ISI
INTERNATIONAL STRATEGY & INVESTMENT
ISI
MANAGED MUNICIPAL
FUND SHARES
(A CLASS OF MANAGED MUNICIPAL FUND, INC.)
SEMI-ANNUAL REPORT
APRIL 30, 2000
<PAGE>
INVESTMENT ADVISOR'S REPORT
--------------------------------------------------------------------------------
We are pleased to report on the progress of your Fund for the period
ended April 30, 2000. The Fund recorded a total return, for the first six months
of the fiscal year of 2.81%. Since its inception on February 26, 1990, the Fund
has produced a cumulative total return of 80.44%, which translates into an
average annual total return of 5.97%. These figures assume the reinvestment of
dividends and capital gains distributions and exclude the impact of any sales
charge.
PORTFOLIO MANAGEMENT
The Fund emphasizes "top quality" in its municipal bond investments. Over
the last six months, quality yield spread differentials have opened a bit. But
the strong revenue growth experienced by most municipalities has so far
moderated any spread opening.
[GRAPH OMITTED]
plot points as follows:
10/29/99 32
11/05/99 33
11/12/99 41
11/19/99 44
11/26/99 37
12/03/99 39
12/10/99 38
12/17/99 35
12/24/99 39
12/31/99 39
01/07/00 40
01/14/00 40
01/21/00 39
01/28/00 38
02/04/00 41
02/11/00 44
02/18/00 49
02/25/00 51
03/03/00 51
03/10/00 53
03/17/00 56
03/24/00 57
03/31/00 64
04/07/00 65
04/14/00 52
04/21/00 50
04/28/00 50
ISI expects the economy will slow over the second half of the fiscal year
and that will hit medium quality municipals. In this environment, we believe the
Fund's high quality orientation should help its performance.
The Fund's high quality municipalities have more financial options than the
typically more leveraged medium quality municipalities. As a result, the Fund's
issues are often quickly pre-refunded. This is an advantage for the Fund in a
rising interest rate environment because the fund can sell these short maturity
issues and re-deploy the proceeds in the higher yielding long maturity market.
The Fund currently has almost 22.5% of its assets in pre-refunded bonds and
short-term reserves. As the second half of the fiscal year unfolds, ISI will be
looking for an opportunity to extend the maturity of the Fund by selling its
short maturity holdings and investing in the 20-year maturity range. For more
information on the outlook for the economy, please see ISI's report which
follows this letter.
We would like to welcome our new investors to the Fund and thank those who
have been with us for some time. We appreciate your confidence.
Sincerely,
/S/SIGNATURE
R. Alan Medaugh
President
May 5, 2000
1
<PAGE>
ECONOMIC OUTLOOK FOR 2000
--------------------------------------------------------------------------------
OVERVIEW
Currently, we see more negatives than positives for bonds. In establishing
our position on bonds, we look at three perspectives: 1) fundamentals, 2)
sentiment, and 3) technicals. Currently, we believe the fundamentals and
technicals are negative, while sentiment is positive. This mix puts us cautious
on bonds. We are watching the "fundamentals" for a possible change, given that
our company surveys last week predicted a slow down in the economy, money growth
has been slowing, and commodity prices have weakened. But strong growth reports
have been dominant so far. First quarter nominal growth was reported last week
to be running at an 8.1% annual rate. Inflation readings have also picked up.
The Employment Cost Index, a report closely watched by the Federal Reserve,
jumped to a 4.3% annual rate for the first quarter. The pick-up in inflation has
gained consumer attention according to the University of Michigan Inflation
Expectation report. Inflation expectations are up 100 basis points in the last
year, implying future pressure on wage demands. We expect the Federal Reserve
will increase the Federal Funds rate by 50 basis points in two 25 basis point
moves at the May and June meetings.
