<PAGE>
As Filed With the Securities and Exchange Commission on February 26, 1999
Registration No. 2-87336
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 22 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 24 [X]
FLAG INVESTORS COMMUNICATIONS FUND, 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: (410) 727-1700
Edward J. Veilleux
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
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It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
_X_ on May 1, 1999 pursuant to paragraph (a) of Rule 485.
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<PAGE>
FLAG INVESTORS
COMMUNICATIONS FUND, INC.
(Class A, Class B and Class C Shares)
Prospectus & Application -- May 1, 1999
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This mutual fund (the "Fund") is designed to maximize total return. The Fund
will seek to achieve this objective through a combination of long-term growth of
capital and, to a lesser extent, current income. In seeking to achieve this
objective, the Fund invests primarily in common stock of companies in the
communications field.
The Fund offers shares through securities dealers and through financial
institutions that act as shareholder servicing agents. You may also buy shares
through the Fund's Transfer Agent. This Prospectus describes Flag Investors
Class A Shares ("Class A Shares"), Flag Investors Class B Shares ("Class B
Shares") and Flag Investors Class C Shares ("Class C Shares") of the Fund. These
separate classes give you a choice as to sales charge and fund expenses. (Refer
to the section on sales charges and the attached Application.)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Investment Summary................................................................................................2
Fees and Expenses of the Fund.....................................................................................4
Investment Program................................................................................................5
The Fund's Net Asset Value........................................................................................6
How to Buy Shares.................................................................................................7
How to Redeem Shares..............................................................................................8
Telephone Transactions............................................................................................9
Sales Charges....................................................................................................10
How to Choose the Class That Is Right for You....................................................................14
Dividends and Taxes..............................................................................................15
Investment Advisor and Sub-Advisor...............................................................................15
Financial Highlights.............................................................................................17
Application.....................................................................................................A-1
</TABLE>
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
The Securities and Exchange Commission has neither approved nor
disapproved these securities nor has it passed upon the adequacy of
this Prospectus. Any representation to
the contrary is a criminal offense.
1
<PAGE>
INVESTMENT SUMMARY
Objective and Strategies
The Fund seeks to maximize total return. The Fund will seek to achieve
this objective through a combination of long-term growth of capital and, to a
lesser extent, current income. In selecting investments, the Fund's investment
advisor and sub-advisor will choose securities of companies that are engaged in
the research, development, manufacture, or sale of communications services,
technology, equipment or products. They emphasize both traditional
communications companies and those that engage in new information based
applications.
Risk Profile
The Fund is suited for you if you are willing to accept the risks and
uncertainties of investing in the common stocks of companies in the
communications field in the hope of achieving above-average total return and
diversifying your investment portfolio.
The value of an investment in the Fund will vary from day to day
based on changes in the prices of the securities the Fund holds. Those prices,
in turn, reflect investor perceptions of the economy, the markets and the
companies represented in the Fund's portfolio. Because the Fund concentrates
its investments in the communications field, it may be affected by risks
associated with this field, such as regulatory or technological change. These
risks may result in greater fluctuations in the Fund's value than would be
experienced in less concentrated investment portfolios. In addition, the Fund
is non-diversified, which means that it may invest in securities of a
relatively limited number of issuers. As a result, the performance of one or a
small number of portfolio holdings can affect overall performance more than if
the Fund was diversified.
An investment in the Fund could lose money. An investment in the Fund
is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year-by-year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of investing in the
Fund. This is an historical record and does not necessarily indicate how the
Fund will perform in the future.
2
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Class A Sharees*
For years ended December 31,
1989 48.80%
1990 -7.55%
1991 23.27%
1992 12.45%
1993 18.11%
1994 -6.32%
1995 33.44%
1996 13.46%
1997 37.36%
1998 85.30%
* The bar chart does not reflect sales charges. If it did, returns would be less
than those shown. For the period from December 31, 1998 through March 31, 1999,
the year-to-date return for Class A Shares was ______%.
During the 10-year period shown in the bar chart, the highest return
for a quarter was 51.19% (quarter ended 12/31/98) and the lowest return for a
quarter was -6.36% (quarter ended 9/30/90).
Average Annual Total Return (for periods ended December 31, 1998)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Class A Shares(1) S&P 500(2) Class B Shares(1) S&P 500(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past One Year............ 76.96% 28.58% 79.91% 28.58%
- ------------------------------------------------------------------------------------------------------------------
Past Five Years.......... 28.08% 24.06% N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Past Ten Years........... 22.75% 19.21% N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Since Inception.......... 21.10% 18.05%(3) 38.87% 30.51%(4)
(1/18/84) (1/31/84) (1/3/95) (12/31/94)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) These figures assume the reinvestment of dividends and capital gains
distributions and include the impact of the maximum sales charges.
(2) The S&P 500 Index is an unmanaged index that is a widely recognized
benchmark of general market performance. The index is a passive measure of
general stock performance. It does not factor in the cost of buying, selling
and holding securities -- costs which are reflected in the Fund's results.
(3) For the period from 1/31/84 through 12/31/98.
(4) For the period from 12/31/94 through 12/31/98.
No performance information is provided for the Class C Shares because
they have not been offered for a full year. However, performance of the Class C
Shares is expected to be similar to that of the Fund's other classes and will
differ only to the extent that Class C Shares do not have the same expenses.
3
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
Initial Sales Deferred Sales Deferred Sales
Shareholder Fees: Charge Charge Charge
(fees paid directly from your investment) Alternative Alternative Alternative
----------- ----------- -----------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage
of offering price).................................................. 4.50%* None None
Maximum Deferred Sales Charge (Load)(as a percentage of original
purchase price or redemption proceeds, whichever is lower).......... 1.00%* 4.00%** 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........................................................ 0.68% 0.68% 0.68%
Distribution and/or Service (12b-1) Fees............................... 0.25% 0.75% 0.75%
Other Expenses (including a 0.25% shareholder servicing fee for Class
B and Class C Shares) .............................................. 0.12% 0.37% 0.42%
----- ----- -----
Total Annual Fund Operating Expenses................................... 1.05% 1.80% 1.85%
----- ----- -----
</TABLE>
- ----------------
* You will pay no sales charge on purchases of $1 million or more of Class A
Shares but, unless you are otherwise eligible for a sales charge waiver or
reduction, you may pay a contingent deferred sales charge when you redeem
your shares. (See "Sales Charges -- Redemption Price.")
