|
|
|
|
|
|
|
|
|
(GRAPHIC APPEARS HERE)
(FLAG INVESTORS LOGO APPEARS HERE)
Managed Municipal
Fund Shares
Annual Report
October 31, 1999
<PAGE>
PORTFOLIO DIVERSIFICATION BY STATE
(MAP GRAPHIC HERE)
State Allocation
% of % of
Municipal Municipal
Bonds Bonds
Texas 20.2% Maryland 3.1%
North Carolina 11.6 Illinois 2.7
Washington 10.1 Ohio 2.6
Minnesota 9.1 Delaware 2.0
South Carolina 6.8 Utah 2.0
Florida 6.5 Missouri 1.8
Wisconsin 5.1 Indiana 1.6
Kansas 4.6 Oregon 1.5
Tennessee 4.5 Hawaii 0.8
Virginia 3.4 Total --------
100.0%
Average Maturity 13.1 years
Average Duration 8.7 years
Quality Breakdown:
AAA 60.2%
AA 39.8%
1
<PAGE>
LETTER TO SHAREHOLDERS
During a year of rising interest rates, the Fund recorded a total
return of -3.61%. From the Fund's inception on February 26, 1990 through October
31, 1999, the Fund has posted a cumulative total return of 75.52%, which
translates into an average annual total return of 5.98%. These figures assume
the reinvestment of dividends and capital gain distributions and exclude the
impact of any sales charge. Please review Additional Performance Information on
page 8.
Review of Rates and Portfolio Management
Long term Municipal interest rates rose 106 basis points, slightly
more than 1% over the last year.
30-YEAR MUNICIPAL AAA GENERAL OBLIGATIONS YIELDS
[GRAPHIC APPEARS HERE]
Date Yield
10/30/98 4.8
11/6/98 4.88
11/13/98 4.87
11/20/98 4.84
11/27/98 4.84
12/4/98 4.82
12/11/98 4.8
12/18/98 4.82
12/25/98 4.88
1/1/99 4.86
1/8/99 4.92
1/15/99 4.89
1/22/99 4.84
1/29/99 4.81
2/5/99 4.86
2/12/99 4.87
2/19/99 4.88
2/26/99 4.94
3/5/99 4.99
3/12/99 4.97
3/19/99 4.94
3/26/99 4.97
4/2/99 4.99
4/9/99 4.96
4/16/99 4.96
4/23/99 4.98
4/30/99 4.97
5/7/99 5.02
5/14/99 5.07
5/21/99 5.06
5/28/99 5.08
6/4/99 5.11
6/11/99 5.2
6/18/99 5.2
6/25/99 5.28
7/2/99 5.27
7/9/99 5.27
7/16/99 5.2
7/23/99 5.22
7/30/99 5.28
8/6/99 5.4
8/13/99 5.49
8/20/99 5.59
8/27/99 5.51
9/3/99 5.51
9/10/99 5.54
9/17/99 5.58
9/24/99 5.59
10/1/99 5.67
10/8/99 5.71
10/15/99 5.79
10/22/99 5.84
10/29/99 5.86
Source: Bloomberg, Inc.
Early in the year, the Fund's short maturities were increased as a way
to moderate the adverse effects of rising rates. For example, holdings of five
years and less maturities were increased from 13.1% of the portfolio in October,
1998 to 22.1% by February, 1999. Since February, as rates climbed, the amount in
short maturities was reduced so that at the end of the fiscal year, five year
and less maturities represented only 11.2% of the portfolio.
The municipal market has good value when compared to the Treasury bond
market. Tax free yields on AAA quality long term General Obligations are near
their highest levels versus Treasuries, at a time when rates themselves are
high. Please see the table below.
YIELD ON AAA MUNICIPAL GO'S
AS A % OF U.S. TREASURY YIELDS (YEAR ENDING OCTOBER)*
Municipal
Maturity % of Comparable Treasury
- ------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
5 Year 76.1 67.9 72.4 72.4 72.3 85.6 77.1
10 Year 78.3 71.5 78.3 77.3 78.2 90.3 84.4
30 Year 80.0 78.4 88.3 83.4 83.1 93.4 93.2
*Source: Bloomberg, Inc.
2
<PAGE>
Value in Top Quality Municipals
At the same time rates are relatively high, the yield spread between
top quality and medium grade municipals is narrow. Please see graph below
comparing BAA and AAA quality long term municipals.
30 YEAR AAA MUNI VS. BAA 30 YEAR MUNI
[GRAPHIC APPEARS HERE]
Date Yield Spread
10/96 62.00
11/96 67.00
12/96 70.00
1/97 66.00
2/97 59.00
3/97 60.00
4/97 59.00
5/97 58.00
6/97 59.00
7/97 61.00
8/97 55.00
9/97 52.00
10/97 50.00
11/97 46.00
12/97 45.00
1/98 33.00
2/98 32.00
3/98 32.00
4/98 39.00
5/98 33.00
6/98 32.00
7/98 34.00
8/98 30.00
9/98 40.00
10/98 41.00
11/98 41.00
12/98 34.00
1/99 37.00
2/99 31.00
3/99 35.00
4/99 37.00
5/99 41.00
6/99 42.00
7/99 45.00
8/99 43.00
9/99 36.00
10/99 32.00
The Managed Municipal Fund does not invest in medium grade municipals,
believing that a top quality approach will pay dividends in terms of bond safety
and higher liquidity.
ISI expects the level of interest rates to trend lower, after the
typical early year seasonal burst of economic growth. Please see ISI's Economic
Outlook that follows this letter for more details.
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/ R. Alan Medaugh
R. ALAN MEDAUGH
President
November 22, 1999
3
<PAGE>
ECONOMIC OUTLOOK FOR 2000
Overview
The strong economic performance in the U.S. and a tight labor market
caused the Federal Reserve to raise rates at their November Open Market
Committee Meeting. A surging stock market which added $1 trillion to the U.S.
stock market's value in the three weeks preceding the meeting probably also
played a role in the decision. The Federal Reserve is unlikely to raise rates at
their late December meeting because of Y2K concerns. The U.S. economy appears to
be slowing but much of the quarter's performance depends on Christmas. To gauge
the market's direction, we are watching five fundamental indicators:
1) Money Growth
2) Unemployment Claims
3) Stock Prices
4) ISI Company Surveys
5) Commodity Prices
Conveniently, the first letter of each of the above spell out MUSIC.
The global economies are growing briskly in large part due to
expanding world trade. In reaction to stronger growth the Central banks around
the world are reversing their year ago financial crisis driven easings. In
November, 1999 we counted 20 Central Bank interest rate increases contrasted to
18 easings October, 1998. We expect the Federal Reserve to raise short term
rates again during the first quarter of 2000. The tightening will counter the
seasonal strength in the U.S. economy. During this quarter and next we expect
long term rates to stay at these high levels as the market assesses the impact
of worldwide central bank tightening action. Please see the forecast table
below.
ISI Economic Forecast
99:1Q 99:2Q 99:3Q 99:4Q* 00:1Q* 00:2Q*
Nominal GDP 5.7% 3.3% 5.8% 4.5% 5.5% 4.5%
GDP Deflator** 1.9% 1.4% 0.9% 1.5% 1.5% 1.5%
Real GDP 3.7% 1.9% 4.8% 3.0% 4.0% 3.0%
30 Year Bond Yields*** 5.6% 6.0% 6.1% 6.2% 6.2% 5.8%
Fed Funds Rate*** 4.7% 5.0% 5.3% 5.5% 5.7% 5.7%
* Estimated.
** A more accurate cost of living barometer than the CPI.
*** End of Quarter.
4
<PAGE>
The U.S. Economy
Over the past six weeks, our company surveys of front-end activity
have posted another downleg. For example, our retailers survey, which rolled
over in July, now has weekly readings below 40 for the past six weeks (very
soft). Another front-end activity, our auto dealers survey, which peaked in
September, declined in October and also declined further in the first half of
November. In contrast, back-end (mfg) activity has continued to firm. As the
chart below indicates, on balance so far the economy overall hasn't slowed
enough to take pressure off labor markets, but overall it is slowing.