U.S. ECONOMY
Over the last five years a distinct economic growth pattern has persisted,
with the first quarter of the year strong relative to the fourth quarter of the
preceding year as illustrated in the following chart. For seasonal strength to
continue for five years means the forces behind the growth are accelerating
faster than the Bureau of Labor Statistics can adjust their seasonal models. We
believe the keys to this first quarter growth are accelerating tax refunds,
rising bonus payments and home mortgage refinancing windfalls.
[GRAPH OMITTED]
plot points as follows:
12/31/95 2.6
3/31/96 3.3
12/31/96 2.9
3/31/97 4.4
12/31/97 3.3
3/31/98 5.8
12/31/98 4.6
3/31/99 6.5
12/31/99 5.9
3/31/00 7.5
The question is what's next. It would seem that the first quarter
acceleration story suggests growth slows in the second quarter. However, that
has not been the case. In the past four years, second quarter consumer spending
has accelerated half the time. This year there is a special stimulus: the repeal
of the Social Security earnings test for workers aged 65 to 69. This will
provide roughly a $1.4 billion tax cut for the second quarter, or almost $6
billion at an annual rate. So, it is likely that this year may see growth
persist at a higher rate into the second quarter. As a result, the Federal
Reserve will be forced to continue with its increases in short rates.
2
<PAGE>
ECONOMIC OUTLOOK FOR 2000 (CONCLUDED)
--------------------------------------------------------------------------------
In the second half of 2000, we expect the Federal Reserve rate increases
along with those of other Central Banks will begin to dampen growth. Also
pointing to lower growth, money supply growth, which leads retail sales, has
rolled over in the last month. Equity prices have also been flat for the last
four months while exhibiting volatile day to day action. This behavior is likely
to reduce consumer confidence. ISI sees a slow down developing from these
factors.
FINANCIAL MARKETS
Strong growth in 1999 and a change in Federal Reserve policy pushed
interest rates up from 4.82% to 5.63% on 20-year AAA municipal bonds. After an
early 2000 rally, strong growth and a hawkish Federal Reserve have again moved
rates higher. The stock market has also played a role in raising rates. The
resulting long-term build up of consumer balance sheet wealth has stimulated
spending, helping bolster economic growth. A year-end 1999 money growth
acceleration to head off any Y2K problems most likely exacerbated the
performance of the speculative part of the equity market such as the NASDAQ. The
recent reversal of the money acceleration seemed to have produced a sizeable
drop in the same speculative stock sector. As a result, price volatility has
become an important feature in the financial markets.
Looking ahead, we expect growth to slow in the second half of 2000. This is
likely to cap the Federal Reserve's interest rate increases and begin to lower
long-term bond yields.
3
<PAGE>
PORTFOLIO DIVERSIFICATION BY STATE
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
STATE ALLOCATION
--------------------------------------------------------------------------------
% of % of
Municipal Municipal
Bonds Bonds
--------- ---------
Texas 19.5% South Carolina 4.4%
North Carolina 11.1 Illinois 2.9
Washington 11.0 Ohio 2.8
Florida 6.9 Utah 2.2
Minnesota 6.0 Colorado 2.0
Wisconsin 5.5 Missouri 1.9
Kansas 5.0 Indiana 1.7
Virginia 5.0 Oregon 1.6
Delaware 4.9 Hawaii 0.8
Tennessee 4.8 -------
Total 100.0%
Average Maturity 12.8 years
--------------------------------------------------------------------------------
Average Duration 8.3 years
--------------------------------------------------------------------------------
Quality Breakdown:
--------------------------------------------------------------------------------
AAA 59%
--------------------------------------------------------------------------------
AA 41%
--------------------------------------------------------------------------------
4
<PAGE>
ADDITIONAL PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The shareholder letter included in this report contains statistics designed
to help you evaluate the performance of your Fund's management. To further
assist in this evaluation, the Securities and Exchange Commission (SEC) requires
that we include the Fund's total return, according to a standardized formula,
for various time periods through the end of the most recent calendar quarter.