** Contingent deferred sales charges decline over time and reach zero after
six years. At that time, Class B Shares convert automatically to Class A
Shares. (See "Sales Charges" and "How to Choose the Class that is Right
for You.")
*** You will be required to pay a contingent deferred sales charge if you
redeem your Class C Shares within one year after purchase. (See "Sales
Charges -- Redemption Price.")
Example:
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in 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
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
4
<PAGE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares................................... $552 $769 $1,003 $1,675
Class B Shares................................... $583 $866 $1,175 $2,130
Class C Shares................................... $288 $582 N/A N/A
You would pay the following expenses if you did not redeem your shares:
Class A Shares................................... $552 $769 $1,003 $1,675
Class B Shares................................... $183 $566 $975 $2,130
Class C Shares................................... $188 $582 N/A N/A
</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. (Refer to the section on sales charges.) If you hold your shares
for a long time, the combination of the 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. ("NASD
Rules").
INVESTMENT PROGRAM
Investment Objective, Policies and Risk Considerations
The Fund is designed to maximize total return. The Fund will seek to
achieve this objective through a combination of long-term growth of capital and,
to a lesser extent, current income. In seeking to achieve this objective, the
Fund invests primarily in common stocks of companies in the communications
field.
The Fund's investment advisor (the "Advisor") and the Fund's
sub-advisor (the "Sub-Advisor") (collectively, the "Advisors") are responsible
for managing the Fund's investments. (Refer to the section on Investment Advisor
and Sub-Advisor.) In selecting investments for the Fund, the Advisors choose
securities of companies that are engaged in the research, development,
manufacture, or sale of communications services, technology, equipment or
products. The Advisors emphasize investment in companies offering products and
services that both support traditional communications and facilitate new
information based applications. They believe that worldwide telecommunications
market expansion will create new opportunities for both established and emerging
providers of telecommunications products and services. As a result, the Advisors
believe that investing in a portfolio of common stocks of companies in the
communications field offers an attractive opportunity for maximizing total
return.
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. In
general, stock prices are sensitive to developments affecting particular
companies and to general economic conditions that affect particular industry
sectors or the securities markets as a whole. No one can predict how the markets
will behave in
5
<PAGE>
the future. In addition, the Fund concentrates its investments in common stocks
of companies in the communications field. As a result, market price movements,
regulatory or technological changes or economic conditions affecting companies
in this field will have a significant impact on the Fund's performance. The Fund
is non-diversified, which means that it may invest in securities of a relatively
limited number of issuers. Thus, the performance of one or a small number of
portfolio holdings can affect overall performance more than if the Fund was
diversified. There can be no guarantee that the Fund will achieve its goals.
To protect the Fund under adverse market conditions, the Advisors may
make temporary, defensive investments in money market instruments and other
income-producing securities, investments that would not ordinarily be consistent
with the Fund's objectives. 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 outweighed the
opportunity for gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in
almost every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition, and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its shareholders
may experience losses if these assurances prove to be incorrect or if issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others, with which the Fund does business experience difficulties as a result
of year 2000 issues.
THE FUND'S NET ASSET VALUE
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. When you buy Class A Shares,
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. Read the
section on sales charges for details on how and when these charges may or may
not be imposed.
The net asset value per share of the Fund is determined at the close of
regular trading on the New York Stock Exchange (ordinarily 4:00 p.m. Eastern
Time) on each day the Exchange is open for business. It is calculated by
subtracting the liabilities attributable to a class from its proportionate share
of the Fund's assets and dividing the result by the outstanding shares of the
class. Because the different classes have different distribution or service
fees, their net asset values may differ.
6
<PAGE>
In valuing the Fund's assets, its investments are priced at their
market value. When price quotes for a particular security are not readily
available, investments are priced at their "fair value" using procedures
approved by the Fund's Board of Directors.
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.
HOW TO BUY SHARES
You may buy any class of the 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. The Application Form, which
includes instructions, is attached to this Prospectus.
You may invest in 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.
Investment Minimums
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment may
be as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your
initial investment in this Fund may be as low as $500.
o If you are a participant in the 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
7
<PAGE>
subsequent investments may be as low as $250. Refer to the section
on the Fund's Automatic Investing Plan for details.
o 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 the 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 attached
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.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares 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 attached 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 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 the 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 the
Fund that is in your name, you may also redeem shares by contacting the Transfer
Agent by mail or (if you are redeeming less than $50,000) 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 on 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:
8
<PAGE>
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
by a member of the Federal Deposit Insurance Corporation, a trust
company, broker, dealer, securities exchange or association, clearing
agency, savings association or (if authorized by state law) credit
union.
3) Any stock certificates representing the shares you are redeeming. The
certificates must be either properly endorsed or accompanied by a duly
executed stock power.
4) 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 by check whether or not that is the payment option
you have selected.
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 5:30 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
9
<PAGE>
personal identification information when you open your account and before you
effect each telephone transaction. You may be required to provide additional
telecopied instructions. If these procedures are employed, neither the Fund nor
the Transfer Agent will bear any liability for following telephone instructions
that it reasonably believes to be genuine. Your telephone transaction request
will be recorded.
During periods of extreme economic or market changes, you may
experience difficulty in contacting the Transfer Agent by telephone. In such
event, you should make your request by mail. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
SALES CHARGES
Purchase Price
The price you pay to buy shares will be the 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:
<TABLE>
<CAPTION>
Class A
Sales Charge
as a % of
---------------------------
Offering Net Amount Class B Class C Sales
Amount of Purchase Price Invested Sales Charge Charge
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $ 50,000....................... 4.50% 4.71% None None
$ 50,000 -$ 99,999....................... 3.50% 3.63% None None
$100,000 - $249,999....................... 2.50% 2.56% None None
$250,000 - $499,999....................... 2.00% 2.04% None None
$500,000 - $999,999....................... 1.50% 1.52% 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 on 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 this Fund or Class A shares of any other Flag Investors fund or if you
already have investments in Class A
10
<PAGE>
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 charges applicable to the amount you
actually did purchase. Some of the shares you own 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:
1) If you are reinvesting some or all of the proceeds of a redemption of
Class A Shares made within the last 90 days.
2) If you are exchanging an investment in another Flag Investors fund for
an investment in this Fund (see "Purchases by Exchange" for a
description of the conditions).
