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Supplement dated September 1, 1997
to the Prospectus of the
Flag Investors Telephone Income Fund, Inc.
(Class A and Class B) dated May 1, 1997
The following information updates and supersedes the information
contained in each Prospectus of the Flag Investors Telephone Income Fund, Inc.
(the "Fund"):
On September 1, 1997, Alex. Brown Incorporated ("Alex. Brown") and
Bankers Trust New York Corporation ("Bankers Trust") consummated an Agreement
and Plan of Merger (the "Merger") under which Alex. Brown merged with and into a
subsidiary of Bankers Trust. Pursuant to the Merger, Investment Company Capital
Corp. ("ICC"), the Fund's investment advisor, and Alex. Brown Investment
Management ("ABIM"), the Fund's sub-advisor, each became indirect subsidiaries
of Bankers Trust. At a Special Meeting of Shareholders of the Fund ("Special
Meeting") held on August 14, 1997, shareholders of the Fund approved a new
investment advisory agreement and a new sub-advisory agreement pursuant to which
ICC and ABIM, respectively, will continue to provide services to the Fund under
substantially the same terms as before.
Alex. Brown & Sons Incorporated, formerly the Fund's distributor, will
continue business operations after the Merger as part of BT Alex. Brown
Incorporated, a renamed Bankers Trust subsidiary. In that capacity it will
continue to provide shareholder services to its customers who are shareholders
of the Fund. However, to comply with applicable banking regulations, the Fund
has engaged ICC Distributors, Inc. ("ICC Distributors") to provide distribution
services to the Fund. ICC Distributors is not affiliated with ICC or ABIM. The
principal business address of ICC Distributors is P.O. Box 7558, Portland, Maine
04101.
In addition, the Board has approved Bankers Trust Company, a subsidiary
of Bankers Trust and an affiliate of the Fund, as the Fund's custodian and it is
currently anticipated that Bankers Trust Company will provide custodial services
to the Fund effective September 22, 1997.
In addition, effective September 1, 1997 certain changes in the Fund's
Directors and officers were effected primarily for the purpose of complying with
bank regulatory requirements. Charles W. Cole, Jr. retired as Director of the
Fund. Harry Woolf has been appointed President of the Fund and Amy M. Olmert has
been appointed Secretary of the Fund. Bruce E. Behrens and Liam D. Burke have
resigned as President and Executive Vice-President of the Fund, respectively,
but each continues in his role as portfolio manager for the Fund. In addition,
J. Dorsey Brown III has resigned as Executive Vice President of the Fund, Hobart
C. Buppert, II, Lee S. Owen, Edward J. Veilleux, and Gary V. Fearnow have
resigned as Vice Presidents of the Fund, and Scott J. Liotta has resigned as
Vice President and Secretary of the Fund.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
