FLAG INVESTORS FUNDS INC, 485APOS, 2001-01-12

FLAG INVESTORS FUNDS INC
485APOS, 2001-01-12

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<PAGE>

As Filed with the Securities and Exchange Commission on January 12, 2001

1933 Act File No. 333-7008
1940 Act File No. 811-8227
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

POST-EFFECTIVE AMENDMENT NO. 11 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 17 [X]

FLAG INVESTORS FUNDS, INC.

(Exact Name of Registrant as Specified in Charter)

One South Street
Baltimore, MD 21202

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (800) 553-8080

Daniel O. Hirsch, Esq.
One South Street, Baltimore, MD 21202

(Name and address of agent for service)

Copy to: Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103

It is proposed that this filing will become effective:

_____ immediately upon filing pursuant to paragraph (b)
_____ on ______________ pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(i)
_____ on________________ pursuant to paragraph (a)(i)
_X__ 75 days after filing pursuant to paragraph (a)(ii)
_____ on________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

[Flag Logo]

Mutual Fund
Prospectus
March ___, 2001

GLOBAL FINANCIAL SERVICES FUND

GLOBAL BIOTECHNOLOGY FUND

GLOBAL TECHNOLOGY FUND

(CLASS A, CLASS B AND CLASS C SHARES)

Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.

<PAGE>

TABLE OF CONTENTS

GLOBAL FINANCIAL SERVICES FUND...............................................
GLOBAL BIOTECHNOLOGY FUND....................................................
GLOBAL TECHNOLOGY FUND.......................................................
INFORMATION CONCERNING ALL OF THE FUNDS......................................
Management of the Funds......................................................
Organizational Structure.....................................................
Administrator ...............................................................
Calculating a Fund's Share Price.............................................
Buying and Selling Fund Shares...............................................
Sales Charges................................................................
How to Choose the Class That is Right For You ...............................
Dividends and Distributions..................................................
Tax Considerations...........................................................

2
<PAGE>

OVERVIEW OF GLOBAL FINANCIAL SERVICES FUND
Goal.........................................................................
Core Strategy................................................................
Investment Policies and Strategies...........................................
Principal Risks of Investing in the Fund.....................................
Who Should Consider Investing in the Fund....................................
Fund Performance.............................................................
Fund Fees and Expenses.......................................................

A DETAILED LOOK AT GLOBAL FINANCIAL SERVICES FUND
Objective....................................................................
Strategy.....................................................................
Principal Investments........................................................
Investment Process...........................................................
Risks........................................................................
Portfolio Managers...........................................................
Additional Performance Information...........................................

3
<PAGE>

OVERVIEW
--------------------------------------------------------------------------------
OF GLOBAL FINANCIAL SERVICES FUND

GOAL: The Fund invests to maximize total return.

CORE STRATEGY: The Fund invests primarily in the equity securities of companies
located in the US or abroad and operating in the financial services sector.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its goal by investing primarily in equity
securities of financial services companies. These companies may be located in
the US or abroad and may have operations in more than 1 country. Investments
abroad will be primarily in developed countries, but may also include emerging
market countries. The Fund may also invest in equity securities of software and
technology companies that focus on developing and producing products for the
financial services industry, including Internet-based financial services
companies.

The Fund's investment process combines bottom-up research and analysis of
companies with top-down research of global and regional trends. The Fund will
identify attractive companies for investment by considering a variety of
factors, including whether such companies possess, in the opinion of the
Advisors, one or more of the following characteristics: a clear strategy, a
focus on profitability, an established brand name, participation in growth
markets, a possible role in industry consolidation, or attention to specialty
markets. In making investment decisions, the Fund will also assess trends such
as deregulation, consolidation, regional economic and financial conditions, and
the relative appeal of different sub-sectors within the financial services
industry.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

- The value of an investment in the Fund will vary from day to day based on
changes in the prices of the securities that the Fund holds. Those prices,
in turn, reflect investor perceptions of the economy, the markets, and the
companies held by the Fund.

- Regulatory or technological change in the financial services industry may
affect the Fund because it concentrates its investments in financial
services companies. The Fund's value may fluctuate more than diversified
investment portfolios.

- Investing in foreign companies may entail different risks than investing in
US companies. The prices of foreign securities may be affected by adverse
political,

4
<PAGE>

economic or social developments unique to a country or region. Accounting
and financial reporting standards differ from those in the US and could
convey incomplete information when compared to information typically
provided by US companies. Foreign securities may trade infrequently and be
subject to greater price fluctuations than US securities.

- Since some of the Fund's investments may be denominated in foreign
currencies, any change in the value of those currencies in relation to the
US dollar will result in a corresponding change in the value of the Fund's
investments and may cause those investments to lose money. The Fund may
seek to hedge some or all of these risks.

- Since the Fund may invest a significant portion of its assets in a
particular foreign country or geographic region, the Fund is subject to
greater currency risk and is more susceptible to adverse impact from
negative economic events or actions of foreign governments in such
countries or regions.

- The Fund may invest in securities of small- to mid-market capitalization
companies that, compared to larger companies, tend to have fewer
shareholders, less liquidity, more volatility, unproven track records,
limited products or services and limited access to capital, which could
cause the prices of these securities to vary significantly.

- The Fund may invest in emerging market countries. Securities issued or
traded in emerging markets generally entail greater risk than securities
issued or traded in developed markets.

- The Fund is non-diversified. Compared to a diversified fund, the Fund is
allowed to invest a higher percentage of its assets in just a few issuers.
This increases the Fund's risks by magnifying the impact (positively or
negatively) that any one issuer has on the Fund's performance. The Fund
generally attempts to maintain exposure to 60-80 issuers.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total return
over the long term and you are willing to accept the short-term and long-term
risks and uncertainties of investing in the common stocks of financial services
companies located in the US and abroad. There is, of course, no guarantee that
the Fund will realize its goal. You should not consider investing in the Fund if
you are pursuing a short-term financial goal, seeking regular income and
stability of principal or cannot tolerate fluctuations in the value of your
investments.

This prospectus describes Flag Investors Class A Shares ("Class A Shares"),
Class B Shares ("Class B Shares") and Class C Shares ("Class C Shares"). Each
class has different sales charges and expenses, allowing you to choose the class
that best meets your needs. (See the section entitled "Sales Charges"). The Fund
offers shares through securities dealers and through financial institutions that
act as shareholder servicing

5
<PAGE>

agents. You may also buy shares from the Fund directly through the Fund's
Transfer Agent. The Fund also offers other classes with different fees, expenses
and investment minimums.

The Fund itself does not constitute a balanced investment program. It can,
however, afford exposure to investment opportunities in the financial services
industry in the US and abroad. Diversifying your investments may improve your
long-term investment return and lower the volatility of your overall investment
portfolio.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

FUND PERFORMANCE

The Fund has no operating history prior to the date of this Prospectus.
However, the Fund has an investment objective and policies that are
substantially similar to those of a mutual fund organized in Germany and managed
by the portfolio managers employed by the Fund's Sub-Advisor. See the section
entitled "Additional Performance Information" for more information.

FUND FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Global Financial Services Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
INITIAL DEFERRED DEFERRED
SALES CHARGE SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE ALTERNATIVE
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)................ 5.50%* None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower)........... 1.00%* 5.00%** 1.00%***
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends.......................................... None None None
Redemption Fee....................................... None None None
Exchange Fee......................................... None None None
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees...................................... % % %
- - -
</TABLE>

6
<PAGE>

<TABLE>
<S> <C> <C> <C>
Distribution and/or Service (12b-1) Fees............. % % %
Other Expenses (including a 0.25% shareholder
servicing fee for Class B and Class C Shares)(1)... % % %
- - -
Total Annual Fund Operating Expenses................. % % %
Less: Fee Waivers and/or Expense Reimbursements(2).. % % %
- - -
Net Annual Fund Operating Expenses................... % % %
- - -
</TABLE>

* You will pay no sales charge on purchases of $1 million or more of Class A
Shares, but you may pay a contingent deferred sales charge if you redeem your
shares within two years after your purchase unless you are otherwise eligible
for a sales charge waiver or reduction. (See the section entitled "Sales
Charges - Redemption Price.")

** You will pay a contingent deferred sales charge if you redeem your shares
within six years after your purchase. The amount of the charge declines over
time and eventually reaches zero after six years. Seven years after your
purchase, your Class B Shares will automatically convert to Class A Shares. (See
the section entitled "Sales Charges - Redemption Price.")

*** You will pay a contingent deferred sales charge if you redeem your shares
within one year after your purchase. (See the section entitled "Sales Charges -
Redemption Price.")

(1) Because the Fund has no operating history prior to the date of this
Prospectus, these expenses are based on estimated amounts for the current fiscal
year.

(2)The Advisor has contractually agreed to waive its fees and/or reimburse
expenses of the Fund through March 31, 2002 to the extent necessary to maintain
the Fund's expense ratio at the level indicated as "Net Annual Fund Operating
Expenses."

EXPENSE EXAMPLE:

You may use this hypothetical example to compare the cost of investing in
each class of the Fund with other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year, the Fund's operating expenses remain the same, and the fee waiver and/or
expense reimbursement apply during the first year only. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A Shares $ $
Class B Shares $ $
Class C Shares $ $
</TABLE>

You would pay the following expenses if you did not redeem your shares:

7
<PAGE>

<TABLE>
<S> <C> <C>
Class A Shares $ $
Class B Shares $ $
Class C Shares $ $
</TABLE>

Federal regulations require that the table above reflect the maximum sales
charge. However, you may qualify for reduced sales charges or no sales charge at
all. (See the section entitled "Sales Charges.") If you hold your shares for a
long time, the combination of any initial sales charge you paid and the
recurring 12b-1 fees may exceed the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.

8
<PAGE>

A DETAILED LOOK
--------------------------------------------------------------------------------
AT GLOBAL FINANCIAL SERVICES FUND

OBJECTIVE

The Fund invests to maximize total return. While we give priority to
seeking the Fund's objective, we cannot offer any assurance of achieving its
objective.

STRATEGY

The Fund seeks to maximize total return by investing primarily in equity
securities of financial services companies. These companies may be located in
the US or abroad and may have operations in more than 1 country. The Fund
invests primarily in developed countries, but may also invest in emerging market
countries.(1) The Fund may also invest in equity securities of software and
technology companies that focus on developing and producing products for the
financial services industry.

The Fund's investment process combines bottom-up research and analysis of
companies with top-down research and analysis of global and regional trends. The
Fund's bottom-up research and analysis of companies seeks to identify attractive
companies for investment by considering a variety of factors, including whether
such companies possess, in the opinion of the Advisors, one or more of the
following characteristics: a clear strategy, a focus on profitability, an
established brand name, participation in growth markets, a possible role in
industry consolidation, or attention to specialty markets. The Fund will also
assess factors such as company management, market position and the
diversification of the company's earnings. No one characteristic or factor is
determinative, and the analysis may differ by company and region.

The Fund's top-down research focuses on global and regional trends such as
deregulation, local and cross-border consolidation, and regional economic and
financial conditions. The Fund will assess these trends as they impact the
financial services industry globally, regionally and locally, as well as across
the different sub-sectors of the financial services industry.

PRINCIPAL INVESTMENTS

Under normal market conditions, the Fund intends to invest primarily in
equity or equity-related securities of financial services companies. These
companies may be located in the US or abroad and may have operations in more
than 1 country. These investments may be made in companies of all market
capitalizations. These companies may include banking, insurance, asset
management, brokerage and financial services companies, including Internet-based
financial services companies, as well as software and technology companies that
focus on developing and producing products for the financial services industry.

9
<PAGE>

(1) An emerging market is commonly defined as one that experienced
comparatively little industrialization or that has a relatively new stock
market and a low level of quoted market capitalization.

Equity or equity-related securities include common stocks, preferred
stocks, American Depositary Receipts ("ADRs") and Global Depositary Receipts
("GDRs"). The Fund may also participate in the Initial Public Offering ("IPO")
market.

INVESTMENT PROCESS

The Fund may invest in companies of all market capitalizations, but will
tend to invest in large-capitalization companies. The Fund generally expects
that its average portfolio holdings will include securities of 60-80 companies,
but the Fund is not limited in the number of its holdings. The Fund tends to
have a heavier weighting of its assets in the US, Japan, Germany, France, Spain,
United Kingdom, Italy, Netherlands, and Switzerland. The Fund considers a
company or issuer to be of a particular country if it is headquartered or has
its primary operations there.

The Fund will consider selling a security in a company when the company is
experiencing deteriorating or substantial changes in its business fundamentals,
including its management, strategy, or ability to meet stated goals or
objectives, the Fund's target price for the security is met, the Fund's top-down
analysis indicates unfavorable trends may adversely impact the security, the
portfolio needs to be rebalanced or in other circumstances when the Fund deems a
sale appropriate.

OTHER INVESTMENTS

The Fund may invest in various instruments commonly known as "DERIVATIVES" to
protect its assets or increase its exposure to an asset class. The Fund
primarily uses FUTURES, OPTIONS, OPTIONS ON FUTURES AND OPTIONS ON STOCKS,
INDEX FUTURES and FORWARD CURRENCY CONTRACTS. The Advisors may use
derivatives in circumstances where the Advisors believe they offer an
economical means of gaining exposure to a particular asset class. The Fund
may also invest in derivatives to keep cash on hand to meet shareholder
redemptions or other needs while maintaining exposure to the market. The Fund
may use derivatives for leveraging, which is a way to attempt to enhance
returns.

Generally, a DERIVATIVE is a financial arrangement that derives its value from a
traditional security (like a stock or bond) asset or index.

FUTURES and OPTIONS ON FUTURES CONTRACTS are used as a low-cost method for
gaining exposure to a particular securities market without investing directly in
those securities.

FORWARD CURRENCY TRANSACTIONS are the purchase or sale of a foreign currency at
an exchange rate established now, but with payment and delivery at a specified
future time.

10
<PAGE>

Forward currency transactions are used as hedges and, where possible, to add
investment returns.

TEMPORARY DEFENSIVE POSITION. To reduce the Fund's risk under adverse market
conditions, the Advisors may make temporary defensive investments in cash, cash
items, and shorter-term, higher-quality debt securities, money market
instruments, and similar obligations, such as repurchase agreements and reverse
repurchase agreements. The Fund may have cash positions of up to 100%. While
engaged in a temporary defensive strategy, the Fund may not achieve its
investment objective. The Advisors would follow such a strategy only if they
believed the risk of loss in pursuing the Fund's primary investment strategies
outweighed the opportunity for gain.

RISKS

BELOW WE HAVE SET FORTH SOME OF THE PROMINENT RISKS ASSOCIATED WITH
INTERNATIONAL INVESTING, AS WELL AS INVESTING IN GENERAL. ALTHOUGH WE ATTEMPT TO
ASSESS THE LIKELIHOOD THAT THESE RISKS MAY ACTUALLY OCCUR AND TO LIMIT THEM, WE
CANNOT GUARANTEE THAT WE WILL SUCCEED.

PRIMARY RISKS

GENERAL STOCK RISK. An investment in the Fund involves risk. Over time, common
stocks have shown greater potential for growth than other types of securities,
but in the short run stocks can be more volatile than other types of securities.
Stock prices are sensitive to developments affecting particular companies as
well as to general economic conditions that affect particular industry sectors
as a whole. No one can predict with certainty how the markets or stock prices
will behave in the future.

MARKET SECTOR RISK. Because the Fund focuses its investments in financial
services companies, it is more susceptible than more diversified funds to market
and other conditions affecting financial services companies. Companies in the
same industry often face similar obstacles, issues and regulatory burdens. As a
result, the securities owned by the Fund may react similarly and move in unison
with one another. Accordingly, the Fund's share price may be more volatile than
a fund with a more broadly diversified portfolio.

FOREIGN INVESTING RISK. Investing in foreign companies may have different risks
than investing in US companies. An investment in a foreign company may be
affected by developments, including political developments, that are unique to
that market. These developments may not affect the US economy or the prices of
US securities in the same manner. Therefore, the prices of foreign common stocks
may, at times, move in a different direction than the prices of US common
stocks. Financial reporting standards for companies based in foreign markets may
differ from those in the United States.

- MARKET AND REGULATORY RISK. From time to time, foreign capital markets
may exhibit more volatility than those in the United States. Stocks
that trade less

11
<PAGE>

frequently can be more difficult or more costly to buy or sell than
more liquid or active stocks. Generally, foreign exchanges are smaller
and less liquid than the US market. Additionally, some foreign
governments regulate their exchanges less stringently, and the rights
of shareholders may not be as firmly established.

- POLITICAL RISK. Profound social changes and business practices that
depart from developed stock market norms have hindered the growth
of the national stock market in the past. High levels of debt have
tended to make them overly reliant on foreign capital investment and
vulnerable to capital flight. Governments have limited foreign
investors' access to capital markets and restricted the flow of
profits overseas. They have resorted to high taxes, expropriation and
nationalization. In many countries, particularly in Eastern Europe and
Asia, stock exchanges have operated largely without regulation and in
the absence of laws or precedents protecting the rights of private
ownership and foreign investors. All these threats remain a part of
emerging market investing today.

- INFORMATION RISK. Emerging market accounting, auditing, and financial
reporting and disclosure standards tend to be far less stringent than
those of developed markets. And the risks of investors acting on
incomplete, inaccurate or deliberately misleading information are
correspondingly greater. Compounding the problem, local investment
research often lacks the sophistication to spot potential pitfalls.

- CURRENCY RISK. The Fund's investments are usually denominated in the
currencies of the countries in which they are traded. As a result, the
Fund may be affected by changes in the value of foreign currencies in
relation to the value of the US dollar. The value of a foreign
currency may change in response to events that do not affect the value
of the investment in its home country.

- REGIONAL RISK. The Fund may invest a significant portion of its assets
in specific regions or countries. The Fund is therefore exposed to the
risks associated with that region or country and could be subject to
greater risk due to unanticipated and negative economic events,
actions by foreign governments, currency movements and/or market
action in such countries or regions.

SMALL- AND MID-SIZED COMPANY RISK. The Fund may invest in the shares of large,
well-established companies as well as small- and mid-sized companies. Investing
in small- and mid-sized companies poses unique risks. The stocks of small- and
mid-sized companies tend to experience steeper fluctuations in price than the
stocks of larger companies. A shortage of reliable information can pose added
risk. Industry-wide reversals may have a greater impact on small- and mid-sized
companies, since they lack a large company's financial resources to deal with
setbacks. Managers of small- and mid-sized companies may have less experience
coping with adversity or capitalizing on opportunity than their

12
<PAGE>

counterparts at larger companies. Finally, stocks of small- and mid-sized
companies are typically less liquid than stocks of large companies.

SECONDARY RISKS

EMERGING MARKETS RISK. To the extent that the Fund invests in emerging markets
to enhance overall returns, it may face higher political, information, and stock
market risks. In addition, profound social changes and business practices that
depart from norms in developed countries' economies have hindered the orderly
growth of emerging economies and their stock markets in the past. High levels of
debt tend to make emerging economies heavily reliant on foreign capital and more
vulnerable to capital flight.

DERIVATIVES RISK. Although not one of its principal investment strategies,
the Fund may invest in FORWARDS, FUTURES, OPTIONS, OPTIONS ON FUTURES
CONTRACTS, OPTIONS ON STOCKS and INDEX FUTURES which are types of
derivatives. Risks associated with derivatives include:

- the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;
- derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and
- the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

If the Fund invests in forwards, futures contracts and options on futures
contracts for non-hedging purposes, the margin and premiums required to make
those investments will not exceed 5% of the Fund's net asset value after taking
into account unrealized profits and losses on the contracts. Futures contracts
and options on futures contracts used for non-hedging purposes involve greater
risks than stock investments.

IPO RISK. IPOs may be very volatile, rising and falling rapidly based, among
other reasons, on investor perceptions rather than economic reasons.
Additionally, IPOs may have a magnified performance on the Fund so long as it
has a small asset base. The Fund may not experience a similar impact on its
performance as its assets grow, as it is unlikely that the Fund will be able to
obtain proportionately larger IPO allocations.

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<PAGE>

EURO RISK. On January 1, 1999, eleven countries of the European Economic and
Monetary Union (EMU) began implementing a plan to replace their national
currencies with a new currency, the euro. Full conversion to the euro is slated
to occur by July 1, 2002.

Although it is impossible to predict the impact of conversion to the euro on the
Fund, the risks may include:

- changes in the relative strength and value of the US dollar or other major
currencies:
- adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and
- unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

DWS is the Sub-Advisor to the Fund. The following portfolio managers at DWS
share primary responsibility for the day-to-day management of the Fund:

- KLAUS KALDEMORGEN, head of international equities at DWS since ________,
oversees the management of five Flag Investors funds. He has over 16 years of
experience as an investment manager.

- KLAUS MARTINI, head of European equities at DWS since _________, oversees the
management of five Flag Investors funds. He has over 16 years of experience as
an investment manager.

- THOMAS KORFGEN has a degree in Economics from the University of Frankfurt and
is a Chartered European Financial Analyst (CEFA). He joined DWS in 1995 and has
been managing financial equities since 1998. Prior to that, he worked at
Dresdner Bank.

ADDITIONAL PERFORMANCE INFORMATION

The Fund has no operating history prior to the date of this Prospectus.
However, the Fund's investment objective and policies are substantially similar
to those of DWS Finanzwerte, a mutual fund organized in Germany and managed by
the portfolio managers employed by the Fund's Sub-Advisor. In managing the Fund,
the Sub-Advisor will employ substantially the same investment policies and
strategies.

The performance data below lists the prior performance of DWS Finanzwerte,
not the prior performance of the Fund. DWS Finanzwerte has substantially the
same investment objective and policies as the Fund. This performance should not
be considered an indication of future performance of the Fund. The data
presented

14
<PAGE>

represents past performance results. Past performance does not guarantee future
results.

TOTAL RETURN

<TABLE>
<CAPTION>
------------------------------------------------------------

YEAR DWS Finanzwerte MSCI WORLD
(USD) Returns FINANCE INDEX
(NET OF FEES) (USD) RETURNS(1)
------------------------------------------------------------
<S> <C> <C>
1999 %
------------------------------------------------------------
2000
------------------------------------------------------------
</TABLE>

ANNUALIZED RATES OF RETURN (2):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
YTD 1 YEAR 3 YEAR 11/30/1998
(ANN.) TO 12/31/00
------------------------------------------------------------------------------------

------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DWS FINANZWERTE (USD) RETURNS % % -- %
MSCI WORLD FINANCE INDEX (USD) % % -- %
RETURNS
------------------------------------------------------------------------------------
</TABLE>

(1)
(2) The figures shown are for the periods ended December 31, 2000.

The performance information shown has been calculated in accordance with
the Securities and Exchange Commission's standardized formula, but excludes the
impact of any sales charges. If sales charges were reflected, performance would
have been lower.

The performance information shown for DWS Finanzwerte is NET of advisory
fees and other expenses (after fee waivers and/or expense reimbursements) of
Class A Shares of the Global Financial Services Fund. Additionally, the
performance results reflect reinvestment of dividends and other earnings.

To the extent that the German fund is not a registered investment company
under the laws of the United States, it is not subject to certain investment
limitations, diversification requirements and other restrictions imposed by the
Investment Company Act of 1940 and the Internal Revenue Code which, if
applicable, may have adversely affected performance results.

15
<PAGE>

OVERVIEW OF GLOBAL BIOTECHNOLOGY FUND
Goal.........................................................................
Core Strategy................................................................
Investment Policies and Strategies...........................................
Principal Risks of Investing in the Fund.....................................
Who Should Consider Investing in the Fund....................................
Fund Performance.............................................................
Fund Fees and Expenses.......................................................

A DETAILED LOOK AT GLOBAL BIOTECHNOLOGY FUND
Objective....................................................................
Strategy.....................................................................
Principal Investments........................................................
Investment Process...........................................................
Risks........................................................................
Portfolio Managers...........................................................
Additional Performance Information...........................................

16
<PAGE>

OVERVIEW
--------------------------------------------------------------------------------
OF GLOBAL BIOTECHNOLOGY FUND

GOAL: The Fund invests to maximize total return.

CORE STRATEGY: The Fund invests primarily in equity securities of companies
located in the US or abroad and operating in the biotechnology industry.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its goal by investing primarily in equity
securities of companies that the Fund expects will benefit from their
involvement in the biotechnology industry. These companies may be located in the
US or abroad and may have operations in more than 1 country. The biotechnology
industry currently includes pharmaceutical, biochemical, medical/surgical, human
health care, and agricultural- and industrial-oriented companies. These
companies may be any market capitalization. Investments abroad will be primarily
in developed countries.

The Fund uses both fundamental research and due diligence in looking for
attractive investment opportunities in the biotechnology sector. The Fund seeks
to identify and invest early in promising opportunities within the sector and
generally pursues a "buy and hold" investment strategy.

PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund could lose money, or the Fund's performance
could trail that of other investments. For example:

- Regulatory or technological change in the biotechnology industry may affect
the Fund because it concentrates its investments in biotechnology
companies. The Fund's value may fluctuate more than diversified investment
portfolios.

- Investing in foreign companies may entail different risks than investing in
US companies. The prices of foreign securities may be affected by adverse
political, economic or social developments unique to a country or region.
Accounting and financial reporting standards differ from those in the US
and could convey incomplete information when compared to information
typically provided by US companies. Foreign securities may trade
infrequently and be subject to greater price fluctuations than US
securities.

17
<PAGE>

- The Fund may invest in securities of small- to mid-market capitalization
companies that, as compared to larger companies, tend to have fewer
shareholders, less liquidity, more volatility, unproven track records,
limited products or services and limited access to capital, which could
cause the prices of these securities to vary significantly.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total return
over the long term and you are willing to accept the short-term and long-term
risks and uncertainties of investing in the common stocks of companies in the
biotechnology industry located in the US and abroad. There is, of course, no
guarantee that the Fund will realize its goal. You should not consider investing
in the Fund if you are pursuing a short-term financial goal, seeking regular
income and stability of principal or cannot tolerate fluctuations in the value
of your investments.

This prospectus describes Flag Investors Class A Shares ("Class A
Shares"), Class B Shares ("Class B Shares") and Class C Shares ("Class C
Shares"). Each class has different sales charges and expenses, allowing you
to choose the class that best meets your needs. (See the section entitled
"Sales Charges"). The Fund offers shares through securities dealers and
through financial institutions that act as shareholder servicing agents. You
may also buy shares from the Fund directly through the Fund's Transfer Agent.
The Fund also offers other classes with different fees, expenses and
investment minimums.

The Fund itself does not constitute a balanced investment program. It can,
however, afford exposure to investment opportunities in the global biotechnology
sector. Diversifying your investments may improve your long-term investment
return and lower the volatility of your overall investment portfolio.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

18
<PAGE>

FUND PERFORMANCE

FUND FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Global Biotechnology Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
INITIAL DEFERRED DEFERRED
SALES CHARGE SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE ALTERNATIVE
----------- ----------- -----------

<S> <C> <C> <C>
SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)................. 5.50%* None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower)............ 1.00%* 5.00%** 1.00%***
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends........................................... None None None
Redemption Fee........................................ None None None
Exchange Fee.......................................... None None None
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees....................................... % % %
- - -
Distribution and/or Service (12b-1) Fees.............. % % %
Other Expenses (including a 0.25% shareholder
servicing fee for Class B and Class C Shares)(1).... % % %
- - -
Total Annual Fund Operating Expenses.................. % % %
Less: Fee Waivers and/or Expense Reimbursements(2)... % % %
- - -
Net Annual Fund Operating Expenses.................... % % %
- - -
</TABLE>

* You will pay no sales charge on purchases of $1 million or more of Class A
Shares, but you may pay a contingent deferred sales charge if you redeem your
shares within two

19
<PAGE>

years after your purchase unless you are otherwise eligible for a sales charge
waiver or reduction. (See the section entitled "Sales Charges - Redemption
Price.")

*** You will pay a contingent deferred sales charge if you redeem your shares
within one year after your purchase. (See the section entitled "Sales Charges -
Redemption Price.")

(1) Because the Fund has no operating history prior to the date of this
Prospectus, these expenses are based on estimated amounts for the current fiscal
year.

(2) The Advisor has contractually agreed to waive its fees and/or reimburse
expenses of the Fund through March 31, 2002 to the extent necessary to maintain
the Fund's expense ratio at the level indicated as "Net Annual Fund Operating
Expenses."

EXPENSE EXAMPLE:

You may use this hypothetical example to help you compare the cost of
investing in each class of the Fund with other mutual funds.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A Shares $ $
Class B Shares $ $
Class C Shares $ $
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<S> <C> <C>
Class A Shares $ $
Class B Shares $ $
Class C Shares $ $
</TABLE>

20
<PAGE>

maximum sales charges permitted by the Conduct Rules of the National Association
of Securities Dealers, Inc.

21
<PAGE>

A DETAILED LOOK
--------------------------------------------------------------------------------
AT GLOBAL BIOTECHNOLOGY FUND

OBJECTIVE

The Fund invests to maximize total return. While we give priority to
seeking the Fund's objective, we cannot offer any assurance of achieving its
objective.

STRATEGY

Biotechnology companies engage in the research, development, provision
and/or manufacture of biotechnological products, services and processes. Such
companies generally employ genetic engineering to develop new products and apply
new and innovative processes. For example, such processes could be used to
discover and develop diagnostic and therapeutic products and services. The
biotechnology industry currently includes pharmaceutical, biochemical,
medical/surgical, human health care, and agricultural- and industrial-oriented
companies. Because of the rapid developments in the biotechnology industry,
companies with new and different products and strategies will likely be included
in the industry over time.

PRINCIPAL INVESTMENTS

Under normal market conditions, the Fund intends to invest primarily in
equity or equity-related securities of biotechnology companies. These companies
may be located in the US or abroad and may have operations in more than 1
country. These investments may be made in companies of all market
capitalizations. Equity or equity-related securities include common stocks,
preferred stocks, American Depositary Receipts and Global Depositary Receipts.

The Fund may also participate in the Initial Public Offering ("IPO")
market.

INVESTMENT PROCESS

The Fund uses both fundamental research and due diligence in looking for
attractive investment opportunities in the global biotechnology sector. The
Fund's fundamental research seeks to identify attractive companies for
investment by considering a variety of factors, including whether such companies
appear to be poised to develop and exploit new technologies or participate in
growth markets, or have a clear strategy, a focus on profitability, or an
established brand name. The Fund will also assess factors such as company
management, market position, and quality of scientific research and

22
<PAGE>

clinical trials underlying the company's products or services. No one
characteristic or factor is determinative, and the analysis may differ by
company and region. The Fund's due diligence includes reviewing all publicly
available scientific and clinical data underlying the company's products or
services and interviewing physicians and scientific experts on such subjects.

The Fund seeks to identify and invest early in promising opportunities
within the biotechnology sector. For example, the Fund may invest in a company
even before its product has been approved by the US Food and Drug Administration
or is available for sale.

Generally, the Fund pursues a "buy and hold" investment strategy. However,
the Fund generally will consider selling all or part of a security holding when
the stock has reached an intermediate-term price objective and its outlook no
longer seems sufficiently promising, and a relatively more attractive stock
emerges, when the issuer is experiencing deteriorating fundamentals or its
fundamentals have changed substantially, the company has experienced a
fundamental shift in its core business processes and objectives, to rebalance
the portfolio or in other circumstances when the Advisors deem a sale
appropriate.

OTHER INVESTMENTS

The Fund may invest in various instruments commonly known as "DERIVATIVES" to
protect its assets or increase its exposure to an asset class. The Fund
primarily uses FUTURES, OPTIONS, OPTIONS ON FUTURES, OPTIONS ON STOCKS,
INDEX FUTURES and FORWARD CURRENCY CONTRACTS. The Advisors may use
derivatives in circumstances where the Advisors believe they offer an
economical means of gaining exposure to a particular asset class. The Fund
may also invest in derivatives to keep cash on hand to meet shareholder
redemptions or other needs while maintaining exposure to the market. The Fund
may use derivatives for leveraging, which is a way to attempt to enhance
returns.

Generally, a DERIVATIVE is a financial arrangement that derives its value from a
traditional security (like a stock or bond) asset or index.

FUTURES and OPTIONS ON FUTURES CONTRACTS are used as a low-cost method for
gaining exposure to a particular securities market without investing directly in
those securities.

FORWARD CURRENCY TRANSACTIONS are the purchase or sale of a foreign currency at
an exchange rate established now, but with payment and delivery at a specified
future time. Forward currency transactions are used as hedges and, where
possible, to add investment returns.

23
<PAGE>

not achieve its investment objective. The Advisors would follow such a strategy
only if they believed the risk of loss in pursuing the Fund's primary investment
strategies outweighed the opportunity for gain.

