrico County, VA, 5.25%, 2009 Aaa/AAA 1,000 1,032,600
Maryland State & Local Facilities,
Second Series, 5.125%, 2010 Aaa/AAA 3,000 3,076,860
Metropolitan Government of Nashville,
Davidson County, TN, 5.125%, 2019 Aa2/AA 4,000 3,945,320
Minneapolis, MN, Sports Arena:
5.00%, 2011 Aaa/AAA 1,710 1,716,823
5.00%, 2012 Aaa/AAA 1,920 1,923,014
</TABLE>
- 27 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rating* Par Market Value
Issuer (Moody's/S&P) (000) (Note 1)
- -----------------------------------------------------------------------------------
<S><C>
MUNICIPAL BONDS--continued
General Obligation--concluded
Minneapolis, MN, Series "B",
5.20%, 2013 Aaa/AAA $ 3,200 $ 3,222,272
Minnesota State, 5.00%, 2014 Aaa/AAA 2,500 2,469,000
Missouri State Building, Series "A",
5.75%, 2014 Aaa/AAA 1,000 1,060,540
Plano, TX, Independent School District,
5.00%, 2011 Aaa/AAA 3,000 2,979,630
Portland, OR, Metro, 5.25%, 2007 Aa/AA+ 1,500 1,561,425
Salt Lake County, UT, 5.25%, 2010 Aaa/AA+ 2,000 2,054,420
South Carolina Capital Improvement:
5.00%, 2009 Aaa/AAA 2,700 2,754,324
5.625%, 2014 Aaa/AAA 2,700 2,824,362
State of Tennessee:
Series "A", 5.50%, 2009 Aaa/AA+ 1,535 1,608,388
Series "A", 5.55%, 2010 Aaa/AA+ 1,000 1,044,830
State of Texas, 6.00%, 2014 Aa2/AA 2,000 2,131,500
Virginia State, 5.375%, 2012 Aaa/AAA 1,000 1,027,970
Washington State:
Series "A", 5.60%, 2010 Aa1/AA+ 1,500 1,570,935
Series "R", 5.00%, 2014 Aa1/AA+ 2,250 2,207,452
Series "E", 5.00%, 2022 Aa1/AA+ 2,000 1,912,500
Wisconsin State Series:
Series 1, 5.00%, 2015 Aa2/AA 1,000 978,320
Series "B", 5.00%, 2016 Aa2/AA 3,500 3,409,350
Series "B", 5.00%, 2018 Aa2/AA 1,000 966,400
------------
86,753,128
------------
Electric and Gas Utility Revenue--0.3%
San Antonio, TX, Electric & Gas Revenue,
Series "A", 6.50%, 2012 Aa1/AA 315 327,269
------------
Prerefunded Issues--13.1%
Arizona Highway Transportation Board,
6.00%, 2010 #AAA(dagger)/AAA 3,480 3,680,935
Florida Board of Education, Refunding
Public Education, 6.50%, 2012 #AAA(dagger)/
AA+ 2,500 2,756,925
</TABLE>
- 28 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) October 31, 1997
<TABLE>
<CAPTION>
Rating* Par Market Value
Issuer (Moody's/S&P) (000) (Note 1)
- -----------------------------------------------------------------------------------
<S><C>
MUNICIPAL BONDS--concluded
Prerefunded Issues--concluded
Howard County, MD, Consolidated
Public Improvements, Series "A",
6.90%, 2002 #AAA(dagger)/
AAA $ 1,000 $ 1,068,090
Jacksonville, FL, Electric Authority
Revenue, Scherer 4-1-A,
6.75%, 2021 #AAA(dagger)/AAA 1,000 1,087,740
Lower Colorado River Authority, Jr. Lien,
4th Supply, 5.25%, 2015 #AAA(dagger)/AAA 2,000 2,029,320
San Antonio, TX, Electric & Gas Revenue,
Series "A", 6.50%, 2012 #AAA(dagger)/AA 685 716,537
State of Hawaii, General Obligation:
7.00%, 2006 Aaa/(dagger) 750 802,958
6.125%, 2010 NR**/
(dagger)(dagger) 1,000 1,065,630
University of Texas, 6.50%, 2011 #AAA(dagger)/AAA 2,000 2,190,460
------------
15,398,595
------------
Transportation Revenue--4.9%
Kansas Transportation Revenue:
5.40%, 2009 Aa/AA 2,000 2,075,060
5.40%, 2009 Aa/AA 2,500 2,587,575
Virginia State Transportation Authority,
6.00%, 2010 Aa/AA 1,000 1,060,130
------------
5,722,765
------------
Other Revenue--1.3%
Indianapolis, IN, Local Public
Improvement Board, 6.00%, 2018 Aaa/AA+ 1,500 1,555,620
------------
Total Municipal Bonds
(Cost $105,730,300) 109,757,377
</TABLE>
- 29 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Market Value
Issuer (000) (Note 1)
- -----------------------------------------------------------------------------------
<S><C>
REPURCHASE AGREEMENT--8.6%
Goldman Sachs & Co., 5.60%
Dated 10/31/97, to be repurchased on 11/3/97,
collateralized by U.S. Treasury Notes
with a market value of $10,343,302.
(Cost $10,140,000) $10,140 $ 10,140,000
------------
Total Investment in Securities--102.1%
(Cost $115,870,300)*** 119,897,377
Liabilities in Excess of Other Assets, Net--(2.1%) (2,503,641)
------------
Net Assets--100.0% $117,393,736
============
Net Asset Value and Redemption Price Per:
Flag Investors Class A Share
($38,390,248 / 3,557,464 shares outstanding) $10.79
======
ISI Class Share
($79,003,488 / 7,322,827 shares outstanding) $10.79
======
Maximum Offering Price Per:
Flag Investors Class A Share
($10.79 / 0.9550) $11.30
======
ISI Class Share
($10.79 / 0.9555) $11.29
======
</TABLE>
- --------
* The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available as of October 31, 1997.
Ratings of issues have not been audited by Coopers & Lybrand
L.L.P.
** Not rated.
*** Also aggregate cost for federal tax purposes.
+ Moody's #AAA rating indicates advance refunded issues secured
by escrowed funds held in cash, held in trust or invested in
direct non-callable U.S. government obligations or non-callable
obligations unconditionally guaranteed by the U.S. government.
++ Prerefunded bonds backed by U.S. Treasury securities. Absent
prerefunding, this obligation is rated Aa3/A+.
See Notes to Financial Statements.
- 30 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
October 31,
- -----------------------------------------------------------------------------------
1997
<S><C>
Investment Income (Note 1):
Interest $6,440,149
----------
Expenses:
Investment advisory fee (Note 2) 480,975
Distribution fee (Note 2) 300,610
Administration fee (Note 2) 240,488
Accounting fee (Note 2) 58,038
Transfer agent fee (Note 2) 56,933
Printing and postage 34,500
Legal 30,248
Audit 28,879
Registration fees 25,681
Miscellaneous 25,414
Custodian fee (Note 1) 21,363
Directors' fees 7,819
Insurance 4,811
----------
Total expenses 1,315,759
Less:Fees waived (Note 2) (233,385)
----------
Net expenses 1,082,374
----------
Net investment income 5,357,775
----------
Net realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 1,002,650
Change in unrealized appreciation or depreciation of investments 2,249,576
----------
Net gain on investments 3,252,226
----------
Net increase in net assets resulting from operations $8,610,001
==========
</TABLE>
See Notes to Financial Statements.
- 31 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended October 31,
- ------------------------------------------------------------------------------------
1997 1996
<S><C>
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 5,357,775 $ 5,787,049
Net realized gain from security transactions 1,002,650 281,659
Change in unrealized appreciation or
depreciation of investments 2,249,576 (272,341)
------------ ------------
Net increase in net assets resulting
from operations 8,610,001 5,796,367
------------ ------------
Dividends to Shareholders from (Note 1):
Net investment income and
net realized short-term gains:
Flag Investors Class A Shares (1,919,815) (2,244,395)
ISI Class Shares (3,948,488) (4,374,225)
Net realized mid-term and long-term gains:
Flag Investors Class A Shares (129,060) (43,313)
ISI Class Shares (267,980) (82,292)
------------ ------------
Total distributions (6,265,343) (6,744,225)
------------ ------------
Capital Share Transactions (Note 3):
Proceeds from sale of shares 5,846,126 8,278,327
Value of shares issued in
reinvestment of dividends 3,443,291 3,789,940
Cost of shares repurchased (20,144,490) (17,488,342)
------------ ------------
Decrease in net assets derived from capital
share transactions (10,855,073) (5,420,075)
------------ ------------
Total decrease in net assets (8,510,415) (6,367,933)
Net Assets:
Beginning of year 125,904,151 132,272,084
------------ ------------
End of year $117,393,736 $125,904,151
============ ============
</TABLE>
See Notes to Financial Statements.
- 32 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
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,
- ------------------------------------------------------------------------------------
1997
<S><C>
Per Share Operating Performance:
Net asset value at beginning of year $ 10.58
-------
Income from Investment Operations:
Net investment income 0.52
Net realized and unrealized gain/(loss) on investments 0.24
-------
Total from Investment Operations 0.76
-------
Less Distributions:
Distributions from net investment income
and net realized short-term gains (0.52)
Distributions from net realized mid-term and
long-term gains (0.03)
-------
Total distributions (0.55)
-------
Net asset value at end of year $ 10.79
=======
Total Return(1) 7.43%
Ratios to Average Daily Net Assets:
Expenses(2) 0.90%
Net investment income(3) 4.46%
Supplemental Data:
Net assets at end of year:
Flag Investors Class A Shares $38,390
ISI Class Shares $79,003
Portfolio turnover rate 26%
</TABLE>
- --------
(1) Total return excludes the effect of sales charge.
(2) Without the waiver of advisory and administration fees (Note 2), the ratio
of expenses to average daily net assets would have been 1.10%, 1.13%, 1.10%,
1.11% and 1.14% for the years ended October 31, 1997, 1996, 1995, 1994 and
1993, respectively.
(3) Without the waiver of advisory and administration fees (Note 2), the ratio
of net investment income to average daily net assets would have been 4.26%,
4.25%, 4.52%, 4.16% and 4.14% for the years ended October 31, 1997, 1996,
1995, 1994 and 1993, respectively.
- 33 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended October 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
<S><C>
Per Share Operating Performance:
Net asset value at beginning of year $ 10.65 $ 9.81 $ 11.10 $ 10.31
------- ------ ------- -------
Income from Investment Operations:
Net investment income 0.48 0.48 0.46 0.50
Net realized and unrealized gain/(loss) on investments -- 0.98 (1.15) 0.94
------- ------ ------- -------
Total from Investment Operations 0.48 1.46 (0.69) 1.44
------- ------ ------- -------
Less Distributions:
Distributions from net investment income
and net realized short-term gains (0.54) (0.54) (0.56) (0.61)
Distributions from net realized mid-term and
long-term gains (0.01) (0.08) (0.04) (0.04)
------- ------ ------- -------
Total distributions (0.55) (0.62) (0.60) (0.65)
------- ------ ------- -------
Net asset value at end of year $ 10.58 $10.65 $ 9.81 $ 11.10
======= ====== ======= =======
Total Return(1) 4.67% 15.42% (6.49)% 14.36%
Ratios to Average Daily Net Assets:
Expenses(2) 0.90% 0.90% 0.90% 0.90%
Net investment income(3) 4.48% 4.72% 4.37% 4.38%
Supplemental Data:
Net assets at end of year:
Flag Investors Class A Shares $41,193 $45,980 $49,903 $53,486
ISI Class Shares $84,712 $86,292 $83,607 $88,378
Portfolio turnover rate 32% 55% 37% 68%
</TABLE>
See Notes to Financial Statements.
- 34 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--Significant Accounting Policies
Managed Municipal Fund, Inc. (the "Fund"), which was organized as a
Maryland Corporation on January 15, 1990 and commenced operations February 26,
1990, is registered under the Investment Company Act of 1940 as a diversified,
open-end investment management company. It is designed to provide a high level
of total return with relative stability of principal as well as the secondary
objective of high current income exempt from federal income tax through
investment in a portfolio consisting primarily of tax-free municipal
obligations.