ISI CO. SURVEYS OVERALL AVERAGE
(GRAPHIC APPEARS HERE)
(GROWTH IS SLOWING-hand written)
7-Nov-97 49.68
14-Nov-97 49.58
21-Nov-97 49.64
28-Nov-97 48.61
5-Dec-97 48.16
12-Dec-97 47.27
19-Dec-97 45.76
26-Dec-97 45.48
2-Jan-98 45.11
9-Jan-98 46.04
16-Jan-98 47.60
23-Jan-98 48.25
30-Jan-98 49.34
6-Feb-98 50.47
13-Feb-98 50.83
20-Feb-98 51.65
27-Feb-98 52.39
6-Mar-98 52.91
13-Mar-98 52.82
20-Mar-98 52.89
27-Mar-98 52.83
3-Apr-98 53.01
10-Apr-98 53.99
17-Apr-98 54.76
24-Apr-98 55.72
1-May-98 55.39
8-May-98 55.77
15-May-98 55.51
22-May-98 55.50
29-May-98 55.76
5-Jun-98 55.61
12-Jun-98 55.14
19-Jun-98 53.79
26-Jun-98 52.58
3-Jul-98 51.87
10-Jul-98 51.17
17-Jul-98 51.08
24-Jul-98 50.94
31-Jul-98 50.30
7-Aug-98 51.35
14-Aug-98 50.99
21-Aug-98 50.60
28-Aug-98 50.41
4-Sep-98 49.79
11-Sep-98 50.69
18-Sep-98 50.98
25-Sep-98 50.73
2-Oct-98 49.63
9-Oct-98 49.46
16-Oct-98 49.69
23-Oct-98 48.91
30-Oct-98 48.70
6-Nov-98 47.20
13-Nov-98 46.27
20-Nov-98 46.61
27-Nov-98 46.76
4-Dec-98 47.11
11-Dec-98 47.33
18-Dec-98 47.25
25-Dec-98 47.29
1-Jan-99 47.92
8-Jan-99 48.91
15-Jan-99 50.07
22-Jan-99 50.85
29-Jan-99 51.41
5-Feb-99 51.97
12-Feb-99 51.98
19-Feb-99 52.65
26-Feb-99 52.58
5-Mar-99 51.87
12-Mar-99 52.09
19-Mar-99 52.28
26-Mar-99 52.90
2-Apr-99 53.80
9-Apr-99 54.46
16-Apr-99 54.21
23-Apr-99 53.78
30-Apr-99 53.97
7-May-99 54.15
14-May-99 54.74
21-May-99 55.00
28-May-99 55.05
4-Jun-99 54.98
11-Jun-99 54.98
18-Jun-99 55.19
25-Jun-99 54.18
2-Jul-99 53.51
9-Jul-99 53.18
16-Jul-99 52.38
23-Jul-99 52.13
30-Jul-99 52.52
6-Aug-99 52.52
13-Aug-99 52.30
20-Aug-99 52.44
27-Aug-99 51.33
3-Sep-99 50.52
10-Sep-99 50.78
17-Sep-99 50.84
24-Sep-99 51.61
1-Oct-99 51.81
8-Oct-99 51.58
15-Oct-99 50.79
22-Oct-99 50.03
29-Oct-99 49.17
5-Nov-99 48.23
12-Nov-99 48.06
The U.S. economy has performed well at the start of the last four
years due to tax refunds, increased bonus payments and home mortgage
refinancing. Good wage gains (larger tax refunds) and corporate earnings (bonus
payments) will likely power another first quarter spurt. In anticipation of
that, lumber prices have reaccelerated. The extent of the seasonal strength will
influence the Federal Reserve and the bond market early next year. ISI's Company
Surveys are likely to be a good early indicator of the extent of this strength.
5
<PAGE>
ECONOMIC OUTLOOK FOR 2000
The Global Economy
Outside the U.S., the recovery since the height of the financial
crisis last Fall has been dramatic. Recently, the growth surge has decelerated
but growth remains at a high rate. Please see South Korea Real Gross Domestic
Product (GDP) below for reference.
SOUTH KOREA REAL GDP Q/Q % A.R. 99: 3rd Quarter 9.6%
(GRAPHIC APPEARS HERE)
Q/Q % A.R.
3/31/94 8.1
6/30/94 6
9/30/94 7.6
12/31/94 14.6
3/31/95 10.1
6/30/95 6.9
9/30/95 7
12/31/95 3.8
3/31/96 11.1
6/30/96 5.7
9/30/96 4.7
12/31/96 5.4
3/31/97 4.3
6/30/97 10.7
9/30/97 0.8
12/31/97 -1
3/31/98 -21.4
6/30/98 -5.7
9/30/98 1
12/31/98 7.3
3/31/99 16.7
6/30/99 15.4
9/30/99 9.6
The developed world has also experienced a growth recovery since last
Fall as can be seen by the OECD (Organization of Economically Developed
Countries) leading indicator.
OECD LEADING INDICATOR 3 MONTH. % A.R. SEPTEMBER 5.6%
(GRAPHIC APPEARS HERE)
Jan-93 4.93
Feb-93 4.04
Mar-93 2.88
Apr-93 1.61
May-93 1.83
Jun-93 1.18
Jul-93 2.02
Aug-93 2.89
Sep-93 5.89
Oct-93 7.12
Nov-93 8.67
Dec-93 9.29
Jan-94 10.34
Feb-94 9.88
Mar-94 7.88
Apr-94 5.62
May-94 3.35
Jun-94 3.09
Jul-94 4.09
Aug-94 5.43
Sep-94 6.20
Oct-94 5.61
Nov-94 5.20
Dec-94 3.52
Jan-95 1.80
Feb-95 -1.73
Mar-95 -3.89
Apr-95 -4.46
May-95 -2.09
Jun-95 1.04
Jul-95 3.42
Aug-95 3.88
Sep-95 2.81
Oct-95 1.10
Nov-95 1.52
Dec-95 2.13
Jan-96 2.96
Feb-96 1.99
Mar-96 2.05
Apr-96 2.19
May-96 3.86
Jun-96 3.87
Jul-96 4.16
Aug-96 4.24
Sep-96 4.90
Oct-96 5.05
Nov-96 4.36
Dec-96 4.45
Jan-97 5.29
Feb-97 6.98
Mar-97 6.29
Apr-97 4.01
May-97 3.42
Jun-97 4.95
Jul-97 7.11
Aug-97 7.16
Sep-97 6.12
Oct-97 4.53
Nov-97 1.69
Dec-97 -0.45
Jan-98 -0.55
Feb-98 0.43
Mar-98 2.57
Apr-98 1.69
May-98 0.69
Jun-98 -1.07
Jul-98 -0.80
Aug-98 -1.57
Sep-98 -3.58
Oct-98 -3.51
Nov-98 -0.96
Dec-98 4.40
Jan-99 7.17
Feb-99 7.53
Mar-99 5.02
Apr-99 3.94
May-99 3.01
Jun-99 5.08
Jul-99 6.05
Aug-99 7.61
Sep-99 5.61
6
<PAGE>
This recent deceleration seen on the last two charts may be extended
but because of the strength in the world stock markets the level of growth is
apt to remain fairly high.