RISKS

BELOW WE HAVE SET FORTH SOME OF THE PROMINENT RISKS ASSOCIATED WITH
INTERNATIONAL INVESTING, AS WELL AS INVESTING IN GENERAL. ALTHOUGH WE ATTEMPT
BOTH TO ASSESS THE LIKELIHOOD THAT THESE RISKS MAY ACTUALLY OCCUR AND TO LIMIT
THEM, WE CANNOT GUARANTEE THAT WE WILL SUCCEED.

PRIMARY RISKS

MARKET SECTOR RISK. Because the Fund focuses its investments in biotechnology
companies, it is more susceptible than more diversified funds to market and
other conditions affecting biotechnology companies. Biotechnology companies are
affected by patent considerations, intense competition, rapid technology change
and obsolescence and regulatory requirements of various government agencies.
Companies in the same industry often face similar obstacles, issues and
regulatory burdens. As a result, the securities owned by the Fund may react
similarly and move in unison with one another. Accordingly, the Fund's share
price may be more volatile than a fund with a more broadly diversified
portfolio.

FOREIGN INVESTING RISK. Investing in foreign companies may have different risks
than investing in US companies. An investment in a foreign company may be
affected by developments, including political developments that are unique to
that market. These developments may not affect the US economy or the prices of
US securities in the same manner. Therefore, the prices of foreign common stocks
may, at times, move in a different direction than the prices of US common
stocks. Financial reporting standards for companies based in foreign markets may
differ from those in the United States.

- MARKET AND REGULATORY RISK. From time to time, foreign capital markets may
exhibit more volatility than those in the United States. Stocks that trade
less frequently can be more difficult or more costly to buy or sell than
more liquid or active stocks. Generally, foreign exchanges are smaller and
less liquid than the US market. Additionally, some foreign governments
regulate their exchanges less stringently, and the rights of shareholders
may not be as firmly established.

24
<PAGE>

- POLITICAL RISK. Profound social changes and business practices that depart
from developed stock market norms have hindered the growth of the national
stock market in the past. High levels of debt have tended to make
them overly reliant on foreign capital investment and vulnerable to
capital flight. Governments have limited foreign investors' access to
capital markets and restricted the flow of profits overseas. They have
resorted to high taxes, expropriation and nationalization. In many
countries, particularly in Easter Europe and Asia, stock exchanges have
operated largely without regulation and in the absence of laws or
precedents protecting the rights of private ownership and foreign
investors. All these threats remain a part of emerging market investing
today.

- INFORMATION RISK. Emerging market accounting, auditing, and financial
reporting and disclosure standards tend to be far less stringent than those
of developed markets. And the risks of investors acting on incomplete,
inaccurate or deliberately misleading information are correspondingly
greater. Compounding the problem, local investment research often lacks the
sophistication to spot potential pitfalls.

- CURRENCY RISK. The Fund's investments are usually denominated in the
currencies of the countries in which they are traded. As a result, the Fund
may be affected by changes in the value of foreign currencies in relation
to the value of the US dollar. The value of a foreign currency may change
in response to events that do not affect the value of the investment in its
home country.

- REGIONAL RISK. The Fund may invest a significant portion of its assets in
specific regions or countries. The Fund is therefore exposed to the risks
associated with that region or country and could be subject to greater risk
due to unanticipated and negative economic events, actions by foreign
governments, currency movements and/or market action in such countries or
regions.

SMALL- AND MID-SIZED COMPANY RISK. The Fund invests in the shares of large,
well-established companies and small- and mid-sized companies. Investing in
small- and mid-sized companies poses unique risks. The stocks of small- and
mid-sized companies tend to experience steeper fluctuations in price than the
stocks of larger companies. A shortage of reliable information can also pose
added risk. Industry-wide reversals may have a greater impact on small- and
mid-sized companies, since they lack a large company's financial resources to
deal with setbacks. Managers of small- and mid-sized companies may have less
experience coping with adversity or capitalizing on opportunity than their
counterparts at larger companies. Finally, stocks of small- and mid-sized
companies are typically less liquid than stocks of large companies.

SECONDARY RISKS

25
<PAGE>

Although it is impossible to predict the impact of conversion to the euro on the
Fund, the risks may include:

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

DWS is the Sub-Advisor to the Fund. The following portfolio managers at DWS
share primary responsibility for the day-to-day management of the Fund:

- MICHAEL SISTENICH has been the head of healthcare sector fund management at
DWS since ______. Mr. Sistenich has a BSc in Biochemistry from Oxford
University. He has research experience in cell-surface proteins. He has been a
fund manager at DWS since April 1997.

26
<PAGE>

- KLAUS KALDEMORGEN, head of international equities at DWS since __________,
oversees the management of five Flag Investors funds. He has over 16 years of
experience as an investment manager.

- CHI TRAN-BRANDLI has a B.A. in immunology from UC Berkeley and has over six
years' research experience in various areas of molecular biology at Stanford
University, UCSF and the Swiss Federal Institute of Technology. She has a
Masters in Economics/Finance from the University of St. Gallen (Switzerland)
(19__). Prior to joining DWS as a fund manager in May 2000, Ms. Tran-Brandli was
a financial analyst at Parnassus Investment in San Francisco from ______ to
______.

ADDITIONAL PERFORMANCE INFORMATION

The Fund has no operating history prior to the date of this Prospectus.
However, the Fund's investment objective and policies are substantially similar
to those of DWS Biotech-Atkien Typ O, a mutual fund organized in Germany and
managed by the portfolio managers employed by the Fund's Sub-Advisor. In
managing the Fund, the Sub-Advisor will employ substantially the same investment
policies and strategies.

The performance data below lists the prior performance of DWS
Biotech-Atkien Typ O, not the prior performance of the Fund. DWS Biotech-Atkien
Typ O has substantially the same investment objective and policies of the Fund.
This performance should not be considered an indication of future performance of
the Fund. The data presented represents past performance results. Past
performance does not guarantee future results.

TOTAL RETURN

<TABLE>
<CAPTION>
------------------------------------------------------

YEAR DWS Biotech-Atkien MSCI BIOTECH
Typ O (USD) SELECT INDEX
Returns RETURNS(1)
(NET OF FEES)
------------------------------------------------------
<S> <C> <C>
1999 %
------------------------------------------------------
2000
------------------------------------------------------
</TABLE>

ANNUALIZED RATES OF RETURN (2):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
YTD 1 YEAR 3 YEAR 8/31/1999 TO
(ANN.) 12/31/00
--------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DWS BIOTECH-ATKIEN TYP O (USD) % % -- %
RETURNS
MSCI BIOTECH SELECT INDEX (USD)
RETURNS % % -- %
--------------------------------------------------------------------------------------
</TABLE>

(1)

27
<PAGE>

(2) The figures shown are for the periods ended December 31, 2000.

The performance information shown for DWS Biotech-Atkien Typ O is NET of
advisory fees and other expenses (after fee waivers and/or expense
reimbursements) of Class A Shares of the Global Biotechnology Fund.
Additionally, the performance results reflect reinvestment of dividends and
other earnings.

28
<PAGE>

OVERVIEW OF GLOBAL TECHNOLOGY FUND
Goal.........................................................................
Core Strategy................................................................
Investment Policies and Strategies...........................................
Principal Risks of Investing in the Fund.....................................
Who Should Consider Investing in the Fund....................................
Fund Performance.............................................................
Fund Fees and Expenses.......................................................

A DETAILED LOOK AT GLOBAL TECHNOLOGY FUND
Objective....................................................................
Strategy.....................................................................
Principal Investments........................................................
Investment Process...........................................................
Risks........................................................................
Portfolio Managers...........................................................
Additional Performance Information...........................................

29
<PAGE>

OVERVIEW
--------------------------------------------------------------------------------
OF GLOBAL TECHNOLOGY FUND

GOAL: The Fund invests to maximize total return.

CORE STRATEGY: The Fund invests primarily in equity securities of technology
companies of any size located in the US or abroad. Investments abroad will be
primarily in developed countries, but may also include emerging market
countries.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to identify technology companies with attractive long-term
growth potential and the ability to increase market share and profits in a
sustainable manner. These companies may be located in the US or abroad and may
have operations in more than 1 country. The Fund will seek investment
opportunities in industries such as computers, software, communications,
healthcare technology, electronics, and other technology-related industries.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

- Regulatory or technological change in the technology industry may affect
the Fund because it concentrates its investments in technology companies.
The Fund's value may fluctuate more than diversified investment portfolios.

- Since some of the Fund's investments may be denominated in foreign
currencies, any change in the value of those currencies in relation to the
US dollar will result in a

30
<PAGE>

corresponding change in the value of the Fund's investments and may cause
those investments to lose money. The Fund may seek to hedge some or all of
these risks.

- The Fund may invest in emerging market countries. Securities issued or
traded in emerging markets generally entail greater risk than securities
issued or traded in developed markets.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total return
over the long term and you are willing to accept the short-term and long-term
risks and uncertainties of investing in the common stocks of companies in the
technology industry located in the US and abroad. There is, of course, no
guarantee that the Fund will realize its goal. You should not consider investing
in the Fund if you are pursuing a short-term financial goal, seeking regular
income and stability of principal or cannot tolerate fluctuations in the value
of your investments.

This prospectus describes Flag Investors Class A Shares ("Class A
Shares"), Class B Shares ("Class B Shares") and Class C Shares ("Class C
Shares"). Each class has different sales charges and expenses, allowing you
to choose the class that best meets your needs. (See the section entitled
"Sales Charges"). The Fund offers shares through securities dealers and
through financial institutions that act as shareholder servicing agents. You
may also buy shares from the Fund directly through the Fund's Transfer Agent.
The Fund also offers other classes with different fees, expenses and
investment minimums.

The Fund itself does not constitute a balanced investment program. It can,
however, afford exposure to investment opportunities in the technology industry
located in the US and abroad. Diversifying your investments may improve your
long-term investment return and lower the volatility of your overall investment
portfolio.

31
<PAGE>

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

FUND PERFORMANCE

The Fund has no operating history prior to the date of this Prospectus.
However, the Fund has an investment objective and policies that are
substantially similar to those of a mutual fund organized in Germany and is
managed by the portfolio managers employed by the Fund's Sub-Advisor. See the
section entitled "Additional Performance Information" for more information.

FUND FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Global Technology Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
INITIAL DEFERRED DEFERRED
SALES CHARGE SALES CHARGE SALES CHARGE
ALTERNATIVE ALTERNATIVE ALTERNATIVE
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)................. 5.50%* None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower)............ 1.00%* 5.00%** 1.00%***
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends........................................... None None None
Redemption Fee........................................ None None None
Exchange Fee.......................................... None None None
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees....................................... % % %
- - -
Distribution and/or Service (12b-1) Fees.............. % % %
Other Expenses (including a 0.25% shareholder
servicing fee for Class B and Class C Shares)(1).... % % %
- - -
Total Annual Fund Operating Expenses.................. % % %
Less: Fee Waivers and/or Expense Reimbursements(2)... % % %
- - -
Net Annual Fund Operating Expenses.................... % % %
- - -
</TABLE>

32
<PAGE>

*** You will pay a contingent deferred sales charge if you redeem your shares
within one year after your purchase. (See the section entitled "Sales Charges -
Redemption Price.")

(1) Because the Fund has no operating history prior to the date of this
Prospectus, these expenses are based on estimated amounts for the current fiscal
year.

(2) The Advisor has contractually agreed to waive its fees and/or reimburse
expenses of the Fund through March 31, 2002 to the extent necessary to maintain
the Fund's expense ratio at the level indicated as "Net Annual Fund Operating
Expenses."

EXPENSE EXAMPLE:

You may use this hypothetical example to help you compare the cost of
investing in each class of the Fund with the cost of investing in other mutual
funds.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A Shares $ $
Class B Shares $ $
Class C Shares $ $
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<S> <C> <C>
Class A Shares $ $
Class B Shares $ $
Class C Shares $ $
</TABLE>

Federal regulations require that the table above reflect the maximum sales
charge. However, you may qualify for reduced sales charges or no sales charge at
all. (See the

33
<PAGE>

section entitled "Sales Charges.") If you hold your shares for a long time, the
combination of any initial sales charge you paid and the recurring 12b-1 fees
may exceed the maximum sales charges permitted by the Conduct Rules of the
National Association of Securities Dealers, Inc.

34
<PAGE>

A DETAILED LOOK
--------------------------------------------------------------------------------
AT GLOBAL TECHNOLOGY FUND

OBJECTIVE

The Fund invests to maximize total return. While we give priority to
seeking the Fund's objective, we cannot offer any assurance of achieving its
objective.

STRATEGY

The Fund invests primarily in equity securities of technology companies of
all market capitalizations. These companies may be located in the US or abroad
and may have operations in more than 1 country. The Fund invests primarily in
developed countries, but may also invest in emerging market countries.(1) The
Fund tends to have a heavier weighting of its assets in the United States,
Europe and Japan, although this may change. The Fund considers a company or
issuer to be of a particular country if it is headquartered or has its
primary operations there.

Technology companies are companies involved in the development, research
and production, distribution and sales of technology products and services.
These may include computers and computer peripherals, software, electronic
components and systems, communications equipment and services, semiconductors
and capital equipment, media and information services, Internet,
pharmaceuticals, biomedical and medical technology and other technology-related
industries.

PRINCIPAL INVESTMENTS

Under normal market conditions, the Fund intends to invest primarily in
equity or equity-related securities of technology companies. These companies may
be located in the US or abroad and may have operations in more than 1 country.
Equity or equity-related securities include common stocks, preferred stocks,
American Depositary Receipts and Global Depositary Receipts.

The Fund may invest in companies of varying market capitalizations. The
Fund may also participate in the Initial Public Offering ("IPO") market.

INVESTMENT PROCESS

The Fund seeks to identify technology companies with attractive long-term
growth potential and the ability to increase market share and profits in a
sustainable manner.

35
<PAGE>

company's revenue growth rate, quality of balance sheet, return on equity,
price-to-earnings and price-to-book ratios, and market capitalization relative
to sales.

(1) An emerging market is commonly defined as one that experienced comparatively
little industrialization or that has a relatively new stock market and a low
level of quoted market capitalization.

The Fund will attempt to modify portfolio composition to benefit from
changing relative performance among various industries affected by new or
emerging technologies. The Fund will consider selling a security when the
company is experiencing deteriorating fundamentals or changes in management; a
relatively more attractive stock emerges; or the industry in which the company
operates is undergoing a shift in focus or industry dynamics (this may include
changing government regulation or maturing of technology in an industry), to
rebalance the portfolio or in other circumstances when the Advisors deem a sale
appropriate.

OTHER INVESTMENTS

The Fund may invest in various instruments commonly known as "DERIVATIVES" to
protect its assets or increase its exposure to an asset class. The Fund
primarily uses FUTURES, OPTIONS, OPTIONS ON FUTURES AND OPTIONS ON STOCKS,
INDEX FUTURES and FORWARD CURRENCY CONTRACTS. The Advisors may use derivatives
in circumstances where the Advisors believe they offer an economical means of
gaining exposure to a particular asset class. The Fund may also invest in
derivatives to keep cash on hand to meet shareholder redemptions or other needs
while maintaining exposure to the market. The Fund may use derivatives for
leveraging, which is a way to attempt to enhance returns.

Generally, a DERIVATIVE is a financial arrangement that derives its value from a
traditional security (like a stock or bond) asset or index.

FUTURES and OPTIONS ON FUTURES CONTRACTS are used as a low-cost method for
gaining exposure to a particular securities market without investing directly in
those securities.

TEMPORARY DEFENSIVE STRATEGY. To reduce the Fund's risk under adverse market
conditions, the Advisors may make temporary defensive investments in cash or
money market instruments, as the Advisors deem appropriate. The Fund may have
cash positions of up to 100%. While engaged in a temporary defensive strategy,
the Fund may not achieve its investment objective. The Advisors would follow
such a strategy only if they believed the risk of loss in pursuing the Fund's
primary investment strategies outweighed the opportunity for gain.

36
<PAGE>

RISKS

PRIMARY RISKS

MARKET SECTOR RISK. By focusing on the technology sector of the stock market
rather than a broad spectrum of companies, the Fund's share price will be
particularly sensitive to market and economic events that affect those
technology companies. The stock prices of technology companies during the past
few years have been highly volatile largely due to the rapid pace of product
change and development within this sector. This phenomenon may also result in
future stock price volatility. In addition, technologies that are dependent upon
consumer demand may be more sensitive to changes in consumer spending patterns.
Technology companies focusing on the information and telecommunications sectors
may also be subject to international, federal and state regulations and may be
adversely affected by changes in those regulations. Companies in the same
industry often face similar obstacles, issues and regulatory burdens. As a
result, the securities owned by the Fund may react similarly and move in unison
with one another. Accordingly, the Fund's share price may be more volatile than
a fund with a more broadly diversified portfolio.

FOREIGN INVESTING RISK. Investing in foreign companies may have different risks
than investing in US companies. An investment in a foreign company may be
affected by developments, including political developments that are unique to
that market. These developments may not affect the US economy or the prices of
US securities in the same manner. Therefore, the prices of foreign common stocks
may, at times, move in a different direction than the prices of US common
stocks. Financial reporting standards for companies based in foreign markets may
differ from those in the United States.

- MARKET AND REGULATORY RISK. From time to time, foreign capital markets
may exhibit more volatility than those in the United States. Stocks
that trade less frequently can be more difficult or more costly to buy
or sell than more liquid or active stocks. Generally, foreign
exchanges are smaller and less liquid than the US market.
Additionally, some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established.

37
<PAGE>

- POLITICAL RISK. Profound social changes and business practices that
depart from developed stock market norms have hindered the growth
of the national stock market in the past. High levels of debt have
tended to make them overly reliant on foreign capital investment and
vulnerable to capital flight. Governments have limited foreign
investors' access to capital markets and restricted the flow of
profits overseas. They have resorted to high taxes, expropriation
and nationalization. In many countries, particularly in Eastern
Europe and Asia, stock exchanges have operated largely without
regulation and in the absence of laws or precedents protecting the
rights of private ownership and foreign investors. All these threats
remain a part of emerging market investing today.

38
<PAGE>

SECONDARY RISKS

DERIVATIVES RISK. Although not one of its principal investment strategies,
the Fund may invest in FORWARDS, FUTURES, OPTIONS, OPTIONS ON FUTURES
CONTRACTS, OPITONS ON STOCKS and INDEX FUTURES which are types of
derivatives. Risks associated with derivatives include:

Although it is impossible to predict the impact of conversion to the euro on the
Fund, the risks may include:

39
<PAGE>

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

DWS is the Sub-Advisor to the Fund. The following portfolio managers at DWS
share primary responsibility for the day-to-day management of the Fund:

- WALTER HOLICK is head of technology sector fund management at DWS. Mr. Holick
has a Masters in Social Science (Money, Banking and Finance) from the University
of Birmingham (UK) and has been a fund manager at DWS since 1990.

- FREDERIC FAYOLLE has an MBA in finance from the University of Michigan
Business School. Prior to joining DWS as a fund manager in June 2000, Mr.
Fayolle had ten years of experience in the United States electronics industry.

- THOMAS SCHUESSLER holds a doctorate in physics from the University of
Heidelberg. He has several years of research experience in laser and atomic
physics.

ADDITIONAL PERFORMANCE INFORMATION

The Fund has no operating history prior to the date of this Prospectus.
However, the Fund's investment objective and policies are substantially similar
to those of DWS Technologiefonds, a mutual fund organized in Germany and managed
by the portfolio managers employed by the Fund's Sub-Advisor. In managing the
Fund, the Sub-Advisor will employ substantially the same investment policies and
strategies.

The performance data below lists the prior performance of DWS
Technologiefonds, not the prior performance of the Fund. DWS Technologiefonds
has substantially the same investment objective and policies of the Fund. This
performance should not be considered an indication of future performance of the
Fund. The data presented represents past performance results. Past performance
does not guarantee future results.

TOTAL RETURN

<TABLE>
<CAPTION>
-------------------------------------------------------------------
YEAR DWS MSCI WORLD
TECHNOLOGIEFONDS INFORMATION
(USD) RETURNS TECHNOLOGY INDEX
(NET OF FEES) RETURNS(1)
-------------------------------------------------------------------
<S> <C> <C>
1984 %
-------------------------------------------------------------------
1985 %
-------------------------------------------------------------------
1986 %
-------------------------------------------------------------------
1987 %
-------------------------------------------------------------------
</TABLE>

40
<PAGE>

ANNUALIZED RATES OF RETURN (2):

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
YTD 1 YEAR 3 YEAR 5 YEAR 10 YEAR 10/31/1983 TO
(ANN.) (ANN.) (ANN.) 12/31/00
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DWS TECHNOLOGIEFONDS % % % % % %
(USD) RETURNS
MSCI WORLD INFORMATION
TECHNOLOGY INDEX (USD) % % N/A N/A N/A N/A
RETURNS
-----------------------------------------------------------------------------------------------------
</TABLE>

(1)
(2) The figures shown are for the periods ended December 31, 2000.

The performance information shown for DWS Technologiefonds is NET of
advisory fees and other expenses (after fee waivers and/or expense
reimbursements) of Class A Shares of the Global Technology Fund. Additionally,
the performance results reflect reinvestment of dividends and other earnings.

41
<PAGE>

INFORMATION
--------------------------------------------------------------------------------
CONCERNING ALL FUNDS

MANAGEMENT OF THE FUNDS

BOARD OF DIRECTORS. A Board of Directors supervises for each Fund all of the
Fund's activities on behalf of the Fund's shareholders.

INVESTMENT ADVISORS. Investment Company Capital Corp. ("ICCC" or the "Advisor")
is the investment advisor and DWS International Portfolio Management GmbH ("DWS"
or "Sub-Advisor") is the sub-advisor to each of the Funds. (ICCC and DWS
collectively are referred to as the "Advisors".) ICCC is also the investment
advisor to other mutual funds in the Flag Investors family of funds. These funds
had approximately $__ billion of net assets as of December 31, 2000.

ICCC and DWS are indirect, wholly owned subsidiaries of Deutsche Bank AG.
Deutsche Bank is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual funds,
retail, private and commercial banking, investment banking and insurance.

ICCC is responsible for supervising and managing all of the Funds'
operations, including overseeing the performance of DWS. DWS is responsible for
decisions to buy and sell securities for the Funds, for broker-dealer selection,
and for negotiation of commission rates.

As compensation for its services, ICCC is entitled to receive from each
Fund a fee equal to 1.00% of the Fund's average daily net assets. ICCC
compensates DWS out of its advisory fee.

ORGANIZATIONAL STRUCTURE

The Funds are organized as series of an open-end investment company that is
organized as a Maryland corporation. Each Fund currently invests its assets
directly in securities. In the future, upon approval by a majority vote of the
Board of Directors, each Fund may be reorganized into a master-feeder structure.
Each Fund would then become a "feeder fund" investing all of its assets in a
corresponding "Master Portfolio." Should the Directors approve the
reorganization, each Fund and its Master Portfolio would have the same
investment objective.

ADMINISTRATOR

ICCC provides administration services to the Funds. ICCC supervises the
day-to-day operations of the Funds, including the preparation of registration
statements, proxy materials, shareholder reports, compliance with all
requirements of securities laws in the states in which shares are distributed
and, subject to the supervision of the Funds' Board of Directors, oversight of
the relationship between the Funds and their other service

42
<PAGE>

providers. ICCC is also the Funds' transfer and dividend disbursing agent and
provides accounting services to the Funds.

CALCULATING A FUND'S SHARE PRICE

The price you pay when you buy shares or receive when you redeem shares is
based on a Fund's net asset value per share. When you buy Class A Shares of any
Fund, the price you pay may be increased by a sales charge. When you redeem any
class of shares, the amount you receive may be reduced by a sales charge. See
the section entitled "Sales Charges" for details on how and when these charges
may or may not be imposed.

The net asset value per share of each class of a Fund is determined at the
close of regular trading on the New York Stock Exchange on each day the Exchange
is open for business. While regular trading ordinarily closes at 4:00 p.m.
(Eastern Time), it could be earlier, particularly on the day before a holiday.
Contact the Transfer Agent to determine whether the Fund will close early before
a particular holiday.

In valuing its assets, a Fund's investments are priced at their market
value. When price quotes for particular securities are not readily available or
when they may be unreliable, the securities are priced at their "fair value"
using procedures approved by the Board.

You may buy or redeem shares on any day the New York Stock Exchange is open
for business (a "Business Day"). If your order is entered before the net asset
value per share is determined for that day, the price you pay or receive will be
based on that day's net asset value per share. If your order is entered after
the net asset value per share is determined for that day, the price you pay or
receive will be based on the next Business Day's net asset value per share.

The following sections describe how to buy and redeem shares.

BUYING AND SELLING FUND SHARES

You may buy any class of a Fund's shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy shares by sending your check (along with a completed
Application Form) directly to the Fund.

43
<PAGE>

You may buy Class A Shares unless you are a defined contribution plan with
assets of $75 million or more.

Your purchase order may not be accepted if the sale of Fund shares has been
suspended or if it is determined that your purchase would be detrimental to the
interests of the Fund's shareholders. In this connection, the Fund specifically
reserves the right to refuse (i) any purchase or exchange request or (ii)
multiple purchase or exchange requests, submitted by a shareholder, group of
shareholders, commonly controlled accounts or a dealer, that are deemed by the
Fund, in its sole discretion, to involve excessive trading or to be part of a
market timing strategy. For these purposes, the Fund may consider, among other
factors, an investor's trading history in the Fund or an affiliated fund, the
funds involved, the amount of the investment and the background of the investors
or dealers involved.

INVESTMENT MINIMUMS

Your initial investment in any Fund must be at least $2,000. Subsequent
investments must be at least $100. The following are exceptions to these
minimums:

- If you are investing in an IRA account, your initial investment may be as
low as $1,000.

- If you are a shareholder of any other Flag Investors fund, your initial
investment may be as low as $500.

- If you are a participant in a Fund's Automatic Investing Plan, your initial
investment may be as low as $250. If you participate in the monthly plan,
your subsequent investments may be as low as $100. If you participate in
the quarterly plan, your subsequent investments may be as low as $250. See
the section entitled "Automatic Investing Plan" for details.

- There is no minimum investment requirement for qualified retirement plans
such as 401(k), pension, or profit sharing plans.

INVESTING REGULARLY

You may make regular investments in a Fund through any of the following
methods. If you wish to enroll in any of these programs or if you need any
additional information, complete the appropriate section of the Application Form
or contact your securities dealer, your servicing agent, or the Transfer Agent.

AUTOMATIC INVESTING PLAN. You may elect to make a regular monthly or
quarterly investment in any class of shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
money is received by the Transfer Agent, it will be invested in the class of
shares selected at that day's offering price. Either you or the Fund may
discontinue your participation upon 30 days' notice.

44
<PAGE>

DIVIDEND REINVESTMENT PLAN. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares of the
same class at net asset value. You may elect to receive your distributions in
cash or to have your distributions invested in shares of other Flag Investors
funds. To make either of these elections or to terminate automatic reinvestment,
complete the appropriate section of the Application Form or notify the Transfer
Agent, your securities dealer, or your servicing agent at least five days before
the date on which the next dividend or distribution will be paid.

SYSTEMATIC PURCHASE PLAN. You may also purchase any class of Fund shares
through a Systematic Purchase Plan. Contact your securities dealer or servicing
agent for details.

HOW TO REDEEM SHARES

You may redeem any class of a Fund's shares through your securities dealer
or servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid. If you have an account with a Fund that
is in your name, you may also redeem shares by contacting the Transfer Agent by
mail or (if you are redeeming $50,000 or less) by telephone. The Transfer Agent
will mail your redemption check within seven days after it receives your order
in proper form. Refer to the section entitled "Telephone Transactions" for more
information on this method of redemption.

Your securities dealer, your servicing agent or the Transfer Agent may
require the following documents before they redeem your shares:

1) A letter of instructions specifying your account number and the number of
shares or dollar amount you wish to redeem. The letter must be signed by
all owners of the shares exactly as their names appear on the account.

2) If you are redeeming more than $50,000, a guarantee of your signature. You
can obtain one from most banks or securities dealers.

3) Any additional documents that may be required if your account is in the
name of a corporation, partnership, trust, or fiduciary.

OTHER REDEMPTION INFORMATION

Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time, the
dividend will be paid to you in cash whether or not that is the payment option
you have selected.

45
<PAGE>

If you redeem sufficient shares to reduce your investment to $500 or less,
the Fund has the power to redeem the remaining shares after giving you 60 days'
notice. The Fund reserves the right to redeem shares in-kind under certain
circumstances.

If you own Fund shares having a value of at least $10,000, you may arrange
to have some of your shares redeemed monthly or quarterly under the Fund's
Systematic Withdrawal Plan. Each redemption under this plan involves all the tax
and sales charge implications normally associated with Fund redemptions. Contact
your securities dealer, your servicing agent or the Transfer Agent for
information on this plan.

TELEPHONE TRANSACTIONS

If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You are automatically entitled
to telephone transaction privileges, but you may specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.

The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional written instructions. If these procedures are
employed, neither a Fund nor the Transfer Agent will bear any liability for
following telephone instructions that either reasonably believes to be genuine.
Your telephone transaction request will be recorded.

During periods of economic or market volatility, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail.

SALES CHARGES

PURCHASE PRICE

The price you pay to buy shares will be a Fund's offering price, which is
calculated by adding any applicable sales charges to the net asset value per
share of the class you are buying. The amount of any sales charge included in
your purchase price will be according to the following schedule:

46
<PAGE>

<TABLE>
<CAPTION>
CLASS A
SALES CHARGE
AS A % OF
-------------------------
CLASS C
OFFERING NET AMOUNT CLASS B SALES
AMOUNT OF PURCHASE PRICE INVESTED SALES CHARGE CHARGE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $ 50,000 ..... 5.50% 5.82% None None
$ 50,000 - $ 99,999...... 4.50% 4.71% None None
$ 100,000 - $249,999...... 3.50% 3.63% None None
$ 250,000 - $499,999...... 2.50% 2.56% None None
$ 500,000 - $999,999...... 2.00% 2.04% None None
$1,000,000 and over........ None None None None
-------------------------------------------------------------------------------------------
</TABLE>

Although you do not pay an initial sales charge when you invest $1,000,000
or more in Class A Shares or when you buy any amount of Class B or Class C
Shares, you may pay a sales charge when you redeem your shares. Refer to the
section entitled "Redemption Price" for details. Your securities dealer may be
paid a commission at the time of your purchase.

The sales charge you pay on your current purchase of Class A Shares may be
reduced under the circumstances listed below.

RIGHTS OF ACCUMULATION. If you are purchasing additional Class A Shares of
a Fund or Class A shares of any other Flag Investors fund or if you already have
investments in Class A shares, you may combine the value of your purchases with
the value of your existing investments to determine whether you qualify for
reduced sales charges. (For this purpose your existing investments will be
valued at the higher of cost or current value.) You may also combine your
purchases and investments with those of your spouse and your children under the
age of 21 for this purpose. You must be able to provide sufficient information
to verify that you qualify for this right of accumulation.

LETTER OF INTENT. If you anticipate making additional purchases of Class A
Shares over the next 13 months, you may combine the value of your current
purchase with the value of your anticipated purchases to determine whether you
qualify for a reduced sales charge. You will be required to sign a letter of
intent specifying the total value of your anticipated purchases and to initially
purchase at least 5% of the total. When you make each purchase during the
period, you will pay the sales charge applicable to their combined value. If, at
the end of the 13-month period, the total value of your purchases is less than
the amount you indicated, you will be required to pay the difference between the
sales charges you paid and the sales charge applicable to the amount you
actually did purchase. Some of your Class A Shares will be redeemed to pay this
difference.

PURCHASES AT NET ASSET VALUE. You may buy Class A Shares without paying a
sales charge under the following circumstances:

47
<PAGE>

1) If you are reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the prior 90 days.

2) If you are exchanging an investment in another Flag Investors fund for an
investment in a Fund (see "Purchases by Exchange" for a description of the
conditions).

3) If you are a current or retired Director of the Funds, or an affiliated
Fund, a director, an employee or a member of the immediate family of an
employee of any of the following (or their respective affiliates): the
Fund's distributor, the Advisors, or a broker-dealer authorized to sell
shares of the Fund.

4) If you are buying shares in any of the following types of accounts:

(i) A qualified retirement plan;

(ii) A Flag Investors fund payroll savings plan program;

(ii) A fiduciary or advisory account with a bank, bank trust department,
registered investment advisory company, financial planner or
securities dealer purchasing shares on your behalf. To qualify for
this provision you must be paying an account management fee for the
fiduciary or advisory services. You may be charged an additional fee
by your securities dealer or servicing agent if you buy shares in this
manner.