The Fund consists of two share classes: ISI Managed Municipal Fund Shares
("ISI Class"), which commenced February 26, 1990, and Flag Investors Managed
Municipal Fund Class A Shares ("Flag Investors Class A"), which commenced
October 23, 1990.
The ISI Class Shares have a 4.45% maximum front-end sales charge and the
Flag Investors Class A Shares have a 4.50% maximum front-end sales charge. Both
classes have a 0.25% distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. Under certain circumstances, it is necessary to reclassify prior year
information in order to conform to the current year's presentation. The Fund's
significant accounting policies are:
A. Security Valuation--Municipal obligations are usually traded in the
over-the-counter market. When there is an available market quotation,
the Fund values a municipal obligation by using the most recent price
provided by an investment dealer. The Fund utilizes the services of an
independent pricing vendor to obtain prices. When a market quotation is
unavailable, the Investment Advisor determines a fair value using
procedures that the Board of Directors establishes and monitors. The
Fund values short-term obligations with maturities of 60 days or less at
amortized cost.
B. Repurchase Agreements--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
- 35 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
NOTE 1--concluded
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the broker defaults.
The Fund's access to the collateral may be delayed or limited if the
broker defaults and the value of the collateral declines or if the
broker enters into an insolvency proceeding.
C. Federal Income Taxes--The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and
gains that are available for distribution under income tax regulations.
The Fund is organized as a regulated investment company. As long as
it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net realized
capital gains, it will be exempt from most, if not all, federal income
and excise taxes. As a result, the Fund has made no provisions for
federal income taxes.
D. Security Transactions, Investment Income, Distributions and Other--The
Fund uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed. Interest
income is recorded on an accrual basis and includes the pro rata
scientific method for amortization of premiums and accretion of
discounts when appropriate. Income and common expenses are allocated to
each class based on its respective average net assets. Class specific
expenses are charged directly to each class. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
International Strategy & Investment Inc. ("ISI") is the Fund's investment
advisor and Investment Company Capital Corp. ("ICC"), an indirect subsidiary of
Bankers Trust New York Corporation, is the Fund's administrator. As compensation
for its advisory services, the Fund pays ISI an annual fee based on the Fund's
average daily net assets. This fee is calculated daily and paid monthly at
- 36 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2--continued
the annual rate of 0.40%. As compensation for its administrative services, the
Fund pays ICC an annual fee based on the Fund's average daily net assets. This
fee is calculated daily and paid monthly at the annual rate of 0.20%.
ISI and ICC have agreed to reduce their fees proportionately when necessary
so that the Fund's annual expenses are no more than 0.90% of the Fund's average
daily net assets. For the year ended October 31, 1997, ISI waived fees of
$157,087 and ICC waived fees of $76,298.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisor or administrator.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $58,038 for accounting services for the year ended
October 31, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $56,933 for
transfer agent services for the year ended October 31, 1997.
Effective September 22, 1997, Bankers Trust Company became the Fund's
custodian. Prior to September 22, 1997, PNCBank served as the Fund's custodian.
From September 22, 1997 to October 31, 1997, the Fund accrued $2,341 in custody
expenses.
As compensation for providing distribution services for the ISI Class, the
Fund pays ISI Group Inc. ("ISI Group"), which is affiliated with ISI, an annual
fee that is calculated daily and paid monthly. This fee is paid at an annual
rate equal to 0.25% of the ISI Class' average daily net assets. Prior to April
1, 1997, Armata Financial Corp. served as the distributor for the ISI Class for
the same compensation and on substantially the same terms as ISI Group. As
compensation for providing distribution services for the Flag Investors Class A
Shares, the Fund pays ICC Distributors, Inc. ("ICC Distributors"), a member of
the Forum Financial Group of companies, an annual fee that is calculated daily
and paid monthly. This fee is paid at an annual rate equal to 0.25% of the Flag
Investors Class A Shares' average daily net assets. Prior to September 1, 1997,
Alex. Brown & Sons Incorporated served as the distributor for the Flag Investors
Class A Shares for the same compensation and on substantially the same terms as
ICC Distributors. For the year ended October 31, 1997, distribution fees
aggregated $300,610, of which $202,335 was attributable to the ISI Class Shares
and $98,275 was attributable to the Flag Investors Class A Shares.
- 37 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
NOTE 2--concluded
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
October 31, 1997 was $6,920, and the accrued liability was $19,880.
NOTE 3--Capital Share Transactions
The Fund is authorized to issue up to 40 million shares of $.001 par value
capital stock (15 million Flag Investors Class A, 20 million ISI Class, 2.5
million Flag Investors Class B, 500,000 Flag Investors Class D and 2 million
undesignated). Transactions in shares of the Fund are listed below.
Flag Investors Class A Shares
---------------------------------
For the For the
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
Shares sold 167,474 200,140
Shares issued to shareholders on
reinvestment of dividends 101,621 114,250
Shares redeemed (606,069) (736,822)
----------- -----------
Net decrease in shares outstanding (336,974) (422,432)
=========== ===========
Proceeds from sale of shares $ 1,785,725 $ 2,079,607
Value of reinvested dividends 1,072,730 1,200,959
Cost of shares redeemed (6,423,913) (7,734,234)
----------- -----------
Net decrease from capital share transactions $(3,565,458) $(4,453,668)
=========== ===========
ISI Class Shares
---------------------------------
For the For the
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
Shares sold 382,670 585,014
Shares issued to shareholders on
reinvestment of dividends 224,594 246,345
Shares redeemed (1,295,279) (924,026)
------------ -----------
Net decrease in shares outstanding (688,015) (92,667)
============ ===========
Proceeds from sale of shares $ 4,060,401 $ 6,198,720
Value of reinvested dividends 2,370,561 2,588,981
Cost of shares redeemed (13,720,577) (9,754,108)
------------ -----------
Net decrease from capital share transactions $ (7,289,615) $ (966,407)
============ ===========
- 38 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 4--Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $30,711,360 and sales of investment securities aggregated $41,685,157
for the year ended October 31, 1997.
On October 31, 1997, aggregate net unrealized appreciation over tax cost
for portfolio securities was $4,027,077, of which $4,186,285 related to
appreciated securities and $159,208 related to depreciated securities.
NOTE 5--Net Assets
On October 31, 1997, net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
Paid-in capital:
Flag Investors Class A Shares $ 36,127,769
ISI Class Shares 76,949,687
Undistributed net realized long-term gains from security transactions 289,203
Unrealized appreciation of investments 4,027,077
------------
$117,393,736
============
</TABLE>
- 39 -
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
- --------------------------------------------------------------------------------
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, 1997, 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, 1997, by correspondence with the custodian and brokers. 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, 1997, 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 each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
November 26, 1997
- 40 -
<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 Part A and B of the Registration Statement:
- Statement of Net Assets as of October 31, 1997
- Statement of Operations for the fiscal year ended October 31,
1997
- Statement of Changes in Net Assets for the fiscal years ended
October 31, 1997 and October 31, 1996
- Financial Highlights for the fiscal years ended October 31,
1997, October 31, 1996, 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) (a) Articles of Incorporation.(1)
(b) Articles Supplementary to Articles of Incorporation dated
December 15, 1993.(1)
(c) Articles Supplementary to Articles of Incorporation dated
December 31, 1994.(1)
(2) By-Laws, as amended through December 18, 1996.(2)
(3) None.
(4) (a) ISI Managed Municipal Fund Shares, Specimen Certificate of
Common Stock, $.001 par value.(3)
(b) Flag Investors Managed Municipal Fund Class A Shares,
Specimen Certificate of Common Stock, $.001 par value.(3)
(5) Investment Advisory Agreement dated April 1, 1991 between
Registrant and International Strategy & Investment Inc.(1)
(6) (a) Distribution Agreement (Flag Investors Shares) dated as of
August 31, 1997 between Registrant and ICC Distributors,
Inc., filed herewith.
(b) Form of Participating Dealer Agreement for Flag Investors Man
aged Municipal Fund Shares between ICC Distributors, Inc. and
Participating Dealers, filed herewith.
(c) Form of Shareholder Servicing Agreement for Flag Investors
Shares, filed herewith.
<PAGE>
(d) Distribution Agreement (ISI Shares) dated April 1, 1997
between Registrant and International Strategy & Investment
Group Inc., filed herewith.
(e) Form of Agency Distribution Agreement for ISI Managed
Municipal Fund Shares between International Strategy &
Investment Group Inc. and Participating Dealers as in effect
from April 1, 1997, filed herewith.
(f) Form of Shareholder Servicing Agreement for ISI Shares, filed
herewith.
(7) None.
(8) Form of Custodian Agreement between Registrant and Bankers Trust
Company, filed herewith.
(9) (a) Master Services Agreement between Registrant and Investment
Company Capital Corp. and Appendices for the provision of
Administrative, Accounting and Transfer Agency Services.(1)
(10) Opinion of Counsel.(1)
(11) Consent of Coopers & Lybrand L.L.P., filed herewith.
(12) None.
(13) Form of Subscription Agreement re: initial $100,000 capital.(1)
(14) None.
(15) (a) Distribution Plan for the ISI Managed Municipal Fund
Shares.(1)
(b) Distribution Plan for the Flag Investors Managed Municipal
Fund Class A Shares.(1)
(c) Amended Distribution Plan for the ISI Managed Municipal Fund
Shares, filed herewith.
(d) Amended Distribution Plan for the Flag Investors Managed
Municipal Fund Class A Shares, filed herewith.
(16) Schedule of Computation of Performance Quotations
(unaudited).(1)
(18) (a) Rule 18f-3 Plan.(1)
(b) Amended Rule 18f-3 Plan, filed herewith.
(24) Powers of Attorney, filed herewith.
(27) Financial Data Schedule, filed herewith.
- -------------------
(1) Incorporated by reference to Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-32819), filed with
the Securities and Exchange Commission via EDGAR on February 26, 1996.
C-2
<PAGE>
(2) Incorporated by reference to Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A. (Registration No. 33-32819), filed with
the Securities and Exchange Commission via EDGAR on February 26, 1997.
(3) Incorporated by reference to Exhibit 1, (Articles of Incorporation), as
amended to date, filed as part of Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-32819), filed with the Securities and Exchange Commission via EDGAR on
February 26, 1996, and Exhibit 2 (By-Laws), as amended to date, filed as
part of Post-Effective Amendment No. 11 to such Registration Statement,
filed with the Securities and Exchange Commission via EDGAR on February 26,
1997.
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 February 2, 1998
ISI Managed 1298
Municipal Fund Shares
Flag Investors Managed 946
Municipal Fund Shares - Class A
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
C-3
<PAGE>
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 ByLaws 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.
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 determina tion 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, Chief Executive Officer and a Director
of International Strategy & Investment Group Inc., the distributor for the
Fund's ISI Managed Municipal Fund Shares; R. Alan Medaugh, President of the
Investment Advisor, served as a Director of International Strategy & Investment
Group Inc.; Nancy Lazar, Executive Vice President and Secretary of the
Investment Advisor, served as Executive Vice President and a Director of
International Strategy & Investment Group, Inc.; and Joel Fein, Chief Financial
Officer of the Investment Advisor served as Chief Financial Officer of
International Strategy & Investment Group Inc.
C-4
<PAGE>
Item 29. Principal Underwriters.
ICC DISTRIBUTORS, INC.
(a) Effective August 31, 1997, ICC Distributors, Inc. acts as distributor
for BT 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
Short-Intermediate Income Fund, Inc. (formerly known as 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>
<S> <C> <C> <C>
Name and Principal Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
----------------- --------------------- ---------------
John Y. Keefer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Richard C. Butt Vice President None
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
</TABLE>
* Two Portland Square
Portland, Maine 04101
(c) Not Applicable
INTERNATIONAL STRATEGY & INVESTMENT GROUP INC.
(a) International Strategy & Investment Group Inc. acts as distributor for
ISI Total Return U.S. Treasury Fund Shares (a class of Total Return
U.S. Treasury Fund, Inc.), ISI North American Government Bond Fund
Shares (a class of North American Government Bond Fund, Inc.), and ISI
Strategy Fund Shares (a class of ISI Strategy Fund, Inc.), registered
open-end investment companies.
C-5
<PAGE>
(b)
Position and
Offices with Position and
Name and Principal Principal Offices with
Business Address** Underwriter Registrant
- ------------------ --------------------- ----------------
Edward S. Hyman Chairman, Chief Chairman and
Executive Officer and Director
Director
R. Alan Medaugh Director President and
Director
Nancy Lazar Executive Vice Vice President
President and
Director
Joel Fein Chief Financial None
Officer
- -----------------------
** 717 Fifth Avenue
New York, New York 10022
(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.