3) If you are a current or retired Fund Director, 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;
(iii) 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
11
<PAGE>
charged an additional fee by your securities dealer or
servicing agent if you buy shares in this manner.
Purchases by Exchange
You may exchange shares of any other Flag Investors fund with the same
sales charge structure for an equal dollar amount of Class A, B or C Shares, as
applicable, without payment of the sales charges described above or any other
charge. If you exchange Class A shares of any Flag Investors fund with a lower
sales charge structure into Class A Shares, you will be charged the difference
in sales charges unless (with the exception of Flag Investors Cash Reserve Prime
Class A Shares) you have owned the shares for at least 24 months. 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 Fund 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 Fund's 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.
<TABLE>
<CAPTION>
Sales Charge as a Percentage of the Dollar Amount Subject to Charge
-------------------------------------------------------------------
Class A Sales Class B Sales Class C Sales
Charge (as % of Charge (as % of Charge (as % of
Years Since Purchase Cost or Value) Cost or Value) Cost or Value)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First .............................. 1.00%* 4.00% 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 only if you bought
those shares at net asset value as part of an investment of $1 million 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.
12
<PAGE>
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) If you acquired your shares through an exchange of shares of another
Flag Investors fund, the period of time you held the original shares
will be combined with the period of time you held the shares being
redeemed to determine the years since purchase.
4) 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 with the same sales charge structure.
2) If your redemption represents the minimum required distribution from an
individual retirement account 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 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, your original investment was at
least $3,000,000 and your securities dealer has agreed to return to the
Fund's distributor any payments 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 six 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.
13
<PAGE>
HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU
Your decision as to which class of the 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 six 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 six years, the
higher expenses continue for as long as you own your shares.
In general, if you intend to invest more than $100,000, your combined
sales charges and expenses are lower with Class A Shares. If you intend to
invest less than $100,000 and expect to hold your shares for more than six
years, your combined sales charges and expenses are lower with Class B Shares.
If you intend to buy less than $100,000 and expect to hold your shares for less
than six years, your combined sales charges and expenses are lower with Class C
Shares.
Your securities dealer is paid a fee when you buy shares. In addition,
your securities dealer is paid an annual fee as long as you hold your shares.
For Class A and Class B Shares, this fee begins when you purchase your shares.
For Class C Shares, this fee begins one year after you purchase your shares.
Your securities dealer or servicing agent may receive different levels
of compensation depending upon which class of shares you buy.
Distribution Plans
The Fund has adopted plans under Rule 12b-1 that allow the Fund to pay
your securities dealer or shareholder servicing agent distribution and other
fees for the sale of its shares and for shareholder service. 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 of the respective class and an annual shareholder servicing fee
equal to 0.25% of
14
<PAGE>
average daily net assets of the respective class. Because these fees are paid
out of net assets on an on-going 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 TAXES
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of quarterly dividends and to
distribute taxable net capital gains on an annual basis.
Federal Income Tax Consequences
The dividends and distributions you receive from the Fund may be
subject to federal, state and local taxation, depending on your tax situation.
The tax treatment of dividends and distributions is the same whether or not you
reinvest them. Dividends are taxed as ordinary income and capital gains
distributions are taxed at various rates based on how long the Fund held the
assets. The Fund will tell you annually how to treat dividends and
distributions.
If you redeem shares of the Fund, you will be subject to tax on any
gains. The character of such gain will generally be based on your holding period
for the shares. An exchange of shares of the Fund for shares of another fund is
a sale of Fund shares for tax purposes. More information about taxes is in the
Statement of Additional Information.
Because each investor's tax circumstances are unique and because the
tax laws are subject to change, you should consult your tax advisor about your
investment.
INVESTMENT ADVISOR AND SUB-ADVISOR
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and BT Alex. Brown Cash
Reserve Fund, Inc. These funds, together with the Fund, had approximately $___
billion of net assets as of March 31, 1999. ABIM is a registered investment
advisor with approximately $___ billion under management as of March 31, 1999.
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.
15
<PAGE>
As compensation for its services for the fiscal year ended December 31,
1998, ICC received from the Fund a fee equal to 0.68% of the Fund's average
daily net assets. ICC compensates ABIM out of its advisory fee.
The Advisor is a wholly owned subsidiary of Bankers Trust Corporation
("Bankers Trust"). Bankers Trust has entered into an Agreement and Plan of
Merger with Deutsche Bank AG ("Deutsche Bank"), dated as of November 30, 1998,
under which Bankers Trust would merge with and into a subsidiary of Deutsche
Bank. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including retail and commercial banking,
investment banking and insurance. The transaction is contingent upon various
regulatory approvals, as well as the approval of the Fund's Board of Directors
and the Fund's shareholders. If the transaction is approved and completed,
Deutsche Bank, as the Advisor's new parent company, will control the operations
of the Advisor. Bankers Trust believes that, under this new arrangement, the
services provided to the Fund will be maintained at their current level.
Portfolio Manager
Messrs. Bruce E. Behrens and Liam D. Burke have shared primary
responsibility for managing the Fund's assets since May 1, 1997. From the Fund's
inception to May 1, 1997, Mr. Behrens shared primary responsibility with Mr.
Hobart C. Buppert.
Mr. Behrens, who has 31 years of investment experience, has been a Vice
President and Principal of ABIM since 1981. Prior to joining ABIM, he was a
Senior Vice President and Principal of Corbyn Associates from 1978 to 1981 and a
Vice President at Investment Counselors of Maryland from 1972 to 1978. Prior
thereto, he was a Securities Analyst at Citibank from 1968 to 1972. Mr. Behrens
received his B.A. from Denison University in 1966 and an M.B.A. from the
University of Michigan in 1968. He is a member and past president of the
Baltimore Security Analysts Society and a member of the Financial Analysts
Federation.
Mr. Burke, who has 10 years of investment experience, joined ABIM in
1994 with primary responsibility as a telecommunications analyst for the Fund.