The SEC standardized total return figures include the impact of the Fund's
maximum initial sales charge. Returns would be higher for investors who
qualified for a lower initial sales charge.
The SEC total return figures may differ from total return figures in the
shareholder letter because the SEC figures include the impact of sales charges
while the total return figures in the shareholder letter do not. Any performance
figures shown are for the full period indicated. Since investment return and
principal value will fluctuate, an investor's shares may be worth more or less
than their original cost when redeemed. Past performance is not an indicator of
future results.
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 1
% Return with
Periods ended 4/30/00: Sales Charge
--------------------------------------------------------------------------------
One Year (6.52)%
--------------------------------------------------------------------------------
Five Years 4.13%
--------------------------------------------------------------------------------
Since Inception (2/26/90) 5.46%
--------------------------------------------------------------------------------
1 Past performance is not an indicator of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. These figures assume the reinvestment
of dividends and capital gain distributions and include the Fund's 4.45%
maximum sales charge. Returns would have been lower during the specified
period if certain fees and expenses had not been waived.
--------------------------------------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.
For more complete information regarding any of the ISI Funds, including
charges and expenses, obtain a prospectus from your investment representative or
directly from the Fund at 1-800-955-7175. Read it carefully before you invest.
--------------------------------------------------------------------------------
5
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR MARKET
ISSUER S&P) (000) VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS -- 94.1%
GENERAL OBLIGATIONS -- 67.4%
Arlington County, VA
5.00%, 10/1/14 .................................... Aaa/AAA $2,000 $ 1,906,960
Arlington, TX, School District
5.75%, 2/15/21 .................................... AAA/NR 1,465 1,440,447
Charlotte, NC
5.30%, 4/1/12 ..................................... Aaa/AAA 1,120 1,123,091
5.00%, 2/1/19 ..................................... Aaa/AAA 2,300 2,095,990
Chesterfield County, VA
5.625%, 1/15/14 ................................... Aaa/AAA 1,350 1,374,651
Dallas, TX
5.00%, 2/15/13 .................................... Aaa/AAA 1,755 1,661,090
Delaware State, Series A
5.125%, 4/1/16 .................................... Aaa/AAA 2,150 2,043,424
5.50%, 4/1/19 ..................................... Aaa/AAA 2,500 2,456,625
Dupage County, IL, Jail Project
5.60%, 1/1/21 ..................................... Aaa/AAA 1,600 1,563,488
Florida Board of Education
6.125%, 6/1/12 .................................... Aa2/AA+ 2,250 2,302,875
Florida State Board Capital Outlay, Series C
5.50%, 6/1/21 ..................................... Aa2/AA+ 2,000 1,927,400
Franklin County, OH
5.45%, 12/1/09 .................................... Aaa/AAA 1,500 1,517,910
5.50%, 12/1/13 .................................... Aaa/AAA 1,000 1,006,630
Grand Prairie, TX, School District
5.20%, 2/15/18 .................................... Aaa/AAA 2,000 1,849,940
King County, WA
5.20%, 12/1/15 .................................... Aa1/AA+ 2,500 2,350,225
5.00%, 12/1/17 .................................... Aa1/AA+ 2,565 2,316,862
Metropolitan Government Nashville &
Davidson County, TN
5.125%, 11/15/19 .................................. Aa2/AA 2,000 1,811,200
Minneapolis, MN Refunding, Series B
5.20%, 3/1/13 ..................................... Aaa/AAA 3,200 3,127,136
</TABLE>
6
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR MARKET
ISSUER S&P) (000) VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS -- (CONTINUED)
GENERAL OBLIGATIONS -- (CONCLUDED)
Minnesota State
5.00%, 11/1/14 .................................... Aaa/AAA $2,500 $ 2,376,150
Missouri State, Series A
5.00%, 6/1/23 ..................................... Aaa/AAA 2,000 1,783,720
North Carolina State Public Improvement, Series A
5.25%, 3/1/16 ..................................... Aaa/AAA 1,170 1,130,840
North Carolina Public School Building
4.60%, 4/1/17 ..................................... Aaa/AAA 5,000 4,333,050
Plano, TX Independent School District