Investment Company Capital Corp. ("ICC"), the Registrant's administrator,
transfer agent, dividend disbursing agent and accounting services provider, One
South 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 maintained by the Registrant's investment advisor,
International Strategy & Investment Inc. ("ISI"), 717 Fifth Avenue, New York,
New York 10022, by the distributor of the Flag Investors Shares, ICC
Distributors, Inc. Two Portland Square, Portland, Maine 04101, by the
distributor for the ISI Managed Municipal Fund Shares, International Strategy &
Investment Group Inc., 717 Fifth Avenue, New York, New York 10022, and by the
Registrant's custodian, Bankers Trust Company, 130 Liberty Street, New York, New
York 10006.
In particular, with respect to the records required by Rule 31a-1(b)(1),
ISI and ICC each maintained physical possession of all journals containing
itemized daily records of all purchases and sales of securities, including sales
and redemptions of Fund securities, and Bankers Trust Company maintains physical
possession of all receipts and deliveries of securities (including certificate
numbers if such detail is not recorded by the transfer-agent), all receipts and
disbursements of cash, and all other debts and credits.
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.
C-6
<PAGE>
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-7
<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 amendment 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 25th day of February, 1998.
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:
* Chairman and Director February 25, 1998
- ------------------------- -----------------
Edward S. Hyman Date
* Director February 25, 1998
- ------------------------- -----------------
Richard T. Hale Date
* Director February 25, 1998
- ------------------------- -----------------
James J. Cunnane Date
* Director February 25, 1998
- ------------------------- -----------------
John F. Kroeger Date
* Director February 25, 1998
- ------------------------- -----------------
Louis E. Levy Date
* Director February 25, 1998
- ------------------------- -----------------
Eugene J. McDonald Date
/s/ R. Alan Medaugh February 25, 1998
- ------------------------- President and -----------------
R. Alan Medaugh Director Date
/s/ Joseph A. Finelli February 25, 1998
- ------------------------- Chief Financial -----------------
Joseph A. Finelli and Accounting Date
Officer
/s/Amy M. Olmert
- -------------------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number
(1) (a) Articles of Incorporation.(1)
(b) Articles Supplementary to Articles of Incorporation dated
December 15, 1993.(1)
(c) Articles Supplementary to Articles of Incorporation dated
December 31, 1994.(1)
(2) By-Laws, as amended through December 18, 1996.(2)
(3) None.
(4) (a) ISI Managed Municipal Fund Shares, Specimen Certifi cate of
Common Stock, $.001 par value.(3)
(b) Flag Investors Managed Municipal Fund Class A Shares,
Specimen Certificate of Common Stock, $.001 par value.(3)
(5) Investment Advisory Agreement dated April 1, 1991 between
Registrant and International Strategy & Investment Inc.(1)
EX-99.B. (6) (a) Distribution Agreement (Flag Investors Shares) dated as of
August 31, 1997 between Registrant and ICC Distributors,
Inc., filed herewith.
EX-99.B. (b) Form of Participating Dealer Agreement for Flag Investors
Managed Municipal Fund Shares between ICC Distributors, Inc.
and Participating Dealers, filed herewith.
EX-99.B. (c) Form of Shareholder Servicing Agreement for Flag Investors
Shares, filed herewith.
EX-99.B. (d) Distribution Agreement (ISI Shares) dated April 1, 1997
between Registrant and International Strategy & Investment
Group Inc., filed herewith.
EX-99.B. (e) Form of Agency Distribution Agreement for ISI Managed
Municipal Fund Shares between International Strategy &
Investment Group Inc. and Participating Dealers as in effect
from April 1, 1997, filed herewith.
EX-99.B. (f) Form of Shareholder Servicing Agreement for ISI Shares, filed
herewith.
(7) None.
EX-99.B. (8) Form Custodian Agreement between Registrant and Bankers Trust
Company, filed herewith.
<PAGE>
(9) (a) Master Services Agreement between Registrant and Investment
Company Capital Corp. and Appendices for the provision of
Administrative, Accounting and Transfer Agency Services.(1)
(10) Opinion of Counsel.(1)
EX-99.B. (11) Consent of Coopers & Lybrand L.L.P., filed herewith.
(12) None.
(13) Form of Subscription Agreement re: initial $100,000 capital.(1)
(14) None.
(15) (a) Distribution Plan for the ISI Managed Municipal Fund
Shares.(1)
(b) Distribution Plan for the Flag Investors Managed Municipal
Fund Class A Shares.(1)
EX-99.B. (15) (c) Amended Distribution Plan for the ISI Managed Municipal Fund
Shares, filed herewith.
EX-99.B. (15) (d) Amended Distribution Plan for the Flag Investors Managed
Municipal Fund Class A Shares, filed herewith.
(16) Schedule of Computation of Performance Quotations (unaudited).(1)
(18) (a) Rule 18f-3 Plan.(1)
EX-99.B. (b) Amended Rule 18f-3 Plan, filed herewith.
EX-99.B. (24) Powers of Attorney, filed herewith.
EX-27 (27) Financial Data Schedule, filed herewith.
- -------------------
(1) Incorporated by reference to Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-32819), filed with
the Securities and Exchange Commission via EDGAR on February 26, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A. (Registration No. 33-32819), filed with
the Securities and Exchange Commission via EDGAR on February 26, 1997.
(3) Incorporated by reference to Exhibit 1 (Articles of Incorporation), as
amended to date, filed as part of Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-32819), filed with the Securities and Exchange Commission via EDGAR on
February 26, 1996, and Exhibit 2 (By-Laws), as amended to date, filed as
part of Post-Effective Amendment No. 11 to such Registration Statement,
filed with the Securities and Exchange Commission via EDGAR on February 26,
1997.
<PAGE>
EX-99.B(6)(a)
MANAGED MUNICIPAL FUND, INC.
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 31st day of August, 1997, by and between Managed
Municipal Fund, Inc., with its principal office and place of business at One
South Street, Baltimore, Maryland 21202 (the "Fund"), and ICC Distributors,
Inc., a Delaware corporation with its principal office and place of business at
Two Portland Square, Portland, Maine 04101 (the "Distributor").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company, may
issue its shares of common stock (the "Shares") in separate series and classes
and continuously offers for sale its Shares to the public; and
WHEREAS, the Distributor is registered under the Securities Exchange Act of
1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the business
of selling shares of registered investment companies either directly to
purchasers or through other securities dealers;
WHEREAS, the Fund offers Shares in one or more series as listed in Appendix
A hereto (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Section 16, being herein referred to as a "Series," and collectively as the
"Series") and the Fund offers shares of one or more classes (each such class
together with all other classes subsequently established by a Series being
herein referred to as a "Class," and collectively as the "Classes");
WHEREAS, the Fund desires that the Distributor offer the Shares of each
Series and Class thereof to the public and the Distributor is willing to provide
those services on the terms and conditions set forth in this Agreement in order
to promote the growth of the Fund and facilitate the distribution of the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and the Distributor hereby agree as
follows:
SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT
(a) The Fund has delivered to the Distributor properly certified or
authenticated copies of its Articles of Incorporation and Bylaws (collectively,
as amended from time to time, "Organic Documents"), the Fund's Notification of
Registration filed with the U.S. Securities and Exchange Commission ("SEC")
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, the
Fund's Registration Statement and all amendments thereto filed with the SEC
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
the 1940 Act (the "Registration
- 1 -
<PAGE>
Statement") and its current Prospectuses and Statements of Additional
Information (collectively, as currently in effect and as amended or
supplemented, the "Prospectus") and shall promptly furnish the Distributor with
all amendments of or supplements to the foregoing, each properly certified or
authenticated. In addition, the Fund shall furnish the Distributor with properly
certified or authenticated copies of all documents, notices and reports filed
with the SEC.
(b) The Fund has delivered to the Distributor certified copies of the
resolutions of the Board of Directors (the "Board") authorizing the appointment
of the Distributor as distributor and approving this Agreement.
(b) The Fund hereby appoints the Distributor as its principal underwriter
and distributor to sell its Shares to the public and hereby agrees during the
term of this Agreement to sell its Shares to the Distributor upon the terms and
conditions herein set forth.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Fund to act as
its principal underwriter and distributor except that the rights given under
this Agreement to the Distributor shall not apply to Shares issued in connection
with the merger, consolidation or reorganization of any other investment company
with the Fund; the Fund's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment company; or the
reinvestment in Shares by the Fund's shareholders of dividends or other
distributions or any other offering by the Fund of securities to its
shareholders.
SECTION 3. PURCHASE OF SHARES; OFFERING OF SHARES
(a) The Distributor shall have the right to buy from the Fund the Shares
needed to fill unconditional orders for unsold Shares of the Fund as shall then
be effectively registered under the Securities Act placed with the Distributor
by investors or securities dealers or depository institutions or other financial
intermediaries acting as agent for their customers or on their own behalf.
Alternatively, the Distributor may act as the Fund's agent, to offer, and to
solicit offers to subscribe to, unsold Shares of the Fund as shall then be
effectively registered under the Securities Act. The Distributor will promptly
forward all orders and subscriptions for Shares of the Fund. The price which the
Distributor shall pay for Shares purchased by it from the Fund shall be the net
asset value, determined as set forth in Section 3(c) hereof, used in determining
the public offering price on which the orders are based. The price at which the
Distributor shall offer and sell Shares to investors shall be the public
offering price, as set forth in Section 3(b) hereof. The Distributor may sell
Shares to securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers that have entered into
agreements with the Distributor pursuant to Section 9 hereof or
- 2 -
<PAGE>
acting on their own behalf. The Fund reserves the right to sell its Shares
directly to investors through subscriptions received by the Fund, but no such
direct sales shall affect the sales charges due to the Distributor hereunder.
(b) The public offering price of the Shares of the Fund, i.e., the price
per Share at which the Distributor or selected dealers or selected agents (each
as defined in Section 11 hereof) may sell Shares to the public or to those
persons eligible to invest in Shares as described in the Fund's Prospectus,
shall be the public offering price determined in accordance with the then
currently effective Prospectus of the Fund or Class thereof under the Securities
Act, relating to such Shares, but not to exceed the net asset value at which the
Distributor, when acting as principal, is to purchase such Shares, plus, in the
case of Shares for which an initial sales charge is assessed, an initial charge
equal to a specified percentage or percentages of the public offering price of
the Shares as set forth in the current Prospectus relating to the Shares. In the
case of Shares for which an initial sales charge may be assessed, Shares may be
sold to certain classes of persons at reduced sales charges or without any sales
charge as from time to time set forth in the current Prospectus relating to the
Shares. The Fund will advise the Distributor of the net asset value per Share at
each time as the net asset value per Share shall have been determined by the
Fund.
(c) The net asset value per Share of each Series or Class thereof shall be
determined by the Fund, or an agent of the Fund, as of the close of the New York
Stock Exchange or such other time as set forth in the applicable Prospectus on
the Fund business day in accordance with the method set forth in the Prospectus
and guidelines established by the Board.
(d) The Fund reserves the right to suspend the offering of Shares of any
Class at any time in the absolute discretion of the Board, and upon notice of
such suspension the Distributor shall cease to offer Shares of the Fund or
Classes thereof specified in the notice.
(e) The Fund, or any agent of the Fund designated in writing to the
Distributor by the Fund, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions for
Shares obtained by the Distributor as agent shall be directed to the Fund for
acceptance and shall not be binding until accepted by the Fund. Any order or
subscription may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or confirm orders
or subscriptions for the purchase of Shares. The Fund (or its agent) will
confirm orders and subscriptions upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment thereof, will
issue such Shares in certificated or uncertificated form pursuant to the
instructions of the Distributor. The Distributor agrees to cause such payment
and such instructions to be delivered promptly to the Fund (or its agent).