Prior to joining ABIM, he worked as a telecommunications industry analyst at a
regional broker-dealer, Ferris, Baker, Watts, Inc. from 1992 to 1994 and as a
managing director of Frey & Co., a Baltimore-based private investment bank, from
1989 to 1992. Mr. Burke began his professional career at AT&T and spent eight
years in positions that included operations, regional staff management and
national account sales. He is a graduate of Georgetown University and received
his M.B.A. from The George Washington University.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five fiscal years for Class A Shares
and since commencement of operations for Class B and Class C Shares. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information is part of the Fund's financial statements
which have been audited by PricewaterhouseCoopers LLP. These financial
statements are included in the Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
- -----------------------------------------------------------------------------------------------------------
Class A Shares
-------------------------------------
For the Year Ended December 31,
-------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year ....... $ 19.37 $ 15.59 $ 14.87 $ 12.30 $ 13.70
---------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income ...................... 0.12 0.27 0.27 0.40 0.41
Net realized and unrealized gain/(loss) on
investments ............................ 16.05 5.41 1.67 3.58 (1.27)
---------- -------- -------- -------- --------
Total from Investment Operations ........... 16.17 5.68 1.94 3.98 (0.86)
---------- -------- -------- -------- --------
Less Distributions:
Distributions from net investment income and
net realized short-term gains .......... (0.40) (0.40) (0.38) (0.41) (0.44)
Distributions from net realized mid-term and
long-term gains ........................ (0.91) (1.50) (0.84) (1.00) (0.10)
---------- -------- -------- -------- --------
Total distributions ........................ (1.31) (1.90) (1.22) (1.41) (0.54)
---------- -------- -------- -------- --------
Net asset value at end of year ............. $ 34.23 $ 19.37 $ 15.59 $ 14.87 $ 12.30
========== ======== ======== ======== ========
Total Return(1) ................................ 85.30% 37.36% 13.46% 33.34% (6.32)%
Ratios to Average Daily Net Assets:
Expenses ................................... 1.05% 1.11% 1.14% 0.93%(2) 0.92%(2)
Net investment income ...................... 0.48% 1.07% 1.74% 2.85%(3) 3.14%(3)
Supplemental Data:
Net assets at end of year (000) ............ $1,275,775 $622,865 $505,371 $492,454 $435,805
Portfolio turnover rate .................... 14% 26% 20% 24% 23%
</TABLE>
- ---------------
(1) Total return excludes the effect of sales charge.
(2) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 0.99% for the years ended December 31, 1995 and
1994.
(3) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 2.79% and 3.07% for the years ended
December 31, 1995 and 1994, respectively.
17
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------- --------------
For the
Period
January 3,
1995(1) For the Period
through November 1, 1998(1)
For the Year Ended December 31, December 31, through December 31,
------------------------------- ------------ --------------------
1998 1997 1996 1995 1998
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......... $ 19.22 $ 15.51 $ 14.83 $12.28 $ 25.50
-------- ------- ------- ------ --------
Income from Investment Operations:
Net investment income/(loss) ................... (0.02) 0.18 0.19 0.30 (0.01)
Net realized and unrealized gain on
investments ................................... 15.83 5.34 1.63 3.56 9.21
-------- ------- ------- ------ --------
Total from Investment Operations ............... 15.81 5.52 1.82 3.86 9.20
-------- ------- ------- ------ --------
Less Distributions:
Distributions from net investment income and net
realized short-term gains ..................... (0.32) (0.31) (0.30) (0.31) (0.21)
Distributions from net realized long-term
gains ......................................... (0.91) (1.50) (0.84) (1.00) (0.65)
-------- ------- ------- ------ --------
Total distributions ............................ (1.23) (1.81) (1.14) (1.31) (0.86)
-------- ------- ------- ------ --------
Net asset value at end of period ............... $ 33.80 $ 19.22 $ 15.51 $14.83 $ 33.84
======== ======= ======= ====== ========
Total Return(2) .................................... 83.91% 36.36% 12.60% 32.42% 36.70%
Ratios to Average Daily Net Assets:
Expenses ....................................... 1.80% 1.86% 1.92% 1.70%(3,4) 1.85%(3)
Net investment income/(loss) ................... (0.35)% 0.29% 0.95% 2.13%(3,5) (0.61)%(3)
Supplemental Data:
Net assets at end of period (000) .............. $165,308 $32,474 $17,661 $ 7,504 $3,247
Portfolio turnover rate ........................ 14% 26% 20% 24% 14%
</TABLE>
- --------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.
(4) Without the waiver of advisory fees, the ratio of expenses to average
daily net assets would have been 1.74% (annualized) for the period ended
December 31, 1995.
(5) Without the waiver of advisory fees, the ratio of net investment income
to average daily net assets would have been 2.09% (annualized)for the
period ended December 31, 1995.
18
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
NEW ACCOUNT APPLICATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Make check payable to "Flag Investors Communications For assistance in completing this Application please call: 1-800-553-8080,
Fund, Inc." and mail with this Application to: Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
Flag Investors Funds To open an IRA account, please call 1-800-767-3524 for an IRA information kit.
P.O. Box 419663
Kansas City, MO 64141-6663
Attn: Flag Investors Communications Fund, Inc.
I wish to purchase the following class of shares of the Fund, in the amount indicated below.
(Please check the applicable box and indicate the amount of purchase.)
|_| Class A Shares (4.5% maximum initial sales charge) in the amount of $
----------------------------------
|_| Class B Shares (4.0% maximum contingent deferred sales charge) in the amount of $
-----------------------------------------
|_| Class C Shares (1.0% maximum contingent deferred sales charge) in the amount of $
-----------------------------------------
YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
Existing Account No., if any: ______________________
Individual or Joint Tenant Gifts to Minors
- ------------------------------------------------------------- ------------------------------------------------------------
First Name Initial Last Name Custodian's Name (only one allowed by law)
- ------------------------------------------------------------- ------------------------------------------------------------
Social Security Number Minor's Name (only one)
- ------------------------------------------------------------- ------------------------------------------------------------
Joint Tenant Initial Last Name Social Security Number of Minor Minor's Date of Birth
(Mo./Day/Yr.)
under the ____________________ Uniform Gifts to Minors Act
(State of Residence)
Corporations, Trusts, Partnerships, etc. Mailing Address
- ------------------------------------------------------------- ------------------------------------------------------------
Name of Corporation, Trust or Partnership Street
- ------------------------------------------------------------- ------------------------------------------------------------
Tax ID Number Date of Trust City State Zip
- ------------------------------------------------------------- ------------------------------------------------------------
Name of Trustees (if to be included in the Registration) Daytime Phone
- -------------------------------------------------------------
For the Benefit of
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LETTER OF INTENT (OPTIONAL)
|_| I intend to invest at least the amount indicated below in Class A Shares of Flag Investors Communications Fund, Inc. I
understand that if I satisfy the conditions described in the attached prospectus, this Letter of Intent entitles me to the
applicable level of reduced sales charges on my purchases.