5.00%, 2/15/11 .................................... Aaa/AAA 3,000 2,881,200
Portland, OR, Metro Regional Government
5.25%, 9/1/07 ..................................... Aa/AA+ 1,500 1,508,910
Salt Lake County, UT
5.25%, 12/15/10 ................................... Aaa/AAA 2,000 1,996,640
South Carolina Capital Improvement
5.625%, 7/1/14 .................................... Aaa/AAA 2,700 2,744,847
5.65%, 7/1/21 ..................................... Aaa/AAA 1,260 1,251,886
Virginia State
5.25%, 6/1/16 ..................................... Aaa/AAA 1,320 1,278,143
Washington State, Series A
5.60%, 7/1/10 ..................................... Aa1/AA+ 1,500 1,522,530
Washington State, Series E
5.00%, 7/1/22 ..................................... Aa1/AA+ 2,000 1,743,080
Washington State, Series R
5.00%, 7/1/14 ..................................... Aa1/AA+ 2,250 2,096,010
Wisconsin State, Series 1
5.00%, 5/1/15 ..................................... Aa2/AA 1,000 929,070
Wisconsin State, Series B
5.00%, 5/1/16 ..................................... Aa2/AA 3,500 3,220,805
5.00%, 5/1/18 ..................................... Aa2/AA 1,000 904,070
-----------
65,576,895
-----------
</TABLE>
7
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR MARKET
ISSUER S&P) (000) VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS -- (CONTINUED)
OTHER REVENUE -- 4.1%
Charlotte, NC, Water & Sewer System Revenue
5.25%, 6/1/24 ..................................... Aa2/AA+ $1,600 $ 1,467,072
Texas Water Development Board Revenue
4.75%, 7/15/20 .................................... Aa1/AAA 3,000 2,551,440
-----------
4,018,512
-----------
PREREFUNDED ISSUES -- 17.9%
Arlington, TX, School District
5.75%, 2/15/21 .................................... Aaa/NR* 3,535 3,642,004
Chicago, IL, Metropolitan Water
Reclamation District-Greater Chicago
6.30%, 12/1/09 .................................... Aa1/AA 1,000 1,058,190
Dallas, TX
5.00%, 2/15/10 .................................... Aaa/AAA 1,750 1,747,655
Florida Transportation
5.80%, 7/1/18 ..................................... Aa2/AAA 2,000 2,087,500
Indianapolis, IN, Public Improvement
Board Revenue
6.00%, 1/10/18 .................................... Aaa/AAA 1,500 1,515,720
Lower Colorado River Authority, Jr. Lien
5.25%, 1/1/15 ..................................... #AAA/AAA 2,000 1,953,860
State of Hawaii
7.00%, 6/1/06 ..................................... #AAA/++ 750 751,762
Tennessee State,Series A
5.50%, 3/1/09 ..................................... Aaa/AAA 1,535 1,566,207
5.55%, 3/1/10 ..................................... Aaa/AAA 1,000 1,022,460
Texas State
6.00%, 10/1/14 .................................... Aa1/AA 2,000 2,079,200
------------
17,424,558
------------
</TABLE>
8
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING*
(MOODY'S/ PAR MARKET
ISSUER S&P) (000) VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS -- (CONCLUDED)
TRANSPORTATION REVENUE -- 4.7%
Kansas Transportation
5.40%, 3/1/09 ..................................... Aa2/AA+ $4,500 $ 4,533,930
-----------
TOTAL MUNICIPAL BONDS
(Cost $93,620,423) ................................ 91,553,895
-----------
REPURCHASE AGREEMENT -- 4.6%
Goldman Sachs & Co., 5.63% Dated 4/28/00, to be
repurchased for $4,484,000 on 5/1/00,
collateralized by U.S. Treasury Bonds, 5.625%,
due 5/15/01 with a market value of $4,559,456
(Cost $4,470,000) ................................................. 4,470 $ 4,470,000
------------
TOTAL INVESTMENTS -- 98.7%
(Cost $98,090,423) ............................................................. 96,023,895
------------
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.3% ...................................... 1,291,292
------------
NET ASSETS-- 100.0% .................................. ............................ $97,315,187
------------
------------
NET ASSET VALUE AND REDEMPTION PRICE PER:
ISI Class Share
($65,117,356 / 6,406,082 shares outstanding) ..... ............................ $10.16
------------
------------
Flag Investors Class A Share
($32,197,831 / 3,168,116 shares outstanding) ..... ............................ $10.16
------------
------------
MAXIMUM OFFERING PRICE PER:
ISI Class Share
($10.16 / 0.9555) ................................ ............................ $10.63
------------
------------
Flag Investors Class A Share
($10.16 / 0.9550) ............................................................. $10.64
------------
------------
</TABLE>
9
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED)