DJ WORLD STOCKS NOVEMBER 12 231.5
(GRAPHIC APPEARS HERE)
(UPSIDE BREAKOUT FOR WORLD STOCKS.-hand written)
1-Jan-97 147.57
2-Jan-97 146.37
3-Jan-97 147.19
6-Jan-97 147.92
7-Jan-97 147.98
8-Jan-97 147.24
9-Jan-97 147.01
10-Jan-97 146.22
13-Jan-97 147.39
14-Jan-97 148.4
15-Jan-97 148.77
16-Jan-97 149.31
17-Jan-97 149.43
20-Jan-97 148.68
21-Jan-97 148.71
22-Jan-97 149.35
23-Jan-97 148.71
24-Jan-97 147.36
27-Jan-97 145.82
28-Jan-97 146.13
29-Jan-97 146.59
30-Jan-97 147.63
31-Jan-97 148.67
3-Feb-97 148.71
4-Feb-97 148.85
5-Feb-97 147.99
6-Feb-97 147.84
7-Feb-97 148.87
10-Feb-97 149.12
11-Feb-97 149.02
12-Feb-97 150.34
13-Feb-97 151.64
14-Feb-97 151.48
17-Feb-97 151.31
18-Feb-97 151.82
19-Feb-97 151.41
20-Feb-97 151.6
21-Feb-97 151.47
24-Feb-97 152.63
25-Feb-97 153.41
26-Feb-97 152.05
27-Feb-97 151.38
28-Feb-97 150.22
3-Mar-97 150.01
4-Mar-97 149.98
5-Mar-97 150.95
6-Mar-97 150.85
7-Mar-97 151.35
10-Mar-97 152.63
11-Mar-97 152.69
12-Mar-97 151.59
13-Mar-97 149.23
14-Mar-97 149.81
17-Mar-97 149.43
18-Mar-97 149.31
19-Mar-97 148.95
20-Mar-97 147.6
21-Mar-97 148.56
24-Mar-97 148.74
25-Mar-97 149.29
26-Mar-97 149.93
27-Mar-97 148.65
28-Mar-97 148.31
31-Mar-97 146.71
1-Apr-97 146.15
2-Apr-97 144.97
3-Apr-97 144.88
4-Apr-97 144.97
7-Apr-97 145.17
8-Apr-97 145.62
9-Apr-97 144.86
10-Apr-97 144.5
11-Apr-97 142.65
14-Apr-97 142.28
15-Apr-97 144.17
16-Apr-97 145.31
17-Apr-97 145.57
18-Apr-97 146.36
21-Apr-97 146.53
22-Apr-97 147.32
23-Apr-97 147.98
24-Apr-97 147.78
25-Apr-97 146.49
28-Apr-97 146.88
29-Apr-97 149.34
30-Apr-97 150.7
1-May-97 151.04
2-May-97 152.76
5-May-97 154.64
6-May-97 155.93
7-May-97 154.71
8-May-97 155.63
9-May-97 157.12
12-May-97 158.73
13-May-97 159.13
14-May-97 160.02
15-May-97 160.45
16-May-97 159.84
19-May-97 159.92
20-May-97 161.41
21-May-97 160.77
22-May-97 159.68
23-May-97 161.42
26-May-97 161.55
27-May-97 161.17
28-May-97 161.33
29-May-97 160.82
30-May-97 160.26
2-Jun-97 160.5
3-Jun-97 160.81
4-Jun-97 160.54
5-Jun-97 161.14
6-Jun-97 162.98
9-Jun-97 163.92
10-Jun-97 164.42
11-Jun-97 164.99
12-Jun-97 165.95
13-Jun-97 167.11
16-Jun-97 167.89
17-Jun-97 167.5
18-Jun-97 166.76
19-Jun-97 167.88
20-Jun-97 168
23-Jun-97 166.69
24-Jun-97 168.04
25-Jun-97 168.77
26-Jun-97 168.68
27-Jun-97 167.98
30-Jun-97 167.53
1-Jul-97 168.18
2-Jul-97 169.82
3-Jul-97 171.88
4-Jul-97 171.44
7-Jul-97 171.45
8-Jul-97 171.68
9-Jul-97 170.93
10-Jul-97 171.28
11-Jul-97 171.42
14-Jul-97 172.36
15-Jul-97 172.31
16-Jul-97 174.5
17-Jul-97 174.15
18-Jul-97 172.01
21-Jul-97 170.87
22-Jul-97 173.18
23-Jul-97 174.17
24-Jul-97 174.05
25-Jul-97 173.77
28-Jul-97 173.36
29-Jul-97 173.55
30-Jul-97 174.87
31-Jul-97 175.17
1-Aug-97 173.4
4-Aug-97 172.84
5-Aug-97 172.54
6-Aug-97 174.26
7-Aug-97 173.87
8-Aug-97 173.1
11-Aug-97 171.45
12-Aug-97 170.86
13-Aug-97 170.28
14-Aug-97 170.05
15-Aug-97 167.94
18-Aug-97 167.67
19-Aug-97 169.2
20-Aug-97 171.18
21-Aug-97 170.21
22-Aug-97 168.44
25-Aug-97 168.11
26-Aug-97 167.61
27-Aug-97 167.06
28-Aug-97 166.38
29-Aug-97 164.56
1-Sep-97 164.15
2-Sep-97 167.1
3-Sep-97 168.67
4-Sep-97 168.64
5-Sep-97 169.41
8-Sep-97 169.54
9-Sep-97 170.24
10-Sep-97 168.42
11-Sep-97 166.78
12-Sep-97 167.18
15-Sep-97 167.65
16-Sep-97 169.84
17-Sep-97 169.93
18-Sep-97 170.62
19-Sep-97 171.06
22-Sep-97 172.06
23-Sep-97 171.64
24-Sep-97 172.43
25-Sep-97 171.92
26-Sep-97 172.39
29-Sep-97 173.06
30-Sep-97 173.18
1-Oct-97 173.94
2-Oct-97 173.98
3-Oct-97 175.17
6-Oct-97 175.82
7-Oct-97 176.46
8-Oct-97 175.99
9-Oct-97 174.51
10-Oct-97 174.18
13-Oct-97 174.31
14-Oct-97 174.42
15-Oct-97 173.86
16-Oct-97 173.49
17-Oct-97 171.16
20-Oct-97 171.44
21-Oct-97 173.04
22-Oct-97 172.68
23-Oct-97 168.6
24-Oct-97 167.74
27-Oct-97 160
28-Oct-97 160.86
29-Oct-97 164.22
30-Oct-97 161.64
31-Oct-97 162.9
3-Nov-97 166.16
4-Nov-97 166.4
5-Nov-97 166.66
6-Nov-97 165.69
7-Nov-97 162.64
10-Nov-97 162.09
11-Nov-97 162.22
12-Nov-97 159.02
13-Nov-97 160
14-Nov-97 160.71
17-Nov-97 164.78
18-Nov-97 164.41
19-Nov-97 163.42
20-Nov-97 165.57
21-Nov-97 167.36
24-Nov-97 165.04
25-Nov-97 163.61
26-Nov-97 164.01
27-Nov-97 164.69
28-Nov-97 165.18
1-Dec-97 167.8
2-Dec-97 167.83
3-Dec-97 168.07
4-Dec-97 167.82
5-Dec-97 168.9
8-Dec-97 168.9
9-Dec-97 168.61
10-Dec-97 167.38
11-Dec-97 164.72
12-Dec-97 163.91
15-Dec-97 164.48
16-Dec-97 165.69
17-Dec-97 167.24
18-Dec-97 165.9
19-Dec-97 163.08
22-Dec-97 162.72
23-Dec-97 161.97
24-Dec-97 161.46