PURCHASES BY EXCHANGE

You may exchange Class A, Class B, or Class C shares of any other Flag
Investors fund for an equal dollar amount of Class A, Class B or Class C Shares,
respectively, without payment of the sales charges described above or any other
charge up to four times a year. You may not exchange Cash Reserve Prime Shares
for shares of any of the Funds unless you acquired those shares through a prior
exchange from shares of another Flag Investors Fund. You may enter both your
redemption and purchase orders on the same Business Day or, if you have already
redeemed the shares of the other fund, you may enter your purchase order within
90 days of the redemption. The Funds may modify or terminate these offers of
exchange upon 60 days' notice.

You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Funds' Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.

REDEMPTION PRICE

The amount of any sales charge deducted from your redemption price will be
determined according to the following schedule.

48
<PAGE>

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE
OF THE DOLLAR AMOUNT SUBJECT TO CHARGE
(AS A % OF COST OR VALUE)

CLASS A SHARES CLASS B SHARES CLASS C SHARES
YEAR SINCE PURCHASE SALES CHARGE SALES CHARGE SALES CHARGE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First.............. 1.00%* 5.00% 1.00%
Second............. 0.50%* 4.00% None
Third.............. None 3.00% None
Fourth............. None 3.00% None
Fifth.............. None 2.00% None
Sixth.............. None 1.00% None
Thereafter......... None None None
</TABLE>
------------

* You will pay a sales charge when you redeem Class A Shares within two years
of purchase only if your shares were purchased at net asset value because they
were part of an investment of $1,000,000 or more.

DETERMINATION OF SALES CHARGE. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:

1) No sales charge will be applied to shares you own as a result of
reinvesting dividends or distributions.

2) If you have purchased shares at various times, the sales charge will be
applied first to shares you have owned for the longest period of time.

3) The sales charge is applied to the lesser of the cost of the shares or
their value at the time of your redemption.

WAIVER OF SALES CHARGE. You may redeem shares without paying a sales charge
under any of the following circumstances:

1) If you are exchanging your shares for shares of another Flag Investors fund
of the same class.

2) If your redemption represents the minimum required distribution from an
individual retirement account (IRA) or other retirement plan.

3) If your redemption represents a distribution from a Systematic Withdrawal
Plan. This waiver applies only if the annual withdrawals under your Plan
are 12% or less of your share balance.

4) If shares are being redeemed in your account following your death or a
determination

49
<PAGE>

that you are disabled. This waiver applies only under the following
conditions:

(i) The account is registered in your name either individually, as a joint
tenant with rights of survivorship, as a participant in community
property, or as a minor child under the Uniform Gifts or Uniform
Transfers to Minors Acts.

(ii) Either you or your representative notifies your securities dealer,
servicing agent, or the Transfer Agent that such circumstances exist.

5) If you are redeeming Class A Shares of a Fund, your original investment was
at least $3,000,000, and your securities dealer has agreed to return to the
Fund's distributor any payments the dealer received when you bought your
shares.

AUTOMATIC CONVERSION OF CLASS B SHARES. Your Class B Shares, along with any
reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares of the same Fund seven years after
your purchase. This conversion will be made on the basis of the relative net
asset values of the classes and will not be a taxable event to you.

HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU

Your decision as to which class of a Fund's shares is best for you should
be based upon a number of factors including the amount of money you intend to
invest and the length of time you intend to hold your shares.

If you choose Class A Shares, you will pay a sales charge when you buy your
shares, but the amount of the charge declines as the amount of your investment
increases. You will pay lower expenses while you hold the shares and, except in
the case of investments of $1,000,000 or more, no sales charge if you redeem
them.

If you choose Class B Shares, you will pay no sales charge when you buy
your shares, but your annual expenses will be higher than Class A Shares. You
will pay a sales charge if you redeem your shares within six years of purchase,
but the amount of the charge declines the longer you hold your shares and, at
the end of seven years, your shares convert to Class A Shares, thus eliminating
the higher expenses.

If you choose Class C Shares, you will pay no sales charge when you buy
your shares or if you redeem them after holding them for at least a year. On the
other hand, expenses on Class C Shares are the same as those on Class B Shares
and, since there is no conversion to Class A Shares at the end of seven years,
the higher expenses continue for as long as you own your shares.

Your securities dealer is paid a fee when you buy your shares and an annual
fee for as long as you hold your shares. For Class A and Class B Shares, the
annual fee begins when you purchase your shares. For Class C Shares, it begins
one year after you purchase your shares. In addition to these payments, the
Advisors may provide significant

50
<PAGE>

compensation to securities dealers and servicing agents for distribution,
administrative and promotional services.

Your securities dealer or servicing agent may receive different levels of
compensation depending upon which class of shares you buy.

DISTRIBUTION PLANS AND SHAREHOLDER SERVICING

The Funds have adopted plans under Rule 12b-1 that allow them to pay your
securities dealer or shareholder servicing agent distribution and other fees for
the sale of its shares and for shareholder service. In addition, the Funds may
pay shareholder servicing fees on Class B and Class C Shares. Class A Shares pay
an annual distribution fee equal to 0.25% of average daily net assets. Class B
and Class C Shares pay an annual distribution fee equal to 0.75% of average
daily net assets and an annual shareholder servicing fee equal to 0.25% of
average daily net. Because these fees are paid out of net assets on an ongoing
basis, they will, over time, increase the cost of your investment and may cost
you more than paying other types of sales charges.

DIVIDENDS AND DISTRIBUTIONS

Each Fund's policy is to distribute to shareholders substantially all of
its net investment income in the form of dividends and to distribute net
realized capital gains at least annually.

TAX CONSIDERATIONS

The following summary is based on current tax laws, which may change.

The dividends and distributions you receive may be subject to federal,
state, local and foreign taxation, depending upon your tax situation. If so,
they are taxable whether or not you reinvest them. Income distributions are
generally taxable at ordinary income tax rates. Capital gains distributions are
generally taxable at the rates applicable to long-term capital gains regardless
of how long you have owned your shares. Each sale or exchange of a Fund's shares
is generally a taxable event. For tax purposes, an exchange of your Fund shares
for shares of a different Flag Investors fund is the same as a sale. The
individual tax rate on any gain from the sale or exchange of your shares depends
upon your marginal tax rate and how long you have held your shares.

If you have a tax-advantaged or other retirement account you will generally
not be subject to federal taxation on income and capital gains distributions
until you begin receiving your distributions from your retirement account. You
should consult your tax advisor regarding the rules governing your own
retirement plan.

If you are a non-US investor in a Fund you may be subject to US withholding
and estate tax and are encouraged to consult your tax advisor prior to investing
in a Fund.

51
<PAGE>

Under certain circumstances, a Fund may elect to pass-through to you your
pro-rata share of foreign taxes paid by a Fund. A Fund will notify you if it
intends to make such an election.

More information about taxes is in the Statement of Additional Information.
Please contact your tax advisor if you have specific questions about federal,
state, local or foreign income taxes.

52
<PAGE>

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

Investment Sub-Advisor
DWS INTERNATIONAL PORTFOLIO MANAGEMENT GMBH
Grueneburgweg 113-115
60323 Frankfurt am Main
Germany

Distributor Custodian
ICC DISTRIBUTORS, INC. INVESTORS BANK & TRUST COMPANIES
200 Clarendon Street
Boston, Massachusetts 02116

Administrator and Transfer Agent Fund Counsel
INVESTMENT COMPANY CAPITAL CORP. MORGAN, LEWIS & BOCKIUS LLP
One South Street 1701 Market Street
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
1-800-553-8080

Independent Accountants

53
<PAGE>

[Flag Logo]

You can find more detailed information about each Fund in the current Statement
of Additional Information, dated March ___, 2001, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference into this prospectus. To receive your free copy of the
Statement of Additional Information, the annual or semi-annual report, or if you
have questions about investing in a Fund, write to us at

Flag Investors Funds
PO Box 515
Baltimore, MD 21203
www.flaginvestors.com

or call our toll-free number:1-800-767-FLAG

You can find reports and other information about each Fund on the EDGAR database
on the SEC website (http://www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by writing an electronic
request to [email protected] or by writing to the Public Reference Section of
the SEC, Washington, D.C. 20549-0102. Information about each Fund, including its
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For more information on the Public
Reference Room, call the SEC at 1-202-942-8090.

GLOBAL FINANCIAL SERVICES FUND
GLOBAL BIOTECHNOLOGY FUND
GLOBAL TECHNOLOGY FUND

Distributed by: CUSIP #
ICC Distributors, Inc. CUSIP #
Two Portland Square CUSIP #
Portland, ME 04101 811-4827
_________ (03/01)

54
<PAGE>

[Flag Logo]

Mutual Fund
Prospectus
March ___, 2001

GLOBAL FINANCIAL SERVICES FUND

GLOBAL BIOTECHNOLOGY FUND

GLOBAL TECHNOLOGY FUND

(INSTITUTIONAL SHARES)

<PAGE>

TABLE OF CONTENTS

GLOBAL FINANCIAL SERVICES FUND......................................
GLOBAL BIOTECHNOLOGY FUND...........................................
GLOBAL TECHNOLOGY FUND..............................................
INFORMATION CONCERNING ALL OF THE FUNDS.............................
Management of the Funds.............................................
Organizational Structure............................................
Administrator ......................................................
Calculating a Fund's Share Price....................................
Buying and Selling Fund Shares......................................
Sales Charges ......................................................
How to Choose the Class That is Right For You.......................
Dividends and Distributions.........................................
Tax Considerations..................................................

2
<PAGE>

OVERVIEW OF GLOBAL FINANCIAL SERVICES FUND

Goal.................................................................
Core Strategy........................................................
Investment Policies and Strategies...................................
Principal Risks of Investing in the Fund.............................
Who Should Consider Investing in the Fund............................
Fund Performance.....................................................
Fund Fees and Expenses...............................................

A DETAILED LOOK AT GLOBAL FINANCIAL SERVICES FUND

Objective............................................................
Strategy.............................................................
Principal Investments................................................
Investment Process...................................................
Risks................................................................
Portfolio Managers...................................................
Additional Performance Information...................................

3
<PAGE>

OVERVIEW
-------------------------------------------------------------------------------
OF GLOBAL FINANCIAL SERVICES FUND

GOAL: The Fund invests to maximize total return.

CORE STRATEGY: The Fund invests primarily in the equity securities of companies
located in the US or abroad and operating in the financial services sector.

INVESTMENT POLICIES AND STRATEGIES

The Fund's investment process combines bottom-up research and analysis
of companies with top-down research of global and regional trends. The Fund will
identify attractive companies for investment by considering a variety of
factors, including whether such companies possess, in the opinion of the
Advisors, one or more of the following characteristics: a clear strategy, a
focus on profitability, an established brand name, participation in growth
markets, a possible role in industry consolidation, or attention to specialty
markets. In making investment decisions, the Fund will also assess trends such
as deregulation, consolidation, regional economic and financial conditions, and
the relative appeal of different sub-sectors within the financial services
industry.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in a Fund could lose money, or a Fund's performance
could trail that of other investments. For example:

4
<PAGE>

financial reporting standards differ from those in the US and could convey
incomplete information when compared to information typically provided by
US companies. Foreign securities may trade infrequently and be subject to
greater price fluctuations than US securities.

- The Fund may invest in emerging market countries. Securities issued or
traded in emerging markets generally entail greater risk than securities
issued or traded in developed markets.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total
return over the long term and you are willing to accept the short-term and
long-term risks and uncertainties of investing in the common stocks of financial
services companies located in the US and abroad. There is, of course, no
guarantee that the Fund will realize its goal. You should not consider investing
in the Fund if you are pursuing a short-term financial goal, seeking regular
income and stability of principal or cannot tolerate fluctuations in the value
of your investments.

The Fund itself does not constitute a balanced investment program. It
can, however, afford exposure to investment opportunities in the financial
services industry in the US and abroad. Diversifying your investments may
improve your long-term investment return and lower the volatility of your
overall investment portfolio.

5
<PAGE>

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

FUND PERFORMANCE

The Fund has no operating history prior to the date of this
Prospectus. However, the Fund has an investment objective and policies that are
substantially similar to those of a mutual fund organized in Germany and managed
by the portfolio managers employed by the Fund's Sub-Advisor. See the section
entitled "Additional Performance Information" for more information.

FUND FEES AND EXPENSES OF THE INSTITUTIONAL SHARES

This table describes the fees and expenses that you may pay if you buy
and hold shares of the Global Financial Services Fund.

SHAREHOLDER FEES:

(FEES PAID DIRECTLY FROM YOUR INVESTMENT)

Maximum Sales Charge (Load) Imposed on Purchases
None

Maximum Deferred Sales Charge (Load)
None

Maximum Sales Charge (Load) Imposed on Reinvested
Dividends............................................. None
Redemption Fee.......................................... None
Exchange Fee............................................ None
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees......................................... %
---
Distribution and/or Service (12b-1) Fees................ None
Other Expenses (1)............ %
---
Total Annual Fund Operating Expenses.................... %
Less: Fee Waivers and/or Expense Reimbursements(2)..... %
---
Net Annual Fund Operating Expenses...................... %
---

(1) Because the Fund has no operating history prior to the date of this
Prospectus, these expenses are based on estimated amounts for the current fiscal
year.

(2) The Advisor has contractually agreed to waive its fees and/or reimburse
expenses of the Fund through March 31, 2002 to the extent necessary to maintain
the Fund's expense ratio at the level indicated as "Net Annual Fund Operating
Expenses."

6
<PAGE>

EXPENSE EXAMPLE:

You may use this hypothetical example to compare the cost of investing
in each class of the Fund with the other mutual funds.

1 YEAR 3 YEARS
Institutional Shares $ $

7
<PAGE>

A DETAILED LOOK
-------------------------------------------------------------------------------
AT GLOBAL FINANCIAL SERVICES FUND

OBJECTIVE

The Fund invests to maximize total return. While we give priority to
seeking the Fund's objective, we cannot offer any assurance of achieving its
objective.

STRATEGY

The Fund's investment process combines bottom-up research and analysis
of companies with top-down research and analysis of global and regional trends.
The Fund's bottom-up research and analysis of companies seeks to identify
attractive companies for investment by considering a variety of factors,
including whether such companies possess, in the opinion of the Advisors, one or
more of the following characteristics: a clear strategy, a focus on
profitability, an established brand name, participation in growth markets, a
possible role in industry consolidation, or attention to specialty markets. The
Fund will also assess factors such as company management, market position and
the diversification of the company's earnings. No one characteristic or factor
is determinative, and the analysis may differ by company and region.

The Fund's top-down research focuses on global and regional trends
such as deregulation, local and cross-border consolidation, and regional
economic and financial conditions. The Fund will assess these trends as they
impact the financial services industry globally, regionally and locally, as well
as across the different sub-sectors of the financial services industry.

PRINCIPAL INVESTMENTS

(1) An emerging market is commonly defined as one that experienced comparatively
little industrialization or that has a relatively new stock market and a low
level of quoted market capitalization.

8
<PAGE>

investments may be made in companies of all market capitalizations. These
companies may include banking, insurance, asset management, brokerage and
financial services companies, including Internet-based financial services
companies, as well as software and technology companies that focus on developing
and producing products for the financial services industry.

INVESTMENT PROCESS

The Fund may invest in companies of all market capitalizations, but
will tend to invest in large-capitalization companies. The Fund generally
expects that its average portfolio holdings will include securities of 60-80
companies, but the Fund is not limited in the number of its holdings. The Fund
tends to have a heavier weighting of its assets in the US, Japan, Germany,
France, Spain, United Kingdom, Italy, Netherlands, and Switzerland. The Fund
considers a company or issuer to be of a particular country if it is
headquartered or has its primary operations there.

The Fund will consider selling a security in a company when the
company is experiencing deteriorating or substantial changes in its business
fundamentals, including its management, strategy, or ability to meet stated
goals or objectives, the Fund's target price for the security is met, the Fund's
top-down analysis indicates unfavorable trends may adversely impact the
security, the portfolio needs to be rebalanced or in other circumstances when
the Fund deems a sale appropriate.

OTHER INVESTMENTS

The Fund may invest in various instruments commonly known as "DERIVATIVES" to
protect its assets or increase its exposure to an asset class. The Fund
primarily uses FUTURES, OPTIONS, OPTIONS ON FUTURES AND OPTIONS ON STOCKS,
INDEX FUTURES and FORWARD CURRENCY CONTRACTS. The Advisors may use derivatives
in circumstances where the Advisors believe they offer an economical means of
gaining exposure to a particular asset class. The Fund may also invest in
derivatives to keep cash on hand to meet shareholder redemptions or other needs
while maintaining exposure to the market. The Fund may use derivatives for
leveraging, which is a way to attempt to enhance returns.

Generally, a DERIVATIVE is a financial arrangement that derives its value from a
traditional security (like a stock or bond) asset or index.

FUTURES and OPTIONS ON FUTURES CONTRACTS are used as a low-cost method for
gaining exposure to a particular securities market without investing directly in
those securities.

9
<PAGE>

RISKS

PRIMARY RISKS

10
<PAGE>

- POLITICAL RISK. Profound social changes and business practices that depart
from developed stock market norms have hindered the growth of the national
stock market in the past. High levels of debt have tended to make them
overly reliant on foreign capital investment and vulnerable to capital
flight. Governments have limited foreign investors' access to capital
markets and restricted the flow of profits overseas. They have resorted to
high taxes, expropriation and nationalization. In many countries,
particularly in Eastern Europe and Asia, stock exchanges have operated
largely without regulation and in the absence of laws or precedents
protecting the rights of private ownership and foreign investors. All these
threats remain a part of emerging market investing today.

- INFORMATION RISK. Emerging market accounting, auditing, and financial
reporting and disclosure standards tend to be far less stringent than those
of developed markets. And the risks of investors acting on incomplete,
inaccurate or deliberately misleading information are correspondingly
greater. Compounding the problem, local investment research often lacks the
sophistication to spot potential pitfalls.

- CURRENCY RISK. The Fund's investments are usually denominated in the
currencies of the countries in which they are traded. As a result, the Fund
may be affected by changes in the value of foreign currencies in relation
to the value of the US dollar. The value of a foreign currency may change
in response to events that do not affect the value of the investment in its
home country.

- REGIONAL RISK. The Fund may invest a significant portion of its assets in
specific regions or countries. The Fund is therefore exposed to the risks
associated with that region or country and could be subject to greater risk
due to unanticipated and negative economic events, actions by foreign
governments, currency movements and/or market action in such countries or
regions.

11
<PAGE>

counterparts at larger companies. Finally, stocks of small- and mid-sized
companies are typically less liquid than stocks of large companies.

SECONDARY RISKS

DERIVATIVES RISK. Although not one of its principal investment strategies, the
Fund may invest in FORWARDS, FUTURES, OPTIONS, OPTIONS ON FUTURES CONTRACTS,
OPTIONS ON STOCKS and INDEX FUTURES which are types of derivatives. Risks
associated with derivatives include:

12
<PAGE>

Although it is impossible to predict the impact of conversion to the euro on the
Fund, the risks may include:

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

DWS is the Sub-Advisor to the Fund. The following portfolio managers
at DWS share primary responsibility for the day-to-day management of the Fund:

- KLAUS KALDEMORGEN, head of international equities at DWS since ________,
oversees the management of five Flag Investors funds. He has over 16 years of
experience as an investment manager.

- KLAUS MARTINI, head of European equities at DWS since _________, oversees the
management of five Flag Investors funds. He has over 16 years of experience as
an investment manager.

ADDITIONAL PERFORMANCE INFORMATION

The Fund has no operating history prior to the date of this
Prospectus. However, the Fund's investment objective and policies are
substantially similar to those of DWS Finanzwerte, a mutual fund organized in
Germany and managed by the portfolio managers employed by the Fund's
Sub-Advisor. In managing the Fund, the Sub-Advisor will employ substantially the
same investment policies and strategies.

The performance data below lists the prior performance of DWS
Finanzwerte, not the prior performance of the Fund. DWS Finanzwerte has
substantially the same investment objective and policies as the Fund. This
performance should not be considered an indication of future performance of the
Fund. The data presented

13
<PAGE>

represents past performance results. Past performance does not guarantee future
results.

TOTAL RETURN

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------

DWS FINANZWERTE MSCI WORLD
(USD) RETURNS FINANCE INDEX
YEAR (NET OF FEES) (USD) RETURNS(1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
1999 %
-----------------------------------------------------------------------------------------
2000
-----------------------------------------------------------------------------------------
</TABLE>

ANNUALIZED RATES OF RETURN (2):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
YTD 1 YEAR 3 YEAR 11/30/1998
(ANN.) TO 12/31/00
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DWS FINANZWERTE (USD) RETURNS % % -- %
MSCI WORLD FINANCE INDEX (USD) RETURNS % % -- %
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)
(2) The figures shown are for the periods ended December 31, 2000.

The performance information shown has been calculated in accordance
with the Securities and Exchange Commission's standardized formula, but excludes
the impact of any sales charges. If sales charges were reflected, performance
would have been lower.

The performance information shown for DWS Finanzwerte is NET of
advisory fees and other expenses (after fee waivers and/or expense
reimbursements) of the Institutional Shares of the Global Financial Services
Fund. Additionally, the performance results reflect reinvestment of dividends
and other earnings.

To the extent that the German fund is not a registered investment
company under the laws of the United States, it is not subject to certain
investment limitations, diversification requirements and other restrictions
imposed by the Investment Company Act of 1940 and the Internal Revenue Code
which, if applicable, may have adversely affected performance results.

14
<PAGE>

OVERVIEW OF GLOBAL BIOTECHNOLOGY FUND

Goal.....................................................................
Core Strategy............................................................
Investment Policies and Strategies.......................................
Principal Risks of Investing in the Fund.................................
Who Should Consider Investing in the Fund................................
Fund Performance.........................................................
Fund Fees and Expenses...................................................

A DETAILED LOOK AT GLOBAL BIOTECHNOLOGY FUND

Objective................................................................
Strategy.................................................................
Principal Investments....................................................
Investment Process.......................................................
Risks....................................................................
Portfolio Managers.......................................................
Additional Performance Information.......................................

15
<PAGE>

OVERVIEW
-------------------------------------------------------------------------------
OF GLOBAL BIOTECHNOLOGY FUND

GOAL: The Fund invests to maximize total return.

CORE STRATEGY: The Fund invests primarily in equity securities of companies
located in the US or abroad and operating in the biotechnology industry.

INVESTMENT POLICIES AND STRATEGIES

The Fund uses both fundamental research and due diligence in looking
for attractive investment opportunities in the biotechnology sector. The Fund
seeks to identify and invest early in promising opportunities within the sector
and generally pursues a "buy and hold" investment strategy.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in a Fund could lose money, or a Fund's performance
could trail that of other investments. For example:

16
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total
return over the long term and you are willing to accept the short-term and
long-term risks and uncertainties of investing in the common stocks of companies
in the biotechnology industry located in the US and abroad. There is, of course,
no guarantee that the Fund will realize its goal. You should not consider
investing in the Fund if you are pursuing a short-term financial goal, seeking
regular income and stability of principal or cannot tolerate fluctuations in the
value of your investments.

The Fund itself does not constitute a balanced investment program. It
can, however, afford exposure to investment opportunities in the global
biotechnology sector. Diversifying your investments may improve your long-term
investment return and lower the volatility of your overall investment portfolio.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

FUND PERFORMANCE

The Fund has no operating history prior to the date of this
Prospectus. However, the Fund has an investment objective and policies that are
substantially similar to those of a mutual fund organized in Germany and managed
by the portfolio managers employed by the Fund's Sub-Advisor. See the section
entitled "Additional Performance Information" for more information.

17
<PAGE>

FUND FEES AND EXPENSES OF THE INSTITUTIONAL SHARES

This table describes the fees and expenses that you may pay if you buy
and hold shares of the Global Biotechnology Fund.

18
<PAGE>

SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases None

Maximum Deferred Sales Charge (Load).......................... None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends..................................................... None
Redemption Fee................................................ None
Exchange Fee.................................................. None
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees............................................... %
---
Distribution and/or Service (12b-1) Fees...................... None

Other Expenses (1).............. %
---
Total Annual Fund Operating Expenses.......................... %
Less: Fee Waivers and/or Expense Reimbursements(2)........... %
---
Net Annual Fund Operating Expenses......................... %
---

(1) Because the Fund has no operating history prior to the date of this
Prospectus, these expenses are based on estimated amounts for the current fiscal
year.

(2) The Advisor has contractually agreed to waive its fees and/or reimburse
expenses of the Fund through March, 2002 to the extent necessary to maintain the
Fund's expense ratio at the level indicated as "Net Annual Fund Operating
Expenses."

EXPENSE EXAMPLE:

You may use this hypothetical example to compare the cost of investing
in each class of the Fund with other mutual funds.

1 YEAR 3 YEARS
Institutional Shares $ $

19
<PAGE>

A DETAILED LOOK
--------------------------------------------------------------------------------
AT GLOBAL BIOTECHNOLOGY FUND

OBJECTIVE

The Fund invests to maximize total return. While we give priority to
seeking the Fund's objective, we cannot offer any assurance of achieving its
objective.

STRATEGY

The Fund invests primarily in equity securities of companies located
in the US or abroad and operating in the biotechnology industry. These companies
may be located in the US or abroad and may have operations in more than 1
country. Investments abroad will be primarily in developed countries.

PRINCIPAL INVESTMENTS

Under normal market conditions, the Fund intends to invest primarily
in equity or equity-related securities of biotechnology companies. These
companies may be located in the US or abroad and may have operations in more
than 1 country. These investments may be made in companies of all market
capitalizations. Equity or equity-related securities include common stocks,
preferred stocks, American Depositary Receipts and Global Depositary Receipts.

The Fund may also participate in the Initial Public Offering ("IPO")
market.

INVESTMENT PROCESS

The Fund uses both fundamental research and due diligence in looking
for attractive investment opportunities in the global biotechnology sector. The
Fund's fundamental research seeks to identify attractive companies for
investment by considering a variety of factors, including whether such companies
appear to be poised to develop and exploit new technologies or participate in
growth markets, or have a clear strategy, a focus on profitability, or an
established brand name. The Fund will also assess factors such as company
management, market position, and quality of scientific research and

20
<PAGE>

Generally, the Fund pursues a "buy and hold" investment strategy.
However, the Fund generally will consider selling all or part of a security
holding when the stock has reached an intermediate-term price objective and its
outlook no longer seems sufficiently promising, and a relatively more attractive
stock emerges, when the issuer is experiencing deteriorating fundamentals or its
fundamentals have changed substantially, the company has experienced a
fundamental shift in its core business processes and objectives, to rebalance
the portfolio or in other circumstances when the Advisors deem a sale
appropriate.

OTHER INVESTMENTS

The Fund may invest in various instruments commonly known as
"DERIVATIVES" to protect its assets or increase its exposure to an asset class.
The Fund primarily uses FUTURES, OPTIONS, OPTIONS ON FUTURES, OPTIONS ON
STOCKS, INDEX FUTURES and FORWARD CURRENCY CONTRACTS. The Advisors may use
derivatives in circumstances where the Advisors believe they offer an economical
means of gaining exposure to a particular asset class. The Fund may also invest
in derivatives to keep cash on hand to meet shareholder redemptions or other
needs while maintaining exposure to the market. The Fund may use derivatives for
leveraging, which is a way to attempt to enhance returns.

Generally, a DERIVATIVE is a financial arrangement that derives its
value from a traditional security (like a stock or bond) asset or index.

FUTURES and OPTIONS ON FUTURES CONTRACTS are used as a low-cost method
for gaining exposure to a particular securities market without investing
directly in those securities.

FORWARD CURRENCY TRANSACTIONS are the purchase or sale of a foreign
currency at an exchange rate established now, but with payment and delivery at a
specified future time. Forward currency transactions are used as hedges and,
where possible, to add investment returns.

21
<PAGE>

positions of up to 100%. While engaged in a temporary defensive strategy,
the Fund may not achieve its investment objective. The Advisors would follow
such a strategy only if they believed the risk of loss in pursuing the Fund's
primary investment strategies outweighed the opportunity for gain.

RISKS

PRIMARY RISKS
-------------

FOREIGN INVESTING RISK. Investing in foreign companies may have different risks
than investing in US companies. An investment in a foreign company may be
affected by developments, including political developments that are unique to
that market. These developments may not affect the US economy or the prices of
US securities in the same manner. Therefore, the prices of foreign common stocks
may, at times, move in a different direction than the prices of US common
stocks. Financial reporting standards for companies based in foreign markets may
differ from those in the United States.

22
<PAGE>

- POLITICAL RISK. Profound social changes and business practices that depart
from developed stock market norms have hindered the growth of the national
stock market in the past. High levels of debt have tended to make them
overly reliant on foreign capital investment and vulnerable to capital
flight. Governments have limited foreign investors' access to capital
markets and restricted the flow of profits overseas. They have resorted to
high taxes, expropriation and nationalization. In many countries,
particularly in Eastern Europe and Asia, stock exchanges have operated
largely without regulation and in the absence of laws or precedents
protecting the rights of private ownership and foreign investors. All these
threats remain a part of emerging market investing today.

- INFORMATION RISK. Emerging market accounting, auditing, and financial
reporting and disclosure standards tend to be far less stringent than those
of developed markets. And the risks of investors acting on incomplete,
inaccurate or deliberately misleading information are correspondingly
greater. Compounding the problem, local investment research often lacks the
sophistication to spot potential pitfalls.

- CURRENCY RISK. The Fund's investments are usually denominated in the
currencies of the countries in which they are traded. As a result, the Fund
may be affected by changes in the value of foreign currencies in relation
to the value of the US dollar. The value of a foreign currency may change
in response to events that do not affect the value of the investment in its
home country.

- REGIONAL RISK. The Fund may invest a significant portion of its assets in
specific regions or countries. The Fund is therefore exposed to the risks
associated with that region or country and could be subject to greater risk
due to unanticipated and negative economic events, actions by foreign
governments, currency movements and/or market action in such countries or
regions.

SECONDARY RISKS
---------------

DERIVATIVES RISK. Although not one of its principal investment strategies, the
Fund may invest in FORWARDS, FUTURES, OPTIONS, OPTIONS ON FUTURES CONTRACTS,
OPTIONS ON STOCKS and INDEX FUTURES which are types of derivatives. Risks
associated with derivatives include:

23
<PAGE>

- the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

- derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

- the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

Although it is impossible to predict the impact of conversion to the euro on the
Fund, the risks may include:

- changes in the relative strength and value of the US dollar or other major
currencies:

- adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

- unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

DWS is the Sub-Advisor to the Fund. The following portfolio managers at DWS
share primary responsibility for the day-to-day management of the Fund:

24
<PAGE>

- KLAUS KALDEMORGEN, head of international equities at DWS since __________,
oversees the management of five Flag Investors funds. He has over 16 years of
experience as an investment manager.

25
<PAGE>

ADDITIONAL PERFORMANCE INFORMATION

The Fund has no operating history prior to the date of this
Prospectus. However, the Fund's investment objective and policies are
substantially similar to those of DWS Biotech-Atkien Typ O, a mutual fund
organized in Germany and managed by the portfolio managers employed by the
Fund's Sub-Advisor. In managing the Fund, the Sub-Advisor will employ
substantially the same investment policies and strategies.

TOTAL RETURN

------------------- ----------------------------- -----------------------------
<TABLE>
<CAPTION>
DWS BIOTECH-ATKIEN TYP O
(USD) RETURNS MSCI BIOTECH SELECT INDEX
YEAR (NET OF FEES) RETURNS(1)
<S> <C> <C>
------------------- ----------------------------- -----------------------------
1999 %
------------------- ----------------------------- -----------------------------
2000
------------------- ----------------------------- -----------------------------
</TABLE>

<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN (2):

------------------------------------------- ------------------ --------------- -------------- ----------------
YTD 1 YEAR 3 YEAR 8/31/1999 TO
(ANN.) 12/31/00
<S> <C> <C> <C> <C>
------------------------------------------- ------------------ --------------- -------------- ----------------
------------------------------------------- ------------------ --------------- -------------- ----------------
DWS BIOTECH-ATKIEN TYP O (USD) RETURNS % % -- %
MSCI BIOTECH SELECT INDEX (USD) RETURNS % % -- %
------------------------------------------- ------------------ --------------- -------------- ----------------
</TABLE>

(1)
(2) The figures shown are for the periods ended December 31, 2000.

26
<PAGE>

The performance information shown has been calculated in accordance
with the Securities and Exchange Commission's standardized formula, but excludes
the impact of any sales charges. If sales charges were reflected, performance
would have been lower.