<S> <C> <C> <C> <C> <C>
|_|$50,000 |_|$100,000 |_|$250,000 |_|$500,000 |_|$1,000,000
RIGHT OF ACCUMULATION (OPTIONAL)
List the Account numbers of other Flag Investors Funds that you or your
immediate family already own that qualify you for reduced sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
DISTRIBUTION OPTIONS
Please check appropriate boxes. If none of the options are selected, all distributions will be reinvested in additional shares of
the same class of the Fund at no sales charge.
Income Dividends Capital Gains
|_| Reinvested in additional shares |_| Reinvested in additional shares
|_| Paid in cash |_| Paid in cash
Call (800) 553-8080 for information about reinvesting your dividends in other funds in the Flag Investors Family of Funds.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
AUTOMATIC INVESTING PLAN (OPTIONAL)
/ / I authorize you as Agent for the Automatic Investing Plan to automatically invest $_______ in Class A Shares or $_______ in
Class B Shares or $________ in Class C Shares for me, on a monthly or quarterly basis, on or about the 20th of each month or if
quarterly, the 20th of January, April, July and October, and to draw a bank draft in payment of the investment against my checking
account. (Bank drafts may be drawn on commercial banks only.)
Minimum Initial Investment: $250 per class
Subsequent Investments (check one): / / Monthly ($100 minimum per class) / / Quarterly ($250 minimum per class)
_____________________________________________________ ______________________________________________________________________
Bank Name Depositor's Signature Date
_____________________________________________________ ______________________________________________________________________
Existing Flag Investors Fund Account No., if any Depositor's Signature (if joint acct., both must sign) Date
SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
/ / Beginning the month of _____________________________, 19__ please send me checks on a monthly or quarterly basis, as indicated
below, in the amount of (complete as applicable) $_______, from Class A Shares and/or $_____ from Class B Shares and/or $_____ from
Class C Shares that I own, payable to the account registration address as shown above. (Participation requires minimum account value
of $10,000 per class.)
Frequency (check one): / / Monthly / / Quarterly (January, April, July and October)
TELEPHONE TRANSACTIONS
I understand that I will automatically have telephone redemption privileges (for amounts up to $50,000) and telephone exchange
privileges (with respect to other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/We do not want: / / Telephone redemption privileges / / Telephone exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If you would prefer redemptions mailed to a predesignated
bank account, please provide the following information:
Bank:_____________________________________________ Bank Account No.:________________________________________
Address:__________________________________________ Bank Account Name:_______________________________________
__________________________________________
SIGNATURE AND TAXPAYER CERTIFICATION
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any taxable dividends, capital gains distributions and
redemption proceeds paid to any individual or certain other non-corporate shareholders who fail to provide the information and/or
certifications required below. This backup withholding is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that the information on this Application is complete and
correct and that as required by federal law: (Please check applicable boxes)
/ / U.S. Citizen/Taxpayer:
/ / I certify that (1) the number shown above on this form is the correct Social Security Number or Tax ID Number and (2) I am
not subject to any backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest
or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
/ / If no Tax ID Number or Social Security Number has been provided above, I have applied, or intend to apply, to the IRS or
the Social Security Administration for a Social Security Number or a Tax ID Number, and I understand that if I do not
provide either number to the Transfer Agent within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a penalty and a 31% backup withholding on distributions
and redemption proceeds. (Please provide either number on IRS Form W- 9. You may request such form by calling the Transfer
Agent at 800-553-8080.)
/ / Non-U.S. Citizen/Taxpayer: Indicated country of residence for tax purposes:________________________________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or resident and I am an exempt foreign person as defined
by the Internal Revenue Service.
- ------------------------------------------------------------------------------------------------------------------------------------
I acknowledge that I am of legal age in the state of my residence. I have received a copy of the Fund's prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required
to avoid backup withholding.
- ------------------------------------------------------------------------------------------------------------------------------------
_____________________________________________________ ___________________________________________________________
Signature Date Signature (if joint acct., both must sign) Date
- ------------------------------------------------------------------------------------------------------------------------------------
For Dealer Use Only
Dealer's Name: _______________________________ Dealer Code:_______________________________
Dealer's Address:_______________________________ _______________________________
_______________________________ Branch Code:_______________________________
Representative: _______________________________ Rep. No.: _______________________________
</TABLE>
A-2
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT ICC DISTRIBUTORS, INC.
MANAGEMENT Two Portland Square
One South Street Portland, Maine 04101
Baltimore, Maryland 21202
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 21201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling (800)
767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion
of market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-800-SEC-0330 to find out about the operation of the Public Reference
Room.) The Commission's Internet site at http://www.sec.gov has reports and
other information about the Fund. You may get copies of this information by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-5009. You will be charged for duplicating fees.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information call (800)767-FLAG, or your securities dealer or servicing
agent.
Investment Company Act File No. 811-3883
- --------------------------------------------------------------------------------
COMMPRS
<PAGE>
FLAG INVESTORS
COMMUNICATIONS FUND, INC.
(Institutional Shares)
Prospectus & Application -- May 1, 1999
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") is designed to maximize total return. The Fund
will seek to achieve this objective through a combination of long-term growth of
capital and, to a lesser extent, current income. In seeking to achieve this
objective, the Fund invests primarily in common stock of companies in the
communications field.
The Fund offers shares through securities dealers and through financial
institutions that act as shareholder servicing agents. You may also buy shares
through the Fund's Transfer Agent. This Prospectus describes Flag Investors
Institutional Shares (the "Institutional Shares") of the Fund. Institutional
Shares may be purchased only by eligible institutions, certain qualified
retirement plans or by investment advisory affiliates of BT Alex. Brown
Incorporated on behalf of their clients.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Investment Summary................................................................................................2
Fees and Expenses of Institutional Shares.........................................................................3
Investment Program................................................................................................3
The Fund's Net Asset Value........................................................................................5
How to Buy Institutional Shares...................................................................................5
How to Redeem Institutional Shares................................................................................6
Telephone Transactions............................................................................................7
Dividends and Taxes...............................................................................................7
Investment Advisor and Sub-Advisor................................................................................8
Financial Highlights.............................................................................................10
Application.....................................................................................................A-1
</TABLE>
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
The Securities and Exchange Commission has neither approved nor
disapproved these securities nor has it passed upon the adequacy of
this Prospectus. Any representation to
the contrary is a criminal offense.