25-Dec-97 161.46
26-Dec-97 161.92
29-Dec-97 164.33
30-Dec-97 166.76
31-Dec-97 166.63
1-Jan-98 166.63
2-Jan-98 166.98
5-Jan-98 166.96
6-Jan-98 165.06
7-Jan-98 164.97
8-Jan-98 163.44
9-Jan-98 159.73
12-Jan-98 158.51
13-Jan-98 160.95
14-Jan-98 162.5
15-Jan-98 161.94
16-Jan-98 164.63
19-Jan-98 165.93
20-Jan-98 167.57
21-Jan-98 167.38
22-Jan-98 166.31
23-Jan-98 166.78
26-Jan-98 167.07
27-Jan-98 169.01
28-Jan-98 169.95
29-Jan-98 170.47
30-Jan-98 170
2-Feb-98 173.6
3-Feb-98 174.78
4-Feb-98 175.19
5-Feb-98 175.59
6-Feb-98 176.13
9-Feb-98 176.11
10-Feb-98 177.43
11-Feb-98 177.63
12-Feb-98 177.29
13-Feb-98 176.36
16-Feb-98 176.21
17-Feb-98 176.95
18-Feb-98 177.98
19-Feb-98 177.76
20-Feb-98 177.89
23-Feb-98 178.72
24-Feb-98 177.64
25-Feb-98 179.3
26-Feb-98 180.78
27-Feb-98 181.64
2-Mar-98 182.87
3-Mar-98 182.93
4-Mar-98 181.55
5-Mar-98 179
6-Mar-98 182.1
9-Mar-98 182.15
10-Mar-98 183.54
11-Mar-98 183.79
12-Mar-98 183.79
13-Mar-98 185.23
16-Mar-98 185.87
17-Mar-98 186.7
18-Mar-98 186.37
19-Mar-98 186.95
20-Mar-98 188.36
23-Mar-98 188.53
24-Mar-98 189.63
25-Mar-98 190.05
26-Mar-98 190.1
27-Mar-98 189.53
30-Mar-98 187.99
31-Mar-98 188.95
1-Apr-98 189.39
2-Apr-98 190.04
3-Apr-98 190.33
6-Apr-98 191.56
7-Apr-98 190.44
8-Apr-98 190.77
9-Apr-98 191.67
10-Apr-98 192.17
13-Apr-98 191.86
14-Apr-98 193.47
15-Apr-98 193.8
16-Apr-98 191.45
17-Apr-98 192.26
20-Apr-98 192.85
21-Apr-98 193.41
22-Apr-98 193.33
23-Apr-98 191.68
24-Apr-98 190.23
27-Apr-98 185.82
28-Apr-98 186.52
29-Apr-98 187.12
30-Apr-98 190.29
1-May-98 191.67
4-May-98 192.71
5-May-98 191.81
6-May-98 190.28
7-May-98 188.28
8-May-98 189.75
11-May-98 190.51
12-May-98 190.5
13-May-98 190.58
14-May-98 190.37
15-May-98 189.24
18-May-98 187.72
19-May-98 188.98
20-May-98 190.72
21-May-98 193.53
22-May-98 193.07
25-May-98 193.2
26-May-98 191.61
27-May-98 189.37
28-May-98 189.78
29-May-98 189.26
1-Jun-98 188.36
2-Jun-98 189.28
3-Jun-98 188.92
4-Jun-98 189.63
5-Jun-98 191.55
8-Jun-98 191.99
9-Jun-98 192.2
10-Jun-98 190.3
11-Jun-98 186.95
12-Jun-98 186.06
15-Jun-98 182.42
16-Jun-98 184.21
17-Jun-98 188.69
18-Jun-98 188.72
19-Jun-98 188.07
22-Jun-98 187.44
23-Jun-98 188.95
24-Jun-98 190.35
25-Jun-98 190.89
26-Jun-98 190.83
29-Jun-98 192.04
30-Jun-98 192.34
1-Jul-98 195
2-Jul-98 194.77
3-Jul-98 194.77
6-Jul-98 196.2
7-Jul-98 196.62
8-Jul-98 197.88
9-Jul-98 196.29
10-Jul-98 196.18
13-Jul-98 197.28
14-Jul-98 199.35
15-Jul-98 199.78
16-Jul-98 201.11
17-Jul-98 202.28
20-Jul-98 202.37
21-Jul-98 199.86
22-Jul-98 197.94
23-Jul-98 195.35
24-Jul-98 195.17
27-Jul-98 193.89
28-Jul-98 192.81
29-Jul-98 191.86
30-Jul-98 193.93
31-Jul-98 191.48
3-Aug-98 189.21
4-Aug-98 185.55
5-Aug-98 184.99
6-Aug-98 184.73
7-Aug-98 185.09
10-Aug-98 183.05
11-Aug-98 179.07
12-Aug-98 181.36
13-Aug-98 180.06
14-Aug-98 179.15
17-Aug-98 180.55
18-Aug-98 184.15
19-Aug-98 184.7
20-Aug-98 183.54
21-Aug-98 179.95
24-Aug-98 180.38
25-Aug-98 181.82
26-Aug-98 178.91
27-Aug-98 172.75
28-Aug-98 171
31-Aug-98 164.75
1-Sep-98 167.6
2-Sep-98 168.75
3-Sep-98 167.49
4-Sep-98 167.14
7-Sep-98 169.57
8-Sep-98 174.57
9-Sep-98 171.68
10-Sep-98 167.88
11-Sep-98 169.61
14-Sep-98 173.21
15-Sep-98 173.68
16-Sep-98 175.05
17-Sep-98 170.23
18-Sep-98 169.72
21-Sep-98 167.54
22-Sep-98 169.48
23-Sep-98 174.36
24-Sep-98 172.62
25-Sep-98 171.27
28-Sep-98 172.89
29-Sep-98 172.86
30-Sep-98 168.06
1-Oct-98 162.65
2-Oct-98 162.94
5-Oct-98 160.37
6-Oct-98 162.95
7-Oct-98 163.87
8-Oct-98 160.36
9-Oct-98 163.52
12-Oct-98 167.88
13-Oct-98 167.56
14-Oct-98 169.22
15-Oct-98 174.44
16-Oct-98 177.14
19-Oct-98 177.58
20-Oct-98 179.45
21-Oct-98 179.27
22-Oct-98 180.16
23-Oct-98 179.26
26-Oct-98 178.65
27-Oct-98 179.83
28-Oct-98 178.89
29-Oct-98 181.16
30-Oct-98 183.65
2-Nov-98 186.9
3-Nov-98 186.42
4-Nov-98 188.98
5-Nov-98 189.15
6-Nov-98 189.26
9-Nov-98 186.93
10-Nov-98 185.92
11-Nov-98 186.36
12-Nov-98 185.16
13-Nov-98 185.99
16-Nov-98 188.95
17-Nov-98 189.02
18-Nov-98 189.36
19-Nov-98 191.18
20-Nov-98 193.61
23-Nov-98 196.67
24-Nov-98 196.24
25-Nov-98 196.21
26-Nov-98 197.47
27-Nov-98 197.69
30-Nov-98 193.81
1-Dec-98 192.94
2-Dec-98 193.05
3-Dec-98 191.72
4-Dec-98 193.68
7-Dec-98 194.62
8-Dec-98 194.82
9-Dec-98 195.61
10-Dec-98 194.27
11-Dec-98 193.23
14-Dec-98 190.47
15-Dec-98 191.97
16-Dec-98 192.37
17-Dec-98 194.83
18-Dec-98 195.91
21-Dec-98 198.76
22-Dec-98 198.39
23-Dec-98 201.53
24-Dec-98 200.85
25-Dec-98 200.85