APRIL 30, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
---------
* The Moody's and Standard & Poor's ratings indicated are believed to be
the most recent ratings available as of April 30, 2000.
++ Prerefunded bonds backed by U.S. Treasury securities. Absent
prerefunding, this obligation is rated Aa3/A+.
Moody's Municipal Bond Ratings:
Aaa Judged to be of the best quality.
Aa Judged to be of high quality by all standards. Issues are always rated
with a 1,2 or 3, which denote a high, medium, or low ranking within the
rating.
#AAA Advance refunded issues secured by escrowed funds held in cash, held in
a trust or invested in direct non-callable U.S. government obligations
or non-callable obligations.
NR Not rated.
S&P Municipal Bond Rating:
AAA Of the highest quality.
AA The second strongest capacity for payments of debt service. Those issues
determined to possess very strong safety characteristics are denoted
with a plus (+) sign.
NR Not rated.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
10
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest .................................................. $2,716,190
----------
EXPENSES:
Investment advisory fee ................................... 200,054
Distribution fee .......................................... 125,034
Administration fee ........................................ 54,083
Accounting fee ............................................ 27,421
Professional fees ......................................... 27,233
Transfer agent fee ........................................ 24,831
Registration fees ......................................... 22,439
Printing and Postage ...................................... 16,478
Miscellaneous ............................................. 5,086
----------
Total expenses ......................................... 502,659
Less: Fees waived ......................................... (49,537)
----------
Net expenses ........................................... 453,122
----------
Net investment income ..................................... 2,263,068
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized loss from security transactions .............. (74,065)
Change in unrealized appreciation/depreciation of investments 559,378
----------
Net gain on investments ................................... 485,313
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................... $2,748,381)
----------
----------
--------------------------------------------------------------------------------
See Notes to Financial Statements.
11
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, OCTOBER 31,
2000(1) 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .................................. $ 2,263,068 $ 4,818,088
Net realized gain/(loss) from
security transactions ............................... (74,065) 547,939
Change in unrealized appreciation/
(depreciation) of investments ....................... 559,378 (9,251,142)
------------ ------------
Net increase/(decrease) in net assets
resulting from operations ........................... 2,748,381 (3,885,115)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income and short-term gains:
ISI Class Shares .................................... (1,616,417) (3,369,957)
Flag Investors Class A Shares ....................... (774,647) (1,600,162)
Net realized long-term gains:
ISI Class Shares .................................... -- (312,768)
Flag Investors Class A Shares ....................... -- (151,301)
------------ ------------
Total distributions .................................... (2,391,064) (5,434,188)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares ........................... 2,968,448 8,098,100
Value of shares issued in reinvestment of dividends .... 1,217,931 2,739,411
Cost of shares repurchased ............................. (11,986,909) (14,720,429)
------------ ------------
Decrease in net assets derived from
capital share transactions .......................... (7,800,530) (3,882,918)
------------ ------------
Total decrease in net assets ........................... (7,443,213) (13,202,221)
NET ASSETS:
Beginning of period .................................... 104,758,400 117,960,621
------------ ------------
End of period including distributions in excess of net
investment income of $10,935 for the year end
October 31, 1999 .................................... $ 97,315,187 $104,758,400
------------ ------------
------------ ------------
-----------------------------------------------------------------------------------------------------