The performance information shown for DWS Biotech-Atkien Typ O is NET
of advisory fees and other expenses (after fee waivers and/or expense
reimbursements) of the Institutional Shares of the Global Biotechnology Fund.
Additionally, the performance results reflect reinvestment of dividends and
other earnings.

To the extent that the German fund is not a registered investment
company under the laws of the United States, it is not subject to certain
investment limitations, diversification requirements and other restrictions
imposed by the Investment Company Act of 1940 and the Internal Revenue Code
which, if applicable, may have adversely affected performance results.

27
<PAGE>

OVERVIEW OF GLOBAL TECHNOLOGY FUND
Goal...............................................................
Core Strategy......................................................
Investment Policies and Strategies.................................
Principal Risks of Investing in the Fund...........................
Who Should Consider Investing in the Fund..........................
Fund Performance...................................................
Fund Fees and Expenses.............................................

A DETAILED LOOK AT GLOBAL TECHNOLOGY FUND
Objective..........................................................
Strategy...........................................................
Principal Investments..............................................
Investment Process.................................................
Risks..............................................................
Portfolio Managers.................................................
Additional Performance Information.................................

28
<PAGE>

OVERVIEW
-------------------------------------------------------------------------------
OF GLOBAL TECHNOLOGY FUND

GOAL: The Fund invests to maximize total return.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to identify technology companies with attractive
long-term growth potential and the ability to increase market share and profits
in a sustainable manner. These companies may be located in the US or abroad and
may have operations in more than 1 country. The Fund will seek investment
opportunities in industries such as computers, software, communications,
healthcare technology, electronics and other technology-related industries.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment a the Fund could lose money, or a Fund's performance
could trail that of other investments. For example:

- Since some of the Fund's investments may be denominated in foreign
currencies, any change in the value of those currencies in relation to the
US dollar will result in a

29
<PAGE>

corresponding change in the value of the Fund's investments and may cause
those investments to lose money. The Fund may seek to hedge some or all of
these risks.

- The Fund may invest in emerging market countries. Securities issued or
traded in emerging markets generally entail greater risk than securities
issued or traded in developed markets.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total
return over the long term and you are willing to accept the short-term and
long-term risks and uncertainties of investing in the common stocks of companies
in the technology industry located in the US and abroad. There is, of course, no
guarantee that the Fund will realize its goal. You should not consider investing
in the Fund if you are pursuing a short-term financial goal, seeking regular
income and stability of principal or cannot tolerate fluctuations in the value
of your investments.

The Fund itself does not constitute a balanced investment program. It
can, however, afford exposure to investment opportunities in the technology
industry located in the US and abroad. Diversifying your investments may improve
your long-term investment return and lower the volatility of your overall
investment portfolio.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

FUND PERFORMANCE

30
<PAGE>

by the Fund's Sub-Advisor. See the section entitled "Additional Performance
Information" for more information.

FUND FEES AND EXPENSES OF THE INSTITUTIONAL SHARES

This table describes the fees and expenses that you may pay if you buy
and hold shares of the Global Technology Fund.

<TABLE>
<CAPTION>
SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases None

Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends...................................................... None
Redemption Fee................................................... None
Exchange Fee..................................................... None
ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees.................................................. %
-
Distribution and/or Service (12b-1) Fees......................... None

Other Expenses(1)................................................ %
-
Total Annual Fund Operating Expenses............................. %
Less: Fee Waivers and/or Expense Reimbursements(2).............. %
-
Net Annual Fund Operating Expenses............................... %
-
</TABLE>

(1) Because the Fund has no operating history prior to the date of this
Prospectus, these expenses are based on estimated amounts for the current fiscal
year.

(2) The Advisor has contractually agreed to waive its fees and/or reimburse
expenses of the Fund through March 31, 2002 to the extent necessary to maintain
the Fund's expense ratio at the level indicated as "Net Annual Fund Operating
Expenses."

EXPENSE EXAMPLE:

You may use this hypothetical example to compare the cost of investing
in each class of the Fund with other mutual funds.

31
<PAGE>

during the first year only. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:

1 YEAR 3 YEARS
<S> <C> <C>
Institutional Shares $ $

</TABLE>

32
<PAGE>

A DETAILED LOOK
-------------------------------------------------------------------------------
AT GLOBAL TECHNOLOGY FUND

OBJECTIVE

The Fund invests to maximize total return. While we give priority to
seeking the Fund's objective, we cannot offer any assurance of achieving its
objective.

STRATEGY

The Fund invests primarily in equity securities of technology
companies of all market capitalizations. These companies may be located in the
US or abroad and may have operations in more than 1 country. The Fund invests
primarily in developed countries, but may also invest in emerging market
countries.(1) The Fund tends to have a heavier weighting of its assets in the
United States, Europe and Japan, although this may change. The Fund considers a
company or issuer to be of a particular country if it is headquartered or has
its primary operations there.

Technology companies are companies involved in the development,
research and production, distribution and sales of technology products and
services. These may include computers and computer peripherals, software,
electronic components and systems, communications equipment and services,
semiconductors and capital equipment, media and information services, Internet,
pharmaceuticals, biomedical and medical technologies and other
technology-related industries.

PRINCIPAL INVESTMENTS

Under normal market conditions, the Fund intends to invest primarily
in equity or equity-related securities of technology companies. These companies
may be located in the US or abroad and may have operations in more than 1
country. Equity or equity-related securities include common stocks, preferred
stocks, American Depositary Receipts and Global Depositary Receipts.

The Fund may invest in companies of varying market capitalizations.
The Fund may also participate in the Initial Public Offering ("IPO") market.

INVESTMENT PROCESS

The Fund seeks to identify technology companies with attractive
long-term growth potential and the ability to increase market share and profits
in a sustainable manner.

(1) An emerging market is commonly defined as one that experienced
comparatively little industrialization or that has a relatively new stock
market and a low level of quoted market capitalization.

<PAGE>

The Fund uses a qualitative technique and, to a lesser extent, a
quantitative technique when it analyzes companies for investment. The Fund's
qualitative technique involves examining a company's technology, management,
business model, market potential and competitors. The Fund's quantitative
technique involves examining a company's revenue growth rate, quality of balance
sheet, return on equity, price-to-earnings and price-to-book ratios, and market
capitalization relative to sales.

The Fund will attempt to modify portfolio composition to benefit from
changing relative performance among various industries affected by new or
emerging technologies. The Fund will consider selling a security when the
company is experiencing deteriorating fundamentals or changes in management; a
relatively more attractive stock emerges; or the industry in which the company
operates is undergoing a shift in focus or industry dynamics (this may include
changing government regulation or maturing of technology in an industry, to
rebalance the portfolio or in other circumstances when the Advisors deem a sale
appropriate.

OTHER INVESTMENTS

The Fund may invest in various instruments commonly known as "DERIVATIVES" to
protect its assets increase its exposure to an asset class. The Fund primarily
uses FUTURES, OPTIONS, OPTIONS ON FUTURES AND OPTIONS ON STOCKS, INDEX
FUTURES and FORWARD CURRENCY CONTRACTS. The Advisors may use derivatives in
circumstances where the Advisors believe they offer an economical means of
gaining exposure to a particular asset class. The Fund may also invest in
derivatives to keep cash on hand to meet shareholder redemptions or other needs
while maintaining exposure to the market. The Fund may use derivatives for
leveraging, which is a way to attempt to enhance returns.

Generally, a DERIVATIVE is a financial arrangement that derives its value from a
traditional security (like a stock or bond) asset or index.

FUTURES AND OPTIONS ON FUTURES CONTRACTS are used as a low-cost method for
gaining exposure to a particular securities market without investing directly in
those securities.

34
<PAGE>

RISKS

PRIMARY RISKS

FOREIGN INVESTING RISK. Investing in foreign companies may have different risks
than investing in US companies. An investment in a foreign company may be
affected by developments, including political developments that are unique to
that market. These developments may not affect the US economy or the prices of
US securities in the same manner. Therefore, the prices of foreign common stocks
may, at times, move in a different direction than the prices of US common
stocks. Financial reporting standards for companies based in foreign markets may
differ from those in the United States.

35
<PAGE>

- POLITICAL RISK. Profound social changes and business practices that depart
from developed stock market norms have hindered the growth of the national
stock market in the past. High levels of debt have tended to make them
overly reliant on foreign capital investment and vulnerable to
capital flight. Governments have limited foreign investors' access to
capital markets and restricted the flow of profits overseas. They have
resorted to high taxes, expropriation and nationalization. In many
countries, particularly in Eastern Europe and Asia, stock exchanges have
operated largely without regulation and in the absence of laws or
precedents protecting the rights of private ownership and foreign
investors. All these threats remain a part of emerging market investing
today.

- INFORMATION RISK. Emerging market accounting, auditing, and financial
reporting and disclosure standards tend to be far less stringent than those
of developed markets. And the risks of investors acting on incomplete,
inaccurate or deliberately misleading information are correspondingly
greater. Compounding the problem, local investment research often lacks the
sophistication to spot potential pitfalls.

- CURRENCY RISK. The Fund's investments are usually denominated in the
currencies of the countries in which they are traded. As a result, the Fund
may be affected by changes in the value of foreign currencies in relation
to the value of the US dollar. The value of a foreign currency may change
in response to events that do not affect the value of the investment in its
home country.

- REGIONAL RISK. The Fund may invest a significant portion of its assets in
specific regions or countries. The Fund is therefore exposed to the risks
associated with that region or country and could be subject to greater risk
due to unanticipated and negative economic events, actions by foreign
governments, currency movements and/or market action in such countries or
regions.

36
<PAGE>

SECONDARY RISKS

DERIVATIVES RISK. Although not one of its principal investment strategies, the
Fund may invest in FORWARDS, FUTURES, OPTIONS, OPTIONS ON FUTURES CONTRACTS,
OPTIONS ON STOCKS and INDEX FURTURES which are types of derivatives. Risks
associated with derivatives include:

Although it is impossible to predict the impact of conversion to the euro on the
Fund, the risks may include:

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

37
<PAGE>

PORTFOLIO MANAGERS

DWS is the Sub-Advisor to the Fund. The following portfolio managers
at DWS share primary responsibility for the day-to-day management of the Fund:

- WALTER HOLICK is head of technology sector fund management at DWS. Mr.
Holick has a Masters in Social Science (Money, Banking and Finance) from
the University of Birmingham (UK) and has been a fund manager at DWS since
1990.

- THOMAS SCHUESSLER holds a doctorate in physics from the University of
Heidelberg. He has several years of research experience in laser and atomic
physics.

ADDITIONAL PERFORMANCE INFORMATION

The Fund has no operating history prior to the date of this
Prospectus. However, the Fund's investment objective and policies are
substantially similar to those of DWS Technologiefonds, a mutual fund organized
in Germany and managed by the portfolio managers employed by the Fund's
Sub-Advisor. In managing the Fund, the Sub-Advisor will employ substantially the
same investment policies and strategies.

TOTAL RETURN

<TABLE>
<CAPTION>
------------------------------- ----------------------------- ---------------------------------

DWS TECHNOLOGIEFONDS (USD)
RETURNS MSCI WORLD INFORMATION
YEAR (NET OF FEES) TECHNOLOGY INDEX RETURNS(1)
<S> <C> <C> <C>
------------------------------- ----------------------------- ---------------------------------
1984 %
------------------------------- ----------------------------- ---------------------------------
1985 %
------------------------------- ----------------------------- ---------------------------------
1986 %
------------------------------- ----------------------------- ---------------------------------
1987 %
------------------------------- ----------------------------- ---------------------------------
1988 %
------------------------------- ----------------------------- ---------------------------------
1989 %
------------------------------- ----------------------------- ---------------------------------
1990 %
------------------------------- ----------------------------- ---------------------------------
</TABLE>

38
<PAGE>

ANNUALIZED RATES OF RETURN (2):

<TABLE>
<CAPTION>
------------------------------------------ ---------- ----------- ------------- ------------- ------------- ------------------
YTD 1 YEAR 3 YEAR 5 YEAR 10 YEAR 10/31/1983 TO
(ANN.) (ANN.) (ANN.) 12/31/00
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------ ---------- ----------- ------------- ------------- ------------- ------------------
DWS TECHNOLOGIEFONDS (USD) RETURNS % % % % % %
MSCI WORLD INFORMATION TECHNOLOGY INDEX
(USD) RETURNS % % % % % %
------------------------------------------ ---------- ----------- ------------- ------------- ------------- ------------------
</TABLE>

(1)
(2) The figures shown are for the periods ended December 31, 2000.

The performance information shown has been calculated in accordance
with the Securities and Exchange Commission's standardized formula, but excludes
the impact of any sales charges. If sales charges were reflected, performance
would have been lower.

The performance information shown for DWS Technologiefonds is NET of
advisory fees and other expenses (after fee waivers and/or expense
reimbursements) of the Institutional Shares of the Global Technology Fund.
Additionally, the performance results reflect reinvestment of dividends and
other earnings.

To the extent that the German fund is not a registered investment
company under the laws of the United States, it is not subject to certain
investment limitations, diversification requirements and other restrictions
imposed by the Investment Company Act of 1940 and the Internal Revenue Code
which, if applicable, may have adversely affected performance results.

<PAGE>

INFORMATION
CONCERNING ALL FUNDS

MANAGEMENT OF THE FUNDS

BOARD OF DIRECTORS. A Board of Directors supervises for each Fund all of the
Fund's activities on behalf of the Fund's shareholders.

ICCC and DWS are indirect, wholly owned subsidiaries of Deutsche Bank
AG. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including investment management, mutual funds,
retail, private and commercial banking, investment banking and insurance.

As compensation for its services, ICCC is entitled to receive from
each Fund a fee equal to 1.00% of the Fund's average daily net assets. ICCC
compensates DWS out of its advisory fee.

ORGANIZATIONAL STRUCTURE

The Funds are organized as series of an open-end investment company
and are organized as a Maryland corporation. Each Fund currently invests its
assets directly in securities. In the future, upon approval by a majority vote
of the Board of Directors, each Fund may be reorganized into a master-feeder
structure. Each Fund would then become a "feeder fund" investing all of its
assets in a corresponding "Master Portfolio." Should the Directors approve the
reorganization, each Fund and its Master Portfolio would have the same
investment objective.

ADMINISTRATOR

ICCC provides administration services to the Funds. ICCC supervises
the day-to-day operations of the Funds, including the preparation of
registration statements, proxy materials, shareholder reports, compliance with
all requirements of securities laws in the states in which shares are
distributed and, subject to the supervision of the Funds' Board of Directors,
oversight of the relationship between the Funds and their other service

40
<PAGE>

providers. ICCC is also the Funds' transfer and dividend disbursing agent and
provides accounting services to the Funds.

CALCULATING A FUND'S SHARE PRICE

The price you pay when you buy shares or receive when you redeem
shares is based on a Fund's net asset value per share. The net asset value per
share of each class of a Fund is determined at the close of regular trading on
the New York Stock Exchange on each day the Exchange is open for business. While
regular trading ordinarily closes at 4:00 p.m. (Eastern Time), it could be
earlier, particularly on a day before a holiday. Contact the Transfer Agent for
information about whether the Fund will close early before a particular holiday.

Because the Funds own foreign securities that trade in foreign markets
on days the Exchange may be closed, the value of a Fund's assets may change on
days you cannot purchase, redeem or exchange shares. The net asset value per
share of a class is calculated by subtracting the liabilities attributable to a
class from its proportionate share of a Fund's assets and dividing the result by
the number of outstanding shares of the class. Because the different classes
have different distribution or service fees, their net asset values may differ.
The net asset value per share of a class is calculated by subtracting the
liabilities attributable to the Institutional Shares from its proportionate
share of the Fund's assets and dividing the result by the number of outstanding
Institutional Shares.

You may buy or redeem Institutional Shares on any day the New York
Stock Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that day,
the price you pay or receive will be based on the next Business Day's net asset
value per share.

The following sections describe how to buy and redeem Institutional
Shares.

BUYING AND SELLING FUND SHARES

You may buy Institutional Shares if you are any of the following:

- An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or charitable
institution or a qualified retirement plan other than a defined
contribution plan).

41
<PAGE>

- A defined contribution plan with assets of at least $75 million.

- An investment advisory affiliate of DB Alex. Brown LLC or the Flag
Investors family of funds purchasing shares for the accounts of your
investment advisory clients.

You may buy Institutional shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy Institutional Shares by sending your check (along with a
completed Application Form) directly to the Fund.

Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental to
the interests of the Fund's shareholders. In this connection, the Fund
specifically reserves the right to refuse (i) any purchase or exchange request
or (ii) multiple purchase or exchange requests, submitted by a shareholder,
group of shareholders, commonly controlled accounts or a dealer, that are deemed
by the Fund, in its sole discretion, to involve excessive trading or to be part
of a market timing strategy. For these purposes, the Fund may consider, among
other factors, an investor's trading history in the Fund or an affiliated fund,
the funds involved, the amount of the investment and the background of the
investors or dealers involved.

INVESTMENT MINIMUMS

Your initial investment must be at least $500,000.

The following are exceptions to this minimum:

- There is no minimum initial investment for investment advisory affiliates
of DB Alex. Brown LLC or the Flag Investors family of funds purchasing
shares for the accounts of their investment advisory clients.

- There is no minimum initial investment for defined contribution plans with
assets of at least $75 million.

- The minimum initial investment for all other qualified retirement plans is
$1 million.

There are no minimums for subsequent investments.

PURCHASES BY EXCHANGE

You may exchange Institutional shares of any other Flag Investors fund
for an equal dollar amount of Institutional Shares of the Fund up to four times
a year. The Fund may modify or terminate this offer of exchange upon 60 days'
notice.

You may request an exchange through your securities dealer or
servicing agent. Contact them for details on how to enter your order. If your
shares are in an account with the Fund's Transfer Agent, you may also request an
exchange directly through the Transfer Agent by mail or by telephone.

42
<PAGE>

HOW TO REDEEM SHARES

You may redeem Institutional Shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid. If your shares are in an account with
the Fund, you may also redeem them by contacting the Transfer Agent by mail or
(if you are redeeming less than $500,000) by telephone. You will be paid for
redeemed shares by wire transfer of funds to your securities dealer, servicing
agent or bank upon receipt of a duly authorized redemption request as promptly
as feasible and, under most circumstances, within three Business Days.

If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice. The Fund reserves the right to redeem shares in-kind under certain
circumstances.

TELEPHONE TRANSACTIONS

If your shares are in an account with the Transfer Agent, you may
redeem them in any amount up to $500,000 or exchange them for Institutional
shares of another Flag Investors fund by calling the Transfer Agent on any
Business Day between the hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You
are automatically entitled to telephone transaction privileges but you may
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.

The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional written instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that either reasonably believes to be genuine.
Your telephone transaction request will be recorded.

During periods of economic or market volatility, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail.

DIVIDENDS AND DISTRIBUTIONS

Each Fund's policy is to distribute to shareholders substantially all
of its net investment income in the form of dividends and to distribute net
realized capital gains at least annually.

43
<PAGE>

TAX CONSIDERATIONS

The following summary is based on current tax laws, which may change.

The dividends and distributions you receive are subject to federal,
state and local taxation, depending upon your tax situation. If so, they are
taxable whether or not you reinvest them. Income distributions are generally
taxable at ordinary income tax rates. Capital gains distributions are generally
taxable at the rates applicable to long-term capital gains. However,
distributions by the Fund to retirement plans that qualify for tax-exempt
treatment under U.S. tax laws will not be taxable. Each sale or exchange of the
Fund's shares is generally a taxable event, except for a sale or exchange by a
retirement plan that qualifies for tax-exempt treatment under U.S. tax laws.

If you have a tax-advantaged or other retirement account you will
generally not be subject to federal taxation on income and capital gains
distributions until you begin receiving your distributions from your retirement
account. You should consult your tax advisor regarding the rules governing your
own retirement plan.

If you are a non-US investor in a Fund you may be subject to US
withholding and estate tax and are encouraged to consult your tax advisor prior
to investing in a Fund.

Under certain circumstances, a Fund may elect to pass-through to you
your pro-rata share of foreign taxes paid by a Fund. A Fund will notify you if
it intends to make such an election.

More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state and local income taxes.

44
<PAGE>

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

Investment Sub-Advisor
DWS INTERNATIONAL PORTFOLIO MANAGEMENT GMBH
Grueneburgweg 113-115
60323 Frankfurt am Main
Germany

Distributor Custodian
ICC DISTRIBUTORS, INC. INVESTORS BANK & TRUST COMPANIES
200 Clarendon Street
Boston, Massachusetts 02116

Independent Accountants

45
<PAGE>

[Flag Logo]

Flag Investors Funds
PO Box 515
Baltimore, MD 21203
www.flaginvestors.com

or call our toll-free number: 1-800-767-FLAG

GLOBAL FINANCIAL SERVICES FUND
GLOBAL BIOTECHNOLOGY FUND
GLOBAL TECHNOLOGY FUND

Distributed by: CUSIP #
ICC Distributors, Inc. CUSIP #
Two Portland Square CUSIP #
Portland, ME 04101 811-4827
_________ (03/01)

46
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FLAG INVESTORS FUNDS, INC.
GLOBAL FINANCIAL SERVICES FUND
GLOBAL BIOTECHNOLOGY FUND
GLOBAL TECHNOLOGY FUND

One South Street
Baltimore, Maryland 21202

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS. A COPY OF THE PROSPECTUS
MAY BE OBTAINED WITHOUT CHARGE FROM YOUR SECURITIES DEALER OR SHAREHOLDER
SERVICING AGENT OR BY WRITING OR CALLING THE FUND, ONE SOUTH STREET,
BALTIMORE, MARYLAND 21202, (800) 767-FLAG.

Statement of Additional Information Dated______________, 2001
relating to Prospectus Dated______________, 2001 for:

Global Financial Services Fund Class A, B, C, and Institutional Shares,
Global Biotechnology Fund Class A, B, C and Institutional Shares and
Global Technology Fund Class A, B, C and Institutional Shares

1
<PAGE>

TABLE OF CONTENTS

PAGE
----
GENERAL INFORMATION AND HISTORY.............................................1
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................1
INVESTMENT OBJECTIVES AND POLICIES.........................................29
PORTFOLIO TURNOVER.........................................................31
WHAT DO SHARES COST?.......................................................31
HOW ARE THE FUNDS SOLD?....................................................33
DISTRIBUTION AND SERVICES PLANS............................................34
REDEMPTION.................................................................34
ACCOUNT AND SHARE INFORMATION..............................................35
TAX INFORMATION............................................................36
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?............................37
ADMINISTRATOR..............................................................43
BROKERAGE TRANSACTIONS.....................................................44
CAPITAL STOCK..............................................................45
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING AGENT.............................45
SMEI-ANNUAL REPORTS AND ANNUAL REPORTS.....................................46
INDEPENDENT ACCOUNTANTS....................................................46
LEGAL MATTERS..............................................................46
PERRFOMANCE INFORMATION....................................................46
APPENDIX...................................................................48
ADDRESSES..................................................................64

2
<PAGE>

GENERAL INFORMATION AND HISTORY
Flag Investors Funds, Inc. (the "Corporation") is an open-end management
investment company with diversified and non-diversified series. Under the
rules and regulations of the Securities and Exchange Commission ("SEC"), all
mutual funds are required to furnish prospective investors with certain
information concerning the activities of the company being considered for
investment. The Corporation is currently comprised of nine funds. This
Statement of Additional Information describes the Class A, Class B, Class C
and Institutional Shares (collectively, the "Shares") for each of the
following funds: Global Financial Services Fund, Global Biotechnology Fund
and Global Technology Fund, (collectively, the "Funds").

Important information concerning the Corporation and the Funds is included in
the Funds' Prospectuses, which may be obtained without charge from the Funds'
distributor (the "Distributor") or from Participating Dealers that offer Shares
to prospective investors. Prospectuses may also be obtained from Shareholder
Servicing Agents. Some of the information required to be in this Statement of
Additional Information is also included in the Funds' current Prospectuses. To
avoid unnecessary repetition, references are made to related sections of the
Prospectuses. In addition, the Prospectuses and this Statement of Additional
Information omit certain information about the Corporation and its business that
is contained in the Registration Statement relating to the Funds and their
shares filed with the SEC. Copies of the Registration Statement as filed,
including such omitted items, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations.

The Corporation was incorporated under the laws of the State of Maryland on
May 22, 1997. The Corporation filed a registration statement with the SEC
registering itself as an open-end, non-diversified management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") and its
Shares under the Securities Act of 1933, as amended (the "Securities Act"). The
Corporation currently offers nine funds, three of which are described in this
Statement of Additional Information. Global Financial Services Fund, Global
Biotechnology Fund and Global Technology Fund were not offered prior to the date
of this Statement of Additional Information.

Under a license agreement dated September 1, 2000, between the Corporation and
Alex. Brown & Sons Incorporated (predecessor to DB Alex. Brown LLC), Alex. Brown
& Sons Incorporated licenses to the Corporation the "Flag Investors" name and
logo but retains the rights to that name and logo, including the right to permit
other investment companies to use them.

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVE AND POLICIES

GLOBAL FINANCIAL SERVICES FUND

The Global Financial Services Fund invests to maximize total return. While we
give priority to seeking the Fund's objective, we cannot offer any assurance of
achieving its objective.

The Fund seeks to maximize total return by investing primarily in equity
securities of financial services companies. These companies may be located in
the US or abroad and may have operations in more than 1 country. The Fund
invests primarily in developed countries, but may also invest in emerging market
countries. The Fund may also invest in equity securities of software and
technology companies that focus on developing and producing products for the
financial services industry.

1
<PAGE>

diversification of the company's earnings. No one characteristic or factor is
determinative, and the analysis may differ by company and region.

GLOBAL BIOTECHNOLOGY FUND

The Global Biotechnology Fund invests to maximize total return. While we give
priority to seeking the Fund's objective, we cannot offer any assurance of
achieving its objective.

Biotechnology companies engage in the research, development, provision and/or
manufacture of biotechnological products, services and processes. Such companies
generally employ genetic engineering to develop new products and apply new and
innovative processes. For example, such processes could be used to discover and
develop diagnostic and therapeutic products and services. The biotechnology
industry currently includes pharmaceutical, biochemical, medical/surgical, human
health care, and agricultural- and industrial-oriented companies. Because of the
rapid developments in the biotechnology industry, companies with new and
different products and strategies will likely be included in the industry over
time.

GLOBAL TECHNOLOGY FUND

The Global Technology Fund invests to maximize total return. While we give
priority to seeking the Fund's objective, we cannot offer any assurance of
achieving its objective.

The Fund invests primarily in equity securities of technology companies of all
market capitalizations. These companies may be located in the US or abroad and
may have operations in more than 1 country. The Fund invests primarily in
developed countries, but may also invest in emerging market countries.The Fund
tends to have a heavier weighting of its assets in the United States, Europe and
Japan, although this may change. The Fund considers a company or issuer to be of
a particular country if it is headquartered or has its primary operations there.

Technology companies are companies involved in the development, research and
production, distribution and sales of technology products and services. These
may include computers and computer peripherals, software, electronic components
and systems, communications equipment and services, semiconductors and capital
equipment, media and information services, Internet, pharmaceuticals, biomedical
and medical technology and other technology-related industries.

ALL FUNDS
While the principal investment policies and strategies for seeking to achieve
these objectives are described in the Funds' Prospectuses, the Funds may from
time to time also use the securities, instruments, policies and principal and
non-principal strategies described below in seeking to achieve their objectives.
The Funds may not be successful in achieving their objectives and you could lose
money.

2
<PAGE>

SECURITIES IN WHICH THE FUNDS INVEST

Following is a table that indicates which types of securities are a:
- P = PRINCIPAL investment of a Fund; (shaded in chart)
- A = ACCEPTABLE (but not principal) investment of a Fund; or
- N = NOT AN ACCEPTABLE investment of a Fund.

<TABLE>
<CAPTION>
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Global Financial Global Biotechnology Global Technology
Services Fund Fund Fund
--------------------------------------- ---------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
EQUITY SECURITIES
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Common Stocks P P P
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Initial Public Offerings (IPOs) A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Preferred Stocks A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Private Equity A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Stock Baskets A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Real Estate Investment Trusts A N N
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Warrants or Rights A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
FIXED INCOME SECURITIES
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Treasury Securities A N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Agency Securities N N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Corporate Debt Securities N N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Commercial Paper N N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Demand Instruments N N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Insurance Contracts N N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Brady Bonds N N A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
CONVERTIBLE SECURITIES P A P
--------------------------------------- ---------------------------- --------------------------- ---------------------------
FOREIGN SECURITIES
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Direct Investments A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
American Depositary Receipts P P P
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Global Depository Receipts P P P
--------------------------------------- ---------------------------- --------------------------- ---------------------------
DERIVATIVE CONTRACTS
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Options A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Options of securities indexes A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Foreign currency forward contracts A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Futures Contracts (i.e. Index) A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Warrants of Futures Contracts
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Currency Exchange Transactions
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Options on futures contracts A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
SPECIAL TRANSACTIONS
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Borrowing A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Repurchase Agreements A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Reverse Repurchase Agreements A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
When-Issued or Delayed Delivery
Transactions A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Securities Lending A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Currency Hedges A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
INVESTING IN SECURITIES OF OTHER
INVESTMENT COMPANIES
--------------------------------------- ---------------------------- --------------------------- ---------------------------
Exchange Traded Funds (ETFs) A A A
--------------------------------------- ---------------------------- --------------------------- ---------------------------
</TABLE>

3
<PAGE>

EQUITY SECURITIES
Each Fund may invest in the equity securities of domestic and foreign issuers to
the extent consistent with its investment objective and policies. As used
herein, "equity securities" include common stock, preferred stock, trust or
limited partnership interests, rights and warrants (to subscribe to or purchase
such securities) and convertible securities (consisting of debt securities or
preferred stock that may be converted into common stock or that carry the right
to purchase common stock.)

COMMON STOCK
Common stocks, the most familiar type of equity securities, represent an
equity (i.e., ownership) interest in a corporation. They may or may not pay
dividends or carry voting rights. Common stock occupies the most junior
position in a company's capital structure. Although equity securities have
a history of long-term growth in value, their prices fluctuate based on
changes in a company's financial condition, as well as, changes in overall
market and economic conditions. This affects the value of the shares of the
Funds, and thus the value of your investment. Smaller companies are more
sensitive to these factors than larger companies.

WARRANTS
Each Fund may purchase warrants in value of up to 10% of the Fund's net
assets. Warrants are securities that give the Funds the right but not the
obligation to buy a specified number of shares of common stock at a
specified price, which is often higher than the market price at the time of
issuance, for a specified period (or in perpetuity). Warrants may be issued
in units with other securities or separately, and may be freely
transferable and traded on exchanges. Investing in warrants can provide a
greater potential for profit or loss than an equivalent investment in the
underlying security, and thus, is a speculative investment. At the time of
issue, the cost of a warrant is substantially less than the cost of the
underlying security itself, and price movements in the underlying security
are generally magnified in the price movements of the warrant. This
leveraging effect enables the investor to gain exposure to the underlying
security with a relatively low capital investment. This leveraging
increases an investor's risk, however, in the event of a decline in the
value of the underlying security and can result in a complete loss of the
amount invested in the warrant.

While the market value of a warrant tends to be more volatile than that of
the securities underlying the warrant, changes in the market value of a
warrant may not necessarily correlate with that of the underlying security.
A warrant ceases to have value if it is not exercised prior to the
expiration date, if any, to which the warrant is subject. The purchase of
warrants involves a risk that a Fund could lose the purchase value of a
warrant if the right to subscribe to additional shares is not exercised
prior to the warrant's expiration. Also, the purchase of warrants involves
the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security. The value of the warrant may decline
because of a decline in the value of the underlying security, the passage
of time, changes in the interest rates or dividend or other policies of the
company whose equity underlies the warrant or a change in the perception as
to the future price of the underlying security, or any combination thereof.
Also warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company.

PREFERRED STOCKS
Preferred stock has a preference (i.e., ranks higher) in liquidation (and
generally dividends) over common stock but is subordinated (i.e., ranks
lower) in liquidation than fixed income securities. Dividends on preferred
stocks may be cumulative, and in such cases, all cumulative dividends
usually must be paid prior to dividend payments to common stockholders.
Because of this preference, preferred stocks generally entail less risk
than common stocks. As a general rule, the market value of preferred stocks
with fixed dividend rates and no conversion rights moves inversely with
interest rates and perceived credit risk, with the price determined by the
dividend rate. Some preferred stocks are convertible into other securities
(e.g., common stock) at a fixed price and ratio upon the occurrence of
certain events. The market price of

4
<PAGE>

convertible preferred stocks generally reflects an element of conversion
value. Because many preferred stocks lack a fixed maturity date, these
securities generally fluctuate substantially in value when interest rates
change; such fluctuations often exceed those of long-term bonds of the
same issuer. Some preferred stocks pay an adjustable dividend that may be
based on an index, formula, auction procedure or other dividend rate reset
mechanism. In the absence of credit deterioration, adjustable rate
preferred stocks tend to have more stable market values than fixed rate
preferred stocks.