28-Dec-98 201.69
29-Dec-98 203.6
30-Dec-98 202.23
31-Dec-98 202.79
1-Jan-99 202.79
4-Jan-99 204.61
5-Jan-99 206.31
6-Jan-99 209.81
7-Jan-99 209.96
8-Jan-99 209.8
11-Jan-99 208.08
12-Jan-99 204.46
13-Jan-99 201.43
14-Jan-99 199.74
15-Jan-99 203.01
18-Jan-99 204.96
19-Jan-99 205.37
20-Jan-99 206.95
21-Jan-99 204.27
22-Jan-99 201.22
25-Jan-99 201.98
26-Jan-99 204.09
27-Jan-99 203.14
28-Jan-99 204.93
29-Jan-99 206.68
1-Feb-99 206.81
2-Feb-99 206.09
3-Feb-99 205.77
4-Feb-99 203.99
5-Feb-99 202.2
8-Feb-99 202.19
9-Feb-99 198.29
10-Feb-99 198.39
11-Feb-99 201.51
12-Feb-99 200.56
15-Feb-99 200.38
16-Feb-99 200.93
17-Feb-99 198.88
18-Feb-99 200.01
19-Feb-99 199.43
22-Feb-99 203.05
23-Feb-99 203.76
24-Feb-99 202.72
25-Feb-99 201.46
26-Feb-99 200.54
1-Mar-99 198.9
2-Mar-99 197.82
3-Mar-99 197.22
4-Mar-99 198.99
5-Mar-99 203.67
8-Mar-99 204.73
9-Mar-99 205.2
10-Mar-99 206.9
11-Mar-99 209.16
12-Mar-99 208.65
15-Mar-99 210.09
16-Mar-99 211.77
17-Mar-99 210.26
18-Mar-99 210.95
19-Mar-99 210.71
22-Mar-99 209.88
23-Mar-99 205.73
24-Mar-99 204.97
25-Mar-99 208.07
26-Mar-99 206.76
29-Mar-99 209.74
30-Mar-99 208.84
31-Mar-99 208.48
1-Apr-99 209.71
2-Apr-99 209.87
5-Apr-99 211.79
6-Apr-99 213.35
7-Apr-99 214.18
8-Apr-99 216.23
9-Apr-99 217.01
12-Apr-99 217.54
13-Apr-99 217.8
14-Apr-99 216.38
15-Apr-99 215.16
16-Apr-99 215.46
19-Apr-99 213.54
20-Apr-99 212.87
21-Apr-99 215.16
22-Apr-99 218.26
23-Apr-99 218.34
26-Apr-99 219.14
27-Apr-99 220.75
28-Apr-99 219.62
29-Apr-99 218.39
30-Apr-99 217.8
3-May-99 219.57
4-May-99 218.02
5-May-99 218.94
6-May-99 218.46
7-May-99 218.64
10-May-99 218.62
11-May-99 219.32
12-May-99 219.54
13-May-99 219.99
14-May-99 215.96
17-May-99 214.25
18-May-99 214.51
19-May-99 215.39
20-May-99 215.19
21-May-99 214.3
24-May-99 212.28
25-May-99 209.26
26-May-99 210.25
27-May-99 208
28-May-99 209.45
31-May-99 209.74
1-Jun-99 209.67
2-Jun-99 209.77
3-Jun-99 210.38
4-Jun-99 213.25
7-Jun-99 214.9
8-Jun-99 214.69
9-Jun-99 215.03
10-Jun-99 213.69
11-Jun-99 214.21
14-Jun-99 212.64
15-Jun-99 213.41
16-Jun-99 216.16
17-Jun-99 218.01
18-Jun-99 218.55
21-Jun-99 219.86
22-Jun-99 218.64
23-Jun-99 217.39
24-Jun-99 215.51
25-Jun-99 215.23
28-Jun-99 216.47
29-Jun-99 218.27
30-Jun-99 220.02
1-Jul-99 222.04
2-Jul-99 223.8
5-Jul-99 225.16
6-Jul-99 224.53
7-Jul-99 224.54
8-Jul-99 224.05
9-Jul-99 224.62
12-Jul-99 224.43
13-Jul-99 223.22
14-Jul-99 224.31
15-Jul-99 226.2
16-Jul-99 226.59
19-Jul-99 226.81
20-Jul-99 223.25
21-Jul-99 223.16
22-Jul-99 220.46
23-Jul-99 218.74
26-Jul-99 217.61
27-Jul-99 219.42
28-Jul-99 220.65
29-Jul-99 218.05
30-Jul-99 218.34
2-Aug-99 217.98
3-Aug-99 217.33
4-Aug-99 215.95
5-Aug-99 214.43
6-Aug-99 213.09
9-Aug-99 212.92
10-Aug-99 210.51
11-Aug-99 212.16
12-Aug-99 213.73
13-Aug-99 216.67
16-Aug-99 218.07
17-Aug-99 219.05
18-Aug-99 218.82
19-Aug-99 217.97
20-Aug-99 220.48
23-Aug-99 223.06
24-Aug-99 223.47
25-Aug-99 224.89
26-Aug-99 222.93
27-Aug-99 221.77
30-Aug-99 220.21
31-Aug-99 218.52
1-Sep-99 220.95
2-Sep-99 219.31
3-Sep-99 223.41
6-Sep-99 224.26
7-Sep-99 222.93
8-Sep-99 222.14
9-Sep-99 223.94
10-Sep-99 223.47
13-Sep-99 223.32
14-Sep-99 221.97
15-Sep-99 220.43
16-Sep-99 219.11
17-Sep-99 220.58
20-Sep-99 220.61
21-Sep-99 218.76
22-Sep-99 217.38
23-Sep-99 215.76
24-Sep-99 213.49
27-Sep-99 214.36
28-Sep-99 214.45
29-Sep-99 213.12
30-Sep-99 215.46
1-Oct-99 215.79
4-Oct-99 218.45
5-Oct-99 218.55
6-Oct-99 220.53
7-Oct-99 221.01
8-Oct-99 222.16
11-Oct-99 222.52
12-Oct-99 221
13-Oct-99 217.47
14-Oct-99 216.73
15-Oct-99 212.92
18-Oct-99 211.29
19-Oct-99 213.57
20-Oct-99 216.06
21-Oct-99 215.66
22-Oct-99 217.98
25-Oct-99 217.55
26-Oct-99 216.97
27-Oct-99 217.09
28-Oct-99 221.82
29-Oct-99 226.02
1-Nov-99 225.32
2-Nov-99 225.09
3-Nov-99 225.72
4-Nov-99 226.87
5-Nov-99 227.8
8-Nov-99 228.17
9-Nov-99 227.74
10-Nov-99 229.58
11-Nov-99 230.64
12-Nov-99 231.51
Inflation
The bond market is concerned about high growth because it opens the
door to inflation. So far, as was sighted by the Federal Reserve in the press
release accompanying their rate increase, productivity has held off price
increases. The price competitive environment facing most companies has required
them to hold down costs. Technology investment and cost cutting mergers have
been at the heart of the company response. Manufacturers' Productivity is at a
record level having increased for most of the 1990's.