<FN>
1 Unaudited.
See Notes to Financial Statements.
</FN>
</TABLE>
12
<PAGE>
MANAGED MUNICIPAL FUND, INC.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--ISI CLASS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED APRIL 30, FOR THE YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------------------------------------------------------------
2000(5) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period ..... $ 10.12 $ 11.01 $ 10.79 $ 10.58 $ 10.65 $ 9.81
-------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.23 0.45 0.46 0.52 0.48 0.48
Net realized and unrealized
gain/(loss) on investments ............... 0.05 (0.83) 0.33 0.24 -- 0.98
-------- -------- -------- -------- -------- -------
Total from Investment Operations ........... 0.28 (0.38) 0.79 0.76 0.48 1.46
-------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Net investment income and net realized
short-term gains ......................... (0.24) (0.47) (0.54) (0.52) (0.54) (0.54)
Net realized long-term gains ............... -- (0.04) (0.03) (0.03) (0.01) (0.08)
-------- -------- -------- -------- -------- -------
Total distributions ........................ (0.24) (0.51) (0.57) (0.55) (0.55) (0.62)
-------- -------- -------- -------- -------- -------
Net asset value at end of period ........... $ 10.16 $ 10.12 $ 11.01 $ 10.79 $ 10.58 $ 10.65
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
TOTAL RETURN 1 ................................ 2.81% (3.61)% 7.51% 7.43% 4.67% 15.42%
RATIOS TO AVERAGE DAILY NET ASSETS:
Expenses2 .................................. 0.90%4 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income3 ..................... 4.48%4 4.23% 4.24% 4.46% 4.48% 4.72%
SUPPLEMENTAL DATA:
Net assets at end of period (000):
ISI Class Shares ........................ $65,117 $70,609 $80,749 $79,003 $84,712 $86,292
Flag Investors Class A Shares ........... $32,198 $34,150 $37,212 $38,390 $41,193 $45,980
Portfolio turnover rate .................... 9% 8% 18% 26% 32% 55%
---------------------------------------------------------------------------------------------------------------------------
<FN>
1 Total return excludes the effect of sales charge.
2 Without the waiver of advisory and administration fees (Note B), the ratio of
expenses to average daily net assets would have been 1.00%(annualized), 1.10%,
1.13%, 1.10%, 1.13% and 1.10% for the six months ended April 30,2000, and for
the years ended October 31, 1999, 1998, 1997, 1996 and 1995, respectively.
3 Without the waiver of advisory and administration fees (Note B), the ratio of
net investment income to average daily net assets would have been 4.03%, 4.01%,
4.26%, 4.25% and 4.52% for the years ended April 30, 2000, 1998, 1997, 1996 and
1995, respectively.
4 Annualized.
5 Unaudited.
</FN>
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A.SIGNIFICANT ACCOUNTING POLICIES -- Managed Municipal Fund, Inc. (the
"Fund"), which was organized as a Maryland Corporation on January 5, 1990
and began operations February 26, 1990, is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment
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 through investment in a portfolio consisting primarily of
municipal obligations, the interest on which is exempt from federal income
tax.
The Fund consists of two share classes: ISI Managed Municipal Fund Shares
("ISI Class Shares"), which began operations February 26, 1990, and Flag
Investors Managed Municipal Fund Class A Shares ("Flag Investors Class A
Shares"), which began operations 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 accounting principles generally accepted in
the UnitedStates. 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 pre-sentation. The Fund's
significant accounting policies are:
SECURITY VALUATION -- Municipal obligations are usually traded in the
over-the-counter market.