- 3 -
<PAGE>
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES
(a) Any of the outstanding Shares of the Fund may be tendered for
redemption at any time, and the Fund agrees to redeem or repurchase the Shares
so tendered in accordance with its obligations as set forth in the Fund's
Organic Documents and the Prospectus relating to the Shares. The price to be
paid to redeem or repurchase the Shares of the Fund shall be equal to the net
asset value calculated in accordance with the provisions of Section 3(b) hereof
less, in the case of Shares for which a deferred sales charge is assessed, a
deferred sales charge equal to a specified percentage or percentages of the net
asset value of those Shares as from time to time set forth in the Prospectus
relating to those Shares or their cost, whichever is less. Shares for which a
deferred sales charge may be assessed and that have been outstanding for a
specified period of time may be redeemed without payment of a deferred sales
charge as from time to time set forth in the Prospectus relating to those
Shares.
(b) The Fund or its designated agent shall pay (i) the total amount of the
redemption price consisting of the redemption price less any applicable deferred
sales charge to the redeeming shareholder or its agent and (ii) except as may be
otherwise required by the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. (the "NASD") and any interpretations
thereof, any applicable deferred sales charges to the Distributor in accordance
with the Distributor's instructions on or before the third business day
subsequent to each calendar month-end.
(c) Redemption of Shares or payment therefor may be suspended at times when
the New York Stock Exchange is closed for any reason other than its customary
weekend or holiday closings, when trading thereon is restricted, when an
emergency exists as a result of which disposal by the Fund of securities owned
by the Fund is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or during any
other period when the SEC so permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the Fund
upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Fund hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long as
the performance of its obligations hereunder is not impaired thereby.
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(b) In selling Shares of the Fund, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by the Fund to give any information or to make any representations
other than as is contained in the Fund's Prospectus or any advertising materials
or sales literature specifically approved in writing by the Fund or its agents.
(c) The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers or selected agents, the collection of
amounts payable by investors and selected dealers or selected agents on such
sales, and the cancellation of unsettled transactions, as may be necessary to
comply with the requirements of the NASD and any other applicable
self-regulatory organization.
(d) The Distributor will perform its duties hereunder under the supervision
of and in accordance with the directives of the Board. The Distributor will
perform its duties hereunder in accordance with the Fund's Organic Documents and
Prospectuses and with the instructions and directions of the Board and will
conform to and comply with the requirements of the 1940 Act, the Securities Act
and other applicable laws.
(e) The Distributor shall provide the Board with a written report of the
amounts expended in connection with this Agreement as requested by the Board.
(f) The Distributor represents and warrants to the Fund that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) It is empowered under applicable laws and by its Articles
of Incorporation to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(v) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Distributor,
enforceable against the Distributor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of
creditors and secured parties;
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(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify the
Fund if its membership in the NASD is terminated or suspended; and
(vii) The performance by the Distributor of its obligations
hereunder does not and will not contravene any provision of its
Articles of Incorporation.
(g) Notwithstanding anything in this Agreement, including the Appendices,
to the contrary, the Distributor makes no warranty or representation as to the
number of selected dealers or selected agents with which it has entered into
agreements in accordance with Section 11 hereof, as to the availability of any
Shares to be sold through any selected dealer, selected agent or other
intermediary or as to any other matter not specifically set forth herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF THE FUND
(a) The Fund shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other papers
or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. The Fund shall make available to the
Distributor the number of copies of its Prospectuses as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, subject to the approval of its
Board and any required approval of its shareholders, all action necessary to fix
the number of authorized Shares (if such number is not limited) and to register
the Shares under the Securities Act, to the end that there will be available for
sale the number of Shares as reasonably may be expected to be sold pursuant to
this Agreement.
(c) The Fund shall register or qualify its Shares for sale under the
securities laws of the various states of the United States and other
jurisdictions ("States") as the Fund, in its sole discretion shall determine.
Any registration or qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such registration or qualification.
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<PAGE>
(d) The Fund represents and warrants to the Distributor that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Maryland;
(ii) It is empowered under applicable laws and by its Organic
Documents to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have
been taken to authorize it to enter into and perform its duties under
this Agreement;
(iv) It is registered as an open-end management investment
company with the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully
paid and non-assessable;
(vi) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Fund,
enforceable against the Fund in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and
secured parties;
(vii) The performance by the Fund of its obligations hereunder
does not and will not contravene any provision of its Articles of
Incorporation.
(viii) The Fund's Registration Statement is currently
effective and will remain effective with respect to all Shares of the
Fund's Series and Classes thereof being offered for sale;
(ix) It will use its best efforts to ensure that its
Registration Statement and Prospectuses have been or will be, as the
case may be, carefully prepared in conformity with the requirements of
the Securities Act and the rules and regulations thereunder;
(x) It will use its best efforts to ensure that (A) its
Registration Statement and Prospectuses contain or will contain all
statements required to be stated therein in accordance with the
Securities Act and the rules and regulations thereunder, (B) all
statements of fact contained or to be contained in the Registration
Statement or Prospectuses are or will be true and correct at the time
indicated or on the effective date as the case may be and (C) neither
the Registration Statement nor any Prospectus, when they shall become
effective or be authorized for use, will include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of Shares;
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<PAGE>
(xi) It will from time to time file such amendment or
amendments to its Registration Statement and Prospectuses as, in the
light of then-current and then-prospective developments, shall, in the
opinion of its counsel, be necessary in order to have the Registration
Statement and Prospectuses at all times contain all material facts
required to be stated therein or necessary to make any statements
therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to its Registration
Statement or Prospectuses without giving the Distributor reasonable
advance notice thereof (which shall be at least three Fund business
days); provided, however, that nothing contained in this Agreement
shall in any way limit the Fund's right to file at any time such
amendments to its Registration Statement or Prospectuses, of whatever
character, as the Fund may deem advisable, such right being in all
respects absolute and unconditional; and
(xiii) It will use its best efforts to ensure that (A) any
amendment to its Registration Statement or Prospectuses hereafter filed
will, when it becomes effective, contain all statements required to be
stated therein in accordance with the 1940 Act and the rules and
regulations thereunder, (B) all statements of fact contained in the
Registration Statement or Prospectuses will, when it becomes effective,
be true and correct at the time indicated or on the effective date as
the case may be and (C) no such amendment, when it becomes effective,
will include an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading to a purchaser of the
Shares.
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and efforts in rendering
services to the Fund under this Agreement but shall be under no duty to take any
action except as specifically set forth herein or as may be specifically agreed
to by the Distributor in writing. The Distributor shall not be liable to the
Fund or any of the Fund's shareholders for any error of judgment or mistake of
law, for any loss arising out of any investment, or for any action or inaction
of the Distributor in the absence of bad faith, willful misfeasance or gross
negligence in the performance of the Distributor's duties or obligations under
this Agreement or by reason of the Distributor's reckless disregard of its
duties and obligations under this Agreement
(b) The Distributor shall not be liable to the Fund for any action taken or
failure to act in good faith reliance upon:
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<PAGE>
(i) the advice of the Fund or of counsel, who may be counsel
to the Fund or counsel to the Distributor;
(ii) any oral instruction which the Distributor receives and
which it reasonably believes in good faith was transmitted by the
person or persons authorized by the Board to give such oral instruction
(the Distributor shall have no duty or obligation to make any inquiry
or effort of certification of such oral instruction);
(iii) any written instruction or certified copy of any
resolution of the Board, and the Distributor may rely upon the
genuineness of any such document or copy thereof reasonably believed in
good faith by the Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement, instrument,
report, notice, consent, order, or other document reasonably believed
in good faith by the Distributor to be genuine and to have been signed
or presented by the Fund or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which the Distributor reasonably believes in
good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties (other than those related to the
Distributor's employees), fire, mechanical breakdowns, flood or catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply. In addition, to the extent the Distributor's
obligations hereunder are to oversee or monitor the activities of third parties,
the Distributor shall not be liable for any failure or delay in the performance
of the Distributor's duties caused, directly or indirectly, by the failure or
delay of such third parties in performing their respective duties or cooperating
reasonably and in a timely manner with the Distributor.
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<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Fund will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section 15 of the Securities Act or section 20
of the 1934 Act ("Distributor Indemnitees") free and harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable counsel fees
incurred in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, under the securities laws of the various States or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Fund's Registration Statement or
Prospectuses, arising out of or based upon any alleged omission to state a
material fact required to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, or arising out of or based upon
any filing made with the regulatory authorities of any State unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished in writing to the Fund in connection with the preparation
of the Registration Statement, exhibits to the Registration Statement or filings
made with the regulatory authorities of any State by or on behalf of the
Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Fund shall indemnify and hold each Distributor Indemnitee free and
harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor Claim
related to the matters for which the Distributor has requested amendment to the
Fund's Registration Statement and for which the Fund has not filed a Required
Amendment, regardless of with respect to such matters whether any statement in
or omission from the Registration Statement was made in reliance upon, or in
conformity with, information furnished to the Fund by or on behalf of the
Distributor.
(b) The Fund may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Fund and
approved by the Distributor, which approval shall not be withheld unreasonably.
The Fund shall advise the Distributor that it will assume the defense of the
suit and retain counsel within ten (10) days of receipt of the notice of the
claim. If the Fund assumes the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional counsel that they
retain. If the Fund does not assume the defense of any such suit, or if
Distributor does not approve of counsel chosen by the Fund or has been advised
that it may have available defenses or claims that are not available to or
conflict with those available to the Fund, the Fund will reimburse any
Distributor Indemnitee named as defendant in such suit for the reasonable fees
and expenses of any counsel that person retains. A Distributor Indemnitee shall
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<PAGE>
not settle or confess any claim without the prior written consent of the Fund,
which consent shall not be unreasonably withheld or delayed.
(c) The Distributor will indemnify, defend and hold the Fund and its
several officers and directors (collectively, the "Fund Indemnitees"), free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained
in the Fund's Registration Statement or Prospectus or any alleged
omission of a material fact required to be stated or necessary to make
the statements therein not misleading, if such statement or omission
was made in reliance upon, and in conformity with, information
furnished to the Fund in writing in connection with the preparation of
the Registration Statement or Prospectus by or on behalf of the
Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement (collectively, "Fund Claims").
(d) The Distributor may assume the defense of any suit brought to enforce
any Fund Claim and may retain counsel of good standing chosen by the Distributor
and approved by the Fund, which approval shall not be withheld unreasonably. The
Distributor shall advise the Fund that it will assume the defense of the suit
and retain counsel within ten (10) days of receipt of the notice of the claim.
If the Distributor assumes the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional counsel that they
retain. If the Distributor does not assume the defense of any such suit, or if
the Fund does not approve of counsel chosen by the Distributor or has been
advised that it may have available defenses or claims that are not available to
or conflict with those available to the Distributor, the Distributor will
reimburse any Fund Indemnitee named as defendant in such suit for the reasonable
fees and expenses of any counsel that person retains. A Fund Indemnitee shall
not settle or confess any claim without the prior written consent of the
Distributor, which consent shall not be unreasonably withheld or delayed.
(e) The Fund's and the Distributor's obligations to provide indemnification
under this Section is conditioned upon the Fund or the Distributor receiving
notice of any action brought against a Distributor Indemnitee or Fund
Indemnitee, respectively, by the person against whom such action is brought
within twenty (20) days after the summons or other first legal process is
served. Such notice shall refer to the person or persons against whom the action
is brought. The failure to provide such notice shall not relieve the party
entitled to such notice of any liability that it may have to any
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<PAGE>
Distributor Indemnitee or Fund Indemnitee except to the extent that the ability
of the party entitled to such notice to defend such action has been materially
adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Fund Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the benefit
of each person that may be a Distributor Indemnitee or Fund Indemnitee at any
time and their respective successors and assigns (it being intended that such
persons be deemed to be third party beneficiaries under this Agreement).
(g) The Distributor agrees promptly to notify the Fund of the commencement
of any litigation or proceeding of which it becomes aware arising out of or in
any way connected with the issuance or sale of Shares. The Fund agrees promptly
to notify the Distributor of the commencement of any litigation or proceeding of
which it becomes aware arising out of or in any way connected with the issuance
or sale of its Shares.
(h) Nothing contained herein shall require the Fund to take any action
contrary to any provision of its Organic Documents or any applicable statute or
regulation or shall require the Distributor to take any action contrary to any
provision of its Articles of Incorporation or Bylaws or any applicable statute
or regulation; provided, however, that neither the Fund nor the Distributor may
amend their Organic Documents or Articles of Incorporation and Bylaws,
respectively, in any manner that would result in a violation of a representation
or warranty made in this Agreement, except if required by any applicable statute
or regulation.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Fund or the security holders of the
Fund to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.