U.S. MFG. PRODUCTIVITY 4 YEAR. % A.R. 99: 3RD QUARTER 4.5%
(GRAPHIC APPEARS HERE)
Mar-55 3.2
Jun-55 3.5
Sep-55 3.8
Dec-55 3.4
Mar-56 2.7
Jun-56 2.7
Sep-56 2.2
Dec-56 1.8
Mar-57 2.1
Jun-57 2.0
Sep-57 2.1
Dec-57 1.9
Mar-58 1.6
Jun-58 1.6
Sep-58 2.0
Dec-58 2.0
Mar-59 2.1
Jun-59 2.2
Sep-59 1.3
Dec-59 1.5
Mar-60 2.8
Jun-60 2.5
Sep-60 2.5
Dec-60 2.3
Mar-61 1.9
Jun-61 2.5
Sep-61 2.6
Dec-61 3.4
Mar-62 3.9
Jun-62 3.2
Sep-62 2.7
Dec-62 2.6
Mar-63 2.3
Jun-63 2.4
Sep-63 3.2
Dec-63 3.4
Mar-64 2.7
Jun-64 3.2
Sep-64 3.3
Dec-64 3.4
Mar-65 3.8
Jun-65 3.4
Sep-65 3.0
Dec-65 2.5
Mar-66 2.4
Jun-66 2.7
Sep-66 2.6
Dec-66 2.7
Mar-67 2.6
Jun-67 2.5
Sep-67 2.7
Dec-67 2.9
Mar-68 2.7
Jun-68 2.6
Sep-68 2.5
Dec-68 2.6
Mar-69 2.7
Jun-69 2.3
Sep-69 2.4
Dec-69 2.5
Mar-70 2.1
Jun-70 2.4
Sep-70 2.7
Dec-70 2.8
Mar-71 3.2
Jun-71 3.3
Sep-71 3.4
Dec-71 3.2
Mar-72 3.4
Jun-72 3.3
Sep-72 3.6
Dec-72 3.7
Mar-73 3.5
Jun-73 3.6
Sep-73 3.7
Dec-73 3.4
Mar-74 3.3
Jun-74 3.3
Sep-74 3.1
Dec-74 3.0
Mar-75 2.4
Jun-75 2.6
Sep-75 3.0
Dec-75 2.7
Mar-76 2.5
Jun-76 2.6
Sep-76 2.8
Dec-76 2.7
Mar-77 3.0
Jun-77 3.2
Sep-77 3.1
Dec-77 3.3
Mar-78 3.7
Jun-78 3.5
Sep-78 3.4
Dec-78 3.2
Mar-79 2.9
Jun-79 2.4
Sep-79 1.5
Dec-79 1.4
Mar-80 1.4
Jun-80 1.1
Sep-80 0.9
Dec-80 0.9
Mar-81 0.4
Jun-81 0.3
Sep-81 0.3
Dec-81 0.3
Mar-82 1.0
Jun-82 1.4
Sep-82 1.6
Dec-82 1.5
Mar-83 2.0
Jun-83 2.1
Sep-83 2.7
Dec-83 2.6
Mar-84 2.9
Jun-84 3.2
Sep-84 3.5
Dec-84 3.2
Mar-85 3.5
Jun-85 3.9
Sep-85 4.0
Dec-85 4.2
Mar-86 4.1
Jun-86 3.6
Sep-86 3.4
Dec-86 3.8
Mar-87 3.6
Jun-87 3.7
Sep-87 3.5
Dec-87 3.6
Mar-88 3.3
Jun-88 3.3
Sep-88 3.1
Dec-88 3.2
Mar-89 2.9
Jun-89 2.4
Sep-89 2.0
Dec-89 2.0
Mar-90 1.9
Jun-90 1.7
Sep-90 2.0
Dec-90 1.7
Mar-91 1.6
Jun-91 1.5
Sep-91 1.9
Dec-91 2.0
Mar-92 2.3
Jun-92 2.5
Sep-92 2.6
Dec-92 2.7
Mar-93 2.9
Jun-93 2.9
Sep-93 3.1
Dec-93 3.2
Mar-94 3.1
Jun-94 3.3
Sep-94 3.0
Dec-94 3.2
Mar-95 3.7
Jun-95 3.7
Sep-95 3.4
Dec-95 3.4
Mar-96 3.3
Jun-96 3.3
Sep-96 3.3
Dec-96 3.3
Mar-97 3.4
Jun-97 3.7
Sep-97 4.3
Dec-97 4.3
Mar-98 4.1
Jun-98 4.0
Sep-98 4.2
Dec-98 4.3
Mar-99 4.4
Jun-99 4.4
Sep-99 4.5
The recent increase in oil prices will test the pricing restraint of
companies. The weekly ISI pricing power surveys for retail and manufacturing
companies should help detect any change in this market sensitive indicator.
7
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
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, on an annual basis, a line graph comparing the Fund's
performance to that of an appropriate market index. This graph must measure the
growth of a $10,000 hypothetical investment from the Fund's inception on October
23, 1990 through the most recent fiscal year-end and must reflect the impact of
the Fund's total expenses and its currently effective 4.50% maximum sales
charge.
While the following chart is required by SEC rules, such comparisons
are of limited utility since the indices shown are not adjusted for sales
charges and ongoing management, distribution and operating expenses applicable
to the Fund. An investor who wished to replicate the total return of these
indices would have had to own the securities that they represent. Acquiring
these securities would require a considerable amount of money and would incur
expenses that are not reflected in the index results.
The SEC also requires that we report 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 total return figures differ from those we
reported because the time periods may be different and because the SEC
calculation includes the impact of the currently effective 4.50% maximum sales
charge. These total returns correspond to those experienced by individual
shareholders only if their shares were purchased on the first day of each time
period and the maximum sales charge was paid. 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.
8
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Change in Value of a $10,000 Investment(1)
October 23, 1990 - October 31, 1999
(GRAPHIC APPEARS HERE)
Flag Investors Lehman Bros. Lehman Bros.
Managed Municipal General Obligation Prerefunded Consumer Price
Fund Shares Index (G.O.) Municipal Index Index (CPI)
10/90 9,550 10,000 10,000 10,000
10/91 10,715 11,125 11,007 10,290
10/92 11,364 12,032 11,889 10,619
10/93 12,996 13,654 13,116 10,916
10/94 12,152 13,172 12,919 11,200
10/95 14,025 14,996 14,282 11,514
10/96 14,680 15,826 14,938 11,859
10/97 15,770 17,141 15,879 12,108
10/98 16,196 18,511 16,811 12,288
10/99 16,348 18,279 17,117 12,610
Average Annual Total Return(1)
Periods Ended 10/31/99 1 Year 5 Years Since Inception(2)
Class A Shares (7.95)% 5.14% 5.60%
(1) Past performance is not an indicator of future results. Investment return
and principal value may fluctuate so that shares, when redeemed,will 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 4.50% maximum sales charge. The Lehman Brothers indices listed above
are unmanaged. Although the G.O. Index reflects general municipal market
performance, the Prerefunded Index is a better indicator of the Fund due to
its higher quality characteristics. The Fund is invested entirely in
AA-rated or better issues. Management is not aware of any single index that
contains securities with substantially the same characteristics as those of
the Fund. One cannot invest directly in an index. The CPI is a widely used
measure of inflation.
(2) 10/23/90.
9
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Statement of Net Assets October 31, 1999
Rating* Par Market
Issuer (Moody's/S&P) (000) Value
- -------------------------------------------------------------------------------
Municipal Bonds: 93.5%
General Obligations--72.8%
Arlington County, VA
5.00%, 10/1/14 Aaa/AAA $2,000 $ 1,875,760
Arlington, TX, School District
5.75%, 2/15/21 Aa2/AAA 1,465 1,424,566
Charlotte, NC
5.30%, 4/1/11 Aaa/AAA 1,590 1,596,694
5.30%, 4/1/12 Aaa/AAA 1,120 1,114,310
5.30%, 4/1/12 Aaa/AAA 2,325 2,313,189
5.00%, 2/1/19 Aaa/AAA 2,300 2,063,470
Dallas, TX
5.00%, 2/15/10 Aaa/AAA 1,750 1,769,338
5.00%, 2/15/13 Aaa/AAA 1,755 1,652,332
Delaware State, Series A
5.125%, 4/1/16 Aa1/AA+ 2,150 1,991,549
Dupage County, IL, Jail Project
5.60%, 1/1/21 Aaa/AAA 1,600 1,536,656
Florida Board of Education
6.125%, 6/1/12 Aa2/AA+ 2,250 2,322,720
Florida State Board Cap. Outlay, Series C
5.50%, 6/1/21 Aa2/AA+ 2,000 1,898,261
Franklin County, OH
5.45%, 12/1/09 Aaa/AAA 1,500 1,525,545
5.50%, 12/1/13 Aaa/AAA 1,000 999,950
Grand Prairie, TX, School District
5.20%, 2/15/18 Aaa/AAA 2,000 1,820,464
King County, WA
5.20%, 12/1/15 Aa1/AA+ 2,500 2,319,877
5.00%, 12/1/17 Aa1/AA+ 2,565 2,273,723
Maryland State & Local Facilities,
Second Series
5.125%, 10/15/10 Aaa/AAA 3,000 2,998,698
Metropolitan Government Nashville &
Davidson County, TN
5.125%, 11/15/19 Aa2/AA 2,000 1,776,548
Minneapolis, MN Ref - Ser B
5.20%, 3/1/13 Aaa/AAA 3,200 3,084,946
10
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Rating* Par Market
Issuer (Moody's/S&P) (000) Value
- -------------------------------------------------------------------------------
Municipal Bonds--(Continued)
General Obligations--(Continued)
Minneapolis, MN Sports Arena Project
5.00%, 10/1/12 Aaa/AAA $1,920 $ 1,849,141
5.00%, 10/1/11 Aaa/AAA 1,710 1,666,486
Minnesota State
5.00%, 11/1/14 Aaa/AAA 2,500 2,339,427
Missouri State Series A
5.00%, 6/1/23 Aaa/AAA 2,000 1,772,201
North Carolina Public School Building
4.60%, 4/1/17 Aaa/AAA 5,000 4,296,179