1
<PAGE>
INVESTMENT SUMMARY
Objective and Strategies
The Fund seeks to maximize total return. The Fund will seek to achieve
this objective through a combination of long-term growth of capital and, to a
lesser extent, current income. In selecting investments, the Fund's investment
advisor and sub-advisor will choose securities of companies that are engaged in
the research, development, manufacture, or sale of communications services,
technology, equipment or products. They emphasize both traditional
communications companies and those that engage in new information based
applications.
Risk Profile
The Fund is suited for you if you are willing to accept the risks and
uncertainties of investing in the common stocks of companies in the
communications field in the hope of achieving above-average total return and
diversifying your investment portfolio.
The value of an investment in the Fund will vary from day to day based
on changes in the prices of the securities the Fund holds. Those prices, in
turn, reflect investor perceptions of the economy, the markets and the companies
represented in the Fund's portfolio. Because the Fund concentrates its
investments in the communications field, it may be affected by risks associated
with this field, such as regulatory or technological change. These risks may
result in greater fluctuations in the Fund's value than would be experienced in
less concentrated investment portfolios. In addition, the Fund is
non-diversified, which means that it may invest in securities of a relatively
limited number of issuers. As a result, the performance of one or a small number
of portfolio holdings can affect overall performance more than if the Fund was
diversified.
An investment in the Fund could lose money. An investment in the Fund
is not a bank deposit and is not guaranteed by the FDIC or any other government
agency.
2
<PAGE>
FEES AND EXPENSES OF INSTITUTIONAL SHARES
This table describes the fees and expenses that you may pay if you buy
and hold Institutional Shares.
<TABLE>
<CAPTION>
<S> <C>
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................................................................................... 0.68%
Distribution and/or Service (12b-1) Fees.......................................................... None
Other Expenses.................................................................................... 0.15%
Total Annual Fund Operating Expenses.............................................................. 0.83%
=====
</TABLE>
Example:
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Institutional Shares 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 and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Shares................................ $84 $261 $449 $973
</TABLE>
INVESTMENT PROGRAM
The Fund is designed to maximize total return. The Fund will seek to
achieve this objective through a combination of long-term growth of capital and,
to a lesser extent, current income. In seeking to achieve this objective, the
Fund invests primarily in common stocks of companies in the communications
field.
The Fund's investment advisor (the "Advisor") and the Fund's
sub-advisor (the "Sub-Advisor") (collectively, the "Advisors") are responsible
for managing the Fund's investments. (Refer to the section on Investment Advisor
and Sub-Advisor.) In selecting investments for the Fund, the Advisors choose
securities of companies that are engaged in the research, development,
manufacture, or sale of communications services, technology, equipment or
3
<PAGE>
products. The Advisors emphasize investment in companies offering products and
services that both support traditional communications and facilitate new
information based applications. They believe that worldwide telecommunications
market expansion will create new opportunities for both established and emerging
providers of telecommunications products and services. As a result, the Advisors
believe that investing in a portfolio of common stocks of companies in the
communications field offers an attractive opportunity for maximizing total
return.
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. In
general, stock prices are sensitive to developments affecting particular
companies and to general economic conditions that affect particular industry
sectors or the securities markets as a whole. No one can predict how the markets
will behave in the future. In addition, the Fund concentrates its investments in
common stocks of companies in the communications field. As a result, market
price movements, regulatory or technological changes or economic conditions
affecting companies in this field will have a significant impact on the Fund's
performance. The Fund is non-diversified, which means that it may invest in
securities of a relatively limited number of issuers. Thus, the performance of
one or a small number of portfolio holdings can affect overall performance more
than if the Fund was diversified. There can be no guarantee that the Fund will
achieve its goals.
To protect the Fund under adverse market conditions, the Advisors may
make temporary, defensive investments in money market instruments and other
income-producing securities, investments that would not ordinarily be consistent
with the Fund's objectives. 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 outweighed the opportunity for
gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in
almost every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition, and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its shareholders
may experience losses if these assurances prove to be incorrect or if issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others, with which the Fund does business experience difficulties as a result
of year 2000 issues.
4
<PAGE>
THE FUND'S NET ASSET VALUE
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. The net asset value per share
of the Fund is determined at the close of regular trading on the New York Stock
Exchange (ordinarily 4:00 p.m. Eastern Time) on each day the Exchange is open
for business. It is calculated by subtracting the liabilities attributable to
the Institutional Shares from their proportionate share of the Fund's assets and
dividing the result by the outstanding Institutional Shares.
In valuing the Fund's assets, its investments are priced at their
market value. When price quotes for a particular security are not readily
available, investments are priced at their "fair value" using procedures
approved by the Fund's Board of Directors.
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.
HOW TO BUY INSTITUTIONAL SHARES
You may buy Institutional Shares if you are any of the following:
o 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).
o A defined contribution plan with assets of at least $75
million.
o An investment advisory affiliate of BT Alex. Brown 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. The Application Form, which
includes instructions, is attached to this Prospectus.
5
<PAGE>
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.
Investment Minimums
Your initial investment must be at least $500,000.
The following are exceptions to this minimum:
o There is no minimum initial investment for investment
advisory affiliates of BT Alex. Brown purchasing
shares for the accounts of their investment advisory
clients.
o There is no minimum initial investment for defined
contribution plans with assets of at least $75
million.
o 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. 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.
HOW TO REDEEM INSTITUTIONAL 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.
6
<PAGE>
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 remitted by wire to your securities dealer, servicing agent or
bank.
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 5:30 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 telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that it reasonably believes to be genuine. Your
telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may
experience difficulty in contacting the Transfer Agent by telephone. In such
event, you should make your request by mail. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
DIVIDENDS AND TAXES
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of quarterly dividends and to
distribute taxable net capital gains on an annual basis.
7
<PAGE>
Certain Federal Income Tax Consequences
The dividends and distributions you receive from the Fund may be
subject to federal, state and local taxation, depending on your tax situation.
