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<PAGE> PAGE 2
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SIGNATURE EDWARD J. VEILLEUX
TITLE VICE PRESIDENT
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Flag Investor Telephone Income Fund:
In planning and performing our audit of the financial statements and financial
highlights of Flag Investor Telephone Income Fund (the "Fund"), for the year
ended December 31, 1997, we considered its internal control, including
procedures for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial statements
and financial highlights and to comply with the requirements of Form N-SAR, not
to provide assurance on internal control.
The management of the Fund is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
controls. Generally, controls that are relevant to an audit pertain to the
Fund's objective of preparing financial statements for external purposes that
are fairly presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use, or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and may not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of any
specific internal control component does not reduce to a relatively low level
the risk that errors or irregularities in amounts that would be material in
relation to the financial statements and financial highlights being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal control, including procedures for safeguarding securities,
that we consider to be material weaknesses, as defined above, as of December 31,
1997.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 29, 1998