Plano, TX Independent School District
5.00%, 2/15/11 Aaa/AAA 3,000 2,872,350
Portland, OR, Metro Regional
Government
5.25%, 9/1/07 Aa/AA+ 1,500 1,522,470
Salt Lake County, UT
5.25%, 12/15/10 Aaa/AAA 2,000 2,006,103
South Carolina Capital Improvement
5.00%, 3/1/09 Aaa/AAA 2,700 2,689,911
5.625%, 7/1/14 Aaa/AAA 2,700 2,709,890
5.65%, 7/1/21 Aaa/AAA 1,260 1,221,633
Tennessee State
5.50%, 3/1/09 Aaa/AAA 1,535 1,589,354
5.55%, 3/1/10 Aaa/AAA 1,000 1,037,740
Washington State, Series A
5.60%, 7/1/10 Aa1/AA+ 1,500 1,522,369
Washington State, Series E
5.00%, 7/1/22 Aa1/AA+ 2,000 1,720,570
Washington State, Series R
5.00%, 7/1/14 Aa1/AA+ 2,250 2,067,351
Wisconsin State, Series 1
5.00%, 5/1/15 Aa2/AA 1,000 910,323
Wisconsin State, Series B
5.00%, 5/1/16 Aa2/AA 3,500 3,153,473
5.00%, 5/1/18 Aa2/AA 1,000 885,063
-----------
76,190,630
-----------
11
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Statement of Net Assets (concluded) October 31, 1999
Rating* Par Market
Issuer (Moody's/S&P) (000) Value
- -------------------------------------------------------------------------------
Municipal Bonds--(Concluded)
Other Revenue--2.4%
Texas Water Development Board Revenue
4.75%, 7/15/20 Aa1/AAA $3,000 $ 2,517,784
-----------
Prerefunded Issues--10.6%
Arlington, TX, School District
5.75%, 2/15/21 Aaa/NR 3,535 3,696,797
Chicago, IL, Metropolitan Water
Reclamation District-Greater Chicago
6.30%, 12/1/09 Aa2/AA 1,000 1,077,763
Indianapolis, IN, Public Improvement
Board Revenue
6.00%, 1/10/18 Aaa/AAA 1,500 1,547,700
Lower Colorado River Authority, Jr. Lien
5.25%, 1/1/15 #AAA/AAA 2,000 1,917,080
State of Hawaii Prerefunded
7.00%, 6/1/06 #AAA/++ 750 763,635
Texas State
6.00%, 10/1/14 Aa2/AA 2,000 2,113,292
-----------
11,116,267
-----------
Transportation Revenue--7.7%
Florida Transportation
5.80%, 7/1/18 Aa2/AA+ 2,000 2,119,540
Kansas Transportation
5.40%, 3/1/09 Aa2/AA+ 2,000 2,025,720
5.40%, 3/1/09 Aa2/AA+ 2,500 2,532,120
Virginia State Transportation Board
5.125%, 5/15/21 Aa2/AA 1,600 1,421,298
-----------
8,098,678
-----------
Total Municipal Bonds
(Cost $100,549,265) 97,923,359
-----------
12
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
<TABLE>
<CAPTION>
Par Market
Issuer (000) Value
<S><C>
Repurchase Agreement: 5.6%
Goldman Sachs & Co., 5.10% Dated 10/29/99,
to be repurchased for $5,854,487 on
11/1/99, collateralized by U.S.
Treasury Bond, 5.625%, due 2/28/01
with a market value of $5,979,634
(Cost $5,852,000) $5,852 $ 5,852,000
------------
Total Investments--99.1%
(Cost $106,401,265)** 103,775,359
Other Assets in Excess of Liabilities--0.9% 983,041
------------
Net Assets--100.0% $104,758,400
------------
Net Asset Value and Redemption Price Per:
Flag Investors Class A Share
($34,149,601 / 3,373,894 shares outstanding) $10.12
============
ISI Class Share
($70,608,799 / 6,974,447 shares outstanding) $10.12
============
Maximum Offering Price Per:
Flag Investors Class A Share
($10.12 / 0.9550) $10.60
============
ISI Class Share
($10.12 / 0.9555) $10.60
============
</TABLE>
- -----------------
* The Moody's and Standard & Poor's ratings indicated are believed
to be the most recent ratings available as of October 31, 1999.
Ratings of issues have not been audited by
PricewaterhouseCoopers LLP.
** Also aggregate cost for federal tax purposes.
++ 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.
13
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Statement of Operations
For the
Year Ended
October 31,
- --------------------------------------------------------------------------------
1999
Investment Income:
Interest $ 5,843,480
------------
Expenses:
Investment advisory fee 455,727
Distribution fee 284,830
Administration fee 180,814
Professional fees 101,468
Accounting fee 57,092
Registration fees 44,320
Transfer agent fee 43,782
Printing and Postage 38,383
Custodian fee 25,756
Miscellaneous 19,836
------------
Total expenses 1,252,008
Less: Fees waived (226,616)
------------
Net expenses 1,025,392
------------
Net investment income 4,818,088
------------
Net realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 547,939
Change in unrealized appreciation/depreciation
of investments (9,251,142)
------------
Net loss on investments (8,703,203)
------------
Net decrease in net assets resulting from operations $ (3,885,115)
============
See Notes to Financial Statements.
14
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Years Ended October 31,
1999 1998
<S><C>
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 4,818,088 $ 4,931,438
Net realized gain from security transactions 547,939 910,737
Change in unrealized appreciation/
depreciation of investments (9,251,142) 2,598,160
------------ ------------
Net increase/(decrease) in net assets resulting
from operations (3,885,115) 8,440,335
------------ ------------
Dividends to Shareholders from:
Net investment income and short-term gains:
Flag Investors Class A Shares (1,600,162) (1,861,540)
ISI Class Shares (3,369,957) (3,912,967)
Net realized long-term gains:
Flag Investors Class A Shares (151,301) (106,065)
ISI Class Shares (312,768) (218,689)
------------ ------------
Total distributions (5,434,188) (6,099,261)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares 8,098,100 7,880,427
Value of shares issued in
reinvestment of dividends 2,739,411 3,000,727
Cost of shares repurchased (14,720,429) (12,655,343)
------------ ------------
Decrease in net assets derived from capital
share transactions (3,882,918) (1,774,189)
------------ ------------
Total increase/(decrease) in net assets (13,202,221) 566,885
Net Assets:
Beginning of year 117,960,621 117,393,736
------------ ------------
End of year including undistributed net
investment income (distributions in
excess of net investment income) of
$(10,935) and $32,118, respectively $104,758,400 $117,960,621
============ ============
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Financial Highlights -- Flag Investors Class A
(For a share outstanding throughout each year)
For the
Year Ended
October 31,
- ----------------------------------------------------------------------------
1999
Per Share Operating Performance:
Net asset value at beginning of year $ 11.01
-------
Income from Investment Operations:
Net investment income 0.45
Net realized and unrealized gain/(loss) on investments (0.83)
-------
Total from Investment Operations (0.38)
-------
Less Distributions:
Distributions from net investment income
and net realized short-term gains (0.47)
Distributions from net realized long-term gains (0.04)
-------
Total distributions (0.51)
-------
Net asset value at end of year $ 10.12
=======
Total Return(3) (3.61)%
Ratios to Average Daily Net Assets:
Expenses(1) 0.90%
Net investment income(2) 4.23%
Supplemental Data:
Net assets at end of year (000):
Flag Investors Class A Shares $34,150
ISI Class Shares $70,609
Portfolio turnover rate 8%
- ---------------
(1) 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%,
1.13% and 1.10% for the years ended October 31, 1999,1998, 1997, 1996 and
1995, respectively.
(2) Without the waiver of advisory and administration fees (Note 2), the ratio
of net investment income to average daily net assets would have been 4.03%,
4.01%, 4.26%, 4.25% and 4.52% for the years ended October 31, 1999, 1998,
1997, 1996 and 1995, respectively.
(3) Total return excludes the effect of sales charge.