The tax treatment of dividends and distributions is the same whether or not you
reinvest them. Dividends are taxed as ordinary income and capital gains
distributions are taxed at various rates based on how long the Fund held the
assets. The Fund will tell you annually how to treat dividends and
distributions.
If you redeem shares of the Fund, you will be subject to tax on any
gain. The character of such gain will generally be based on your holding period
for the shares. An exchange of shares of the Fund for shares of another fund is
a sale of Fund shares for tax purposes. More information about taxes is in the
Statement of Additional Information.
Because each investor's tax circumstances are unique and because the
tax laws are subject to change, you should consult your tax advisor about your
investment.
INVESTMENT ADVISOR AND SUB-ADVISOR
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and BT Alex. Brown Cash
Reserve Fund, Inc. These funds, together with the Fund, had approximately $___
billion of net assets as of March 31, 1999. ABIM is a registered investment
advisor with approximately $___ billion under management as of March 31, 1999.
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.
As compensation for its services for the fiscal year ended December 31,
1998, ICC received from the Fund a fee equal to 0.68% of the Fund's average
daily net assets. ICC compensates ABIM out of its advisory fee.
The Advisor is a wholly owned subsidiary of Bankers Trust Corporation
("Bankers Trust"). Bankers Trust has entered into an Agreement and Plan of
Merger with Deutsche Bank AG ("Deutsche Bank"), dated as of November 30, 1998,
under which Bankers Trust would merge with and into a subsidiary of Deutsche
Bank. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including retail and commercial banking,
investment banking and insurance. The transaction is contingent upon various
regulatory approvals, as well as the approval of the Fund's Board of Directors
and the Fund's shareholders. If the transaction is approved and completed,
Deutsche Bank, as the Advisor's new
8
<PAGE>
parent company, will control the operations of the Advisor. Bankers Trust
believes that, under this new arrangement, the services provided to the Fund
will be maintained at their current level.
Portfolio Manager
Messrs. Bruce E. Behrens and Liam D. Burke have shared primary
responsibility for managing the Fund's assets since May 1, 1997. From the Fund's
inception to May 1, 1997, Mr. Behrens shared primary responsibility with Mr.
Hobart C. Buppert.
Mr. Behrens, who has 31 years of investment experience, has been a Vice
President and Principal of ABIM since 1981. Prior to joining ABIM, he was a
Senior Vice President and Principal of Corbyn Associates from 1978 to 1981 and a
Vice President at Investment Counselors of Maryland from 1972 to 1978. Prior
thereto, he was a Securities Analyst at Citibank from 1968 to 1972. Mr. Behrens
received his B.A. from Denison University in 1966 and an M.B.A. from the
University of Michigan in 1968. He is a member and past president of the
Baltimore Security Analysts Society and a member of the Financial Analysts
Federation.
Mr. Burke, who has 10 years of investment experience, joined ABIM in
1994 with primary responsibility as a telecommunications analyst for the Fund.
Prior to joining ABIM, he worked as a telecommunications industry analyst at a
regional broker-dealer, Ferris, Baker, Watts, Inc. from 1992 to 1994 and as a
managing director of Frey & Co., a Baltimore-based private investment bank, from
1989 to 1992. Mr. Burke began his professional career at AT&T and spent eight
years in positions that included operations, regional staff management and
national account sales. He is a graduate of Georgetown University and received
his M.B.A. from The George Washington University.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance since it began operations. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information is part of the Fund's financial statements which have been audited
by PricewaterhouseCoopers LLP. These financial statements are included in the
Statement of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------------------------------------
For the Period
May 1, 1998(1)
through December 31,
--------------------
1998
<S> <C>
- --------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value at beginning of period............................................ $23.26
------
Income from Investment Operations:
Net investment income............................................................. 0.06
Net realized and unrealized gain on investments................................... 12.17
------
Total from Investment Operations.................................................. 12.23
Less Distributions:
Distributions from net investment income and net realized short-term gains........ (0.31)
Distributions from net realized long-term gains................................... (0.91)
------
Total distributions............................................................... (1.22)
------
Net asset value at end of period ................................................. $34.27
======
Total Return(2)....................................................................... 53.95%
Ratios to Average Net Assets:
Expenses.......................................................................... 0.83%(3)
Net investment income............................................................. 0.49%(3)
Supplemental Data:
Net assets at end of period (000)................................................. $ 813
Portfolio turnover rate........................................................... 14%
- ----------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.
</TABLE>
10
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Send completed Application by overnight carrier to: For assistance in completing this application please call: 1-800-553-8080,
Flag Investors Funds Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
330 West Ninth Street, First Floor
Kansas City, MO 64105
Attn: Flag Investors Communications Fund, Inc.
If you are paying by check, make check payable to "Flag Investors Communications Fund, Inc." and mail with this Application.
If you are paying by wire, see instructions below.
YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
Name on Account Mailing Address
- -------------------------------------------------------------- ------------------------------------------------------------
Name of Corporation, Trust or Partnership Name of Individual to Receive Correspondence
- -------------------------------------------------------------- ------------------------------------------------------------
Tax ID Number Street
|_| Corporation |_| Partnership |_|Trust ------------------------------------------------------------
|_| Non-Profit or Charitable Organization |_|Other _________ City State Zip
If a Trust, please provide the following: ( )
------------------------------------------------------------
Daytime Phone
- ---------------------------------------------------------------------------------------------------------------------------------
Date of Trust For the Benefit of
- ---------------------------------------------------------------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
INITIAL INVESTMENT
Indicate the amount to be invested and the method of payment:
__A. By Mail: Enclosed is a check in the amount of $ payable to Flag Investors Communications Inc.
------------------
__B. By Wire: A bank wire in the amount of $ has been sent from
----------------- ----------------------- ----------------------
Wire Instructions Name of Bank Wire Control Number
Follow the instructions below to arrange for a wire transfer for initial
investment:
o Send completed Application by overnight carrier to Flag
Investors Funds at the address listed above.
o Call 1-800-553-8080 to obtain new investor's Fund account number.
o Wire payment of the purchase price to Investors Fiduciary Trust Company
("IFTC"), as follows:
IFTC
a/c Flag Investors Funds
Acct. #7519206
ABA #1010-0362-1
Kansas City, Missouri 64105
Please include the following information in the wire:
o Flag Investors Communications Fund, Inc. -- Institutional Shares
o The amount to be invested
o "For further credit to _________________________________ ."