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<PAGE>
SECTION 9. NOTIFICATION TO THE DISTRIBUTOR
The Fund shall advise the Distributor immediately: (i) of any request
by the SEC for amendments to the Fund's Registration Statement or Prospectus or
for additional information; (ii) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Fund's Registration Statement or
any Prospectus or the initiation of any proceedings for that purpose; (iii) of
the happening of any material event which makes untrue any statement made in the
Fund's then current Registration Statement or Prospectus or which requires the
making of a change in either thereof in order to make the statements therein not
misleading; and (iv) of all action of the SEC with respect to any amendments to
the Fund's Registration Statement or Prospectus which may from time to time be
filed with the Commission under the 1940 Act or the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with the
distribution of Shares of the Fund and each Class thereof, the Distributor shall
receive: (i) any applicable sales charge assessed upon investors in connection
with the purchase of Shares; (ii) from the Fund, any applicable contingent
deferred sales charge ("CDSC") assessed upon investors in connection with the
redemption of Shares; (iii) from the Fund, the distribution service fees with
respect to the Shares of those Classes as designated in Appendix A for which a
plan under Rule 12b-1 under the 1940 Act (a "Plan") is effective (the
"Distribution Fee"); and (iv) from the Fund, the shareholder service fees with
respect to the Shares of those Classes as designated in Appendix A (the "Service
Fee"). The Distribution Fee and Service Fee shall be accrued daily by each
applicable Fund or Class thereof and shall be paid monthly as promptly as
possible after the last day of each calendar month but in any event on or before
the fifth (5th) Fund business day after month-end, at the rate or in the amounts
set forth in Appendix A and, as applicable, the Plan(s). The Fund grants and
transfers to the Distributor a general unperfected lien and security interest in
any and all securities and other assets of the Fund now or hereafter maintained
in an account at the Fund's custodian on behalf of the Fund to secure any
Distribution Fees and Service Fees owed the Distributor by the Fund under this
Agreement.
(b) The Fund shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Series
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after each month end.
(c) Except as specified in Sections 8 and 10(a), the Distributor shall be
entitled to no compensation or reimbursement of expenses for the services
provided by the Distributor pursuant to this Agreement. The Distributor may
receive compensation from the Fund's investment advisors, other service
providers or their respective affiliates (collectively, the "Advisor") for its
services hereunder or for additional services all as may be agreed to between
the Advisor and the Distributor. Notwithstanding anything in this Agreement to
the contrary, to the extent the Distributor receives
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<PAGE>
compensation from the Advisor that is disclosed to the Board, the Fund will
indemnify, defend and hold each Distributor Indemnitees free and harmless from
and against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses of
every nature and character (including the cost of investigating or defending
such claims, demands, actions, suits or liabilities and any reasonable counsel
fees incurred in connection therewith) related in any way to such payment.
(d) The Fund shall be responsible and assumes the obligation for payment of
all its expenses, including fees and disbursements of its counsel and auditors,
in connection with the preparation and filing of the Registration Statement and
Prospectuses (including but not limited to the expense of setting in type the
Registration Statement and Prospectuses and printing sufficient quantities for
internal compliance, regulatory purposes and for distribution to current
shareholders).
(e) The Fund shall bear the cost and expenses (i) of the registration of
its Shares for sale under the Securities Act; (ii) of the registration or
qualification of its Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Fund, or its Series or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Fund; and (iv) payable to each State for continuing registration or
qualification therein until the Fund decides to discontinue registration or
qualification. The Distributor shall pay all expenses relating to the
Distributor's broker-dealer qualification.
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
(a) The Distributor shall have the right to enter into sub-distribution
agreements with securities dealers of its choice ("selected dealers") and with
depository institutions and other financial intermediaries of its choice
("selected agents") for the sale of Shares and to fix therein the portion of the
sales charge, if any, that may be allocated to the selected dealers or selected
agents; provided, that all such agreements shall be in substantially the form of
agreement as set forth in Appendix B hereto. Shares of each Series or Class
thereof shall be resold by selected dealers or selected agents only at the
public offering price(s) set forth in the Prospectus relating to the Shares. The
Distributor shall offer and sell Shares of the Fund only to such selected
dealers as are members in good standing of the NASD. The Distributor shall have
the right to enter into shareholder servicing agreements with financial
intermediaries of its choice; provided, that all such agreements shall be in
substantially the form of agreement as set forth in Appendix C hereto.
(b) The Distributor will supervise the Fund's relationship with selected
dealers and agents and may make payments to those selected dealers and agents in
such amounts as the Distributor may determine from time to time in its sole
discretion. The amount of payments to selected dealers and
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<PAGE>
agents by the Distributor may be reviewed by the Board from time to time;
provided, however, that no payment by the Distributor to any selected dealer or
agent with respect to a Share shall exceed the amount of payments made to the
Distributor hereunder with respect to that Share.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information related
to the Fund as proprietary information of the Fund and, on behalf of itself and
its employees, to keep confidential all such information, except that the
Distributor may:
(i) prepare or assist in the preparation of periodic reports
to shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the investment
company industry to companies that track or report price, performance
or other information regarding investment companies; and
(iii) release such other information as approved in writing by
the Fund, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding
the Fund without the consent of the Fund if the Distributor reasonably believes
that it may be exposed to civil or criminal legal proceedings for failure to
comply, when requested to release any information by duly constituted
authorities or when so requested by the Fund.
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each series or
class listed in Appendix A on the later of (i) August 31, 1997 or (ii) the date
on which the Fund's Registration Statement relating to Shares of the Fund
becomes effective. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Fund.
(b) This Agreement shall continue in effect with respect to a Series Fund
for a period of one year from its effectiveness and thereafter shall continue in
effect with respect to the Series until terminated; provided, that continuance
is specifically approved at least annually (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund and (ii) by a vote of
a majority of Directors of the Fund (I) who are not parties to this Agreement or
interested persons of any such party (other than as Directors of the Fund) and
(II) with respect to each Class of a Series for which there is an effective
Plan, who do not have any direct or indirect financial interest in any such Plan
applicable to the Class or in any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on such approval.
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<PAGE>
(c) This Agreement may be terminated at any time with respect to a Series,
without the payment of any penalty, (i) by the Board or by a vote of a majority
of the outstanding voting securities of the Series or, with respect to each
Class for which there is an effective Plan, a majority of Directors of the Fund
who do not have any direct or indirect financial interest in any such Plan or in
any agreements related to the Plan, on 60 days' written notice to the
Distributor or (ii) by the Distributor on 60 days' written notice to the Fund.
(d) This Agreement shall automatically terminate upon its assignment and
upon the termination of the Distributor's membership in the NASD.
(e) If the Fund does not file a Required Amendment within fifteen days
following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement immediately.
(f) The obligations of Sections 5(e), 6(d), 8, 9 and 10 shall survive any
termination of this Agreement with respect to a Series or Class thereof.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by the Distributor
to the Fund or the Fund to the Distributor shall be deemed sufficiently given if
personally delivered or sent by telegram, facsimile or registered, certified or
overnight mail, postage prepaid, addressed by the party giving such notice to
the other party at the last address furnished by the other party to the party
giving such notice, and unless and until changed pursuant to the foregoing
provisions hereof each such notice shall be addressed to the Fund or the
Distributor, as the case may be, at their respective principal places of
business.
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of the Distributor's employees, agents, officers or
directors who may also be a director, officer or employee of the Fund, or
affiliated persons of the Fund to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, trust, firm, individual or association.
SECTION 16. ADDITIONAL FUNDS AND CLASSES
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<PAGE>
In the event that the Fund establishes one or more series of Shares or
one or more classes of Shares after the effectiveness of this Agreement, such
series of Shares or classes of Shares, as the case may be, shall become Series
and Classes under this Agreement upon approval of this Agreement by the Fund
with respect to the series of Shares or class of Shares and the execution of an
amended Appendix A reflecting the applicable names and terms. The Distributor
may elect not to make any such series or classes subject to this Agreement.
SECTION 17. MISCELLANEOUS
(a) The Distributor shall not be liable to the Fund and the Fund shall not
be liable to the Distributor for consequential damages under any provision of
this Agreement except that Distributor Claims, as that term is used in Section
8(a), shall include consequential damages related to, arising out of or based
upon any filing made with the regulatory authorities of any State.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Distributor and the Fund.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Maryland.
(d) This Agreement constitutes the entire agreement between the Distributor
and the Fund and supersedes any prior agreement with respect to the subject
matter hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number of
counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(h) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(i) The Fund shall be liable to the Distributor only with respect to those
Series and Classes of the Fund and the Distributor shall look solely to the Fund
to satisfy any liability of a Series or Class thereof to the Distributor.
- 17 -
<PAGE>
(j) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof.
(k) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
MANAGED MUNICIPAL FUND, INC.
By:
Name:
Secretary
ICC DISTRIBUTORS, INC.
By:
John Y. Keffer
President
<PAGE>
MANAGED MUNICIPAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix A
as of August 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Distribution Service
Series Class Fee Fee
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Managed Municipal Fund, Inc. Flag Investors Class A 0.25% ----
Flag Investors Class B(1) 0.75% 0.25%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- A1 -
<PAGE>
MANAGED MUNICIPAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix B
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) 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" as used herein refers to each
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
- B1 -
<PAGE>
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 the 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,
provided that said assets are at least $25,000 in the fund family 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 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.
- B2 -
<PAGE>
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 Conduct
Rules (formerly the Rules of Fair Practice) of the NASD, including, without
limitation, the provisions of Rule 2830 (formerly Section 26) of such Rules. You
agree that you will not combine customer orders to reach breakpoints in
commission for any purposes whatsoever unless authorized by the then current
Prospectus in respect of a particular class of Shares 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 relevant
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 make appropriate notice filings in
certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund 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 provisions 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.
- B3 -
<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 such
phrase is 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 other than this agreement and those
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
Confirmed and accepted:
Firm Name:
- B4 -
<PAGE>
By:
Signature
Printed Name and Title
Date:
Address:
Clears Through:
Phone No.:
- B5 -
<PAGE>
MANAGED MUNICIPAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and 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
- C1 -
<PAGE>
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.
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 your responsibilities under this Agreement. By your written
acceptance of this Agreement, you agree 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 and your
offices, employees, agents or assigns 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 to pay you, and you will accept as full
payment therefore, 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
- C2 -
<PAGE>
5, the average daily net assets of the Customer's 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 by 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:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
- C3 -
<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,
ICC DISTRIBUTORS, INC.
By: ___________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name:
By:
Name:
Address:
Date:
- C4 -
<PAGE>
EX-99.B(6)(b)
MANAGED MUNICIPAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix B
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) 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" as used herein refers to each
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
the 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.
-B1-
<PAGE>
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 $25,000 in the fund family 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 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 Conduct Rules (formerly the
Rules of Fair Practice) of the NASD, including, without limitation, the
provisions of Rule 2830 (formerly Section 26) of such Rules. You agree that you
will not combine customer orders to reach breakpoints in commission for any
purposes whatsoever unless authorized by the then current Prospectus in respect
of a particular class of Shares 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 relevant 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 make appropriate notice filings in
certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund 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.
-B2-
<PAGE>
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 provisions 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 such
phrase is 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 other than this agreement and those
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
-B3-
<PAGE>
Confirmed and accepted:
Firm Name:
By:
Signature
Printed Name and Title
Date:
Address:
Clears Through:
Phone No.:
-B4-
<PAGE>
EX-99.B(6)(c)
MANAGED MUNICIPAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and 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
-C1-
<PAGE>
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.
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 your responsibilities under this Agreement. By your written
acceptance of this Agreement, you agree 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 and your
offices, employees, agents or assigns 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 to pay you, and you will accept as full
payment therefore, 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 Customer's
-C2-
<PAGE>
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 by 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:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
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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,
ICC DISTRIBUTORS, INC.
By: ________________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name:
By:
Name:
Address:
Date:
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EX-99.B(6)(d)
MANAGED MUNICIPAL FUND, INC.
ISI MANAGED MUNICIPAL FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 1st day of April, 1997, by and
between MANAGED MUNICIPAL FUND, INC., a Maryland corporation (the "Fund"), and
INTERNATIONAL STRATEGY & INVESTMENT GROUP INC., a Delaware corporation ("ISI").