All preferred stocks are subject to the same types of credit risks as
corporate bonds. In addition, because preferred stock is subordinate to
debt securities and other obligations of an issuer, deterioration in the
credit rating of an issuer will cause greater changes in the value of a
preferred stock than in a more senior debt security with similar yield
characteristics. Preferred stocks may be rated by Standard & Poor's Ratings
Services ("S&P") and Moody's Investors Service, Inc. ("Moody's") although
there is no minimum rating which a preferred stock must have to be an
eligible instrument of a Fund. Generally, however, the preferred stocks in
which the Fund invests will be rated at least CCC by S&P or Caa by Moody's
or, if unrated, of comparable quality in the opinion of the Advisors.
Preferred stocks rated CCC by S&P are regarded as predominately speculative
with respect to the issuer's capacity to pay preferred stock obligations
and represent the highest degree of speculation among rated securities
between BB and CCC; preferred stocks rated Caa by Moody's are likely to be
in arrears on dividend payments. Moody's ratings with respect to preferred
stocks do not purport to indicate the future status of payment of
dividends.

CONVERTIBLE SECURITIES
A convertible security is a bond or preferred stock which may be converted
at a stated price within a specific period of time into a specified number
of shares of common stock of the same or a different issuer. Convertible
securities are senior to common stock in a corporation's capital structure,
but are generally subordinate to non-convertible debt securities. While
providing a fixed income stream, generally higher in yield than the income
derived from a common stock but lower than that afforded by a
non-convertible debt security, a convertible security also affords an
investor the opportunity, through its conversion feature, to participate in
the capital appreciation of common stock in to which it is convertible. The
option allows the Funds to realize additional returns if the market price
of the equity securities exceeds the conversion price. For example, the
Funds may hold fixed income securities that are convertible into shares of
common stock at a conversion price of $10 per share. If the market value of
the shares of common stock reached $12, the Funds could realize an
additional $2 per share by converting its fixed income securities.

The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders'
claim on assets and earnings are subordinated to the claims of all
creditors and senior to the claims of common shareholders.

In general, the market value of a convertible security is the greater of
its investment value (its value as a fixed income security) or its
conversion value (the value of the underlying shares of common stock if the
security is converted). As a fixed income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases as the market value of the underlying stock declines.
Investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

INITIAL PUBLIC OFFERINGS ("IPOS")
Each Fund may invest in IPOs. IPOs may be very volatile, rising and falling
rapidly based on, among other reasons, investor perceptions rather than
economic reasons. Additionally, IPOs may have a magnified performance
effect on a portfolio with a small asset base. A Fund may not experience a
similar impact on its performance as its assets grow, as it is unlikely
that the Fund will be able to obtain proportionately larger IPO
allocations.

5
<PAGE>

FIXED INCOME SECURITIES (GLOBAL FINANCIAL SERVICES FUND AND GLOBAL TECHNOLOGY
FUND ONLY)
Fixed income securities, including (but not limited to) bonds, are used by
issuers to borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity. Some
debt securities do not pay current interest, but are purchased at a discount
from their face values.

The value of fixed income securities in a Fund's portfolio generally varies
inversely with the changes in interest rates. Prices of fixed income securities
with longer effective maturities are more sensitive to interest rate changes
than those with shorter effective maturities.

In periods of declining interest rates, the yield (the income generated over a
stated period of time) of a Fund that invests in fixed income securities may
tend to be higher than prevailing market rates, and in periods of rising
interest rates, the yield of a Fund may tend to be lower. Also, when the
interest rates are falling, the inflow of net new money to the Funds
experiencing the impact of the continuous sale of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of a
Fund's portfolio, thereby reducing the yield of a Fund. In periods of rising
interest rates, the opposite can be true. The net asset value of a Fund
investing in fixed income securities can generally be expected to change as
general levels of interest rates fluctuate.

FIXED INCOME SECURITY RISK
Fixed income securities generally expose a Fund to four types of risk: (1)
interest rate risk (the potential for fluctuations in bond prices due to
changing interest rates); (2) income risk (the potential for a decline in a
Fund's income due to falling market interest rates); (3) credit risk (the
possibility that a bond issuer will fail to make timely payments of either
interest or principal to a Fund); and (4) prepayment risk or call risk (the
likelihood that, during a period of falling interest rates, securities with
high stated interest rates will be prepaid, or "called" prior to maturity,
requiring a Fund to invest the proceeds at the generally lower interest
rates).

DEMAND INSTRUMENTS (GLOBAL TECHNOLOGY FUND ONLY)
Demand instruments are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a
dealer or bank, to repurchase the security for its face value upon demand.
Each Fund treats demand instruments as short-term securities, even though
their stated maturity may extend beyond one year.

INSURANCE CONTRACTS (GLOBAL TECHNOLOGY FUND ONLY)
Insurance contracts include guaranteed investment contracts, funding
agreements and annuities. Each Fund treats these contracts as fixed income
securities.

SHORT-TERM INSTRUMENTS
Short-term instruments consist of foreign and domestic: (1) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (2) other short-term debt securities
rated AA or higher by S&P or Aa or higher by Moody's or, if unrated, are
deemed to be of comparable quality in the opinion of the Advisors; (3)
commercial paper; (4) bank obligations, including negotiable certificates
of deposit, time deposits and banker's acceptances; and (5) repurchase
agreements. At the time the Funds invest in commercial paper, bank
obligations or repurchase agreements, the issuer or the issuer's parent
must have outstanding debt rated AA or higher by S&P or Aa or higher by
Moody's; outstanding commercial paper or bank obligations rated A-1 by S&P
or Prime-1 by Moody's; or, if no such ratings are available, the instrument
must be deemed to be of comparable quality in the opinion of the Advisors.
These instruments may be denominated in U.S. dollars or in foreign
currencies.

Short-term instruments also include credit balances and bank certificates
of deposit, discounted treasury notes and bills issued by Germany, the
states of Germany, the European Union, OECD Members or quasi-governmental
entities of any of the foregoing.

6
<PAGE>

Up to 49% of the net assets of each Fund may temporarily invest in bank
deposits and money market instruments maturing in less than 12 months, as a
measure taken in the Advisors' judgment during, or in anticipation of,
adverse market conditions, to meet anticipated expenses or for day-to-day
operating. When the Fund experiences large cash inflows, for example
through the sale of securities, and attractive investments are unavailable
in sufficient quantities, the Funds may hold short-term investments (or
shares of money market mutual funds) for a limited time pending
availability of such investments.

In addition, when in the opinion of the Advisors, it is advisable to adopt
a temporary defensive position because of unusual and adverse market or
other conditions, up to 100% of a Fund's assets may be invested in such
short-term instruments. Under normal circumstances each Fund will purchase
bank deposits and money market instruments to invest temporary cash
balances or to maintain liquidity to meet redemptions. However, for each
Fund, certificates of deposit from the same credit institution may not
account for more than [10%] of a Fund's total assets.

DERIVATIVE SECURITIES
The Funds may invest in various instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile and/or less liquid than more traditional debt securities. There
are, in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. For example, the
Funds may use futures and options as a low-cost method of gaining exposure to a
particular securities market without investing directly in those securities and
for traditional hedging purposes to attempt to protect the Funds from exposure
to changing interest rates, securities prices or currency exchange rates and for
cash management or other investment purposes. The use of derivatives may result
in leverage, which tends to magnify the effects of an instrument's price changes
as market conditions change. Leverage involves the use of a small amount of
money to control a large amount of financial assets, and can in some
circumstances, lead to significant losses. The Funds will limit the leverage
created by its use of derivatives for investment purposes by "covering" such
positions as required by the SEC. The Advisors may use derivatives in
circumstances where the Advisors believe they offer an economical means of
gaining exposure to a particular asset class. Derivatives will not be used to
acquire exposure to changes in the value of assets or indexes that by themselves
would not be purchased for the Funds. The use of derivatives for non-hedging
purposes may be considered speculative.

A Fund's investment in options, futures or forward contracts, and similar
strategies depend on the Advisors' judgment as to the potential risks and
rewards of different types of strategies. Options and futures can be volatile
investments, and may not perform as expected. If the Advisors apply a hedge at
an inappropriate time or judge price trends incorrectly, options and futures
strategies may lower a Fund's return. A Fund could also experience losses if the
prices of its options and futures positions were poorly correlated with its
other investments, or if it could not close out its positions because of an
illiquid secondary market. Options and futures traded on foreign exchanges
generally are not regulated by U.S. authorities, and may offer less liquidity
and less protection to a Fund in the event of default by the other party to the
contract.

Many derivative contracts are traded on securities or commodities exchanges.
Derivative contracts bought and sold by the Funds must be admitted to official
listing on a recognized futures or securities exchange and the securities
underlying the options are within the applicable investment objective and
policies of the Funds. These exchanges set all the terms of the contract except
for the price. Investors make payments due under their contracts through the
exchange. Most exchanges require investors to maintain margin accounts through
their brokers to cover their potential obligations to the exchange. Parties to
the contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allow investors to close out their contracts by entering into

7
<PAGE>

offsetting contracts. These options place greater reliance on the dealer to
fulfill the terms of the options, and therefore entail greater risk to the
Funds.

Transactions in options, futures contracts, options on futures contracts and
forward contracts entered into for non-hedging purposes involve greater risk and
could result in losses which are not offset by gains on other portfolio assets.

OPTIONS ON SECURITIES
The Funds may purchase and write (sell) put and call options on stocks.
Options are rights, but not obligations to buy or sell an underlying asset
for a specified price (the exercise price) during, or at the end of, a
specified period. A call option gives the purchaser of the option the right
(but not the obligation) to buy, and obligates the writer to sell, the
underlying stock at the exercise price at any time during the option
period. Similarly, a put option gives the purchaser of the option the right
(but not the obligation) to sell, and obligates the writer to buy, the
underlying stock at the exercise price at any time during the option
period.

Each Fund may write (sell) covered call and put options to a limited extent
(the limit being 20%) on their portfolio securities ("covered options") in
an attempt to increase income through the premiums they receive for writing
the option(s). However, in return for the premium, the Funds may forgo the
benefits of appreciation on securities sold or may pay more than the market
price on securities acquired pursuant to call and put options written by
the Funds.

A call option written by a Fund is "covered" if a Fund owns the underlying
security covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if a Fund holds a call option on
the same security and in the same principal amount as the written call
option where the exercise price of the call option so held (a) is equal to
or less than the exercise price of the written call option or (b) is
greater than the exercise price of the written call option if the
difference is segregated by a Fund in cash or liquid securities.

When a Fund writes a covered call option, it gives the purchaser of the
option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time
during the option period. If the option expires unexercised, the Fund will
realize income in an amount equal to the premium received for writing the
option. If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder at
the exercise price. By writing a covered call option, the Fund forgoes, in
exchange for the premium less the commission ("net premium"), the
opportunity to profit during the option period from an increase in the
market value of the underlying security above the exercise price. In
addition, the Fund may continue to hold a stock which might otherwise have
been sold to protect against depreciation in the market price of the stock.

A put option written by a Fund is "covered" when, among other things, cash
or liquid securities acceptable to the broker are placed in a segregated
account to fulfill the obligations undertaken. When a Fund writes a covered
put option, it gives the purchaser of the option the right to sell the
underlying security to the Fund at the specified exercise price at any time
during the option period. If the option expires unexercised, the Fund will
realize income in the amount of the net premium received for writing the
option. If the put option is exercised, a decision over which the Fund has
no control, the Fund must purchase the underlying security from the option
holder at the exercise price. By writing a covered put option, a Fund, in
exchange for the net premium received, accepts the risk of a decline in the
market value of the underlying security below the exercise price. The Funds
will only write put options involving securities for which a determination
is made at the time the option is written that the Funds wish to acquire
the securities at the exercise price.

8
<PAGE>

A Fund may terminate its obligation as the writer of a call or put option
by purchasing an option with the same exercise price and expiration date as
the option previously written. This transaction is called a "closing
purchase transaction." A Fund will realize a profit or loss on a closing
purchase transaction if the amount paid to purchase an option is less or
more, as the case may be, than the amount received from the sale thereof.
To close out a position as a purchaser of an option, a Fund may enter into
a "closing sale transaction" which involves liquidating the Fund's position
by selling the option previously purchased. Where the Fund cannot effect a
closing purchase transaction, it may be forced to incur brokerage
commissions or dealer spreads in selling securities it receives or it may
be forced to hold underlying securities until an option is exercised or
expires.

When a Fund writes an option, an amount equal to the net premium received
by the Fund is included in the liability section of the Fund's Statement of
Assets and Liabilities as a deferred credit. The amount of the deferred
credit will be subsequently marked to market to reflect the current market
value of the option written. The current market value of a traded option is
the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated
expiration date or if the Fund enters into a closing purchase transaction,
the Fund will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option
is exercised, the Fund will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be
deemed to involve the pledge of the securities against which the option is
being written. Securities against which call options are written will be
identified on the Fund's books.

A Fund may also purchase call and put options on any securities in which it
may invest. The Fund would normally purchase a call option in anticipation
of an increase in the market value of such securities. The purchase of a
call option would entitle the Fund, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The Fund
would ordinarily have a gain if the value of the securities increased above
the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price
during the option period.

A Fund would normally purchase put options in anticipation of a decline in
the market value of securities in its portfolio ("protective puts") or
securities of the type in which it is permitted to invest. The purchase of
a put option would entitle the Fund, in exchange for the premium paid, to
sell a security, which may or may not be held by the Fund at a specified
price during the option period. The purchase of protective puts is designed
merely to offset or hedge against a decline in the market value of the
Fund. Put options also may be purchased by the Fund for the purpose of
affirmatively benefiting from a decline in the price of securities that the
Fund does not own. The Fund would ordinarily recognize a gain if the value
of the securities decreased below the exercise price sufficiently to cover
the premium and would recognize a loss if the value of the securities
remained at or above the exercise price. Gains and losses on the purchase
of protective put options would tend to be offset by countervailing changes
in the value of underlying portfolio securities.

All options on securities purchased or sold by a Fund will be traded on a
securities exchange.

There is no limitation on the percentage of the options that may be
purchased or written by a Fund. However, the strike prices of the
securities options, together with the strike prices of the securities that
underlie other securities options already purchased or granted for the
account of each Fund, may not exceed 20% of net assets of the Fund. Options
on securities may be purchased or granted to a third party only to the
extent that the strike prices of such options, together with the strike
prices of options on securities of the same issuer already purchased by or
granted for the account of a Fund, do not exceed 10% of the net assets of
the Fund. Options on securities may only be written (sold) to the extent
that the strike prices of such options, together with the strike prices of
options on securities of the same issuer already written for the account of
a Fund, do not exceed 2% of the net assets of the Fund. When an option
transaction is offset by

9
<PAGE>

a back- to-back transaction (e.g., where a Fund writes a put option on a
security and purchases a put option on the same security having the same
expiration date), these two transactions will not be counted for purposes
of the limits set forth in this paragraph.

OPTIONS ON SECURITIES INDICES
The Funds may also purchase and write exchange-listed and OTC put and call
options on securities indices. A securities index measures the movement of
a certain group of securities by assigning relative values to the
securities included in the index, fluctuating with changes in the market
values of the securities included in the index. Some securities index
options are based on a broad market index, such as the NYSE Composite
Index, or a narrower market index such as the Standard & Poor's 100.
Indices may also be based on a particular industry or market segment.

Options on securities indices are similar to options on securities except
that (1) the expiration cycles of securities index options are monthly,
while those of securities options are currently quarterly, and (2) the
delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a put) or is less than (in the case
of a call) the closing value of the underlying index on the date of
exercise, multiplied by (b) a fixed "index multiplier." Receipt of this
cash amount will depend upon the closing level of the securities index upon
which the option is based being greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the index and the
exercise price of the option times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery
of this amount. Securities index options may be offset by entering into
closing transactions as described above for securities options.

The staff of the SEC has taken the position that, in general, purchased OTC
options and the underlying securities used to cover written OTC options are
illiquid securities.

As discussed above in "Options on Securities," a Fund would normally
purchase a call option in anticipation of an increase in the market value
of the relevant index. The purchase of a call option would entitle the
Funds, in exchange for the premium paid, to purchase the underlying
securities at a specified price during the option period. The Funds would
ordinarily have a gain if the value of the underlying securities increased
above the exercise price sufficiently to cover the premium and would have a
loss if the value of the securities remained at or below the exercise price
during the option period.

As discussed above in "Options on Securities," a Fund would normally
purchase put options in anticipation of a decline in the market value of
the relevant index ("protective puts"). The purchase of a put option would
entitle the Funds, in exchange for the premium paid, to sell the underlying
securities at a specified price during the option period. The purchase of
protective puts is designed merely to offset or hedge against a decline in
the market value of the index. The Fund would ordinarily recognize a gain
if the value of the index decreased below the exercise price sufficiently
to cover the premium and would recognize a loss if the value of the index
remained at or above the exercise price. Gains and losses on the purchase
of protective put options would tend to be offset by countervailing changes
in the value of the index.

Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether a Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular stock.
Accordingly, successful use by a Fund of options on stock indices will be
subject to the Advisors' ability to predict correctly movements in the
direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the
price of individual stocks.

10
<PAGE>

Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close
out options positions on securities indices is more likely to occur,
although a Fund generally will only purchase or write such an option if the
Advisors believe the option can be closed out. Use of options on securities
indices also entails the risk that trading in such options may be
interrupted if trading in certain securities included in the index is
interrupted. A Fund will not purchase such options unless the Advisors
believe the market is sufficiently developed such that the risk of trading
in such options is no greater than the risk of trading in options on
securities.

Price movements in a Fund's portfolio may not correlate precisely with
movements in the level of an index and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities
indices require settlement in cash, the Advisors may be forced to liquidate
portfolio securities to meet settlement obligations. A Fund's activities in
index options may also be restricted by the requirements of the Internal
Revenue Code, as amended (the "Code") for qualification as a regulated
investment company.

In addition, the hours of trading for options on the securities indices may
not conform to the hours during which the underlying securities are traded.
To the extent that the option markets close before the markets for the
underlying securities, significant price and rate movements can take place
in the underlying securities markets that cannot be reflected in the option
markets and that may adversely affect the value of any options held by the
Funds. It is impossible to predict the volume of trading that may exist in
such options, and there can be no assurance that viable exchange markets
will develop or continue.

OPTIONS ON FOREIGN SECURITIES INDICES
A Fund may purchase and write put and call options on foreign stock indices
listed on domestic and foreign stock exchanges. A Fund may also purchase
and write OTC Options on foreign stock indices.

A Fund may, to the extent allowed by federal securities laws, invest in
securities indices instead of investing directly in individual non-U.S.
securities . A Fund may also use foreign stock index options for hedging
purposes.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A Fund may enter into futures contracts on securities, securities indices,
foreign currencies and interest rates, and purchase and write (sell)
options thereon which are traded on exchanges designated by the Commodity
Futures Trading Commission (the "CFTC") or, if consistent with CFTC
regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of, among other things, a commodity, a
non-U.S. currency, an interest rate sensitive security or, in the case of
index futures contracts or certain other futures contracts, a cash
settlement with reference to a specified multiplier times the change in the
index. An option on a futures contract gives the purchaser the right (but
not the obligation), in return for the premium paid, to assume a position
in a futures contract.

A Fund may enter into futures contracts and options on futures contracts on
securities, securities indices and currencies both to manage their exposure
to changing interest rates, securities prices and currency exchange rates
and as an efficient means of managing allocations between asset classes.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be "bona fide hedging" will not exceed
5% of a Fund's net asset value, after taking into account unrealized
profits and unrealized losses on any such contracts.

The successful use of futures contracts and options thereon draws upon the
Advisors' skill and experience with respect to such instruments and are
subject to special risk considerations. A liquid secondary market for any
futures or options contract may not be available when a futures or options
position is sought to be closed. In addition, there may be an imperfect
correlation between movements in the price of the futures contracts and
options on the value of the securities or currency in the Funds. Successful
use of futures or

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options contracts is further dependent on the Advisors' ability to predict
correctly movements in the securities or foreign currency markets and no
assurance can be given that their judgment will be correct.

FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts.

At the same time a futures contract is entered into, the Fund must allocate
cash or liquid securities as a deposit payment ("initial margin"). Daily
thereafter, the futures contract is valued and the payment of "variation
margin" may be required, and each day the Fund would provide or receive
cash that reflects any decline or increase in the contract's value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that specified
in the contract. In some, but not many, cases, securities called for by a
futures contract may not have been issued when the contract was written.

Although futures contracts (other than those that settle in cash, such as
index futures) by their terms call for the actual delivery or acquisition
of the instrument underlying the contract, in most cases the contractual
obligation is fulfilled by offset before the date of the contract without
having to make or take delivery of the instrument underlying the contract.
The offsetting of a contractual obligation is accomplished by entering into
an opposite position in an identical futures contract on the commodities
exchange on which the futures contract was entered into (or a linked
exchange) calling for delivery in the same month. Such a transaction, which
is effected through a member of an exchange, cancels the obligation to make
or take delivery of the instrument underlying the contract. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are
traded, the Fund will incur brokerage fees when it enters into futures
contracts.

When a Fund purchases a futures contract, it agrees to purchase a specified
quantity of an underlying instrument at a specified future date and price
or to make or receive a cash payment based on the value of a securities
index or a financial instrument. When a Fund sells a futures contract, it
agrees to sell a specified quantity of the underlying instrument at a
specified future date and price or to receive or make a cash payment based
on the value of a securities index or a financial instrument. When a Fund
purchases or sells a futures contract, the value of the futures contract
tends to increase and decrease in tandem with the value of its underlying
instrument or index. The price at which the purchase and sale will take
place is fixed when a Fund enters into the contract. Futures can be held
until their delivery dates or the positions can be (and normally are)
closed out, by entering into an opposing contract, before then.

When a Fund purchases or sells a futures contract, it is required to make
an initial margin deposit. Although the amount may vary, initial margin can
be as low as 1% or less of the notional amount of the contract. Additional
margin may be required as the contract fluctuates in value. Since the
amount of margin is relatively small compared to the value of the
securities covered by a futures contract, the potential for gain or loss on
a futures contract may be much greater than the amount of the Fund's
initial margin deposit.

The purpose of the acquisition or sale of a futures contract, in cases
where the Fund holds or intends to acquire fixed-income securities, is to
attempt to protect the Fund from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities
or foreign currencies. For example, if interest rates were expected to
increase (which thus would cause the prices of debt securities held by the
Fund to decline), the Fund might enter into futures contracts for the sale
of debt securities. Such a sale would have much the same effect as selling
an equivalent value of the debt securities owned by

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<PAGE>

the Fund. If interest rates did increase, the value of the debt securities
in the Fund would decline, but the value of the futures contracts to the
Fund would increase at approximately the same rate, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have.
The Fund could seek to accomplish similar results by selling debt
securities and investing in bonds with short maturities when interest rates
are expected to increase. However, since the futures market is more liquid
than the cash market, the use of futures contracts as an investment
technique allows the Fund to maintain a defensive position without having
to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline (thus
increasing the value of debt securities held by the Fund), futures
contracts may be purchased to attempt to hedge against anticipated
purchases of debt securities at higher prices. Since the fluctuations in
the value of futures contracts should be similar to those of debt
securities, the Fund could take advantage of the anticipated rise in the
value of debt securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the
Fund could then buy debt securities on the cash market. The segregated
assets maintained to cover the Fund's obligations with respect to such
futures contracts will consist of cash or liquid securities acceptable to
the broker from its portfolio in an amount equal to the difference between
the fluctuating market value of such futures contracts and the aggregate
value of the initial and variation margin payments made by the Fund with
respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial
deposit and variation margin requirements. Rather than meeting additional
variation margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on most participants entering into offsetting transactions
rather than making or taking delivery. To the extent that many participants
decide to make or take delivery, liquidity in the futures market could be
reduced, thus producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may cause
temporary price distortions. Due to the possibility of distortion, a
correct forecast of securities price, general interest rate or currency
exchange rate trends by the Advisors may still not result in a successful
transaction.

In addition, futures contracts entail other significant risks. Although the
Advisors believe that use of such contracts will benefit the Fund, if the
Advisors' investment judgment about the general direction of interest rates
or an index is incorrect, the Fund's overall performance would be poorer
than if it had not entered into any such contract. For example, if the Fund
has hedged against the possibility of an increase in interest rates or a
decrease in an index which would adversely affect the value of securities
held in its portfolio and interest rates decrease or securities prices
increase instead, the Fund will lose part or all of the benefit of the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin requirements.
Such sales of securities may be, but will not necessarily be, at increased
prices which reflect the rising market. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

FUTURES CONTRACTS ON SECURITIES INDICES
The Funds may also enter into futures contracts providing for the making
and acceptance of a cash settlement based upon changes in the value of an
index of U.S. or non-U.S. securities. This investment technique may be used
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities or to hedge against
anticipated future changes in general market prices which otherwise might
either adversely affect the value of securities held by the Fund or
adversely affect the prices of securities which are intended to be
purchased at a later date for the Fund or as an efficient means of managing
allocation between asset classes. A futures contract may also be entered
into to close out or offset an existing futures position.

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<PAGE>

When used for hedging purposes, each transaction in futures contracts on a
securities index involves the establishment of a position which, the
Advisors believe, will move in a direction opposite to that of the
investment being hedged. If these hedging transactions are successful, the
futures positions taken for the Fund will rise in value by an amount which
approximately offsets the decline in value of the portion of the Fund's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of futures contracts may
not be achieved or a loss may be realized.

For the purpose of hedging a Fund's assets, the Fund may sell (but not
purchase) stock index or interest rate futures contracts and may purchase
put or call options on futures contracts, options on securities indices and
any of the warrants described above. Any such transaction will be
considered a hedging transaction, and not subject to the limitations on
non-hedging transactions stated below, to the extent that (1) in the case
of stock index futures, options on securities indices and warrants thereon,
the contract value does not exceed the market value of the shares held by
the Fund for which the hedge is intended and such shares are admitted to
official listing on a stock exchange in the country in which the relevant
futures or securities exchange is based or (2) in the case of interest rate
futures and options on securities indices and warrants thereon, the
contract value does not exceed the interest rate exposure associated with
the assets held in the applicable currency by the Fund. In carrying out a
particular hedging strategy, a Fund may sell futures contracts and purchase
options or warrants based on securities, financial instruments or indices
that have issuers, maturities or other characteristics that do not
precisely match those of the Fund's assets for which such hedge is
intended, thereby creating a risk that the futures, options or warrants
position will not mirror the performance of such assets. A Fund may also
enter into transactions in futures contracts, options on futures, options
on indices and warrants for non-hedging purposes, as described below.

OPTIONS ON FUTURES CONTRACTS (INCLUDING FUTURES CONTRACTS ON SECURITIES
INDICES)
The Funds may purchase and write (sell) options on futures contracts for
hedging purposes. For example, as with the purchase of futures contracts,
when the Fund is not fully invested, it may purchase a call option on an
interest rate sensitive futures contract to hedge against a potential price
increase on debt securities due to declining interest rates.

The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an index or individual
security. Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based or the price of the
underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities.

The writing of a call option on a futures contract may constitute a partial
hedge against declining prices of the underlying portfolio securities which
are the same as or correlate with the security or foreign currency that is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the price specified in the premium
received for writing the option ("exercise price"), the Fund will retain
the full amount of the net premium (the premium received for writing the
option less any commission), which provides a partial hedge against any
decline that may have occurred in the Fund's holdings.

The writing of a put option on an index futures contract may constitute a
partial hedge against increasing prices of the underlying securities or
foreign currency that are deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than
the exercise price, the Fund will retain the full amount of the option net
premium, which provides a partial hedge against any increase in the price
of securities that the Fund intends to purchase.

If a put or call option a Fund has written is exercised, the Fund will
incur a loss that will be reduced by the amount of the net premium it
receives. Depending on the degree of correlation between changes in the
value of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from

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<PAGE>

existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.

The purchase of a call or put option on a futures contract with respect to
an index is similar in some respects to the purchase of a call or
protective put option on an index. For example, the Fund may purchase a put
option on an index futures contract to hedge against the risk of lowering
securities values.

The amount of risk a Fund assumes when it purchases an option on a futures
contract with respect to an index is the premium paid for the option plus
related transaction costs. In addition to the correlation risks discussed
above, the purchase of such an option also entails the risk that changes in
the value of the underlying futures contract will not be fully reflected in
the value of the option purchased.

Each Fund may purchase or sell stock index or interest rate futures
contracts, put or call options on futures, options on securities indices
and warrants other than for hedging purposes. Each Fund may enter into
transactions for non-hedging purposes only to the extent that (1) the
underlying contract values, together with the contract values of any
instrument then held by the Fund for non-hedging purposes, do not exceed in
the aggregate 20% of the net assets of the Fund and (2) such instruments
relate to categories of assets which the Fund is permitted to hold.

WARRANTS ON FUTURES CONTRACTS
Each Fund may purchase warrants which, like options on futures contracts
and options on securities indices, entitle the holder to purchase or sell a
futures contract or to a cash payment reflecting the price fluctuation in
an index of securities. A Fund may also purchase warrants that entitle the
holder to a cash payment reflecting the fluctuation in the value of certain
financial futures contracts. Warrants on futures contracts and warrants on
securities indices differ from the equivalent options in that: (1) they are
securities issued by a financial institution/special purpose issuer rather
than contracts entered into with a futures exchange and (2) they are traded
on a securities exchange rather than on a futures exchange. The use of
warrants will generally entail the same risks that are associated with a
Fund's positions in options on futures and options on securities indices.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS
There is no assurance a liquid market will exist for any particular option
or futures contract at any particular time even if the contract is traded
on an exchange. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts and may halt trading
if a contract's price moves up or down more than the limit in a given day.
On volatile trading days when the price fluctuation limit is reached or a
trading halt is imposed, it may be impossible for a Fund to enter into new
positions or close out existing positions. If the market for a contract is
not liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and could potentially
require a Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, a Fund's access to other
assets held to cover its options or futures positions could also be
impaired.

COMBINED POSITIONS
Each Fund may purchase and write options in combination with each other, or
in combination with futures or forward contracts, to adjust the risk and
return characteristics of the overall position. For example, a Fund may
purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price
and buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.

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<PAGE>

POSITION LIMITS
Futures exchanges can limit the number of futures and options on futures
contracts that can be held or controlled by an entity. If an adequate
exemption cannot be obtained, the Fund may be required to reduce the size
of its futures and options positions or may not be able to trade a certain
futures or options contract in order to avoid exceeding such limits.

OTHER LIMITATIONS
The Commodity Exchange Act prohibits U.S. persons, such as a Fund, from
buying or selling certain foreign futures contracts or options on such
contracts. Accordingly, no Fund will engage in foreign futures or options
transactions unless the contracts in question may lawfully be purchased and
sold by U.S. persons in accordance with applicable CFTC regulations or CFTC
staff advisories, interpretations and no action letters. In addition, in
order to assure that a Fund will not be considered a "commodity pool" for
purposes of CFTC rules, the Fund will enter into transactions in futures
contracts or options on futures contracts only if (1) such transactions
constitute bona fide hedging transactions, as defined under CFTC rules or
(2) no more than 5% of the Fund's net assets are committed as initial
margin or premiums to positions that do not constitute bona fide hedging
transactions.

ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS
Each Fund intends to comply with Section 4.5 of the regulations under the
Commodity Exchange Act, which limits the extent to which a Fund can commit
assets to initial margin deposits and option premiums. In addition, each
Fund will comply with guidelines established by the SEC with respect to
coverage of options and futures contracts by mutual funds, and if the
guidelines so require, will set aside appropriate liquid assets in a
segregated account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures contract or option is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
Fund's assets could impede portfolio management or a Fund's ability to meet
redemption requests or other current obligations.

STOCK BASKETS
Each Fund may invest in stock baskets. A stock basket is a group of stocks
that is formed with the intention of either being bought or sold all at
once, usually to perform index arbitrage (an investment/trading strategy
which exploits divergence between actual and theoretical futures prices) or
a hedging program.