The Fund utilizes the services of an independent pricing vendor to obtain
prices. When there is an available market quotation, the Fund values a
municipal obligation by using the most recent price provided by an
investment dealer. When a market quotation is not readily available, the
Investment Advisor determines a fair value using procedures that the Board
of Directors establishes and monitors. At April 30, 2000 there were no
Board Valued Securities. The Fund values short-term obligations with
maturities of 60 days or less at amortized cost which approximates fair
market value.
REPURCHASE AGREEMENTS -- The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase 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.
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.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER -- The
Fund uses the trade date to account for security transactions and the
specific identification cost method for financial reporting and income tax
purposes to determine the gain or loss of investments sold or redeemed.
Interest income is recorded on an accrual basis and includes 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.
B.INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES --
International Strategy & Investment Inc. ("ISI") is the Fund's investment
advisor. 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 the annual rate of 0.40%. For the six
month period ended April 30, 2000, ISI's advisory fee was $200,054 of which
$32,443 was payable at the end of the period.
ISI has contractually agreed to waive its fees through February 28, 2001,
to the extent necessary, so that the Fund's annual expenses do not exceed
0.90% of its average daily net assets. For the six month period ended April
30, 2000, ISI waived fees of $49,537.
Investment Company Capital Corp. ("ICCC") is the Fund's Administrator. As
compensation for its administrative services, the Fund pays ICCC an annual
fee based on the combined assets of the ISI Funds and is calculated daily
and paid monthly at the following annual rates: 0.20% of the first $75
million, 0.15% of the next $75 million, 0.10% of the next $75 million,
0.05% of the next $275 million, and 0.03% of the amount over $500 million.
Certain officers and directors of the Fund are also officers or directors
of ISI or ICCC.
ICCC provides accounting services, to the Fund for which the Fund pays ICCC
an annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets. For the six month period ended April 30, 2000,
ICCC's fee was $27,421, of which $4,499 was payable at the end of the
period.
ICCC also provides transfer agent services to the Fund for which the Fund
pays ICCC a per account fee that is calculated and paid monthly. For the
six month period ended April 30, 2000, ICCC's fee was $24,831, of which
$3,614 was payable at the end of the period.
ISI Group Inc. ("ISI Group"), which is affiliated with ISI, provides
distribution services for the ISI class of the Fund for which ISI Group is
paid an annual fee, pursuant to Rule 12b-1, that is calculated daily and
paid monthly at an annual rate equal to 0.25% of the ISI Class' average
daily net assets.
ICC Distributors, Inc. ("ICC Distributors"), a member of the Forum
Financial Group of companies, provides distribution services for the Flag
Investors Class A Shares for which ICC Distributors is paid an annual fee
that is calculated daily and paid monthly at an annual rate equal to 0.25%
of the Flag Investors Class A Shares' average daily net assets.