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 ISI as the exclusive
distributor of the class of shares of the Fund known as the ISI Managed
Municipal Fund Shares (the "Shares") and ISI wishes to become the distributor of
the Shares; and
WHEREAS, the compensation to ISI 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 1940 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 ISI as the exclusive
distributor of the Shares for the period and on the terms set forth in this
Agreement. ISI 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 ISI 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");
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of ISI 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;
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(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 ISI 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. ISI 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, ISI shall undertake the
following actions and responsibilities:
(a) receive orders for the 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 deemed
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. ISI shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that ISI does
not undertake to sell all or any specific portion of the Shares. The Fund shall
not sell any of the Shares except through ISI and securities dealers who have
valid Agency Distribution Agreements with ISI. 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 ISI pursuant to this Agreement, as well as any other activities
undertaken by ISI 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, ISI shall at all times conform to:
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(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 and any amendments and supplements
thereto;
(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 federal and
state law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and ISI as follows:
(a) ISI 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) ISI shall bear the expenses of any promotional or
sales literature used by ISI or
furnished by ISI 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; and
(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 and administrator; 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 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 Fund's 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; 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. ISI 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 ISI's charges in rendering such
services may be billed
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<PAGE>
monthly to the Fund, subject to examination by the Fund's independent
accountants. Payment or assumption by ISI of any Fund expense that ISI is not
required to pay or assume under this Agreement shall not relieve ISI of any of
its obligations to the Fund or obligate ISI 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 ISI, the Fund shall pay to ISI, compensation at the annual
rate of .25% of the average daily net assets invested in 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 ISI may compensate its investment representatives for opening
accounts, processing investor letters of transmittal 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. ISI 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 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 ISI, ISI may pay each such transmitting broker an amount not to exceed that
portion of the compensation paid to ISI hereunder that is attributable to
accounts of Fund shareholders who are customers of such transmitting broker.
12. Non-Exclusivity. The services of ISI to the Fund are not
to be deemed exclusive and ISI 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
ISI 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 ISI to
the extent permitted by law; and that directors, officers and employees of ISI
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.
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 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 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.
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 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
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<PAGE>
outstanding voting securities (as defined in the 1940 Act) or (iv) by ISI. 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 the 1940
Act.
15. Liability. In the performance of its duties hereunder, ISI
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 ISI or reckless disregard by ISI 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 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 for this purpose
the address of the Fund and ISI shall be 717 Fifth Avenue, New York, New York
10022.
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.
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/ Scott J. Liotta By /s/ R. Alan Medaugh
Name: Scott J. Liotta Name: R. Alan Medaugh
Title: President
[SEAL] INTERNATIONAL STRATEGY &
INVESTMENT GROUP INC.
Attest: /s/ Nancy Lazar By /s/ Edward S. Hyman
Name: Nancy Lazar Name: Edward S. Hyman
Title: Chairman
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<PAGE>
Exhibit A
ISI FAMILY OF FUNDS
717 Fifth Avenue
New York, New York 10022
AGENCY DISTRIBUTION AGREEMENT
_______________________, 19___
Gentlemen:
International Strategy & Investment Group Inc. ("ISI"), a
Delaware 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
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are
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<PAGE>
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 comply with applicable
state laws. We will notify you of the states or other jurisdictions in which the
Shares may be sold. You agree that you will offer Shares to your customers only
in those states where there has been compliance with state laws applicable to
the sale of such Shares. 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
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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.
INTERNATIONAL STRATEGY & INVESTMENT
GROUP INC.
(Authorized Signature)
Confirmed and accepted:
Firm Name:
By:________________________________
Address:
Date:______________________________
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ISI MANAGED MUNICIPAL FUND SHARES
(a class of Managed Municipal Fund, Inc.)
717 Fifth Avenue
New York, New York 10022
FORM OF
SHAREHOLDER SERVICING AGREEMENT
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
shares of 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. 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 any 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 assigns 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.
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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 assigns 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 at the annual rate of ___ of 1% of
the average daily net asset value of the Customers' Shares held of record by you
from time to time, which fee will be computed daily and payable ______. For
purposes of determining the fees payable under this Section 5, the average daily
net asset value 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:
Managed Municipal Fund, Inc.
717 Fifth Avenue
New York, New York 10022
Attention: R. Alan Medaugh
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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,
MANAGED MUNICIPAL FUND, INC.
Date: By:
Authorized Officer
Accepted and Agreed to:
Date: By:
Authorized Officer
Address:___________________
-3-
<PAGE>
EX-99.B(6)(e)
ISI FAMILY OF FUNDS
717 Fifth Avenue
New York, New York 10022
AGENCY DISTRIBUTION AGREEMENT
_______________________, 19___
Gentlemen:
International Strategy & Investment Group Inc. ("ISI"), a
Delaware 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
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
<PAGE>
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 comply with applicable
state laws. We will notify you of the states or other jurisdictions in which the
Shares may be sold. You agree that you will offer Shares to your customers only
in those states where there has been compliance with state laws applicable to
the sale of such Shares. 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 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.
<PAGE>
INTERNATIONAL STRATEGY & INVESTMENT
GROUP INC.
(Authorized Signature)
Confirmed and accepted:
Firm Name:
By:_____________________________
Address:
Date:___________________________
<PAGE>
EX-99.B(6)(f)
ISI MANAGED MUNICIPAL FUND SHARES
(a class of Managed Municipal Fund, Inc.)
717 Fifth Avenue
New York, New York 10022
FORM OF
SHAREHOLDER SERVICING AGREEMENT
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
shares of 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. 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 any 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 assigns 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 assigns 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 at the annual rate of ___ of 1% of
the average daily net asset value of the Customers' Shares held of record by you
from time to time, which fee will be computed daily and payable ______. For
purposes of determining the fees payable under this Section 5, the average daily
net asset value 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:
Managed Municipal Fund, Inc.
717 Fifth Avenue
New York, New York 10022
Attention: R. Alan Medaugh
-2-
<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,
MANAGED MUNICIPAL FUND, INC.
Date: By:
Authorized Officer
Accepted and Agreed to:
Date: By:
Authorized Officer
Address:
---------------------
-3-
<PAGE>
EX-99.B(8)
FORM OF
CUSTODIAN AGREEMENT
AGREEMENT dated as of _______________ , 199__ between BANKERS TRUST
TRUST COMPANY (the "Custodian") and MANAGED MUNICIPAL FUND, INC. (the
"Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
noncash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instructions to settle Securities transactions in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio,
1
<PAGE>
the Customer shall, by Instructions (as herein defined in Section 14),
specifically indicate which Portfolio such Property belongs or if such Property
belongs to more than one Portfolio shall allocate such Property to the
appropriate Portfolio. The Custodian shall allocate such Property to the
Accounts in accordance with the Instructions; provided that the Custodian shall
have the right, in its sole discretion, to refuse to accept any Property that is
not in proper form for deposit for any reason. The Customer on behalf of each
Portfolio, acknowledges its responsibility as a principal for all of its
obligations to the Custodian arising under or in connection with this Agreement
warrants its authority to deposit in the appropriate Account any Property
received therefor by the Custodian or a Subcustodian and to give, and authorize
others to give, instructions relative thereto. The Custodian may deliver
securities of the same class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account;
(b) present for payment all Securities held in an Account which
are called, redeemed or otherwise become payable and all
coupons and other income items which call for payment upon
presentation to the extent that the Custodian or Subcustodian
is actually aware of such opportunities and hold the cash
received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Custodian
to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Custodian to take timely
action or if actual notice of such actions was received too
late to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby
2
<PAGE>
authorizes the Custodian to make) such rights entitlement or
fractional interest and credit the Account with the net
proceeds of such sale:
(e) execute in the Customer's name for an Account whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with the
payment of any such taxes to cooperate with the Custodian in
furnishing information, executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.,
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions: provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any
3
<PAGE>
Subcustodian or Securities System has been proper under the 1940 Act or any rule
or regulation thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement Subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S. Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities as may reasonably be requested by the
Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5 requires
the Customer's Board of Trustees to directly approve its foreign custody
arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the nominal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be subject
only to the instructions of the Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall require that (i) the
Account will be adequately indemnified or its losses adequately insured; (ii)
the Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of such Subcustodian or its creditors except a claim
for payment in accordance with such agreement for their safe custody or
administration and expenses
4
<PAGE>
related thereto, (iii) beneficial ownership of such Securities be freely
transferable without the payment of money or value other than for safe custody
or administration and expenses related thereto, (iv) adequate records will be
maintained identifying the Property held pursuant to such Agreement as belonging
to the Custodian, on behalf of its customers and (v) to the extent permitted by
applicable law, officers of or auditors employed by, or other representatives of
or designated by, the Custodian, including the independent public accountants of
or designated by, the Customer be given access to the books and records of such
Subcustodian relating to its actions under its agreement pertaining to any
Property held by it thereunder or confirmation of or pertinent information
contained in such books and records be furnished to such persons designated by
the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by
its agreement with the Custodian to, identify on its books
such Property as being held for the account of the Custodian
or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or
other property, and whether held by the Custodian or a
Subcustodian or in a Securities System as authorized herein,
shall be clearly recorded on the Custodian's books as
belonging to the appropriate Account and not for the
Custodian's own interest. The Custodian shall
5
<PAGE>
keep accurate and detailed accounts of all investments,
receipts, disbursements and other transactions for each
Account. All accounts, books and records of the Custodian
relating thereto shall be open to inspection and audit at all
reasonable times during normal business hours by any person
designated by the Customer. All such accounts shall be
maintained and preserved in the form reasonably requested by
the Customer. The Custodian will supply to the Customer from
time to time, as mutually agreed upon, a statement in respect
to any Property in an Account held by the Custodian or by a
Subcustodian. In the absence of the filing in writing with the
Custodian by the Customer of exceptions or objections to any
such statement within sixty (60) days of the mailing thereof,
the Customer shall be deemed to have approved such statement
and in such case or upon written approval of the Customer of
any such statement, such statement shall be presumed to be for
all purposes correct with respect to all information set forth
therein.
(b) The Custodian shall take all reasonable action as the Customer
may request to obtain from year to year favorable opinions
from the Customer's independent certified public accountants
with respect to the Custodian's activities hereunder in
connection with the preparation of the Customer's Form N1-A
and the Customer's Form N-SAR or other periodic reports to the
SEC and with respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to
the Customer a written report prepared by the Custodian's
independent certified public accountants with respect to the
services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for
safeguarding Cash and Securities, including Cash and
Securities deposited and/or maintained in a securities system
or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required
by the Customer and as may reasonably be obtained by the
Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the
Custodian which can provide the Customer, on a daily basis,
with the ability to view on-line or to print on hard copy
various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such
service shall include market values of Securities in an
Account, the Customer hereby acknowledges that the Custodian
now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be
reliable and the Customer agrees that the Custodian (i) does
not verify or represent or warrant either the reliability of
such service nor the accuracy or completeness of any such
information furnished or obtained by or through such service
and (ii) shall be without liability in selecting and utilizing
such service or furnishing any information derived therefrom.
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9. Holding of Securities, Nominees, etc. Securities in an Account which
are held by the Custodian or any Subcustodian may be held by such entity in the
name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. The
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called portion of the respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the Jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard
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operating procedures of the Custodian in effect from time to time for that
jurisdiction or market. The Custodian shall not be liable for any loss which
results from effecting transactions in accordance with the customary or
established securities trading or securities processing practices and procedures
in the applicable jurisdiction or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Global Guide provided to the Customer by the Custodian, the Custodian may,
at its sole option, reverse such credits or debits to the appropriate Account in
the event that the transaction does not settle, or the income is not received in
a timely manner, and the Customer agrees to hold the Custodian harmless from any
losses which may result therefrom.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the
Custodian shall not be required to comply with any
Instructions to settle the purchase of any securities for the
Account, unless there are sufficient immediately available
funds in the relevant currency in the Account, provided that
if, after all expenses, debits and withdrawals of Cash in the
relevant currency ("Debits") applicable to the Account have
been made and if after all Conditional Credits, as defined
below, applicable to the Account have been made final entries
as set forth in (c) below, the amount of immediately available
funds of the relevant currency in such Account is at least
equal to the aggregate purchase price of all securities for
which the Custodian has received Instructions to settle on
that date ("Settlement Date"), the Custodian, upon settlement,
shall credit the Securities to the Account by making a final
entry on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable
to the Account have been made, there remains outstanding any
Conditional Credit (as defined below) applicable to the
Account or the amount of immediately available funds in a
given currency in such Account are less than the aggregate
purchase price in such currency of all securities for which
the Custodian has received Instructions to settle on the
Settlement Date, the Custodian, upon settlement, may credit
the securities to the Account by making a conditional entry on
its books and records ("Conditional Credit"), pending receipt
of sufficient immediately available funds in the relevant
currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have
been made, immediately available funds in the relevant
currency at least equal to the aggregate purchase price in
such currency of all securities subject to a Conditional
Credit on a Settlement Date are deposited into the Account,
the Custodian shall make the Conditional Credit a final entry
on its books and records. In such case, the Customer shall be
liable to the Custodian only for late charges at a rate which
the Custodian customary charges for similar extensions of
credit.