SECURITIES OF NON-U.S. ISSUERS
The Funds may invest in securities of non-U.S. issuers directly or in the form
of American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
or other similar securities representing ownership of securities of non-U.S.
issuers held in trust by a bank or similar financial institution. These
securities may not necessarily be denominated in the same currency as the
securities they represent. Designed for use in U.S., European and international
securities markets, ADRs, and GDRs are alternatives to the purchase of the
underlying securities in their national markets and currencies, but are subject
to the same risks as the non-U.S. securities to which they relate.

With respect to certain countries in which capital markets are either less
developed or not easily accessed, investments by the Funds may be made through
investment in other investment companies that in turn are authorized to invest
in the securities of such countries. Investment in other investment companies is
generally limited in amount by the 1940 Act, will involve the indirect payment
of a portion of the expenses (including advisory fees of such other investment
companies) and may result in a duplication of fees and expenses.

The Funds consider an issuer to be based in a country if:
- it is headquartered in the country; or
- it has primary operations in the country.

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INVESTMENTS IN AMERICAN AND GLOBAL DEPOSITORY RECEIPTS
Each Fund may invest in non-U.S. securities in the form of ADRs or GDRs.
ADRs are receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign
corporation. GDRs are receipts issued by either a U.S. or non-U.S. banking
institution evidencing ownership of the underlying non-U.S. securities .
Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and GDRs in bearer form, are designed for use in
European and international securities markets. An ADR or GDR may be
denominated in a currency different from the currency in which the
underlying foreign security is denominated.

FOREIGN GOVERNMENT DEBT SECURITIES (GLOBAL FINANCIAL SERVICES FUND AND
GLOBAL TECHNOLOGY FUND ONLY)
Each Fund may invest in foreign government debt securities which include
debt obligations issued or guaranteed by national, state or provincial
governments or similar political subdivisions and quasi-governmental and
supranational entities (collectively, "sovereign debt obligations").
Sovereign debt obligations, especially those of developing countries, may
involve a high degree of risk. The issuer of such an obligation or the
governmental authorities that control the repayment of the obligation may
be unable or unwilling to repay principal and interest when due and may
require renegotiation or rescheduling of debt payments. In addition,
prospects for repayment of principal and interest may depend on political
as well as economic factors.

Quasi-governmental and supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking
institutions and related government agencies. Examples include (but are not
limited to) the International Bank for Reconstruction and Development (the
"World Bank"), the Japanese Development Bank, the Asian Development Bank
and the Inter-American Development Bank. Currently, each Fund intends to
invest only in obligations issued or guaranteed by the Asian Development
Bank, the Inter-American Development Bank, the World Bank, the African
Development Bank, the European Coal and Steel Community, the European
Economic Community, the European Investment Bank and the Nordic Investment
Bank. Foreign government securities also include mortgage-related
securities issued or guaranteed by national, state or provincial
governmental instrumentalities, including quasi-governmental agencies.

BRADY BONDS (GLOBAL TECHNOLOGY FUND ONLY)
Each Fund may invest in so-called "Brady Bonds," which are issued as part
of a debt restructuring in which the bonds are issued in exchange for cash
and certain of the country's outstanding commercial bank loans. Brady Bonds
may be collateralized or uncollateralized, are issued in various currencies
(primarily the U.S. dollar) and are actively traded in the over-the-counter
secondary market.

U.S. dollar-denominated collateralized Brady Bonds which may be fixed rate
par bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds that have the same maturity as
the stated bonds. Interest payments on such bonds generally are
collateralized by cash or liquid securities in an amount that, in the case
of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at
least one year's rolling interest payments based on the applicable interest
rate at the time and is adjusted at regular intervals thereafter.

The International Monetary Fund (IMF) typically negotiates the exchange to
cure or avoid a default by restructuring the terms of the bank loans. The
principal amount of some Brady Bonds is collateralized by zero coupon U.S.
Treasury securities which have the same maturity as the Brady Bonds.
However, neither the U.S. government nor the IMF has guaranteed the
repayment of any Brady Bond.

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<PAGE>

REGION AND COUNTRY INVESTING
A Fund may focus their investments in a particular region and/or in one or
more foreign countries. Focusing the Funds' investments in a particular
region or country will subject the Funds (to a greater extent than if its
investments in such region or country were more diversified) to the risks
of adverse securities markets, exchange rates and social, political or
economic developments which may occur in that particular region or country.

CURRENCY MANAGEMENT
In connection with the Funds' investments denominated in foreign currencies, the
Advisors may choose to utilize a variety of currency management (hedging)
strategies. The Advisors seek to take advantage of different yield, risk and
return characteristics that different currencies, currency denominations and
countries can provide to U.S. investors. In doing so, the Advisors will consider
such factors as the outlook for currency relationships; current and anticipated
interest rates; levels of inflation within various countries; prospects for
relative economic growth; and government policies influencing currency exchange
rates and business conditions. There can be no guarantee that any currency
management strategies will be successful and they could result in losses that
are not otherwise offset by gains in a Fund's portfolio securities.

CURRENCY EXCHANGE TRANSACTIONS
Because the Funds may buy and sell securities denominated in currencies
other than the U.S. dollar and receive interest, dividends and sale
proceeds in currencies other than the U.S. dollar, the Funds from time to
time may enter into currency exchange transactions to convert to and from
different currencies and to convert foreign currencies to and from the U.S.
dollar. The Funds either enter into these transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the currency exchange market or
use forward currency exchange contracts (discussed below) to purchase or
sell currencies.

CURRENCY HEDGING
The Funds' currency hedging strategies will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is
the purchase or sale of forward currency with respect to specific
receivables or payables of the Funds generally accruing in connection with
the purchase or sale of its portfolio securities. Position hedging is the
sale of forward currency with respect to portfolio security positions. The
Funds may not position hedge to an extent greater than the aggregate market
value (at the time of entering into the hedge) of the hedged securities.

Currency hedging may be important because a decline in the U.S. dollar
value of a foreign currency in which the Funds' securities are denominated
will reduce the U.S. dollar value of the securities, even if their value in
the foreign currency remains constant. The use of currency hedges does not
eliminate fluctuations in the underlying prices of the securities, but it
does establish a rate of exchange that can be achieved in the future. For
example, in order to protect against diminutions in the U.S. dollar value
of non-dollar denominated securities they hold, the Funds may purchase
foreign currency put options. If the value of the foreign currency does
decline, the Funds will have the right to sell the currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on the U.S. dollar value of their securities that otherwise would
have resulted. Conversely, if a rise in the U.S. dollar value of a currency
in which securities to be acquired are denominated is projected, thereby
potentially increasing the cost of the securities, the Funds may purchase
call options on the particular currency. The purchase of these options
could offset, at least partially, the effects of the adverse movements in
exchange rates. The benefit to the Funds derived from purchases of currency
options, like the benefit derived from other types of options, will be
reduced by premiums and other transaction costs. Because transactions in
currency exchange are generally conducted on a principal basis, no fees or
commissions are generally involved. Currency hedging involves some of the
same risks and considerations as other transactions with similar
instruments. Although currency hedges may limit the risk of loss due to a
decline in the value of a hedged currency, at the same time, they also may
limit any potential gain that might result should the value of the currency

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<PAGE>

increase. If a devaluation is generally anticipated, the Funds may not be
able to contract to sell a currency at a price above the devaluation level
they anticipate.

FORWARD CURRENCY EXCHANGE CONTRACTS
A forward currency exchange contract is an obligation by a Fund to purchase
or sell a specific currency at a future date, which may be any fixed number
of days from the date of the contract. Forward currency exchange contracts
establish an exchange rate at a future date. These contracts are traded in
the interbank market conducted directly between currency traders (usually
large commercial banks and brokerages) and their customers. A forward
currency exchange contract may not have a deposit requirement and may be
traded at a net price without commission. The Funds maintain with their
custodian a segregated account of cash or liquid securities in an amount at
least equal to their obligations under each forward currency exchange
contract. Neither spot transactions nor forward currency exchange contracts
eliminate fluctuations in the prices of a Fund's securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.

Each Fund may enter into foreign currency hedging transactions in an
attempt to protect against changes in currency exchange rates between the
trade and settlement dates of specific securities transactions or changes
in currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect
for currency parities will be incorporated into the Advisors' long-term
investment decisions, each Fund will not routinely enter into currency
hedging transactions with respect to securities transactions; however, the
Advisors believe that it is important to have the flexibility to enter into
currency hedging transactions when they determine that the transactions
would be in a Fund's best interest. Although these transactions tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain that might
be realized should the value of the hedged currency increase. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date the forward
contract is entered into and the date it matures. The projection of
currency market movements is extremely difficult, and the successful
execution of any hedging strategy involves risk.

While these contracts are not presently regulated by the CFTC, the CFTC may
in the future assert authority to regulate forward contracts. In such event
a Fund's ability to utilize forward contracts may be restricted. Forward
contracts may reduce the potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a
Fund than if they had not entered into such contracts. The use of currency
forward contracts may not eliminate fluctuations in the underlying U.S.
dollar equivalent value of the prices of or rates of return on a Fund's
foreign currency denominated portfolio securities and the use of such
techniques will subject a Fund to certain risks.

OPTIONS ON FOREIGN CURRENCIES
Each Fund may write covered put and call options and purchase put and call
options on foreign currencies for the purpose of protecting against
declines in the dollar value of portfolio securities and against increases
in the dollar cost of securities to be acquired. As with other types of
options, however, the writing of an option on foreign currency will
constitute only a partial hedge up to the amount of the premium received,
and a Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of
an option on foreign currency may be used to hedge against fluctuations in
exchange rates although, in the event of exchange rate movements adverse to
a Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. In addition, a Fund may purchase call options on
currency when the Advisors anticipate that the currency will appreciate in
value.

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Each Fund may also write options on foreign currencies for the same types
of hedging purposes. For example, where a Fund anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected
decline occurs, the options will most likely not be exercised, and the
diminution in value of portfolio securities will be offset by the amount of
the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a
Fund could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow a Fund to hedge
such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option
will constitute only a partial hedge up to the amount of the premium, and
only if rates move in the expected direction. If this does not occur, the
option may be exercised and a Fund would be required to purchase or sell
the underlying currency at a loss which may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, a Fund
also may be required to forego all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.

Each Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by a Fund is covered if a Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration identified on a Fund's
books) upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if a Fund has a call on the same
foreign currency and in the same principal amount as the call written where
the exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the exercise
price of the call written if the difference is segregated by the Fund in
cash or liquid securities.

There is no assurance that a liquid secondary market will exist for any
particular option, or at any particular time. If a Fund is unable to effect
a closing purchase transaction with respect to covered options it has
written, a Fund may not be able to sell the underlying currency or dispose
of assets held in a segregated account until the options expire or are
exercised. Similarly, if a Fund is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying currency. A Fund
pays brokerage commissions or spreads in connection with its options
transactions.

As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which
may not be present in the case of exchange-traded currency options. In some
circumstances, a Fund's ability to terminate OTC options may be more
limited than with exchange-traded options. It is also possible that
broker-dealers participating in OTC options transactions will not fulfill
their obligations. The Funds intend to treat OTC options as not readily
marketable and therefore subject to a Fund's limitation with respect to
illiquid securities.

Each Fund may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates
between the trade and settlement dates of specific securities transactions
or anticipated securities transactions. Each Fund may also enter into
foreign currency transactions to hedge currency risks associated with the
assets of the Fund denominated in foreign currencies or principally traded
in foreign currencies. Each Fund may also enter into foreign currency
transactions to hedge against currencies other than the U.S. dollar. A Fund
may purchase or sell foreign currency contracts for forward delivery. To
conduct the hedging discussed above, a Fund would generally enter into a
forward contract to sell the foreign currency in which the investment is
denominated in exchange for U.S. dollars or other currency in which the
Advisors desire to protect the value of the Fund. A Fund may also purchase
option rights for the purchase or sale of currencies or currency futures
contracts or warrants which entitle the holder to the right to purchase or
sell currencies or currency futures contracts or to receive payment of a

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<PAGE>

difference, which is measured by the performance of currencies or currency
futures contracts, provided that these option rights and warrants are
admitted to official listing on an exchange.

None of the Funds currently intend to engage in foreign currency
transactions as an investment strategy. However, as discussed above, each
Fund may enter into forward contracts to hedge against changes in foreign
currency exchange rates that would affect the value of existing or
anticipated investments denominated or principally traded in a foreign
currency.

ADDITIONAL LIMITATIONS AND RISK FACTORS

ASSET COVERAGE
The Funds will comply with the segregation or coverage guidelines
established by the SEC and other applicable regulatory bodies with respect
to certain transactions, including (but not limited to) options written on
securities and indexes; currency, interest rate and security index futures
contracts and options on these futures contracts; and forward currency
contracts. These guidelines may, in certain instances, require the Fund to
identify cash or liquid securities to the extent the Fund's obligations
with respect to these strategies are not otherwise covered through
ownership of the underlying security or financial instrument, by other
portfolio positions or by other means consistent with applicable regulatory
policies. Unless the transaction is otherwise covered, the segregated
assets must at all times equal or exceed the Funds' obligations with
respect to these strategies. Segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it
is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of a Fund's assets could
impede portfolio management or a Fund's ability to meet redemption requests
or other current obligations. In addition, this may cause the Fund to miss
favorable trading opportunities or to realize losses on derivative
contracts or special transactions.

For example, a call option written on securities may require a Fund to hold
the securities subject to the call (or securities convertible into the
securities without additional consideration) or to segregate assets (as
described above) sufficient to purchase and deliver the securities if the
call is exercised. A call option written on an index may require a Fund to
own portfolio securities that correlate with the index or to segregate
assets (as described above) equal to the excess of the index value over the
exercise price on a current basis. A put option written by a Fund may
require the Fund to segregate assets (as described above) equal to the
exercise price. A Fund could purchase a put option if the strike price of
that option is the same or higher than the strike price of a put option
sold by the Fund. If a Fund holds a futures contract, the Fund could
purchase a put option on the same futures contract with a strike price as
high or higher than the price of the contract held. The Fund may enter into
fully or partially offsetting transactions so that its net position,
coupled with any segregated assets (equal to any remaining obligation),
equals its net obligation. Asset coverage may be achieved by other means
when consistent with applicable regulatory policies.

The use of options, futures and foreign currency contracts is a highly
specialized activity which involves investment techniques and risks that
are different from those associated with ordinary portfolio transactions.
Gains and losses on investments in options and futures depend on a variety
of factors including the Advisors' ability to predict the direction of
stock prices, interest rates, currency movements and other economic
factors. The loss that may be incurred by a Fund in entering into futures
contracts and written options thereon and forward currency contracts is
potentially unlimited. There is no assurance that higher than anticipated
trading activity or other unforeseen events might not, at times, render
certain facilities of an options clearing entity or other entity performing
the regulatory and liquidity functions of an options clearing entity
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers'
orders. Most futures exchanges limit the amount of fluctuation permitted in
a futures contract's prices during a single trading day. Once the

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<PAGE>

limit has been reached no further trades may be made that day at a price
beyond the limit. The price limit will not limit potential losses, and may
in fact prevent the prompt liquidation of futures positions, ultimately
resulting in further losses. Options and futures traded on foreign
exchanges generally are not regulated by U.S. authorities, and may offer
less liquidity and less protection to the Fund in the event of default by
the other party to the contract.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
securities markets that cannot be reflected in the option markets and that
may adversely affect the value of any options held by the Funds. It is
impossible to predict the volume of trading that may exist in such options,
and there can be no assurance that viable exchange markets will develop or
continue.

Except as set forth above under "Futures Contracts" and "Options on Futures
Contracts", there is no limit on the percentage of the assets of the Funds
that may be at risk with respect to futures contracts and related options
or forward currency contracts. A Fund may not invest more than 25% of their
total assets in purchased protective put options. The Funds' transactions
in options, forward currency contracts, futures contracts and options on
futures contracts may be limited by the requirements for qualification of
the Funds as regulated investment companies for tax purposes. See the
section entitled "Taxes." There can be no assurance that the use of these
portfolio strategies will be successful.

FOREIGN SECURITIES
Investment in securities of foreign issuers involves different and
additional investment risks than those affecting securities of U.S.
domestic issuers.

The value of a Fund's investments in foreign securities may be adversely
affected by changes in political or social conditions, diplomatic
relations, confiscatory taxation, expropriation, nationalization,
limitation on the removal of funds or assets, or imposition of (or change
in) currency exchange control or tax regulations in those foreign
countries. In addition, changes in government administrations or economic
or monetary policies in the United States or abroad could result in
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect a Fund's operations. Furthermore, the economies of
individual foreign nations may differ from the U.S. economy, whether
favorably or unfavorably, in areas such as growth of gross domestic
product, rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payments position; it may also be more difficult to obtain
and enforce a judgment against a foreign issuer. Any foreign investments
made by the Funds must be made in compliance with foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains
appreciably below that of domestic securities exchanges. Accordingly, the
Funds' foreign investments may be less liquid and their prices may be more
volatile than comparable investments in securities of U.S. companies.
Moreover, the settlement periods for foreign securities, which are often
longer than those for securities of U.S. issuers, may affect portfolio
liquidity. In buying and selling securities on foreign exchanges,
purchasers normally pay fixed commissions that are generally higher than
the negotiated commissions charged in the United States. In addition, there
is generally less government supervision and regulation of securities
exchanges, brokers and issuers located in foreign countries than in the
United States.

Since each Fund's investments in foreign securities involve foreign
currencies, the value of the Fund's assets as measured in U.S. dollars may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, including currency blockage. As discussed
above, the Funds may engage in certain currency management strategies to
hedge currency risks, though there can be no guarantee that these
strategies will be successful.

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<PAGE>

Certain of the risks associated with foreign investments are heightened for
the Funds which invest in certain Asian countries. In some cases, political
uncertainty and political corruption in such countries could threaten to
reverse favorable trends toward market and economic reform, privatization
and removal of trade barriers, and further disruptions in Asian securities
markets could result. In addition, certain Asian countries have managed
currencies which are maintained at artificial levels relative to the U.S.
dollar rather than at levels determined by the market. This type of system
can lead to sudden and large adjustments in the currency which, in turn,
may have a disruptive and negative effect on foreign investors. For
example, in 1997 the Thai Baht lost 46.75% of its value against the U.S.
dollar. A number of Asian companies are highly dependent on foreign loans
for their operation. In 1997, several Asian countries were forced to
negotiate loans from the International Monetary Fund and other
supranational organizations which impose strict repayment term schedules
and require significant economic and financial restructuring. There can be
no assurance that such restructurings or future restructurings, will not
have an adverse effect on individual companies, or securities markets, in
which the Funds are invested. The Funds may invest in Hong Kong, which
reverted to Chinese administration in 1997. Investments in Hong Kong may be
subject to expropriation, nationalization or confiscation, and to the risk
that the Hong Kong dollar will be devalued. The Advisors cannot predict the
effects of a possible loss of investor confidence in the currency or stock
market of Hong Kong, although they could be significant and adverse.

EMERGING MARKETS
An emerging market is commonly defined as one that experienced
comparatively little industrialization or that has a relatively new stock
market and a low level of quoted market capitalization.

Investments in securities of issuers in emerging markets countries may
involve a high degree of risk and many may be considered speculative.
Investments in developing and emerging markets may be subject to
potentially greater risks than those of other foreign issuers. These risks
include: (i) the small current size of the markets for such securities and
the low volume of trading, which result in less liquidity and in greater
price volatility; (ii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iii) foreign
taxation; (iv) the absence, until recently, of a capital market structure
or market oriented economy as well as issuers without a long period of
successful operations; (v) the possibility that recent favorable economic
developments may be slowed or reversed by unanticipated political or social
events in such countries or their neighboring countries; and (vi) greater
risks of expropriation, confiscatory taxation, nationalization, and less
social, political and economic stability.

The risks involved in making investments in securities of issuers in
emerging markets have been underscored by recent events. For example,
issuers in the Asia region have experienced currency volatility, political
instability and economic declines in recent years. In response to these
declines, Malaysia has enacted currency exchange controls, restricting the
repatriation of assets for a period of one year. In the past, Russia
declared a moratorium on repayment of its own debt, substantially devalued
its currency and suspended the government- sponsored foreign exchange
market for its currency.

In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive
than in the United States. Some markets have been unable to keep pace with
the volume of securities transactions, making it more difficult to conduct
such transactions. The inability of the Funds to make intended securities
purchases due to settlement problems could cause the Funds to miss
attractive investment opportunities. Inability to dispose of a security due
to settlement problems could result either in losses to a Fund due to
subsequent declines in the value of the security or, if the Fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser.

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<PAGE>

EURO RISKS
On January 1, 1999, eleven countries of the European Economic and Monetary
Union (EMU) began implementing a plan to replace their national currencies
with a new currency, the euro. Full conversion to the euro is slated to
occur by July 1, 2002. Although it is impossible to predict the impact of
the conversion to the euro on a Fund, the risks may include:
- Changes in the relative strength and value of the US dollar or other
major currencies;
- Adverse effects on the business or financial condition of European
issuers that the Fund holds in its portfolio; and
- Unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets
worldwide and could adversely affect the value of securities held by a
Fund.

CURRENCY
The Advisors attempt to manage currency risk by limiting the amount the
Funds invest in securities denominated in a particular currency. However,
this type of diversification will not protect the Funds against a general
increase in the value of the U.S. dollar relative to other currencies.

LIQUIDITY
OTC derivative contracts are considered to be illiquid and generally carry
greater liquidity risk than exchange-traded contracts.

LEVERAGE
Leverage risk is created when an investment exposes a Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify a Fund's risk of loss and potential for gain. Leverage
risk may exist when a Fund purchases securities while it also has borrowed
money.

INTEREST RATES
Interest rate risks apply to the Funds only to the extent they invest in
fixed income securities. Prices of fixed income securities rise and fall in
response to changes in the interest rate paid by similar securities.
Potential or anticipated changes in interest rates also may affect the
value of fixed income securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as
the demand for particular fixed income securities, may cause the price of
certain fixed income securities to fall while the prices of other
securities rise or remain unchanged.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.

CREDIT
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a
Fund will lose money. Credit risk is only a risk for a Fund if it invests
in fixed income securities or chooses to lend securities.

Many fixed income securities receive credit ratings from services such as
S & P and Moody's. These services assign ratings to securities by assessing
the likelihood of issuer default. Lower credit ratings correspond to higher
credit risk. If a security has not received a rating, a Fund must rely
entirely upon the Advisors' credit assessment.

Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's

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<PAGE>

rating is lowered, or the security is perceived to have an increased credit
risk. An increase in the spread will cause the price of the security to
decline.

Credit risk includes the possibility that a party to a transaction
involving a Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from
selling or buying other securities to implement their investment
strategies.

RISKS ASSOCIATED WITH FUTURES, OPTIONS AND WARRANTS
The successful use of futures, options and warrants depends on the ability
of the Advisors to predict the direction of the market or, in the case of
hedging transactions, the correlation between market movements and
movements in the value of the Funds' assets, and is subject to various
additional risks. The investment techniques and skills required to use
futures, options and warrants successfully are different from those
required to select equity securities for investment. The correlation
between movements in the price of the futures contract, option or warrant
and the price of the securities or financial instruments being hedged is
imperfect and the risk from imperfect correlation increases, with respect
to stock index futures, options and warrants, as the composition of a
Fund's portfolio diverges from the composition of the index underlying such
stock index futures, options or warrants. If a Fund has hedged portfolio
securities by purchasing put options or selling futures contracts, the Fund
could suffer a loss which is only partially offset or not offset at all by
an increase in the value of the Fund's securities. As noted, a Fund may
also enter into transactions in future contracts, options and warrants for
other than hedging purposes (subject to applicable law), including
speculative transactions, which involve greater risk. In particular, in
entering into such transactions, a Fund may experience losses which are not
offset by gains on other portfolio positions, thereby reducing its gross
income. In addition, the markets for such instruments may be volatile from
time to time, which could increase the risk incurred by a Fund in entering
into such transactions. The ability of a Fund to close out a future, option
or warrant position depends on a liquid secondary market.

As noted above, the Funds intend to adhere to certain policies relating to
the use of futures contracts, which should have the effect of limiting the
amount of leverage by the Funds.

Although foreign currency exchange transactions are intended to minimize
the risk of loss due to a decline in the value of the hedged currency, at
the same time they limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the
value of such securities between the date the forward contract is entered
into and the date it matures. The projection of currency market movements
is difficult, and the successful execution of a hedging strategy is highly
uncertain.

CORRELATION OF PRICE CHANGES
Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized options and futures
contracts available will not match a Fund's current or anticipated
investments exactly. Each Fund may invest in options and futures contracts
based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of a Fund's other investments.

Options and futures contracts prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match a
Fund's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates,
changes in volatility of the underlying instrument, and the time remaining
until expiration of the contract, which may not affect securities prices
the same way. Imperfect correlation may also result from differing levels
of demand in the options and futures markets and the securities markets,
from structural differences in how options and futures and securities are
traded, or from imposition of daily price fluctuation limits or trading
halts. A

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<PAGE>

Fund may purchase or sell options and futures contracts with a greater or
lesser value than the securities it wishes to hedge or intends to purchase
in order to attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in all
cases. If price changes in a Fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.

OTHER INVESTMENTS AND INVESTMENT PRACTICES

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Funds may purchase securities on a when-issued or delayed delivery
basis. Delivery of and payment for these securities can take place a month
or more after the date of the purchase commitment. The payment obligation
and the interest rate that will be received on when-issued and
delayed-delivery securities are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities purchased or
sold on a when-issued or delayed-delivery basis, the yields obtained on
such securities may be higher or lower than the yields available in the
market on the dates when the investments are actually delivered to the
buyers. When-issued securities may include securities purchased on a "when,
as and if issued" basis, under which the issuance of the security depends
on the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The value of such
securities is subject to market fluctuation during this period and no
interest or income, as applicable, accrues to the Fund until settlement
takes place.

At the time a Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the transaction,
reflect the value each day of such securities in determining its net asset
value and, if applicable, calculate the maturity for the purposes of
average maturity from that date. At the time of settlement a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, the Fund identifies on its books cash or liquid assets in an
amount at least equal to such commitments. It may be expected that a Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
On delivery dates for such transactions, the Fund will meet its obligations
from maturities or sales of the segregated securities and/or from cash
flow. If the Fund chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it could, as with the disposition of any
other portfolio obligation, incur a gain or loss due to market fluctuation.
It is the current policy of the Funds not to enter into when-issued
commitments exceeding in the aggregate 15% of the market value of the
Funds' total assets, less liabilities other than the obligations created by
when-issued commitments. When a Fund engages in when-issued or
delayed-delivery transactions, it relies on the other party to consummate
the trade. Failure of the seller to do so may result in a Fund's incurring
a loss or missing an opportunity to obtain a price considered to be
advantageous.

REPURCHASE AGREEMENTS
Repurchase agreements may be entered into for the only with a "primary
dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
government securities. This is an agreement in which the seller (the
"Lender") of a security agrees to repurchase from the the security sold at
a mutually agreed upon time and price. As such, it is viewed as the lending
of money to the Lender. The resale price normally is in excess of the
purchase price, reflecting an agreed upon interest rate. The rate is
effective for the period of time assets of the are invested in the
agreement and is not related to the coupon rate on the underlying security.
The period of these repurchase agreements is usually short, from overnight
to one week, and at no time are assets of the invested in a repurchase
agreement with a maturity of more than one year. The securities which are
subject to repurchase agreements, however, may have maturity dates in
excess of one year from the effective date of the repurchase agreement. The
always receives as collateral securities which are issued or guaranteed by
the U.S. government, its agencies or instrumentalities. Collateral is
marked to the market daily and has a market value including accrued
interest at least equal to 100% of the dollar amount invested on behalf of
the in each agreement along with accrued interest. Payment for such
securities is made for the only upon physical delivery or evidence of
book-entry transfer to the account of ,

26
<PAGE>

the 's Custodian. If the Lender defaults, the might incur a loss if the
value of the collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced with
respect to the Lender, realization upon the collateral on behalf of the may
be delayed or limited in certain circumstances. A repurchase agreement with
more than seven days to maturity may not be entered into for the if, as a
result, more than 10% of the 's net assets would be invested in such
repurchase agreement together with any other investment for which market
quotations are not readily available.

REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements may be entered into only with a "primary
dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
government securities. This is an agreement in which the agrees to
repurchase securities sold by it at a mutually agreed upon time and price.
As such, it is viewed as the borrowing of money for the . Proceeds of
borrowings under reverse repurchase agreements are invested for the . This
is the speculative factor known as "leverage." If interest rates rise
during the term of a reverse repurchase agreement utilized for leverage,
the value of the securities to be repurchased for the as well as the value
of securities purchased with the proceeds will decline. In these
circumstances, the 's entering into reverse repurchase agreements may have
a negative impact on the ability to maintain the Funds' net asset value of
$1.00 per share. Proceeds of a reverse repurchase transaction are not
invested for a period which exceeds the duration of the reverse repurchase
agreement. A reverse repurchase agreement is not entered into for the if,
as a result, more than one- third of the market value of the 's total
assets, less liabilities other than the obligations created by reverse
repurchase agreements, is engaged in reverse repurchase agreements. In the
event that such agreements exceed, in the aggregate, one-third of such
market value, the amount of the 's obligations created by reverse
repurchase agreements is reduced within three days thereafter (not
including Sundays and holidays) or such longer period as the SEC may
prescribe. A segregated account with the Custodian is established and
maintained for the with liquid assets in an amount at least equal to the 's
purchase obligations under its reverse repurchase agreements. Such a
segregated account consists of liquid, high grade debt securities marked to
the market daily, with additional liquid assets added when necessary to
insure that at all times the value of such account is equal to the purchase
obligations.

LENDING OF PORTFOLIO SECURITIES
The Funds may lend its investment securities to approved institutional
borrowers who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Fund attempts to increase its net investment income through
the receipt of interest on the loan. Any gain or loss in the market price
of the securities loaned that might occur during the term of the loan would
belong to the Fund. A Fund may lend its investment securities so long as
the terms, structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended (the "1940
Act") or the Rules and Regulations or interpretations of the SEC
thereunder, which currently require that (a) the borrower pledge and
maintain with the Fund collateral consisting of liquid, unencumbered assets
having a value at all times not less than 100% of the value of the
securities loaned, (b) the borrower add to such collateral whenever the
price of the securities loaned rises (i.e., the borrower "marks to the
market" on a daily basis), (c) the loan be made subject to termination by
the Fund at any time, and (d) the Fund receive reasonable interest on the
loan (which may include the Fund investing any cash collateral in interest
bearing short-term investments), and distributions on the loaned securities
and any increase in their market value. There may be risks of delay in
recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be
made only to borrowers deemed by the Advisors to be of good standing and
when, in the judgment of the Advisors, the consideration that can be earned
from such securities loans justifies the attendant risk. All relevant facts
and circumstances, including the creditworthiness of the borrower, will be
considered in making decisions with respect to the lending of securities.

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At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition,
voting rights may pass with the loaned securities, but if a material event
occurs affecting an investment on loan, the loan must be called and the
securities voted. Cash collateral may be invested in a money market fund
managed by Investors Bank & Trust Company (or its affiliates) and Investors
Bank & Trust Company may serve as the Funds' lending agent and may share in
revenue received from securities lending transactions as compensation for
this service.

REAL ESTATE INVESTMENT TRUSTS ("REITS") (GLOBAL FINANCIAL SERVICES FUND
ONLY)
REITs pool investors' funds for investment primarily in income- producing
commercial real estate or real estate related loans. A REIT is not taxed on
income distributed to shareholders if it complies with several requirements
relating to its organization, ownership, assets, and income and a
requirement that it distribute to its shareholders at least 95% of its
taxable income (other than net capital gains) for each taxable year.

REITs are like closed-end investment companies in that they are essentially
holding companies that rely on professional managers to supervise their
investments.

PRIVATE EQUITY
[TO BE DEFINED]

INVESTMENT RATINGS
The fixed income securities in which the Funds invest must be rated
investment grade (in one of the four highest rating categories) by one or
more nationally recognized rating service or be of comparable quality to
securities having such ratings. The Advisors determine whether a security
is investment grade based upon the credit ratings given by one or more
nationally recognized rating service. For example, Standard and Poor's
assigns ratings to investment grade securities (AAA, AA, A, and BBB) based
on its assessment of the likelihood of the issuer's inability to pay
interest or principal (default) when due on each security. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely upon the Advisors' credit assessment
that the security is comparable to investment grade. Securities rated BBB
have speculative characteristics.

EXCHANGE TRADED FUNDS
Each Fund may be invested in shares of Exchange Traded Funds (ETFs). ETFs
are mutual funds that trade like stocks.

