<PAGE>
INVESTMENT ADVISORY AGREEMENT
Agreement, made as of September 29th, 2000, between Flag
Investors Portfolios Trust (formerly Deutsche Portfolios), a trust organized
under New York law (the "Trust") on behalf of the COMMUNICATIONS PORTFOLIO (the
"Portfolio"), and Investment Company Capital Corp., a Maryland corporation
("ICCC" or "Investment Adviser"), registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act").
W I T N E S S E T H:
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), and consists on the date hereof of the sub-trust listed on Schedule
A to this Agreement (each such sub-trust, together with each other sub-trust of
the Trust hereafter established by the Trustees of the Trust and made subject to
this Agreement in accordance with Section 13 hereof, individually a "Portfolio"
and, collectively, the "Portfolios"); and
WHEREAS, the Board of Trustees of the Trust desires to retain
the Investment Adviser to render various investment management services to the
Portfolio, and the Investment Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. The Trust hereby appoints the Investment Adviser to act as
investment manager to the Portfolio for the period and the terms set forth in
this Agreement, with the understanding that it may appoint an adviser to perform
certain services relating to the management of the investment operations of the
Portfolio as set forth in Section 4. The Investment Adviser accepts such
appointment and agrees to render or provide the services herein set forth, for
the compensation herein provided as set forth in Schedule A.
2. The activities of the Investment Adviser or any adviser appointed
hereunder shall at all times be subject to the supervision of the Trustees of
the Trust.
3. The Investment Adviser shall manage, or appoint an adviser to
manage, the investment operations of the Portfolio and the composition of the
Portfolio's holdings of securities and investments, including cash, the
purchase, retention and disposition thereof and agreements relating thereto, in
accordance with the Portfolio's investment
<PAGE>
objectives and policies as stated in the Registration Statement (as defined in
paragraph 6(d) of this Agreement). The Investment Adviser, or in case it
appoints an adviser, such adviser, shall perform such services (the person
performing such services being referred to herein as the "Sub-Adviser") subject
to the following understandings:
(a) The Sub-Adviser in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Declaration of Trust
and By-Laws of the Trust and the Registration Statement and with the
instructions and directions of the Trustees of the Trust and will conform to
and comply with the requirements of the 1940 Act and all other applicable
federal and state laws and regulations;
(b) the Sub-Adviser shall use the same skill and care in the
management of the Portfolio's investments as it uses in the administration
of other accounts for which it has investment responsibility as agent;
(c) the Sub-Adviser shall determine the securities or other
investments to be purchased, sold or lent by the Portfolio and as agent for
the Portfolio will effect portfolio transactions pursuant to its
determinations either directly with the issuer or with any broker and/or
dealer in such securities, including a broker affiliated with the Sub-
Adviser; in placing orders with brokers and/or dealers the Sub-Adviser
intends to seek best price and execution for purchases and sales; the
Sub-Adviser shall also determine whether or not a Portfolio shall enter into
repurchase or reverse repurchase agreements;
On occasions when the Sub-Adviser deems the purchase or sale of a
security or other investment to be in the best interest of a Portfolio as
well as other customers of the Sub-Adviser, the Sub-Adviser may, to the
extent permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be so sold or purchased on behalf
of such Portfolio and such other customer of the Sub-Adviser in order to
obtain best execution, including lower brokerage commissions, if applicable.
In such event, allocation of the securities so purchased or sold, as well as
the expenses incurred in the transaction, will be made by the Sub-Adviser in
the manner it considers to be the most equitable and consistent with its
fiduciary obligations to a Portfolio;
(d) the Sub-Adviser shall maintain a set of books and records with
respect to the Portfolio's securities and other investment transactions as
required by the Advisers Act and other applicable laws and regulations and
shall render to the Trustees of the Trust such periodic and special reports
as the Trustees may reasonably request; and
-2-
<PAGE>
(e) the services of the Sub-Adviser to the Trust under this Agreement
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others.
4. The Investment Adviser is authorized to appoint an investment
adviser to carry out the aforementioned investment operations of the Portfolio,
as Sub-Adviser, on the above terms pursuant to an investment advisory contract
conforming to the requirements of the 1940 Act and subject to approval of the
Board of Trustees and the holders of beneficial interests in the Trust as
required by the 1940 Act. Any such investment advisory contract shall provide
that the Sub-Adviser is not authorized to make any business, operational or
management decisions on behalf of the Trust or the Portfolio other than with
respect to the investment operations and composition of the Portfolio's holdings
of securities and other investments as set forth herein. The compensation of any
such Sub-Adviser will be paid by the Investment Adviser.