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(d) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have
been made, immediately available funds in the relevant
currency at least equal to the aggregate purchase price in
such currency of all securities subject to a Conditional
Credit on a Settlement Date are not deposited into the
Account, the Customer authorizes the Custodian, as agent, to
sell the securities and credit the Account with the proceeds
of such sale. In such case, the Customer shall be liable to
the Custodian for any deficiencies, out-of-pocket costs and
expenses associated with the sale of the securities, including
but not limited to, shortfalls in the sales proceeds and the
Custodian is hereby authorized to sell such other securities
to the extent necessary to satisfy such shortfalls with the
net proceeds of such sales.
(e) The Customer agrees that it will not use the Account to
facilitate the purchase of securities without sufficient funds
in the Account (which funds shall not include the expected
proceeds of the sale of the purchased securities).
14. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance with Section 15 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or
readjustment.
(d) Upon conversion of Securities pursuant to their terms into
other securities.
(e) Upon exercise of subscription, purchase or other similar
rights represented by Securities.
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts
borrowed.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer.
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(i) For the purpose of redeeming shares of the capital stock of
the Customer against delivery of the shares to be redeemed to
the Custodian, a Subcustodian or the Customer's transfer
agent.
(j) For the purpose of redeeming in kind shares of the Customer
against delivery of the shares to be redeemed to the
Custodian, a Subcustodian or the Customer's transfer agent.
(k) For delivery in accordance with the provisions of any
agreement among the Customer, on behalf of a Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association
of Securities Dealers, Inc., relating to compliance with the
rules of The Options Clearing Corporation, the Commodities
Futures Trading Commission and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to the Custodian of monies for the
premium due and a receipt for the Securities which are to be
held in escrow. Upon exercise of the option, or at expiration,
the Custodian will receive the Securities previously deposited
from broker. The Custodian will act strictly in accordance
with Instructions in the delivery of Securities to be held in
escrow and will have no responsibility or liability for any
such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to
facilitate security trading or receipt of income from
Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section
20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 22 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, or (iii) a
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<PAGE>
telephonic or oral communication by one or more persons as the Customer shall
have from time to time authorized to give the particular class of Instructions
in question and whose name has been filed with the Custodian; or (iv) upon
receipt of such other form of instructions as the Customer may from time to time
authorize in writing and which the Custodian has agreed in writing to accept.
Instructions in the form of oral communications shall be confirmed by the
Customer by tested telex or writing in the manner set forth in clause (i) above,
but the lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions prior to the Custodian's
receipt of such confirmation. Instructions may relate to specific transactions
or to types or classes of transactions, and may be in the form of standing
instructions.
The Custodian shall have the night to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
16. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be counsel for the Customer) on
all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
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In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution, strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
18. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the
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performance of this Agreement, including (but without limitation) legal fees as
described herein and/or deemed necessary in the judgment of the Custodian to
keep safe or protect the Property in the Account. The initial fee schedule is
attached hereto as Exhibit C. The Customer hereby agrees to hold the Custodian
harmless from any liability or loss resulting from any taxes or other
governmental charges, and any expense related thereto, which may be imposed, or
assessed with respect to any Property in an Account and also agrees to hold the
Custodian, its Subcustodians, and their respective nominees harmless from any
liability as a record holder of Property in such Account. The Custodian is
authorized to charge the applicable Account for such items and the Custodian
shall have a lien on the Property in the applicable Account for any amount
payable to the Custodian under this Agreement, including but not limited to
amounts payable pursuant to Section 13 and pursuant to indemnities granted by
the Customer under this Agreement. The provisions of this Section shall survive
the termination of this Agreement.
19. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
21. Termination.
(a) Termination of Entire Agreement. This Agreement may be
terminated by the Customer or the Custodian by ninety (90)
days' written notice to the other; provided that notice by the
Customer shall specify the names of the persons to whom the
Custodian shall deliver the Securities in each Account and to
whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall,
within ninety (90) days following the giving of such notice,
deliver to the Custodian a written notice specifying the names
of the persons to whom the Custodian shall deliver the
Securities in each Account and to whom the Cash in such
Account shall be paid. In either case, the Custodian will
deliver such Securities and Cash to the persons so specified,
after deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 13, 18, and 24. In
addition, the Custodian may in its discretion withhold from
such delivery such Cash and Securities as may be necessary to
settle transactions pending at the time of such delivery. The
Customer grants to the Custodian a lien and right of setoff
against the Account and all Property held therein from time to
time in the full amount of the foregoing obligations. If
within ninety (90)
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days following the giving of a notice of termination by the
Custodian, the Custodian does not receive from the Customer a
written notice specifying the names of the persons to whom the
Custodian shall deliver the Securities in each Account and to
whom the Cash in such Account shall be paid, the Custodian, at
its election, may deliver such Securities and pay such Cash to
a bank or trust company doing business in the State of New
York to be held and disposed of pursuant to the provisions of
this Agreement, or may continue to hold such Securities and
Cash until a written notice as aforesaid is delivered to the
Custodian, provided that the Custodian's obligations shall be
limited to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may
be terminated by the Customer or the Custodian as to one or
more Portfolios (but less than all of the Portfolios) by
delivery of an amended Exhibit A deleting such Portfolios, in
which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery,
or such earlier time as mutually agreed. The execution and
delivery of an amended Exhibit A which deletes one or more
Portfolios shall constitute a termination of this Agreement
only with respect to such deleted Portfolio(s), shall be
governed by the preceding provisions of Section 21 as to the
identification of a successor custodian and the delivery of
Cash and Securities of the Portfolio(s) so deleted to such
successor custodian and shall not affect the obligations of
the Custodian and the Customer hereunder with respect to the
other Portfolios set forth in Exhibit A, as amended from time
to time.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by
registered mail, telex or facsimile addressed to such other address as shall
have been furnished by the receiving party pursuant to the provisions hereof and
(b) shall be deemed effective when received, or, in the case of a telex, when
sent to the proper number and acknowledged by a proper answer back.
23. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
24. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; provided that,
if there is more than one Account and the obligations secured pursuant to this
Section can be allocated to a specific Account or the Portfolio related to such
Account, such security interest and right of setoff will be limited to Property
held for that Account only and its related Portfolio.
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Should the Customer fail to pay promptly any amounts owed hereunder, Custodian
shall be entitled to use available Cash in the Account or applicable Account, as
the case may be, and to dispose of Securities in the Account or such applicable
Account as is necessary. In any such case and without limiting the foregoing,
Custodian shall be entitled to take such other action(s) or exercise such other
options, powers and rights as Custodian now or hereafter has as a secured
creditor under the New York Uniform Commercial Code or any other applicable law.
25. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian
that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian a duly
executed Secretary's Certificate in the form of Exhibit E hereto or such other
evidence of such authorization as the Custodian may reasonably require, whether
by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any
obligation by which the Custodian is bound, whether
arising by contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by
appropriate action and when executed and delivered
will be binding upon the Custodian in accordance with
its terms;
(iii) the Custodian will deliver to the Customer such
evidence of such authorization as the Customer may
reasonably require, whether by way of a certified
resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section
26(a) of the 1940 Act and warrants that it will
remain so qualified or upon ceasing to be so
qualified shall promptly notify the Customer in
writing.
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26. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
27. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 22 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement.
[28. Representative Capacity and Binding Obligation. A copy of the
[Declaration of Trust/Trust Instrument] of the Customer is on file with The
Secretary of the [Commonwealth of Massachusetts/State of Delaware], and notice
is hereby given that this Agreement is not executed on behalf of the Trustees of
the Customer as individuals, and the obligations of this Agreement are not
binding upon any of the Trustees, officers or shareholders of the Customer
individually but are binding only upon the assets and property of the
Portfolios.]
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
29. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation. The
provisions of this Section shall survive the termination of this Agreement.
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31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
32. Entire Agreement. This Agreement together with any exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior writings
with respect thereto.
33. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
34. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
signatories to execute this Agreement as of the date first written above.
[NAME OF CUSTOMER]
By:_______________________________
Name:_____________________________
Title:____________________________
By:_______________________________
Name:_____________________________
Title:____________________________
BANKERS TRUST COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
17
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of ______________,199__ between Bankers
Trust Company and _______________________.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above- referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Dated as of:
[NAME OF CUSTOMER]
By:_______________________________
Name:
Title:
By:
Name:
Title:____________________________
BANKERS TRUST COMPANY
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of ________________, 199__ between
Bankers Trust Company and __________________.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in the countries specified in the Global Guide]. For the United
States and Canada, the term "corporate communications" means the proxy
statements or meeting agenda, proxy cards, annual reports and any other meeting
materials received by the Custodian. For countries other then the United States
and Canada, the term "corporate communications" means the meeting agenda only
and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
<PAGE>
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian wall not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
Global Guide. The Custodian will notify the Customer as
<PAGE>
to the inclusion of additional countries or deletion of existing countries after
their inclusion or deletion and this Exhibit B will be deemed to be
automatically amended to include or delete such countries as the case may be.
Dated as of [NAME OF CUSTOMER]
By:_______________________________
Name:_____________________________
Title:____________________________
By:_______________________________
Name:_____________________________
Title:____________________________
BANKERS TRUST COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of _____________, 199__ between Bankers
Trust Company and ________________.
CUSTODY FEE SCHEDULE
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of _____________, 199__ between Bankers
Trust Company and ______________.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When Withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional tax advisers and
shall be without liability to the Customer for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
<PAGE>
Dated as of [NAME OF CUSTOMER]
By:_______________________________
Name:_____________________________
Title:____________________________
BANKERS TRUST COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
EXHIBIT E
[Name of Entity]
Certificate of the Secretary
I, [Name of Secretary], hereby certify that I am the Secretary of
[Name of Entity], a [type of entity] organized under the laws of [jurisdiction]
(the "Company"), and as such I am duly authorized to, and do hereby, certify
that:
1. Organizational Documents. The Company's organizational documents,
and all amendments thereto, have been filed with the appropriate governmental
officials of [jurisdiction], the Company continues to be in existence and is in
good standing, and no action has been taken to repeal such organizational
documents, the same being in full force and effect on the date hereof.
2. By-Laws. The Company's By-Laws have been duly adopted and no action
has been taken to repeal such By-Laws, the same being in full force and effect.
3. Resolutions. Resolutions have been duly adopted on behalf of the
Company, which resolutions (i) have not in any way been revoked or rescinded,
(ii) have been in full force and effect since their adoption, to and including
the date hereof, and are now in full force and effect, and (iii) are the only
corporate proceedings of the Company now in force relating to or affecting the
matters referred to therein, including, without limitation, confirming that the
Company is duly authorized to enter into a certain custody agreement with
Bankers Trust Company (the "Agreement"), and that certain designated officers,
including those identified in paragraph 4 of this Certificate, are authorized to
execute said Agreement on behalf of the Company, in conformity with the
requirements of the Company's organizational documents, Bylaws, and other
pertinent documents to which the Company may be bound.
4. Incumbency. The following named individuals are duly elected (or
appointed), qualified, and acting officers of the Company holding those offices
set forth opposite their respective names as of the date hereof, each having
full authority, acting individually, to bind the Company as a legal matter, with
respect to all matters pertaining to the Agreement, and to execute and deliver
said Agreement on behalf of the Company, and the signatures set forth opposite
the respective names and titles of said officers are their true, authentic
signatures:
Name Title Signature
[Name] [Position] ______________________________________
[Name] [Position] ______________________________________
[Name] [Position] ______________________________________
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
[Date], 19__.