RISK MANAGEMENT
Each Fund may employ non-hedging risk management techniques. Examples of
such strategies include synthetically altering the duration of a portfolio
or the mix of securities in a portfolio. For example, if the Advisors wish
to extend maturities in a fixed income portfolio in order to take advantage
of an anticipated decline in interest rates, but does not wish to purchase
the underlying long term securities, they might cause the Funds to purchase
futures contracts on long-term debt securities. Similarly, if the Advisors
wish to decrease fixed income securities or purchase equities, they could
cause a Fund to sell futures contracts on debt securities and purchase
futures contracts on a stock index. Because these risk management
techniques involve leverage, they include the possibility of losses as well
as gains that are greater than if these techniques involved the purchase
and sale of the securities themselves.

INVESTMENT OBJECTIVE AND POLICIES

A Fund's investment objective and its fundamental investment policies cannot be
changed unless authorized by the "vote of a majority of its outstanding voting
securities".

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A Fund's non-fundamental investment policies, however, may be changed by the
Board without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective. Whenever a Fund is
requested to vote on a change in the fundamental investment policies, the
Corporation will hold a meeting of Fund shareholders and will cast its votes
as instructed by such Fund's shareholders.

Unless otherwise noted and except with respect to borrowing money, there will be
no violation of any investment restriction if that restriction is complied with
at the time the relevant action is taken even if there is a later change in
market value of an investment, in net or total assets, in the securities rating
of the investment, or any other later change.

FUNDAMENTAL INVESTMENT POLICIES

GLOBAL FINANCIAL SERVICES FUND

The Fund invests primarily in the equity securities of companies located in
the US or abroad and operating in the financial services sector.

GLOBAL BIOTECHNOLOGY FUND

The Fund invests primarily in equity securities of companies located in the
US or abroad and operating in the biotechnology industry.

GLOBAL TECHNOLOGY FUND

The Fund invests primarily in equity securities of technology companies of
any size located in the US or abroad. Investments abroad will be primarily
in developed countries, but may also include emerging market countries.

FUNDAMENTAL POLICIES (ALL FUNDS)
The Funds' investment programs are subject to a number of investment
restrictions that reflect self-imposed standards as well as federal and state
regulatory limitations. The investment restrictions recited below are matters of
fundamental policy of each Fund and are in addition to those described in the
Funds' Prospectuses, and may not be changed without the affirmative vote of a
majority of outstanding shares. The percentage limitations contained in these
restrictions apply at the time of purchase of securities. Each Fund will not:

1) Concentrate 25% or more of its total assets in securities of issuers in any
one industry (for these purposes the U.S. government and its agencies and
instrumentalities are not considered an industry )and notwithstanding this
limitation or any other fundamental investment limitation, assets may be
invested in the securities of one or more management investment companies to the
extent permitted by the 1940 Act and the rules and regulations thereunder;

2) Invest in the securities of any single issuer if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of such issuer,
except that the Fund's assets may be invested in the securities of one or more
management investment companies to the extent permitted by the 1940 Act and the
rules and regulations thereunder;

3) Borrow money, except as a temporary measure for extraordinary or emergency
purposes in an amount not exceeding 331/3% of the value of the total assets of
the Fund at the time of such borrowing;

4) Invest in real estate or mortgages on real estate;

5) Purchase or sell commodities or commodities contracts, provided that the
Fund may

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<PAGE>

invest in financial futures and options on such futures;

6) Act as an underwriter of securities within the meaning of the U.S. federal
securities laws except insofar as it might be deemed to be an underwriter upon
disposition of certain portfolio securities acquired within the limitation on
purchases of restricted securities. This restriction shall not limit the Fund's
ability to invest in securities issued by one or more management investment
companies to the extent permitted by the 1940 Act and the rules and regulations
thereunder;

7) Issue senior securities; or make loans, except that the Fund may purchase
or hold debt instruments in accordance with its investment objectives and
policies, and may loan portfolio securities and enter into repurchase agreements
as described in this Registration Statement.

The following investment restriction may be changed by a vote of the
majority of the Board of Directors. The Fund will not:

Invest more than 10% of the value of its net assets in illiquid securities
(as defined under federal and state securities laws).

NON-FUNDAMENTAL INVESTMENT POLICIES

1. Up to 5% of the total assets of each Fund may be invested in shares of
investment companies, provided these shares are offered to the public
without limitation on the number of shares, the shareholders have the right
to redeem their shares, and the investment companies have investment
policies consistent with those of the Fund. Each Fund may not own more than
3% of the total outstanding voting stock of any other investment company.
As a shareholder of another investment company, a Fund would bear, along
with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees.

Subject to the foregoing limitations, shares of another securities
investment fund managed by the Advisors or by another investment advisor
affiliated with the Advisors through a substantial direct or indirect
interest may be purchased, subject to certain limitations, if the other
investment fund according to its investment policies is specialized in a
specific geographic area or economic sector. A Fund would not, however, pay
a sales charge when investing in an investment company managed by the
Advisors or their affiliates. In addition, no management or advisory fees
would be paid by a Fund with respect to its assets which are invested in
investment companies managed by the Advisor or their affiliates.

2. Acquire any illiquid investments, such as repurchase agreements with more
than seven days to maturity, if as a result thereof, more than 15% of the
market value of the Fund's net assets would be in investments that are
illiquid;

3. Invest more than 10% of its net assets in unlisted securities and Notes;

4. Sell any security short, except to the extent permitted by the 1940 Act.
Transactions in futures contracts and options shall not constitute selling
securities short; or

5. Purchase securities on margin, but a Fund may obtain such short term
credits as may be necessary for the clearance of transactions.

PORTFOLIO TURNOVER

Although none of the Funds intend to invest for the purpose of seeking
short-term profits, securities in the Funds may be sold whenever the Advisors
believe it is appropriate to do so in light of the investment objective of the
Fund without regard to the length of time a particular security may have been
held. A 100% annual turnover rate would occur, for example, if all portfolio
securities (excluding short-term obligations) were replaced once in a

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<PAGE>

period of one year, or if 10% of the portfolio securities were replaced ten
times in one year. The rate of portfolio turnover of each Fund may exceed that
of certain other mutual funds with the same investment objective. The amount of
brokerage commissions and taxes on realized capital gains to be borne by the
shareholders of a Fund tend to increase as the level of portfolio activity
increases.

The Fund's annual portfolio turnover rate (the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the portfolio during the year, excluding U.S. Government securities and
securities with maturities of one year or less) may vary from year to year, as
well as within a year, depending on market conditions.

WHAT DO SHARES COST?

MARKET VALUES

Each Fund computes its net asset value once daily on Monday through Friday
as described in the Prospectus. The net asset value will not be computed on the
day the following legal holidays are observed: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. On days when U.S. trading
markets close early in observance of these holidays, each Fund would expect to
close for purchases and redemptions at the same time. The days on which net
asset value is determined are the Fund's business days.

Securities held by a Fund which are listed on foreign exchanges may be
traded on days that the Fund does not value its securities, such as Saturdays
and the customary US business holidays on which the New York Stock Exchange is
closed. As a result, the net asset value of Fund Shares may be significantly
affected on days when shareholders do not have access to a Fund.

A Fund's net asset value per share fluctuates. The net asset value for
shares of each class is determined by adding the interest of such class of
shares in the market value of a Fund's total assets , subtracting the interest
of such class of shares in the liabilities of such Fund and those attributable
to such class of shares, and dividing the remainder by the total number of such
class of shares outstanding. The net asset value for each class of shares may
differ due to the variance in daily net income realized by each class. Such
variance will reflect only accrued net income to which the shareholders of a
particular class are entitled. Values of assets in each Fund are determined on
the basis of their market value or where market quotations are not available or
are unreliable, in accordance with procedures established by and under the
general supervision of the Directors, although the actual calculation may be
done by others.

Market values of portfolio securities are determined as follows:

The fixed income portion of the Funds and portfolio securities with a
maturity of 60 days or more, including securities that are listed on an exchange
or traded over the counter, are valued using prices supplied daily by an
independent pricing service or services that (i) are based on the last sale
price on a national securities exchange or, in the absence of recorded sales, at
the average of readily available closing bid and asked prices on such exchange
or at the average of readily available closing bid and asked prices in the
over-the-counter market, if such exchange or market constitutes the broadest and
most representative market for the security and (ii) in other cases, take into
account various factors affecting market value, including yields and prices of
comparable securities, indication as to value from dealers and general market
conditions. If such prices are not supplied by a Fund's independent pricing
service, such securities are priced in accordance with procedures established by
and under the general supervision of the Directors although the actual
calculation may be done by others, when this is appropriate. All portfolio
securities with a remaining maturity of less than 60 days are valued by the
amortized cost method.

The value of investments listed on a U.S. securities exchange, other than
options on stock indexes, is based on the last sale prices on the exchange
generally at 4:00 p.m. (U.S. Eastern time) or, in the absence of recorded sales,
at the average of readily available closing bid-and-asked prices on such
exchange. Securities listed on a foreign

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<PAGE>

exchange considered by the Advisors to be a primary market for the securities
are valued at the last quoted sale price available before the time when net
assets are valued. Unlisted securities, and securities for which the Advisors
determine the listing exchange is not a primary market, are valued at the
average of the quoted bid-and-asked prices in the over-the-counter market. The
value of each security for which readily available market quotations exist is
based on a decision as to the broadest and most representative market for such
security. For purposes of calculating net asset value, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the prevailing market rates available at the time of valuation.

Options on stock indexes traded on U.S. national securities exchanges are
valued at the close of options trading on such exchanges, which is currently
4:10 p.m. (U.S. Eastern time). Stock index futures and related options, which
are traded on U.S. futures exchanges, are valued at their last sales price as of
the close of such futures exchanges which is currently 4:15 p.m. (U.S. Eastern
time). Options, futures contracts and warrants traded on a foreign stock
exchange or on a foreign futures exchange are valued at the last price available
before the time when the net assets are valued. Securities or other assets for
which market quotations are not readily available (including certain restricted
and illiquid securities) are valued at fair value in accordance with procedures
established by and under the general supervision and responsibility of the
Directors of the Fund. Such procedures include the use of independent pricing
services that use prices based upon yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers; and
general market conditions.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when a Fund's net asset value is calculated, such
securities may be valued at fair value in accordance with procedures established
by and under the general supervision of the Directors, although the actual
calculation may be done by others.

The Fund may enter into agreements that allow a third party, as agent for
the Fund, to accept orders from its customers up until the Fund's close of
business. So long as a third party receives an order prior to the Fund's close
of business, the order is deemed to have been received by the Fund and,
accordingly, may receive the net asset value computed at the close of business
that day. These "late day" agreements are intended to permit investors placing
orders with third parties to place orders up to the same time as other
investors.

HOW ARE THE FUNDS SOLD?

Under the Distributor's Contract with the Funds, the Distributor (ICC
Distributors, Inc.) offers Shares on a continuous, best-efforts basis. ICC
Distributors, Inc. is a Delaware corporation organized in August 1995, and is
the principal distributor for a number of investment companies. In connection
with any sale, the Distributor may from time to time offer certain items of
nominal value to any shareholder or investor.

SUBSCRIPTIONS

Under normal circumstances, a Fund will sell Shares by check or wire
transfer of funds, as described in the Prospectuses. Shareholders may opt to
subscribe to a Fund in whole or in part by a contribution of readily available
marketable securities to a Portfolio of a Fund.

SUPPLEMENTAL PAYMENTS

Investment professionals who initiate and are responsible for purchases of
$1 million or more may be paid fees out of the assets of the Distributor (but
not out of Fund assets). Securities laws may require certain investment
professionals such as depository institutions to register as dealers. The
Distributor may pay dealers an amount up to 4.0% of the net asset value of Class
B Shares and 1.0% of the net asset value of Class C Shares purchased by their
clients or customers as an advance payment. These payments will be made directly
by the Distributor from its assets, and will not be made from the assets of a
Fund. Dealers may voluntarily waive receipt of all or any portion of these

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<PAGE>

advance payments. The Distributor may pay all or a portion of the distribution
fee discussed above to investment professionals that waive all or any portion of
the advance payments.

DISTRIBUTION AND SERVICES PLANS

Under a distribution and services plan adopted in accordance with Rule
12b-1 of the 1940 Act, Class A Shares, Class B Shares and Class C Shares are
subject to a distribution plan (Distribution Plan), and to a service plan
(Service Plan).

Under the Distribution Plan, Class A Shares will pay a fee to the
Distributor in an amount computed at an annual rate of 0.25% of the average
daily net assets of a Fund represented by Class A Shares. Class B Shares and
Class C Shares will pay a fee to the Distributor in an amount computed at an
annual rate of 0.75% of the average daily net assets of a Fund represented by
Class B Shares and Class C Shares. The Distributor uses these fees to finance
any activity which is principally intended to result in the sale of Class A
Shares, Class B Shares and Class C Shares of a Fund subject to the Distribution
Plan. Because distribution fees to be paid by a Fund to the Distributor may not
exceed an annual rate of 0.25% of Class A Shares and 0.75% of Class B Shares'
and Class C Shares' average daily net assets, it will take the Distributor a
number of years to recoup the expenses, including payments to other dealers, it
has incurred for its sales services and distribution-related support services
pursuant to the Distribution Plan. The Distribution Plan is a compensation-type
plan. As such, a Fund makes no payments to the Distributor except as described
above. Therefore, a Fund does not pay for unreimbursed expenses of the
Distributor, including amounts expended by the Distributor in excess of amounts
received by it from a Fund, interest, carrying or other financing charges in
connection with excess amounts expended, or the Distributor's overhead expenses.
However, the Distributor may be able to recover such amounts or may earn a
profit from payments made by shares under the Distribution Plan.

Under the Service Plan, each Fund pays to ICC Distributors, Inc. for the
provision of certain services to the holders of Class B Shares and Class C
Shares a fee computed at an annual rate of 0.25% of the average daily net assets
of each such class of shares. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund, providing reports and other information to
shareholders and investment professionals, and services related to the
maintenance of shareholder accounts, and other services. ICC Distributors, Inc.
determines the amounts to be paid to investment professionals, the schedules of
such fees and the basis upon which such fees will be paid.

Furthermore, with respect to Class A Shares, Class B Shares and Class C
Shares, the Distributor may offer to pay a fee from its own assets to financial
institutions as financial assistance for providing substantial sales services,
distribution related support services, or shareholder services.

REDEMPTION

The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC so that valuation of the net assets of the Fund is not
reasonably practicable.

Under normal circumstances, the Fund will redeem Shares by check or by
wire transfer of funds, as described in the Prospectuses. However, if the Board
of Directors determines that it would be in the best interests of the remaining
shareholders, the Fund will make payment of the redemption price in whole or in
part by a distribution of readily marketable securities from the portfolio of
the Fund in lieu of cash, in conformity with applicable rules of the SEC. If
Shares are redeemed in kind, the redeeming shareholder will incur brokerage
costs in later converting the assets into cash. The method of valuing portfolio
securities is described under "What Do Shares Cost?," and such valuation will be
made as of the same time the redemption price is determined. The Fund, however,
has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which it
is obligated to redeem

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<PAGE>

Shares solely in cash up to the lesser of $250,000 or 1% of its net asset value
during any 90-day period for any one shareholder.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

Each share of a Fund or class shall have equal rights with each other share
of that Fund or class with respect to the assets of the Corporation pertaining
to that Fund or class. Upon liquidation of a Fund, shareholders of each class
are entitled to share pro rata in the net assets of the Fund available for
distribution to their class.

Shareholders of a Fund are entitled to one vote for each full share held
and to a fractional vote for fractional shares. Shareholders in each Fund
generally vote in the aggregate and not by class, unless the law expressly
requires otherwise or the Directors determine that the matter to be voted upon
affects only the interests of shareholders of a particular Fund or class of
shares. The voting rights of shareholders are not cumulative. Shares have no
preemptive or conversion rights (other than the automatic conversion of Class B
Shares into Class A Shares as described in the Prospectuses) Shares are fully
paid and nonassessable by the Corporation. It is the intention of the
Corporation not to hold meetings of shareholders annually. The Directors of the
Corporation may call meetings of shareholders for action by shareholder vote as
may be required by the 1940 Act or as may be permitted by the Articles of
Incorporation or By-laws.

Directors may be removed by the Board or by shareholders at a special
meeting. A special meeting of shareholders will be called by the Board upon the
written request of shareholders who own at least 10% of the Corporation's
outstanding shares of all series entitled to vote.

The Corporation's Articles of Incorporation provide that the presence in
person or by proxy of the holders of record of one-third of the shares
outstanding and entitled to vote shall constitute a quorum at all meetings of
shareholders of a Fund, except as otherwise required by applicable law. The
Articles of Incorporation further provide that all questions shall be decided by
a majority of the votes cast at any such meeting at which a quorum is present,
except as otherwise required by applicable law.

The Corporation's Articles of Incorporation provide that, at any meeting of
shareholders of a Fund or Class, a financial intermediary may vote any shares as
to which that financial intermediary is the agent of record and which are
otherwise not represented in person or by proxy at the meeting, proportionately
in accordance with the votes cast by holders of all shares otherwise represented
at the meeting in person or by proxy as to which that financial intermediary is
the agent of record. Any shares so voted by a financial intermediary are deemed
represented at the meeting for purposes of quorum requirements.

Shareholders owning 25% or more of outstanding Shares may be in control and
be able to affect the outcome of certain matters presented for a vote of
shareholders.

Interests in a Fund have no preference, preemptive, conversion or similar
rights and are fully paid and non-assessable. The Funds are not required to hold
annual meetings of investors, but will hold special meetings of investors when,
in the judgment of its Directors, it is necessary or desirable to submit matters
for an investor vote. Each investor is entitled to a vote in proportion to the
share of its investment in a Fund.

The Funds are organized as series of an open-end investment company and are
organized as a Maryland corporation. Each Fund currently invests its assets
directly in securities. In the future, upon approval by a majority vote of the
Board of Directors, each Fund may be reorganized into a master-feeder structure.
Each Fund would then become a "feeder fund" investing all of its assets in a
corresponding "Master Portfolio." Should the Directors approve the
reorganization, each Fund and its Master Portfolio would have the same
investment objective.

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<PAGE>

TAX INFORMATION

FEDERAL TAXES

Each Fund intends to meet the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, (the "Code") applicable to regulated
investment companies. If these requirements are not met, it will not receive
special tax treatment and will pay federal, and possibly state and local,
corporate income tax on its net income, and distributions to shareholders will
be taxed as ordinary dividend income to the extent of each Fund's earnings and
profits. The Board reserves the right not to maintain the qualification of a
Fund as a regulated investment company if it determines such course of action to
be beneficial to shareholders.

Each Fund will be treated as a single, separate entity for federal income
tax purposes so that income earned and capital gains and losses realized by the
Corporation's other Funds will be separate from those realized by the Fund.

In order to qualify as a RIC, a Fund must meet certain income and asset
requirements and must distribute at least 90% of its investment company taxable
income (that generally includes dividends, taxable interest, and the excess of
net short-term capital gains over net long-term capital losses less operating
expenses, but determined without regard to the deduction for dividends paid) and
at least 90% of its net tax-exempt interest income for each tax year, if any, to
its shareholders.

In addition, to avoid federal excise taxes, the Code requires that a Fund
distribute to shareholders by December 31 of each year at least 98% of its
taxable ordinary income earned during the calendar year and at least 98% of its
capital gain net income earned during the 12 month period ending October 31;
plus 100% of any undistributed amounts from the prior year. The Funds intend to
make sufficient distributions to avoid these excise taxes, but can give no
assurances that all taxes will be eliminated.

Each Fund intends to distribute at least annually to its shareholders
substantially all of its net investment income and realized net capital gains.

The Funds will inform you of the amount of your distributions at the time
they are paid, and will advise you of their tax status for federal income tax
purposes shortly after the close of each calendar year. If you have not held
fund shares for a full year the a Fund may designate and distribute to you as
ordinary income a percentage of income that is not equal to the actual amount of
such income earned during the period of your investment in the Fund.

Because the Funds' income is expected to be derived primarily from
investments in foreign rather than domestic U.S. securities, the Funds
anticipate that no portion of their distributions will generally be eligible for
the dividends-received deduction.

FOREIGN INVESTMENTS

If a Fund purchases foreign securities, their investment income may be
subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which a Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of a Fund's assets to be invested within various countries is
uncertain. However, each Fund intends to operate so as to qualify for
treaty-reduced tax rates when applicable.

If a Fund invests in futures contracts, options, and certain other complex
investments (including the stock of certain foreign corporations that may
constitute Passive Foreign Investment Companies (PFIC)), the Fund may be subject
to special tax rules. In a given case, these rules may accelerate income to a
Fund, defer its losses, convert

35
<PAGE>

short-term capital losses into long-term capital losses, or otherwise affect the
character or amount of a Fund's net income. In turn, these rules may affect the
amount, timing or character of the income distributed to you by a Fund.

If more than 50% of the value of a Fund's assets at the end of the tax year
is represented by stock or securities of foreign corporations, it intends to
qualify for certain Code stipulations that would allow the Fund to elect to
pass-through the pro-rata share of foreign taxes paid by the Fund to
shareholders, who may be able to claim a foreign tax credit or deduction on
their U.S. income tax returns. The Code may limit a shareholder's ability to
claim a foreign tax credit. Shareholders who elect to deduct their portion of
the Fund's foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.

STATE TAXES

Each Fund may be subject to state or local taxes in jurisdictions in which
that Fund is deemed to be doing business. In addition, the treatment of a Fund
and its shareholders for state and local tax purposes might differ from
treatment under the federal income tax laws. Shareholders should consult their
own tax advisors regarding state or local taxes affecting their investment in a
Fund.

By law, a Fund must withhold 31% of your taxable distributions and proceeds
if you do not provide your correct social security or taxpayer identification
number, or if the IRS instructs a Fund to do so.

TAX TREATMENT OF REINVESTMENTS

Generally, a reinvestment of the proceeds of a redemption of shares in a
Fund will not alter the federal income tax status of any capital gain realized
on the redemption of the shares. However, any loss on the disposition of the
shares in a Fund will be disallowed to the extent shares of the same Fund are
purchased within a 61-day period beginning 30 days before and ending 30 days
after the disposition of shares. Further, if the proceeds are reinvested within
90 days after the redeemed shares were acquired, the sales charge imposed on the
original acquisition, to the extent of the reduction in the sales charge on the
reinvestment, will not be taken into account in determining gain or loss on the
disposition of the original shares, but will be treated instead as incurred in
connection with the acquisition of the replacement shares and will be added to
the tax basis of such shares..

WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?

OFFICERS AND BOARD OF DIRECTORS OF THE COMPANY

The Directors of the Corporation and their executive officers are
responsible for managing the Corporation's business affairs and for exercising
all the Corporation powers except those reserved for the shareholders.

The Directors and executive officers of the Fund, their respective dates of
birth and their principal occupations during the last five years are set forth
below. Unless otherwise indicated, the address of each Director and executive
officer is One South Street, Baltimore, Maryland 21202.

RICHARD R. BURT, Director (2/3/47)

IEP Advisors, LLP, 1275 Pennsylvania Avenue, NW, 10th Floor, Washington, DC
20004. Chairman, IEP Advisors, Inc.; Chairman of the Board, Weirton Steel
Corporation; Member of the Board, Archer Daniels Midland Company (agribusiness
operations), Hollinger International, Inc. (publishing), Homestake Mining
(mining and exploration), HCL Technologies (information technology) and Anchor
Technologies (gaming software and equipment); Director, Mitchell Hutchins family
of funds (registered investment companies); and Member, Textron Corporation
International Advisory Council. Formerly, Partner, McKinsey & Company
(consulting), 1991-1994; U.S. Chief Negotiator in Strategic Arms Reduction Talks
(START) with former Soviet Union and U.S. Ambassador to the Federal Republic of
Germany, 1985-1989.

36
<PAGE>

*RICHARD T. HALE, Director/President (7/17/45)

Managing Director, DB Alex. Brown LLC (formerly BT Alex. Brown Incorporated);
Deutsche Asset Management Americas; Director and President, Investment Company
Capital Corp. (registered investment advisor). Director and President, Deutsche
Asset Management Mutual Funds (registered investment companies). Chartered
Financial Analyst. Formerly, Director, ISI Family of Funds (registered
investment companies).

JOSEPH R. HARDIMAN, Director (5/27/37)

8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor and
Capital Markets Consultant; Director, Wit Capital Group (registered broker
dealer), Corvis Corporation, (optical networks)The Nevis Fund (registered
investment company), Brown Investment Advisory & Trust Company, and ISI Family
of Funds (registered investment companies). Formerly, Director, Circon Corp.
(medical instruments), November 1998-January 1999; President and Chief Executive
Officer, The National Association of Securities Dealers, Inc. and The NASDAQ
Stock Market, Inc., 1987-1997; Chief Operating Officer of Alex. Brown & Sons
Incorporated, (now DB Alex.Brown LLC), 1985-1987; General Partner,
Alex. Brown & Sons Incorporated (now DB Alex. Brown LLC), 1976-1985; Director,
Flag Investors Emerging Growth Fund, Inc. and Flag Investors Short-Intermediate
Income Fund, Inc. (registered investment companies).

LOUIS E. LEVY, Director (11/16/32)

26 Farmstead Road, Short Hills, New Jersey 07078. Director, Household
International (banking and finance) and ISI Family of Funds (registered
investment companies). Formerly, Chairman of the Quality Control Inquiry
Committee, American Institute of Certified Public Accountants, 1992-1998;
Trustee, Merrill Lynch Funds for Institutions, 1991-1993; Adjunct Professor,
Columbia University-Graduate School of Business, 1991-1992; Director,
Kimberly-Clark Corporation, retired 2000 and Partner, KPMG Peat Marwick,
retired 1990.

EUGENE J. McDONALD, Director (7/14/32)

Duke University, Investment Counsel, 2200 West Main Street, Suite 240, Durham,
North Carolina, 27705. Executive Vice President, Investment Counsel, Duke
University; Director, Victory Funds (registered investment companies);; Lead
Director, National Commerce Bank Corporation (NCBC) (banking); and Chairman,
Winston Hedged Equity Group. Formerly, Executive Vice Chairman and Director,
Central Carolina Bank & Trust (banking); Director, AMBAC Treasurers Trust
(registered investment company), DP Mann Holdings (insurance) and ISI Family of
Funds (registered investment companies); President, Duke Management Company
(investments); Executive Vice President, Duke University (education, research
and health care).

REBECCA W. RIMEL, Director (4/10/51)

The Pew Charitable Trusts, One Commerce Square, 2005 Market Street, Suite 1700,
Philadelphia, Pennsylvania 19103-7017. President and Chief Executive Officer,
The Pew Charitable Trusts (charitable foundation); and Director and Executive
Vice President, The Glenmede Trust Company (investment trust and wealth
management). Formerly, Executive Director, The Pew Charitable Trusts and
Director, ISI Family of Funds (registered investment companies).

*TRUMAN T. SEMANS, Director 10/27/26)

Brown Investment Advisory & Trust Company, 19 South Street, Baltimore, MD 21202.
Vice Chairman, Brown Investment Advisory & Trust Company (formerly, Alex.Brown
Capital Advisory & Trust Company), Director and Chairman, Virginia Hot Springs,
Inc. (property management), and Director of Argonex (biotechnology). Formerly,
Managing Director and Vice Chairman, Alex. Brown & Sons Incorporated
(now DB Alex.Brown LLC); Director,

37
<PAGE>

Investment Company Capital Corp. (registered investment advisor) and Director,
ISI Family of Funds (registered investment companies).

CARL W. VOGT, Esq., Director (4/20/36)

Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington, D.C.
20004-2604. Senior Partner, Fulbright & Jaworski L.L.P. (law); Director, Yellow
Corporation (trucking), American Science & Engineering (x-ray detection
equipment), and ISI Family of Funds (registered investment companies). Formerly,
Chairman and Member, National Transportation Safety Board; Director, National
Railroad Passenger Corporation (Amtrak); Member, Aviation System Capacity
Advisory Committee (Federal Aviation Administration); Interim President of
Williams College and President, Flag Investors Family of Funds (registered
investment companies).

ROBERT H. WADSWORTH, Director (1/29/40)

4455 E. Camelback Road, Suite 261 E., Phoenix, Arizona 85018. President,
Investment Company Administration LLC, President, Trustee, Trust for Investment
Managers (registered investment company) and President, Director, First Fund
Distributors, Inc. (registered broker-dealer); Director, The Germany Fund, Inc.,
The New Germany Fund, Inc., The Central European Equity Fund, Inc., and Vice
President, Professionally Managed Portfolios and Advisors Series Trust
(registered investment companies). Formerly, President, Guinness Flight
Investment Funds, Inc. (registered investment companies).

AMY M. OLMERT, Secretary (5/14/63)

Director, Deutsche Asset Management; Certified Public Accountant. Formerly, Vice
President, BT Alex. Brown Incorporated, (now DB Alex. Brown LLC), 1997-1999;
Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP),
1992-1997.

DANIEL O. HIRSCH, Assistant Secretary (3/27/54)

Director, Deutsche Asset Management. Formerly, Principal, BT Alex. Brown
Incorporated, (now DB Alex. Brown), 1998-1999; Assistant General Counsel, United
States Securities and Exchange Commission, 1993-1998.

CHARLES A. RIZZO, Treasurer (8/5/57)

Director, Deutsche Asset Management; Certified Public Accountant; Certified
Management Accountant. Formerly, Vice President and Department Head, BT Alex.
Brown Incorporated (now DB Alex. Brown LLC), 1998-1999; Senior Manager, Coopers
& Lybrand L.L.P. (now PricewaterhouseCoopers LLP), 1993-1998.

------------------------------

* Messrs. Semans and Hale are directors who are "interested persons" as defined
in the Investment Company Act.

Directors and officers of the Funds are also directors and officers of some or
all of the other investment companies managed, advised, or administered by
Investment Company Capital Corporation ("ICCC") or its affiliates. There are
currently 25 funds in the Flag Investors Funds and Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as
Chairman of six funds and as Director of 18 other funds in the Fund Complex. Mr.
Hale serves as Chairman of three funds and as President of 22 other funds in the
Fund Complex. Ms. Rimel and Messrs. Burt, Vogt, Levy, McDonald and Wadsworth
serve as Directors of each fund in the Fund Complex. Mr. Hardiman serves a
Director of each fund (except Flag Investors Emerging Growth Fund, Inc. and Flag
Investors Short-Intermediate Income Fund, Inc.) in the Fund Complex. Mr. Rizzo
serves as Treasurer, Ms. Olmert serves as Secretary and Mr. Hirsch serves as
Assistant Secretary, of each of the funds in the Fund Complex.

38
<PAGE>

The Corporation does not require employees, and none of the executive officers
devotes full time to the affairs of the Corporation or receives any compensation
from a Fund.

Some of the Directors of the Corporation are customers of, and have had normal
brokerage transactions with, DB Alex. Brown LLC in the ordinary course of
business. All such transactions were made on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated persons.
Additional transactions may be expected to take place in the future.

Officers of the Corporation receive no direct remuneration in such capacity from
the Corporation. Officers and Directors of the Corporation who are officers or
directors of ICCC or its affiliates may be considered to have received
remuneration indirectly. As compensation for his or her services, each Director
who is not an "interested person" of the Corporation (as defined in the 1940
Act) (an "Independent Director") receives an aggregate annual fee (plus
reimbursement for reasonable out-of-pocket expenses incurred in connection with
his or her attendance at board and committee meetings) from each fund in the
Fund Complex for which he or she serves. In addition, the Chairmen of the Fund
Complex's Audit Committee and Executive Committee receive an annual fee from the
Fund Complex. Payment of such fees and expenses is allocated among all such
funds described above in direct proportion to their relative net assets.

The following table shows the aggregate compensation payable to each of the
Corporation's Directors by the Corporation and the Fund Complex, respectively,
and pension or retirement benefits accrued as part of the Corporation's expenses
for the Corporation's fiscal year ended August 31, 2000. As of March 28, 2000
the Corporation joined the Flag Fund Complex, as described below.