For the six month period ended April 30, 2000, distribution fees aggregated
$125,034. ISI group's fee was $84,526, of which $13,582 was payable at the
end of the period. ICC Distributor's fee was $40,508, of which $6,696 was
payable at the end of the period.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
C.CAPITAL SHARE TRANSACTIONS -- The Fund is authorized to issue up to 55
million shares of $.001 par value capital stock (20 million ISI Class, 15
million Flag Investors Class A, 2.5 million Class B, 15 million Class C,
0.5 million Class D and 2 million undesignated). Transactions in shares of
the Fund are listed in the chart below:
ISI CLASS SHARES
---------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
APRIL 30, 20001 OCT. 31, 1999
---------------------------------------
Shares sold ........... 70,594 261,822
Shares issued to share-
holders on reinvest-
ment of dividends ... 74,603 163,148
Shares redeemed ....... (713,562) (786,574)
----------- -----------
Net decrease in shares
outstanding ......... (568,365) (361,604)
----------- -----------
----------- -----------
Proceeds from sale
of shares ........... $ 710,860 $ 2,797,892
Value of reinvested
dividends ........... 752,771 1,747,918
Cost of shares
redeemed ............ (7,190,584) (8,384,868)
----------- -----------
Net decrease from
capital share
transactions ........ $(5,726,953) $(3,839,058)
----------- -----------
----------- -----------
FLAG INVESTORS CLASS A SHARES
---------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
APRIL 30, 20001 OCT. 31, 1999
---------------------------------------
Shares sold ........... 222,913 490,026
Shares issued to share-
holders on reinvest-
ment of dividends ... 46,086 92,630
Shares redeemed ....... (474,778) (590,052)
----------- -----------
Net decrease in shares
outstanding ......... (205,779) (7,396)
----------- -----------
----------- -----------
Proceeds from sale
of shares ........... $2,257,587 $ 5,300,208
Value of reinvested
dividends ........... 465,160 991,493
Cost of shares
redeemed ............ (4,796,324) (6,335,561)
----------- -----------
Net decrease from
capital share
transactions ........ $(2,073,577) $ (43,860)
----------- -----------
----------- -----------
-------------------
1 Unaudited.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
--------------------------------------------------------------------------------
D.INVESTMENT TRANSACTIONS -- Excluding short-term obligations, purchases of
investment securities aggregated $8,681,400 and sales of investment
securities aggregated $15,547,882 for the period ended April 30, 2000.
On April 30, 2000, aggregate net unrealized depreciation over tax cost for
portfolio securities was $2,066,528 of which $1,061,387 related to
appreciated securities and $3,127,915 related to depreciated securities.
E. NET ASSETS -- On April 30, 2000, net assets consisted of:
Paid-in capital:
ISI Class Shares ..................... $67,518,820
Flag Investors
Class A Shares ................... 32,075,889
Distributions in excess of
net investment income ................ (138,930)
Undistributed net realized loss
from investment transactions(74,064)
Unrealized depreciation
of investments ....................... (2,066,528)
-----------
$97,315,187
-----------
-----------
17
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<PAGE>
ISI
MANAGED
MUNICIPAL
FUND SHARES
--------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Edward S. Hyman Margaret M. Beeler
CHAIRMAN ASSISTANT VICE PRESIDENT
R. Alan Medaugh Suzanne H. Ughetta
PRESIDENT ASSISTANT VICE PRESIDENT
Joseph R. Hardiman Keith C. Reilly
DIRECTOR ASSISTANT VICE PRESIDENT
Louis E. Levy Charles A. Rizzo
DIRECTOR TREASURER
Carl W. Vogt, Esq. Felicia A.Emry
DIRECTOR SECRETARY
Nancy Lazar Amy M. Olmert
VICE PRESIDENT ASSISTANT SECRETARY
Edward J. Veilleux Daniel O. Hirsch
VICE PRESIDENT ASSISTANT SECRETARY
Carrie L. Butler
VICE PRESIDENT
INVESTMENT OBJECTIVE
A mutual fund designed to provide a high level of total return with relative
stability of principal and, secondarily, high current income through investment
in a portfolio consisting primarily of municipal obligations, the interest on
which is exempt from federal income tax.
INVESTMENT ADVISOR
--------------------------------------------------------------------------------
ISI Inc.
535 Madison Avenue, 30th Floor
New York, NY 10022
(800) 955-7175
SHAREHOLDER SERVICING AGENT
--------------------------------------------------------------------------------
Investment Company Capital Corp.
P.O. Box 219426
Kansas City, MO 64121-9426
(800) 882-8585
DISTRIBUTOR
--------------------------------------------------------------------------------
ISI Group, Inc.
535 Madison Avenue, 30th Floor
New York, NY 10022
(800) 955-7175/p