By:________________________________________
Name:______________________________________
Title: Secretary
I, [Name of Confirming Officer], [Title] of the Company, hereby certify
that on this ___ day of [Date], 19__, [Name of Secretary] is the duly elected
Secretary of the Company and that the signature above is his genuine signature.
By:_________________________________________
Name: ______________________________________
Title: _____________________________________
<PAGE>
EX-99.B(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Managed Municipal Fund, Inc.
We consent to the inclusion in Post Effective Amendment No. 12 to the
Registration Statement on Form N-1A (File No. 33-32819) of our report dated
November 26, 1997 on our audit of the financial statements and financial
highlights of Managed Municipal Fund, Inc., which report is included in the
Annual Report to Shareholders for the year ended October 31, 1997, which is
included in the Registration Statement. We also consent to the reference to our
Firm under the headings "Financial Highlights" and "General Information" in the
Prospectuses and "Independent Accountants" in the Statement of Additional
Information.
/s/ Coopers & Lybrand L.L.P.
- -----------------------------
Coopers & Lybrand L.L.P.
Baltimore, Maryland
February 23, 1998
<PAGE>
EX-99b.15c
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
-1-
<PAGE>
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. 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 the 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.
-2-
<PAGE>
EX-99.B(15)(d)
Amended
August 4, 1997
MANAGED MUNICIPAL FUND, INC.
Flag Investors Class A 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") for the Flag Investors Class A 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) The Fund's distributor (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 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 does not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor 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. 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 and distributor of the other
class of the Fund's shares; the fees of the Funds'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; 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
<PAGE>
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.
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. (a)
This Plan has been approved 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. 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.
(b) 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).
(c) This Plan may not be amended to increase materially the
amount of payments to be made without the approval by a vote of the holders of
at least a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act), and all amendments must be approved by the Board of Directors in
the manner set forth under (a) above.
-2-
<PAGE>
Exhibit 99.B(18)(b)
Managed Municipal Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A, Flag Investors Class B and ISI Class Shares
Adopted December 13, 1995
Amended through August 4, 1997
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
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. 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
<PAGE>
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 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.
<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.
FURTHER RESOLVED, that the proposed form of Sub-Distribution Agreement
be, and the same hereby is, approved.
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 and Creating Flag Investors Class B Shares
WHEREAS, the Board of Directors of Managed Municipal Fund, Inc. has
previusly 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;"
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> <C>
40,000,000 15,000,000 2,500,000 500,000 20,000,000 2,000,000
</TABLE>
FURTHER RESOLVED, that the proper officers of each of the foregoing
Funds be, and each of them hereby is, authorized and directed to file articles
supplementary to the relevant 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.
Approved: September 22, 1992
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
<PAGE>
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.
Approved: August 4, 1997
Resolutions of Board Approving New
Distribution Agreement with ICC Distributors, Inc.
RESOLVED, that ICC Distributors, Inc. ("ICC ") be, and it
hereby is, appointed distributor for all classes of Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Flag
Investors Short-Intermediate 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., and for the Flag Investors classes of each of Managed
Municipal Fund, Inc. and Total Return U.S. Treasury Fund, Inc., such appointment
to be effective upon the consummation of the merger of Alex. Brown Incorporated
with and into a subsidiary of Bankers Trust New York Corporation (the "Merger"),
or at such other time as the proper officers of the Fund shall determine;
FURTHER RESOLVED, that the proposed Distribution Agreement
between Alex. Brown Cash Reserve Fund, Inc. and ICC Distributors, Inc. with
respect to all shares except the Flag Investors 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 negotiate, enter into and execute such Distribution Agreement with
such modifications as said officers in consultation with counsel 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 Distribution Agreement
between Alex. Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income
Fund, Inc., Flag Investors International Fund, Inc., Flag Investors Emerging
Growth Fund, Inc., Total Return U.S. Treasury Fund, Inc. (for Flag Investors
Shares), Managed Municipal Fund, Inc. (for the Flag Investors Shares), Flag
Investors Short-Intermediate 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
Partner Fund, Inc., and ICC Distributors, Inc. be, and the same hereby is,
approved in substantially the form presented to this meeting and that the
appropriate officers of the Funds be, and they hereby are, authorized and
directed to negotiate, enter into and execute such Distribution Agreement with
such modifications as said officers in consultation with counsel shall deem
necessary or appropriate or as may be required to conform with the requirements
of any applicable statute, regulation or regulatory body.
Approved: August 4, 1997
Resolutions of Board Approving Plans
of Distribution for Flag Investors Class A Shares
and Flag Investors Class B Shares
FURTHER RESOLVED, that the Plan of Distribution for the Flag
Investors Class A Shares of Managed Municipal Fund, Inc. be, and hereby is,
amended to reflect the change in distributor effected at this meeting, such
amendment to be effective upon the consummation of the Merger, or such other
time as the proper officers of the Fund shall determine;
<PAGE>
FURTHER RESOLVED, that the amended Plan is determined to be
reasonably likely to benefit such class and its shareholders; and that based on
information reasonably available to the Directors, expenditures contemplated by
such Plan are comparable to expenditures for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan, as
amended, be, and the same hereby is, approved.
FURTHER RESOLVED, that the Plan of Distribution for the Flag
Investors Class B Shares of said Fund be, and hereby is, amended to reflect the
change in distributor effected at this meeting, such amendment to be effective
upon the consummation of the Merger, or such other time as the proper officers
of the Fund shall determine;
FURTHER RESOLVED, that the amended Plan is determined to be
reasonably likely to benefit such class and its shareholders; and that based on
information reasonably available to the Directors, expenditures contemplated by
such Plan are comparable to expenditures for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan, as
amended, be, and the same hereby is, approved;
FURTHER RESOLVED, that at such time as the Fund offers the
Flag Investors Class B Shares, the amended Plan of Distribution presented at
this meeting shall govern the payment of 12b-1 fees by that class.
<PAGE>
Managed Municipal Fund, Inc.
18f-3 Plan Exhibits
1. Registrant's Articles of Incorporation filed as Exhibit (1)(a) to
Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form
N-1A (Registration No. 33-32819), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 0000950116-96-000078) on February 26, 1996
is herein incorporated by reference.
2. Registrant's Articles Supplementary dated December 31, 1994 filed as Exhibit
(1)(c) to Post-Effective Amendment No. 10 to Registrant's Registration Statement
on Form N-1A (Registration No. 33-32819), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 0000950116-96-000078) on February 26, 1996
is herein incorporated by reference.
3. Registrant's By-Laws are filed as Exhibit (2) to Post-Effective Amendment No.
11 to Registrant's Registration Statement on Form N-1A (Registration No.
33-32819) filed with the Securities and Exchange Commission via EDGAR (Accession
No. 0000950116-97-000366) on February 26, 1997 and are herein incorporated by
reference.
4. Registrant's Distribution Agreement between Registrant and ICC Distributors,
Inc. with respect to Flag Investors Shares filed as Exhibit (6)(a) to this
Post-Effective Amendment No. 12 to Registrant's Registration Statement on Form
N-1A (Registration No. 33-32819), filed herewith and is herein incorporated by
reference.
5. Registrant's Distribution Plan with respect to Flag Investors Class A Shares
filed as Exhibit (15)(d) to this Post-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-32819), filed herewith
and is herein incorporated by reference.
6. Registrant's Distribution Agreement between Registrant and International
Strategy & Investment Group, Inc. with respect to ISI Managed Muncipal Fund
Shares filed as Exhibit (6)(d) to this Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (Registration No. 33-32819),
filed herewith and is herein incorporated by reference.
7. Registrant's Distribution Plan with respect to ISI Managed Municipal Fund
Shares filed as Exhibit (15)(c) to this Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-32819), filed herewith and is herein incorporated by reference.
8. Registrant's Form of Sub-Distribution Agreement between ICC Distributors,
Inc. and Participating Dealers is filed as Exhibit (6)(e) to this Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-32819) filed herewith and is herein incorporated by
reference.
9. Registrant's Prospectus relating to its Flag Investors Class A Shares is
filed as part of this Registration Statement on Form N-1A (Registration No.
33-32819) and as amended from time to time, is herein incorporated by reference.
10. Registrant's Prospectus relating to its ISI Managed Municipal Fund Shares is
filed as part of this Registration Statement on Form N-1A (Registration No.
33-32819) and as amended from time to time, is herein incorporated by reference.
<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,
R. Alan Medaugh and Amy M. Olmert, 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 any 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 25, 1998
<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 ,
R. Alan Medaugh and Amy M. Olmert, 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 any 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 25, 1998
<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 ,
R. Alan Medaugh and Amy M. Olmert, 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 any 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 25, 1998
<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 ,
R. Alan Medaugh and Amy M. Olmert, 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 any 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 25, 1998
<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 ,
R. Alan Medaugh and Amy M. Olmert, 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 any 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 25, 1998
<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 ,
R. Alan Medaugh and Amy M. Olmert, 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 any 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 25, 1998
-----------------------
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000859031
<NAME> FLAG MANAGED MUNICIPAL FUND
<SERIES>
<NUMBER>001
<NAME> MANAGED MUNICIPAL FUND - FLAG A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 115,870,300
<INVESTMENTS-AT-VALUE> 119,897,377
<RECEIVABLES> 1,511,894
<ASSETS-OTHER> 31,376
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121,440,647
<PAYABLE-FOR-SECURITIES> 3,860,819
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 186,092
<TOTAL-LIABILITIES> 4,046,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,127,769
<SHARES-COMMON-STOCK> 3,557,464
<SHARES-COMMON-PRIOR> 3,894,438
<ACCUMULATED-NII-CURRENT> 5,357,775
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 289,203
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,027,077
<NET-ASSETS> 38,390,248
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,440,149
<OTHER-INCOME> 0
<EXPENSES-NET> 1,082,374
<NET-INVESTMENT-INCOME> 5,357,775
<REALIZED-GAINS-CURRENT> 1,002,650
<APPREC-INCREASE-CURRENT> 2,249,576
<NET-CHANGE-FROM-OPS> 8,610,001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,919,815
<DISTRIBUTIONS-OF-GAINS> 129,060
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 167,474
<NUMBER-OF-SHARES-REDEEMED> 606,069
<SHARES-REINVESTED> 101,621
<NET-CHANGE-IN-ASSETS> (8,510,415)
<ACCUMULATED-NII-PRIOR> 5,787,049
<ACCUMULATED-GAINS-PRIOR> 194,121
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 480,975
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,315,759
<AVERAGE-NET-ASSETS> 39,310,240
<PER-SHARE-NAV-BEGIN> 10.58
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.24
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000859031
<NAME> FLAG MANAGED MUNICIPAL FUND
<SERIES>
<NUMBER>002
<NAME> MANAGED MUNICIPAL FUND - FLAG - ISI
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 115,870,300
<INVESTMENTS-AT-VALUE> 119,897,377
<RECEIVABLES> 1,511,894
<ASSETS-OTHER> 31,376
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121,440,647
<PAYABLE-FOR-SECURITIES> 3,860,819
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 186,092
<TOTAL-LIABILITIES> 4,046,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,949,687
<SHARES-COMMON-STOCK> 7,322,827
<SHARES-COMMON-PRIOR> 8,010,842
<ACCUMULATED-NII-CURRENT> 5,357,775
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 289,203
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,027,077
<NET-ASSETS> 79,003,488
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,440,149
<OTHER-INCOME> 0
<EXPENSES-NET> 1,082,374
<NET-INVESTMENT-INCOME> 5,357,775
<REALIZED-GAINS-CURRENT> 1,002,650
<APPREC-INCREASE-CURRENT> 2,249,576
<NET-CHANGE-FROM-OPS> 8,610,001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,948,488
<DISTRIBUTIONS-OF-GAINS> 267,980
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382,670
<NUMBER-OF-SHARES-REDEEMED> 1,295,279
<SHARES-REINVESTED> 224,594
<NET-CHANGE-IN-ASSETS> (8,510,415)
<ACCUMULATED-NII-PRIOR> 5,787,049
<ACCUMULATED-GAINS-PRIOR> 194,121
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 480,975
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,315,759
<AVERAGE-NET-ASSETS> 80,934,526
<PER-SHARE-NAV-BEGIN> 10.58
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.24
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