<TABLE>
<CAPTION>
AGGREGATE
PENSION OR COMPENSATION
AGGREGATE RETIREMENT PAYABLE FROM
NAME COMPENSATION BENEFITS THE
PAYABLE FROM ACCRUED AS CORPORATION,
POSITION WITH CORPORATION THE PART OF FUND ANDTHE FUND
CORPORATION EXPENSES COMPLEX
-------------------------------------------------------------------------------------------------------------
<S> <C>
RICHARD R. BURT (1)
DIRECTOR (3)

JOSEPH R. HARDIMAN
DIRECTOR (3)

LOUIS E. LEVY
DIRECTOR (3)

EUGENE J. MCDONALD
DIRECTOR (3)

REBECCA W. RIMEL (3)
DIRECTOR

TRUMAN T. SEMANS*
DIRECTOR $0

RICHARD T. HALE*
DIRECTOR/ PRESIDENT $0
</TABLE>

39
<PAGE>

<TABLE>
<S> <C>
(since December 19, 2000)

CARL W. VOGT (4) (3)
DIRECTOR

ROBERT H. WADSWORTH (1) (3)
DIRECTOR

EDWARD SCHMULTS (2) N/A

WERNER WALBROEL (2) N/A
</TABLE>

--------------------------
* Messrs. Hale and Semans are directors who are "interested persons" as
defined in the Investment Company Act.
(1) Messrs. Burt and Wadsworth were trustees of the original Deutsche Funds and
subsequently became directors of Flag Investors Funds, Inc.
(2) Mr. Walbroel resigned as Director effective March 22, 2000. Mr. Schmults
completed his term as Director effective March 22, 2000.
(3) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described below. The actuarially computed pension expense for the Funds for the
year ended December 31, 1999 was approximately $1,189.
(4) Formerly, President of the Funds. Mr. Vogt was elected as Director for the
Funds on December 19, 2000.

The Fund Complex has adopted a Retirement Plan for Directors who are not
employees of the Corporation, a Corporation's Administrator or its respective
affiliates (the "Directors Retirement Plan"). After completion of six years of
service, each participant in the Directors Retirement Plan will be entitled to
receive an annual retirement benefit equal to a percentage of the fee earned by
the participant in his or her last year of service. Upon retirement, each
participant will receive annually 10% of such fee for each year that he or she
served after completion of the first five years, up to a maximum annual benefit
of 50% of the fee earned by the participant in his or her last year of service.
The fee will be paid quarterly, for life, by each fund for which he or she
serves. The Directors Retirement Plan is unfunded and unvested. Such fees are
allocated to each fund in the Flag Fund Complex based upon the relative net
assets of such fund to the Flag Fund Complex. As of December 31, 2000 Messrs.
McDonald and Levy have qualified for, but have not received, benefits.

Set forth in the table below are the estimated annual benefits payable to a
Participant upon retirement assuming various years of service and payment of a
percentage of the fee earned by such Participant in his or her last year of
service, as described above. The approximate credited years of service at
December 31, 2000 are as follows: for Mr. McDonald, 8 years; for Mr. Levy, 6
years; for Ms. Rimel and Mr. Vogt, 5 years; for Mr. Hardiman, 2 years; and for
Mr. Burt and Mr. Wadsworth, 1 year.

<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND COMPLEX UPON RETIREMENT
YEARS OF SERVICE CHAIRMEN OF AUDIT AND EXECUTIVE COMMITTEES OTHER PARTICIPANTS
---------------- ----------------------------------------------------------------- ------------------
<S> <C> <C>
6 years $4,900 $3,900

7 years $9,800 $7,800

8 years $14,700 $11,700

9 years $19,600 $15,600

10 years or more $24,500 $19,500
</TABLE>

40
<PAGE>

Any Director who receives fees from the Corporation is permitted to defer 50% to
100% of his or her annual compensation pursuant to a Deferred Compensation Plan.
Messrs. Levy, McDonald, Burt, Wadsworth, and Ms. Rimel have each executed a
Deferred Compensation Agreement. Currently, the deferring Directors may select
from among various Flag Investors funds and Deutsche Banc Alex. Brown Cash
Reserve Fund, Inc. in which all or part of their deferral account shall be
deemed to be invested. Distributions from the deferring Directors' deferral
accounts will be paid in cash, in generally equal quarterly installments over a
period of ten years.

CODES OF ETHICS

The Board of Directors of the Corporation has adopted a Code of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Corporation's Code permits access
persons to engage in personal trading provided that the access persons comply
with the provisions of the Advisors' Code of Ethics, as applicable, and requires
that each of these Codes be approved by the Board of Directors. In addition, the
Corporation's Code contains reporting requirements applicable to Independent
Directors of the Corporation. ICCC has adopted a Code of Ethics pursuant to Rule
17j-1 under the 1940 Act. The Code permits access persons to invest in
securities that may be purchased or held by the Corporation for their own
accounts, but requires compliance with the Code's preclearance requirements. In
addition, the Code provides for trading "blackout periods" that prohibit trading
by access persons within periods of trading by a Fund in the same security,
subject to certain exceptions. The Code also prohibits short term trading
profits and personal investment in initial public offerings. The Code requires
prior approval with respect to purchases of securities in private placements.

DWS has adopted a Code of Ethics pursuant to Rule 17j-1 under the 1940 Act.
DWS's Code permits access persons to trade securities that may be purchased or
held by the Funds but prohibits front-running, frequent buying and selling, and
purchase of restricted list securities without prior approval. DWS's Code also
requires prior approval for personal investments in initial public offerings and
prohibits investments in private placements.

ICC Distributors, Inc., is not required to adopt a Code of Ethics as it
meets the exception provided by Rule 17j-1(c)(3) under the 1940 Act.

The Codes of the Corporation, the Advisor and Sub-Advisor are on public
file with, and are available from , the SEC.

ADVISOR AND SUB-ADVISOR

ICCC, the investment advisor is an indirect subsidiary of Deutsche Bank AG.
Deutsche Bank is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual funds,
retail and commercial banking, investment banking and insurance. DWS is the
investment sub-advisor. ICCC also serves as investment advisor to other funds in
the Flag Investors family of funds.

Until recently, the Glass-Steagall Act and other applicable laws generally
prohibited banks (including foreign banks having U.S. operations, such as
Deutsche Bank) from engaging in the business of underwriting or distributing
securities in the United States, and the Board of Governors of the Federal
Reserve System interpreted these laws as prohibiting a bank holding company
registered under the Federal Bank Holding Company Act (or a foreign bank subject
to such Act's provisions) or certain subsidiaries thereof from sponsoring,
organizing, or controlling a registered open-end investment company continuously
engaged in the issuance of its shares, such as the Corporation, but not
prohibiting a holding company (or such a foreign bank) or a subsidiary thereof
from acting as investment advisor and custodian to such an investment company.
Recent changes in federal statutes and regulations concerning the permissible
activities of banks or trust companies, and future judicial and administrative
decisions and interpretations of the changes to federal statutes and
regulations, will repeal most, if not all, of these prohibitions over the next
year, when the changes take effect.

41
<PAGE>

Under the Advisory Agreement, ICCC obtains and evaluates economic,
statistical and financial information to formulate and implement investment
policies for each Fund. ICCC has delegated this responsibility to DWS, provided
that ICCC continues to supervise the performance of DWS and report thereon to
the Corporation's Board of Directors. Any investment program undertaken by ICCC
or DWS will at all times be subject to policies and control of the Corporation's
Board of Directors. Neither ICCC nor DWS shall be liable to a Fund or its
shareholders for any act or omission by ICCC or DWS or any losses sustained by
the Fund or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty. The services of ICCC and
DWS to the Funds are not exclusive and ICCC and DWS are free to render similar
services to others.

As compensation for its services to each of the Funds, ICCC is entitled to
receive an annual fee based on such Funds' average daily net assets. This fee is
calculated daily and paid monthly, according to the following schedule of annual
rates:

Average Daily Net Assets Fee

As compensation for its services to each of the Funds, DWS is entitled to
receive a fee from ICCC, payable from its advisory fee based on the Funds'
average daily net assets. This fee is calculated daily and paid monthly,
according to the following schedule of annual rates:

Average Daily Net Assets Fee

The Advisory Agreement and the Sub-Advisory Agreement will continue for an
initial term of two years, and thereafter, from year to year if such continuance
is specifically approved at least annually by the Corporation's Board of
Directors, including a majority of the Independent Directors who have no direct
or indirect financial interest in such agreements, with such Independent
Directors casting votes in person at a meeting called for such purpose, or by a
vote of a majority of the outstanding Shares (as defined under "Capital Stock").
The Fund or ICCC may terminate the Advisory Agreement on 60 days' written notice
without penalty. The Advisory Agreement will terminate automatically in the
event of assignment (as defined in the 1940 Act). The Sub-Advisory Agreement has
similar termination provisions.

ICCC also serves as the Corporation's transfer and dividend disbursing
agent and provides accounting services to the Corporation. An affiliate of ICCC
serves as the Corporation's custodian. (See "Custodian, Transfer Agent and
Accounting Services.")

ADMINISTRATOR
ICCC serves as Administrator of the Funds. The Administrative Services
Appendix to the Master Services Agreement provides that the Administrator, in
return for its fee, will (a) supervise and manage all aspects of each Fund's
operations; (b) provide the Fund with such executive, administrative, clerical
and bookkeeping services as are deemed advisable by the Corporation's Board of
Directors; (c) provide each Fund with, or obtain for it, adequate office space
and all necessary office equipment and services including all items for any
offices as are deemed advisable by the Corporation's Board of Directors; (d)
supervise the operations of the Coimpany's transfer and dividend disbursing
agent; and (e) arrange, but not pay for, the periodic updating of prospectuses
and supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and State Blue Sky
authorities.

Under the Administrative Services Appendix to the Master Services
Agreement, the Funds pay ICCC an annual fee based on each Fund's average daily
net assets. This fee is calculated and accrued daily and the amounts of the
daily accruals are paid monthly, at the annual rate of 0.15% of the Fund's
average daily net assets. The Administrator may from time to time voluntarily
waive a portion of its administrative services fee.

42
<PAGE>

The Administrative Services Appendix to the Master Services Agreement may
be terminated at any time, on waivable written notice within 60 days and without
any penalty, by vote of the Fund's Board of Directors or by the Administrator.
The agreement automatically terminates in the event of its assignment.

The Administrative Services Appendix to the Master Services Agreement
obligates the Administrator to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing the
services provided for under the agreement, but the Administrator is not liable
for any act or omission which does not constitute willful misfeasance, bad faith
or gross negligence on the part of the Administrator.

BROKERAGE TRANSACTIONS

DWS is responsible for decisions to buy and sell securities for the Funds, for
broker-dealer selection and for negotiation of commission rates, subject to the
supervision of ICCC. Purchases and sales of securities on a securities exchange
are effected through broker-dealers who charge a commission for their services.
Brokerage commissions are subject to negotiation between DWS and the
broker-dealers. DWS may direct purchase and sale orders to any broker-dealer,
including, to the extent and in the manner permitted by applicable law, its
Advisor's affiliates and ICC Distributors.

In over-the-counter transactions, orders are placed directly with a principal
market maker and such purchases normally include a mark up over the bid to the
broker-dealer based on the spread between the bid and asked price for the
security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. A Fund will not deal with
affiliates of the Advisors in any transaction in which they act as a principal,
except as may be permitted by law.

If affiliates of the Advisors are participating in an underwriting or selling
group, the Funds may not buy portfolio securities from the group except in
accordance with rules of the SEC. Each Fund believes that the limitation will
not affect its ability to carry out its present investment objective.

DWS's primary consideration in effecting securities transactions is to obtain
best price and execution of orders on an overall basis. As described below,
however, DWS may, in its discretion, effect transactions with broker-dealers
that furnish statistical, research or other information or services which are
deemed by DWS to be beneficial to a Fund's investment program. Certain research
services furnished by broker-dealers also may be useful to DWS with clients
other than the Funds. Similarly, any research services received by DWS through
placement of portfolio transactions of other clients may be of value to DWS in
fulfilling its obligations to the Funds. Although DWS's policies and procedures
may not produce mathematical precision in the allocation of the costs of these
services with respect to individual purchases and sales of securities to each
account, its policies are reasonably intended to produce fairness over time such
that each account will bear its proportionate share of costs to pay for such
research services and benefits, consistent with DWS's duty to seek best
execution and best price obtainable under the circumstances in light of DWS's
overall responsibilities for all accounts under its management. In
over-the-counter transactions, DWS will not pay any commission or other
remuneration for research services. Subject to periodic review by the
Corporation's Board of Directors, DWS is also authorized to pay broker-dealers
other than affiliates of the Advisors higher commissions than another broker
might have charged on brokerage transactions for a Fund for brokerage or
research services. The allocation of orders among broker-dealers and the
commission rates paid by the Funds will be reviewed periodically by the Board.
The foregoing policy under which a Fund may pay higher commissions to certain
broker-dealers in the case of agency transactions, does not apply to
transactions effected on a principal basis.

Subject to the above considerations, the Board of Directors has authorized the
Funds to effect portfolio transactions through affiliates of the Advisors. At
the time of such authorization, the Board adopted certain policies and
procedures incorporating the standards of Rule 17e-1 under the 1940 Act, which
requires that the commissions paid affiliates of the Advisors must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities

43
<PAGE>

during a comparable period of time." Rule 17e-1 also contains requirements for
the review of such transactions by the Board of Directors and requires ICCC and
DWS to furnish reports and to maintain records in connection with such reviews.

Each Fund is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) which the Fund has acquired
during its most recent fiscal year.

CAPITAL STOCK

Under the Corporation's Articles of Incorporation, the Corporation is authorized
to issue ___ million Shares of common stock, par value of $.001 per share. The
Board of Directors may increase or decrease the number of authorized Shares
without shareholder approval.

The Corporation's Articles of Incorporation provide for the establishment of
separate series or separate classes of Shares by the Directors at any time
without shareholder approval. The Corporation currently has five series and the
Board has designated various classes of shares for each series. This Statement
of Additional Information describes: Global Financial Services Fund Class A, B,C
and Institutional Shares, Global Biotechnology Fund Class A, B,C and
Institutional Shares and Global Technology Fund Class A, B,C and Institutional
Shares. In the event separate series or classes are established, all Shares of
the Corporation, regardless of series or class, would have equal rights with
respect to voting, except that with respect to any matter affecting the rights
of the holders of a particular series or class, the holders of each series or
class would vote separately. Each such series would be managed separately and
shareholders of each series would have an undivided interest in the net assets
of that series. For tax purposes, each series would be treated as a separate
entity. Generally, each class of Shares issued by a particular series would be
identical to every other class and expenses of the Corporation (other than 12b-1
and any applicable service fees) are prorated between all classes of a series
based upon the relative net assets of each class. Any matters affecting any
class exclusively would be voted on by the holders of such class.

Shareholders of the Corporation do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding Shares voting together
for election of Directors may elect all the members of the Board of Directors of
the Corporation. In such event, the remaining holders cannot elect any members
of the Board of Directors of the Corporation.

There are no preemptive, conversion or exchange rights applicable to any of the
Shares. The Corporation's issued and outstanding Shares are fully paid and
non-assessable. In the event of liquidation or dissolution of the Corporation,
each Share is entitled to its portion of the Corporation's assets (or the assets
allocated to a separate series of shares if there is more than one series) after
all debts and expenses have been paid.

As used in this Statement of Additional Information the term "majority of the
outstanding Shares" means the vote of the lesser of (i) 67% or more of the
Shares present at the meeting if the holders of more than 50% of the outstanding
Shares are present or represented by proxy, or (ii) more than 50% of the
outstanding Shares.

CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES

Investors Bank & Trust Company ("IBT Co.") is custodian for the securities and
cash of each Funds' assets. Foreign instruments purchased by the Funds are held
by various sub-custodial arrangements employed by IBT Co. Investment Company
Capital Corp., One South Street, Baltimore, Maryland 21202, has been retained to
act as transfer and dividend disbursing agent. As compensation for providing
these services, the Corporation pays ICCC up to $16.068 per account per year,
plus reimbursement for out-of-pocket expenses incurred in connection therewith.

44
<PAGE>

ICCC also provides certain accounting services to the Corporation. As
compensation for these services, ICCC receives an annual fee, calculated daily
and paid monthly as shown below.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS INCREMENTAL ANNUAL ACCOUNTING FEE
<S> <C> <C>
0 - $10,000,000 $25,000 (fixed fee)
$10,000,000 - $25,000,000 0.080%
$25,000,000 - $50,000,000 0.060%
$50,000,000 - $75,000,000 0.040%
$75,000,000 - $100,000,000 0.035%
$100,000,000 - $500,000,000 0.017%
$500,000,000 - $1,000,000,000 0.006%
over $1,000,000,000 0.002%
</TABLE>

In addition, the Corporation will reimburse ICCC for the following out-of-pocket
expenses incurred in connection with ICCC's performance of its services under
the Master Services Agreement: express delivery service, independent pricing and
storage.

SEMI-ANNUAL REPORTS AND ANNUAL REPORTS

The Fund furnishes shareholders with semi-annual reports and annual reports
containing information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
financial statements are audited by the Corporation's independent accountants.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP , 250 West Pratt Street, Baltimore, Maryland 21201,
serves as independent accountants to the Corporation.

LEGAL MATTERS

Morgan, Lewis & Bockius LLP serves as counsel to the Corporation.

PERFORMANCE INFORMATION

For purposes of quoting and comparing the performance of the Funds to that
of other open-end diversified management investment companies and to stock
or other relevant indices in advertisements or in certain reports to
shareholders, performance will be stated in terms of total return rather
than in terms of yield. The total return quotations, under the rules of the
SEC, must be calculated according to the following formula:

P(1 + T)n = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years (1, 5 or 10)

45
<PAGE>

ERV = ending redeemable value at the end of the 1-, 5- or 10-year periods
(or fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the 1-, 5- or 10-year periods.

Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to use or submission of the advertising for
publication, and will cover one-, five-, and ten-year periods or a shorter
period dating from the effectiveness of the Corporation's registration
statement or the date a Fund began operations (or the later commencement of
operations of a series or class).

Each Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth
above to compare more accurately the Fund's performance with other measures
of investment return. For example, in comparing a Fund's total return with
data published by Lipper, Inc., CDA Investment Technologies Inc.,
Morningstar Inc., or SEI Corporation or with the performance of the
Consumer Price Index, the Standard and Poor's 400 Mid-Cap Stock Index and
other market indices such as NASDAQ and the Wilshire 5000, the Fund
calculates its aggregate and average annual total return for the specified
periods of time by assuming the investment of $10,000 in Shares and
assuming the reinvestment of each dividend or other distribution at net
asset value on the reinvestment date. For this alternative computation, a
Fund assumes that the $10,000 invested in Shares is net of all sales
charges. Each Fund will, however, disclose the maximum sales charges and
will also disclose that the performance data do not reflect sales charges
and that inclusion of sales charges would reduce the performance quoted.
Such alternative total return information will be given no greater
prominence in such advertising than the information prescribed under SEC
rules, and all advertisements containing performance data will include a
legend disclosing that such performance data represent past performance and
that the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.

46
<PAGE>

APPENDIX A

STANDARD & POOR'S

LONG-TERM DEBT RATING DEFINITIONS
AAA--The highest rating assigned by Standard & Poor's. Capacity to pay interest
and repay principal is extremely strong.

AA--A very strong capacity to pay interest and repay principal and differs from
the higher-rated issues only in small degree.

A--A strong capacity to pay interest and repay principal although somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.

BBB--Regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher-rated categories.

BB--Less near-term vulnerability to default than other speculative issues.
However, faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. Also used for debt subordinated to
senior debt that is assigned an actual or implied BBB rating.

B--A greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay interest
and repay principal. Also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

CCC--A currently identifiable vulnerability to default, and dependent upon
favorable business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, not likely to have the capacity to pay
interest and repay principal. Also used for debt subordinated to senior debt
that is assigned an actual or implied B or B rating.

CC--Typically applied to debt subordinated to senior debt that is assigned an
actual or implied CCC debt rating.

C--Typically applied to debt subordinated to senior debt which is assigned an
actual or implied CCC debt rating. May be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are continued.

COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

A-1--Indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1.

SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.

47
<PAGE>

SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.

SP-2--Satisfactory capacity to pay principal and interest.

VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)

MOODY'S INVESTORS SERVICE

LONG-TERM BOND RATING DEFINITIONS
Aaa--Judged to be of the best quality. Carry the smallest degree of investment
risk and are generally referred to as gilt edged. Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa--Judged to be of high quality by all standards. Together with the Aaa group,
comprise what are generally known as high-grade bonds. Rated lower than the best
bonds because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities.

A--Possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa--Considered as medium-grade obligations, (i.e., neither highly protected nor
poorly secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.

Ba--Judged to have speculative elements; future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.

B--Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.

Caa--Of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.

Ca--Represent obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.

C--The lowest-rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.

COMMERCIAL PAPER RATINGS
P-1--A superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structure with
moderate reliance on debt and ample

48
<PAGE>

asset protection, broad margins in earning coverage of fixed financial charges
and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.

P-2--A strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.

MIG1--Best quality. There is present strong protection by established cash
flows, superior liquidity support or demonstrated broad based access to the
market for refinancing.

MIG2--High quality. Margins of protection are ample although not so large as in
the preceding group.

VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.

FITCH IBCA, INC./FITCH INVESTORS SERVICE, L.P.

LONG-TERM DEBT RATING DEFINITIONS
AAA--Considered to be investment grade and of the highest credit quality. The
obligor has an exceptionally strong ability to pay interest and repay principal,
which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher ratings.

BBB--Considered to be investment grade and of satisfactory credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB--Considered speculative. The obligor's ability to pay interest and repay
principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Considered highly speculative. While bonds in this class are currently
meeting debt service requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity throughout the life of
the issue.

49
<PAGE>

CCC--Certain identifiable characteristics which, if not remedied, may lead to
default. The ability to meet obligations requires an advantageous business and
economic environment.

CC--Minimally protected. Default in payment of interest and/or principal seems
probable over time.

C--Imminent default in payment of interest or principal.

SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Regarded as having the strongest
degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Reflect an assurance for timely payment, only
slightly less in degree than issues rated F-1+.

F-2--Good Credit Quality. A satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned F-1+ and F-1
ratings.

COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Regarded as having the strongest degree of assurance
for timely payment.

FITCH-2--(Very Good Grade) Reflect an assurance of timely payment only slightly
less in degree than the strongest issues.

LONG-TERM DEBT RATINGS
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.

NR(1)--Other outstanding debt rated AAA by S&P or Aaa by Moody's.

NR(2)--Other outstanding debt rated AA by S&P or Aa by Moody's.

NR(3)--Other outstanding debt rated A by S&P or Moody's.

OTHER CONSIDERATIONS
Among the factors considered by Moody's in assigning bond, note and commercial
paper ratings are the following: (i) evaluation of the management of the issuer;
(ii) economic evaluation of the issuer's industry or industries and an appraisal
of speculative-type risks which may be inherent in certain areas; (iii)
evaluation of the issuer's products in relation to competition and customer
acceptance; (iv) liquidity; (v) amount and quality of long-term debt; (vi) trend
of earnings over a period of 10 years; (vii) financial strength of a parent
company and the relationships which exist with the issuer; and (viii)
recognition by management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.

Among the factors considered by S&P in assigning bond, note and commercial paper
ratings are the following: (i) trend of earnings and cash flow with allowances
made for unusual circumstances, (ii) stability of the issuer's industry, (iii)
the issuer's relative strength and position within the industry and (iv) the
reliability and quality of management.

50
<PAGE>

ADDRESSES

GLOBAL FINANCIAL SERVICES FUND
GLOBAL BIOTECHNOLOGY FUND
GLOBAL TECHNOLOGY FUND
One South Street
Baltimore, Maryland 21202

INVESTMENT ADVISOR
Investment Company Capital Corp.
One South Street
Baltimore, Maryland 21202

INVESTMENT SUB-ADVISOR
DWS International Portfolio Management GmbH
Grueneburgweg 113-115
60323 Frankfurt am Main, Germany

DISTRIBUTOR
ICC Distributors, Inc.
2 Portland Square
Portland, Maine 04101

ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investment Company Capital Corp.
One South Street
Baltimore, Maryland 21202

CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
250 W. Pratt Street
Baltimore, Maryland 21201

51
<PAGE>

PART C. OTHER INFORMATION.

ITEM 23. EXHIBITS:

(a)(i) Registrant's Articles of Incorporation, incorporated by
reference to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A (File Nos. 333-7008 and
811-8227) filed with the Securities and Exchange Commission via
EDGAR on March 31, 2000.

(a)(ii) Registrant's Articles of Amendment, incorporated by reference to
Post-Effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A (File Nos. 333-7008 and 811-8227) filed
with the Securities and Exchange Commission via EDGAR on
November 2, 1998.

(a)(iii) Registrant's Articles Supplementary, incorporated by reference
to Post-Effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A (File Nos. 333-7008 and 811-8227) filed
with the Securities and Exchange Commission via EDGAR on
November 2, 1998.

(a)(iv) Registrant's Articles of Amendment Certificate of Correction,
incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A (File Nos.
333-7008 and 811-8227) filed with the Securities and Exchange
Commission via EDGAR on November 2, 1998.

(a)(v) Registrant's Articles of Amendment, incorporated by reference to
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A (File Nos. 333-7008 and 811-8227) filed
with the Securities and Exchange Commission via EDGAR on
December 30, 1999.

(a)(vi) Registrant's Articles Supplementary;+

(b)(i) Registrant's By-Laws, incorporated by reference to Registrant's
Registration Statement on Form N-1A (File Nos. 333-7008 and
811-8227) filed with the Securities and Exchange Commission via
EDGAR on May 23, 1997.

(b)(ii) Registrant's Amendment #1 to the By-Laws, incorporated by
reference to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A (File Nos.333-7008 and
811-8227) filed with the Securities and Exchange Commission vai
EDGAR on March 31, 2000.

(c) Registrant's Specimen Certificate for shares of common,
incorporated by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File Nos.
333-7008 and 811-8227) filed with the Securities and Exchange
Commission via EDGAR on September 1, 1998.

<PAGE>

(d)(i) Investment Advisory Agreement between Investment Company Capital
Corp. and Registrant; +

(d)(ii) Investment Sub-Advisory Agreement by and among Registrant,
Investment Company Capital Corp. and DWS International Portfolio
Management GmbH; +

(e)(i) Registrant's Distributor's Contract including Exhibits A and B
thereto, incorporated by reference to Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A (File
Nos. 333-7008 and 811-8227) filed with the Securities and
Exchange Commission via EDGAR on April 13, 1998.

(e)(ii) Registrant's Exhibit C to the Distributor's Contract,
incorporated by reference to Registrant's Post-Effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A (File Nos. 333-7008 and 811-8227) filed with the Securities
and Exchange Commission via EDGAR on November 2, 1998.

(e)(iii) Registrant's Form of Appendix to the Distribution Agreement; +

(e)(iv) Conformed copy of Mutual Funds Sales and Service Agreement; (1)

(f) Not applicable;

(g)(i) Custodian Agreement between Registrant and Investors Bank and
Trust Company; +.

(h)(i) Conformed Copy of Master Services Agreement; (3)

(h)(ii) Appendix to the Master Services Agreement between Investment
Company Capital Corporation and the Registrant; +

(h)(iii) Letter Agreement between Registrant and Investment Company
Capital Corp.; +

(h)(iv) Conformed Copy of Master License Agreement; (3)

(h)(v) Appendix to Master License Agreement; +

(h)(vi) Expense Limitation Agreement among Registrant, Investment
Company Capital Corp. and DWS International Portfolio Management
GmbH; +

(i) Conformed copy of Opinion and Consent of Counsel as to legality
of shares being registered; +

(j) Conformed copy of consent of Independent Accountants; +

(k) Not applicable;

(l) Copy of investment representation letters from initial
shareholders; (2)
<PAGE>

(m)(i) Conformed copy of Distribution and Services Plan; +

(n) Conformed copy of Amended and Restated Multiple Class Plan; +

(o) Conformed copy of Powers of Attorney. (3)

(p) Codes of Ethics

(p)(i) Code of Ethics of Registrant; (3)

(p)(ii) DWS International
Portfolio Management; (3)

(p)(iv) Deutsche Asset Management; (3)
--------------------------------------------
+All exhibits will be filed by amendment

1. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed on April 13, 1998. (File Nos. 333-7008
and 811-8227)

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 6 on Form N-1A filed on September 23, 1997. (File Nos.
333-7008 and 811-8227)

3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed on December 29, 2000. (File Nos.
333-7008 and 811-8227)

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:

None

ITEM 25. INDEMNIFICATION:

Reference is made to Article EIGHT of Registrant's Articles of Amendment and
Restatement.

Registrant, its Directors and officers, and persons affiliated with them are
insured against certain expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities that might be imposed as a result
of such actions, suits or proceedings.

Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "Act"), may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities

<PAGE>

and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

During the last two fiscal years, no director or officer of Investment
Company Capital Corp. ("ICCC"), the Fund's investment advisor, has engaged in
any other business, profession, vocation or employment of a substantial nature
other than that of the business of investment management and, through
affiliates, investment banking.

During the last two fiscal years, no director or officer of DWS
International Portfolio Management GmbH ("DWS"), the Fund's investment
sub-advisor, has engaged in any other business, profession, vocation, or
employment of a substantial nature other than that of the business of investment
management and through affiliates, investment banking.

ITEM 27. PRINCIPAL UNDERWRITERS:

(a) ICC Distributors, Inc., the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment companies:
BT Advisor Funds, BT Institutional Funds, BT Pyramid Mutual Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, Treasury Money Portfolio, International Equity
Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset
Management Portfolio, BT Investment Portfolios, Deutsche Banc Alex. Brown Cash
Reserve Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., the Flag Investors Total Return U.S. Treasury Fund
Shares of Total Return U.S. Treasury Fund, Inc., the Flag Investors Managed
Municipal Fund Shares of Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
Flag Investors Real Estate Securities Fund, Inc., Flag Investors Equity Partners
Fund, Inc., Flag Investors Series Funds, Inc.(formerly known as Flag Investors
International Fund, Inc.), Flag Investors Funds, Inc. (formerly known as
Deutsche Funds, Inc.), Flag Investors Portfolios Trust (formerly known as
Deutsche Portfolios), Morgan Grenfell Investment Trust, Glenmede Fund, Inc. and
Glenmede Portfolios.

(b)
<PAGE>

<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriters with Registrant
<S> <C> <C>
John Y. Keffer President None
Ronald H. Hirsch Treasurer None
Nanette K. Chern Chief Compliance Officer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Frederick Skillin Assistant Treasurer None
Marc D. Keffer Assistant Secretary None
</TABLE>
--------------
* Two Portland Square
Portland, Maine 04101

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Flag Investors Funds, Inc. One South Street
Baltimore, MD 21202

ICC Distributors, Inc. Two Portland Square
(Distributor) Portland, ME 04101

Investment Company Capital Corp. One South Street
(Advisor, Transfer Agent, Administrator, Baltimore, MD 21202
Dividend Disbursing Agent and
Accounting Services Provider)

Investors Bank & Trust Co. 200 Clarendon Street
(Custodian) Boston, MA 02116

ITEM 29. MANAGEMENT SERVICES:

Not applicable

ITEM 30. UNDERTAKINGS:
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Registrant, FLAG INVESTORS FUNDS, INC., has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Baltimore, on the 12th day of January, 2001.

FLAG INVESTORS FUNDS, INC.

By: /s/ Richard T. Hale*
--------------------
Richard T. Hale, President/Director

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the date(s) indicated:

Name Title Date
--------------------------------------------------------------
*/s/ Truman T. Semans Chairman and Director January 12, 2001
---------------------
Truman T. Semans

*/s/ Richard R. Burt Director January 12, 2001
--------------------
Richard R. Burt

* /s/ Richard T. Hale Director January 12, 2001
---------------------
Richard T. Hale

*/s/ Joseph R. Hardiman Director January 12, 2001
-----------------------
Joseph R. Hardiman

*/s/ Louis E. Levy Director January 12, 2001
------------------
Louis E. Levy

*/s/ Eugene J. Mcdonald Director January 12, 2001
-----------------------
Eugene J. Mcdonald

*/s/ Rebecca W. Rimel Director January 12, 2001
---------------------
Rebecca W. Rimel

*/s/ Robert H. Wadsworth Director January 12, 2001
------------------------
Robert H. Wadsworth

*/s/ Carl W. Vogt, Esq. Director January 12, 2001
-----------------------
Carl W. Vogt, Esq.

*/s/ Richard T. Hale President January 12, 2001
--------------------
Richard T. Hale

<PAGE>

*/s/ Charles A. Rizzo Chief Financial and January 12, 2001
---------------------
Charles A. Rizzo Accounting Officer

By: /s/ Daniel O. Hirsch
----------------
Daniel O. Hirsch, Attorney-In-Fact January 12, 2001

* By Power of Attorney
<PAGE>

RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and any
Post-Effective Amendments thereto, of FLAG INVESTORS FUNDS, INC. on
behalf of the Fund's President pursuant to a properly executed power
of attorney.

RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and any
Post-Effective Amendments thereto, of FLAG INVESTORS FUNDS, INC. on
behalf of the Fund's Chief Financial Officer pursuant to a properly
executed power of attorney.