See Notes to Financial Statements.
16
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
For the Years Ended October 31,
1998 1997 1996 1995
$ 10.79 $ 10.58 $ 10.65 $ 9.81
------- -------- -------- ---------
0.46 0.52 0.48 0.48
0.33 0.24 -- 0.98
------- -------- -------- ---------
0.79 0.76 0.48 1.46
------- -------- -------- ---------
(0.54) (0.52) (0.54) (0.54)
(0.03) (0.03) (0.01) (0.08)
------- -------- -------- ---------
(0.57) (0.55) (0.55) (0.62)
------- -------- -------- ---------
$ 11.01 $ 10.79 $ 10.58 $ 10.65
======= ======== ======== =========
7.51% 7.43% 4.67% 15.42%
0.90% 0.90% 0.90% 0.90%
4.24% 4.46% 4.48% 4.72%
$37,212 $38,390 $41,193 $45,980
$80,749 $79,003 $84,712 $86,292
18% 26% 32% 55%
See Notes to Financial Statements.
17
<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 5, 1990 and began 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 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 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. The Fund utilizes the services of an
independent pricing vendor to obtain prices when such prices are
determined by the Investment Advisor to reflect the fair market
value of such municipal obligations. When there is an available
market quotation, the Fund values a municipal obligation by using
the most recent quoted bid 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. The Fund values short-term
obligations with maturities of 60 days or less at amortized cost
which approximates fair market value.
18
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
NOTE 1--concluded
B. 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, the value of the collateral declines
or 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 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.
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 Deutsche Bank AG, is the Fund's administrator. As compensation for
its
19
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Notes to Financial Statements (continued)
NOTE 2--continued
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 year ended October 31, 1999, ISI's advisory fee was
$455,727 of which $30,221 was payable at the end of the year. As compensation
for its administrative services, the Fund pays ICC an annual fee based on the
Fund's average daily net assets. Prior to June 1, 1999, this fee was calculated
daily and paid monthly at the annual rate of 0.20%. Effective June 1, 1999 the
fee is based on the combined assets of 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. Concurrent with the fee
change, ISI has agreed to be solely responsible for any fee waivers necessary to
cap fund expense levels.
Prior to June 1, 1999, ISI and ICC had 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, 1999, ISI waived fees of $166,103 and ICC waived fees of $60,513.
Certain officers and directors of the Fund are also officers or
directors of the Fund's investment advisor or administrator.
ICC also provides accounting services to the Fund for which the Fund
pays ICC an annual fee that is calculated daily based upon its average daily
net assets and paid monthly. For the year ended October 31, 1999, ICC's fee was
$57,092 of which $4,740 was payable at the end of the year.
ICC also provides transfer agency services to the Fund for which the
Fund pays ICC a per account fee that is calculated and paid monthly. For the
year ended October 31, 1999, ICC's fee was $43,782 of which $6,719 was payable
at the end of the year.
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 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 year ended October 31, 1999, distribution fees
aggregated $284,830. ISI group's fee was $192,842 of which $15,049 was payable
at the end of the year. ICC Distributor's fee was $91,988 of which $7,324 was
payable at the end of the year.
20
<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, 1999 was $5,453, and the accrued liability was $24,957.
NOTE3--Capital Share Transactions
The Fund is authorized to issue up to 37 million
shares of $.001 par value capital stock (15 million Flag Investors Class A, 20
million ISI Class, and 2 million undesignated). Transactions in shares of the
Fund are listed below.
<TABLE>
<CAPTION>
Flag Investors Class A Shares
-------------------------------------
For the For the
Year Ended Year Ended
October 31, 1999 October 31, 1998
--------------- ----------------
<S><C>
Shares sold 490,026 206,924
Shares issued to shareholders on
reinvestment of dividends 92,630 87,142
Shares redeemed (590,052) (470,241)
------------ ------------
Net decrease in shares outstanding (7,396) (176,175)
============ ============
Proceeds from sale of shares $ 5,300,208 $ 2,245,321
Value of reinvested dividends 991,493 943,497
Cost of shares redeemed (6,335,561) (5,115,075)
------------ ------------
Net decrease from capital share transactions $ (43,860) $ (1,926,257)
============ ============
<CAPTION>
ISI Class Shares
-------------------------------------
For the For the
Year Ended Year Ended
October 31, 1999 October 31, 1998
--------------- ----------------
Shares sold 261,822 518,215
Shares issued to shareholders on
reinvestment of dividends 163,148 190,021
Shares redeemed (786,574) (695,012)
------------ ------------
Net increase/(decrease) in
shares outstanding (361,604) 13,224
============ ============
Proceeds from sale of shares $ 2,797,892 $5,635,106
Value of reinvested dividends 1,747,918 2,057,230
Cost of shares redeemed (8,384,868) (7,540,268)
------------ ------------
Net increase/(decrease) from
capital share transactions $ (3,839,058) $ 152,068
============ ============
</TABLE>
21
<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 $8,305,917 and sales of investment securities aggregated $16,582,959
for the year ended October 31, 1999.
On October 31, 1999, aggregate net unrealized depreciation over tax
cost for portfolio securities was $2,625,906, of which $1,324,517 related to
appreciated securities and $3,950,423 related to depreciated securities.
NOTE 5--Net Assets
On October 31, 1999, net assets consisted of:
Paid-in capital:
Flag Investors Class A Shares $ 34,149,466
ISI Class Shares 73,245,775
Distributions in excess of net investment income (10,935)
Unrealized depreciation of investments (2,625,906)
-------------
$104,758,400
=============
NOTE 6--Subsequent Event
Pursuant to the regular meetings of the Board of Directors held on
December 13, 1999, the following appointment was resolved. Deloitte & Touche LLP
were appointed as Independent Auditors for Managed Municipal Fund, Inc., to
review and report on such Fund's financial statements for the fiscal period
ending October 31, 2000, subject to termination as provided in the Investment
Company Act 1940, as amended. This change was not the result of any
disagreements or reportable events with PricewaterhouseCoopers LLP.
22
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Report of Independent Accountants
To the Shareholders and Directors of
Managed Municipal Fund, Inc.
In our opinion, the accompanying statement of net assets and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Managed Municipal Fund, Inc. (the "Fund") at October 31, 1999, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Baltimore, Maryland
December 14, 1999
23
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Tax Information (unaudited) for the Tax Year Ended October 31, 1999
We are providing this information as required by the Internal Revenue
Code. The amounts shown may differ from those elsewhere in this report because
of differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $464,069 from
long-term capital gains which are subject to the 20% rate gains category.
The fund's distributions to shareholders included $4,740,502 from
tax-exempt income.
24
<PAGE>
FLAG INVESTORS MANAGED MUNICIPAL FUND SHARES
Directors and Officers
EDWARD S. HYMAN
Chairman
R. ALAN MEDAUGH MARGARET M. BEELER
President Assistant Vice President
JOSEPH R. HARDIMAN KEITH C. REILLY
Director Assistant Vice President
LOUIS E. LEVY AMY M. OLMERT
Director Secretary
CARL W. VOGT, ESQ. CHARLES A. RIZZO
Director Treasurer
NANCY LAZAR 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 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.
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 Flag
Investors Funds, including charges and expenses, obtain a prospectus
from your investment representative or directly from the Fund at
1-800-767-FLAG. Read it carefully before you invest.
25
<PAGE>
(GRAPHIC APPEARS HERE)
(ALEX BROWN LOGO)
Growth
Flag Investors Emerging Growth Fund
Flag Investors Equity Partners Fund
Flag Investors International Fund
Specialty
Flag Investors Communications Fund
Flag Investors Real Estate Securities Fund
Balanced
Flag Investors Value Builder Fund
Fixed Income
Flag Investors Short-Intermediate Income Fund
Flag Investors Total Return U.S. Treasury Fund Shares
Tax-Free Income
Flag Investors Managed Municipal Fund Shares
Money Market
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
www.flaginvestors.com
Distributed by:
ICC Distributors, Inc.
MMANN (12/99)
|
|