Subject to the approval of the Board of Trustees and holders of
beneficial interests of the Trust, to the extent required by the 1940 Act, the
Investment Adviser may delegate to any company that it controls, is controlled
by, or is under common control with (or to more than one such company), or to
specified employees of any such companies, certain of its duties enumerated
herein provided that the Investment Adviser shall continue to supervise the
performance of any such company and shall regularly report thereon to the
Trust's Board of Trustees.
The Investment Adviser may, but shall not be under any duty
to, perform services on behalf of the Portfolio which are not required by this
Agreement upon the request of the Trust's Board of Trustees. Such services will
be performed on behalf of the Portfolio and the Investment Adviser's charge in
rendering such services may be billed monthly to the Trust, subject to
examination by the Trust's independent accountants. Payment or assumption by the
Investment Adviser of any Trust expense that the Investment Adviser is not
required to pay or assume under this Agreement shall not relieve the Investment
Adviser of any of its obligations to the Portfolio nor obligate the Investment
Adviser to pay or assume any similar Portfolio's expenses on any subsequent
occasions.
5. The Investment Adviser shall also provide certain supervisory and
administrative services to the Trust, including:
(a) negotiating, maintaining, evaluating and coordinating contractual
arrangements with third-party service providers, including, but not limited
to,
-3-
<PAGE>
administrators, custodians, transfer agents, fund accounting agents,
independent accountants, attorneys, printers and insurers;
(b) assisting the various third-party service providers retained by
or for the Trust by, among other things, providing any information to such
service providers as the Trustees of the Trust deem appropriate, including
information concerning Portfolio performance and administration;
(c) reviewing agendas for and minutes of meetings of Trustees and
committees of Trustees; and preparing such supporting documents for such
meetings as the Trustees may request the Investment Adviser to prepare;
(d) arranging, if desired by the Trust, for directors, officers or
employees of the Investment Adviser to serve as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to
their individual consent and to any limitations imposed by law; and
(e) reviewing all registration statements, amendments thereto and
other documents as may be required for compliance by the Trust and each
Portfolio with all applicable laws and regulations and preparing such
portions thereof as the Trustees of the Trust may request the Investment
Adviser to prepare.
Notwithstanding the foregoing, the Investment Adviser shall not be
deemed to have assumed any duties under this Agreement with respect to, and
shall not be responsible for, functions specifically assumed by any
administrator, fund accounting agent, custodian, private placement agent or
transfer agent of the Trust. As to any of the services contemplated by this
Section 5 to be provided by the Investment Adviser, it may instead retain a
third party to perform those services on its behalf and expense, subject to its
supervision of such third party.
6. The Trust has delivered copies of each of the following documents
to the Investment Adviser and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) Declaration of Trust of the Trust (such Declaration of Trust, as
presently in effect and as amended from time to time, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as presently in effect and as
amended from time to time, are herein called the "By-Laws");
-4-
<PAGE>
(c) Certified resolutions of the Trustees of the Trust authorizing
the appointment of the Investment Adviser and approving the form of this
Agreement;
(d) The Trust's Notification of Registration on Form N-8A under the
1940 Act, its Registration Statement on Form N-1A under the 1940 Act (No.
811-8375) and the Registration Statement on Form N-1A of Deutsche Funds,
Inc. (No. 333-27709) under the Securities Act of 1933, as amended, and the
1940 Act, as filed with the Securities and Exchange Commission (the
"Commission") on May 23, 1997, including all amendments thereto (together
with the Registration Statement of the Trust, the "Registration Statement").
7. The Sub-Adviser shall keep the books and records required to be
maintained by it pursuant to paragraph 3(e). The Investment Adviser agrees that
all records which it maintains for the Trust are the property of the Trust and
it will promptly surrender any of such records to the Trust upon request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
of the Commission under the 1940 Act any such records as are required to be
maintained by the Sub-Adviser with respect to the Portfolios by Rule 31a-2 of
the Commission under the 1940 Act.
8. During the term of this Agreement the Investment Adviser will pay
all expenses, including personnel costs and overhead, incurred by it in
connection with the performance of its obligations under this Agreement other
than the cost of securities and investments purchased for the Portfolio
(including taxes and brokerage commissions, if any) and extraordinary expenses
and shall pay the salaries of Trustees and officers of the Trust who are
affiliated persons (as defined in the 1940 Act) of the Investment Adviser. The
Investment Adviser shall not be required to pay expenses of any activity which
is intended primarily to result in sales of shares of the Portfolio.
9. For the services provided and the expenses borne pursuant to this
Agreement, the Portfolio will pay to the Investment Adviser as full compensation
therefor a fee, computed daily and paid monthly in arrears, at an annual rate
equal to the percentage of the average daily net assets of the Portfolio
specified in Schedule A hereto.
10. The Investment Adviser shall not be liable for any error of
judgment or mistake of law or for any loss or expense suffered by the Trust or
the Portfolio in connection with the matters to which this Agreement relates,
except a loss or expense resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
-5-
<PAGE>
11. This Agreement shall continue in effect until the date two years
after its execution and shall continue in effect from year to year thereafter
with respect to the Portfolio if such continuance is specifically approved at
least annually in conformity with the requirements of the 1940 Act; provided,
however, that this Agreement may be terminated by the Trust in its entirety or
with respect to the Portfolio, at any time, without the payment of any penalty,
by vote of a majority of all the Trustees of the Trust or by vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of the Trust
or the Portfolio, as the case may be, on 60 days' written notice to the
Investment Adviser, or by the Investment Adviser at any time, without the
payment of any penalty, on 60 days' written notice to the Trust. This Agreement
will automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
12. The Investment Adviser shall for all purposes herein be deemed to
be an independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Trustees of the Trust from time to time, have no
authority to act for or represent the Trust or the Portfolio in any way or
otherwise be deemed an agent of the Trust or the Portfolio.
13. This Agreement may be amended by mutual consent, but the consent
of the Trust must be approved (a) by vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
amendment, and (b) by vote of a majority of the outstanding voting securities of
the Trust or a majority of the outstanding voting securities of the Portfolio.
In the event that the Trustees of the Trust establish one or more additional
sub-trusts with respect to which they wish to retain the Investment Adviser to
act as investment manager, the Trust and the Investment Adviser may amend
Schedule A hereto to add each such sub-trust and specify the fee payable to the
Investment Adviser in respect thereof, in which event such sub-trust shall
become subject to the provisions of this Agreement and be deemed a "Portfolio"
hereunder to the same extent as the existing Portfolios, except to the extent
that such provisions may be modified with respect to any additional Portfolio in
writing by the Trust and the Investment Adviser at the time of the addition of
the Portfolio.
14. Notices of any kind to be given to the Investment Adviser by the
Trust shall be in writing and shall be duly given if mailed or delivered to the
Investment Adviser at One South Street, Baltimore, Maryland 21202, Attention:
President, or at such other address or to such other individual as shall be
specified by the Investment Adviser to the Trust. Notices of any kind to be
given to the Trust by the Investment Adviser shall be in writing and shall be
duly given if mailed or delivered to the Trust at
-6-
<PAGE>
Cardinal Avenue, Grand Cayman, Cayman Islands, BWI or at such other address or
to such other individual as shall be specified by the Trust to the Investment
Adviser.
15. The Trustees of the Trust have authorized the execution of this
Agreement in their capacity as Trustees and not individually and the Investment
Adviser agrees that neither the holders of interests in the Trust nor the
Trustees nor any officer, employee, representative or agent of the Trust shall
be personally liable upon, or shall resort be had to their private property for
the satisfaction of, obligations given, executed or delivered on behalf of or by
the Trust or the Portfolio, that the interest holders of the Portfolios and the
trustees, officers, employees, representatives and agents of the Trust shall not
be personally liable hereunder, and that the Investment Adviser shall look
solely to the property of the Trust for the satisfaction of any claim hereunder.
16. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original.
-7-
<PAGE>
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the date first set forth
above.
FLAG INVESTORS PORTFOLIOS TRUST on behalf
of the COMMUNICATIONS PORTFOLIO
/s/ Amy M. Olmert
-----------------
By: Amy M. Olmert
Title: Secretary
INVESTMENT COMPANY CAPITAL CORP.
/s/ Richard T. Hale
-------------------
By: Richard T. Hale
Title: President
-8-
<PAGE>
SCHEDULE A
----------
FEE (ANNUALIZED
% OF AVERAGE
PORTFOLIO DAILY NET ASSETS)
----------- -----------------
Communications Portfolio 0.85% of first $100 million
0.75% of next $100 million
0.70% of next $100 million
0.65% of next $200 million
0.58% of next $500 million
0.53% of next $500 million
0.50% of portion in excess of $1.5
billion
-9-