(Investor's Fund Account Number)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OPTIONS
Please check appropriate boxes. If none of the options are selected, all distributions will be reinvested in additional
Institutional Shares of the Fund.
Income Dividends Capital Gains
<S> <C> <C>
|_| Reinvested in additional shares |_| Reinvested in additional shares
|_| Paid in cash |_| Paid in cash
TELEPHONE TRANSACTIONS
I understand that I will automatically have telephone redemption privileges (for amounts up to $500,000) and exchange privileges
(with respect to Institutional Shares of other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I do not want: |_|Telephone redemption privileges |_|Telephone exchange privileges
Redemptions effected by telephone will be wired to the bank account designated below.
BANK ACCOUNT DESIGNATION
(THIS SECTION MUST BE COMPLETED)
Please attach a blank, voided check to provide account and bank routing information.
__________________________________________________________________________________________________________________________________
Name of Bank Branch
__________________________________________________________________________________________________________________________________
Bank Address City/State/Zip
__________________________________________________________________________________________________________________________________
Name(s) on Account
__________________________________________________________________________________________________________________________________
Account Number A.B.A. Number
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
ACKNOWLEDGEMENT, CERTIFICATE AND SIGNATURE
__________________________________________________________________________________________________________________________________
<S> <C> <C>
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any taxable dividends, capital gains distributions and
redemption proceeds paid to any individual or certain other non-corporate shareholders who fail to provide the information and/or
certifications required below. This backup withholding is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that the information on this Application is complete and
correct and that as required by federal law: (Please check applicable boxes)
|_| U.S. Citizen/Taxpayer:
|_| I certify that (1) the number shown above on this form is the correct Tax ID Number and (2) I am not subject to any backup
withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup withholding.
|_| If no Tax ID Number has been provided above, I have applied, or intend to apply, to the IRS for a Tax ID Number, and I
understand that if I do not provide such number to the Transfer Agent within 60 days of the date of this Application or if
I fail to furnish my correct Tax ID Number, I may be subject to a penalty and a 31% backup withholding on distributions and
redemption proceeds. (Please provide your Tax ID Number on IRS Form W- 9. You may request such form by calling the Transfer
Agent at 800-553-8080.)
|_| Non-U.S. Citizen/Taxpayer: Indicated country of residence for tax purposes: _______________________________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or resident and I am an exempt foreign person as defined
by the Internal Revenue Service.
__________________________________________________________________________________________________________________________________
I have received a copy of the Fund's prospectus.
__________________________________________________________________________________________________________________________________
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required
to avoid backup withholding.
__________________________________________________________________________________________________________________________________
Signature of Corporate Officer, General Partner, Trustee, etc. Date
__________________________________________________________________________________________________________________________________
Signature of Corporate Officer, General Partner, Trustee, etc. Date
PERSON(S) AUTHORIZED TO CONDUCT TRANSACTIONS
The following person(s) ("Authorized Person(s)") are currently officers, trustees, general partners or other authorized agents of
the investor. Any* of the Authorized Person(s) is, by lawful and appropriate action of the investor, a person entitled to give
instructions regarding purchases and redemptions or make inquiries regarding the Account.
_________________________________________ ________________________________________ ______________________
Name/Title Signature Date
_________________________________________ ________________________________________ ______________________
Name/Title Signature Date
_________________________________________ ________________________________________ ______________________
Name/Title Signature Date
_________________________________________ ________________________________________ ______________________
Name/Title Signature Date
The signature appearing to the right of each Authorized Person's name is that person's signature. Investment Company Capital Corp.
("ICC") may, without inquiry, act upon the instructions (whether verbal, written, or provided by wire, telecommunication, or any
other process) of any person claiming to be an Authorized Person. Neither ICC nor any entity on behalf of which ICC is acting shall
be liable for any claims or expenses (including legal fees) or for any losses resulting from actions taken upon any instructions
believed to be genuine. ICC may continue to rely on the instructions made by any person claiming to be an Authorized Person until it
is informed through an amended Application that the person is no longer an Authorized Person and it has a reasonable period (not to
exceed one week) to process the amended Application. Provisions of this Application shall be equally Applicable to any successor of
ICC.
* If this space is left blank, any one Authorized Person is authorized to give instructions and make inquiries. Verbal
instructions will be accepted from any one Authorized Person. Written instructions will require signatures of the number of
Authorized Persons indicated in this space.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[CERTIFICATE OF AUTHORITY]
<S> <C> <C>
Investors must complete one of the following two Certificates of Authority.
Certificate A: FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS (With a Board of Directors or Board of Trustees.)
I _______________________________________________________________________ , Secretary of the above-named investor, do hereby certify
that at a meeting on , at which a quorum was present throughout, the Board of Directors (Board of Trustees) of the investor duly
adopted a resolution which is in full force and effect and in accordance with the investor's charter and by-laws, which resolution
did the following: (1) empowered the officers/trustees executing this Application (or amendment) to do so on behalf of the investor;
(2) empowered the above-named Authorized Person(s) to effect securities transactions for the investor on the terms described above;
(3) authorized the Secretary to certify, from time to time, the names and titles of the officers of the investor and to notify ICC
when changes in officers occur, and (4) authorized the Secretary to certify that such resolution has been duly adopted and will
remain in full force and effect until ICC receives a duly-executed amendment to the Certification form. Witness my hand and seal on
behalf of the investor.
this ___day of _____________, 199_ Secretary__________________________________________________
The undersigned officer (other than the Secretary) hereby certifies that the foregoing instrument has been signed by the Secretary
of the investor.
__________________________________________________________________________________________________________________________________
Signature and title Date
Certificate B: FOR PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are the general partners/trustees of the investor and that they have done the following under the
authority of the investor's partnership agreement/trust agreement: (1) empowered the general partner/trustee executing this
Application (or amendment) to do so on behalf of the investor; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the investor on the terms described above; (3) authorized the Secretary to certify, from time to time,
the names of the general partners/trustees of the investor and to notify ICC when changes in general partners/trustees occur. This
authorization will remain in full force and effect until ICC receives a further duly-executed certification. (If there are not
enough spaces here for all necessary signatures, complete a separate certificate containing the language of this Certificate B and
attach it to the Application).
__________________________________________________________________________________________________________________________________
Signature and title Date
__________________________________________________________________________________________________________________________________
Signature and title Date
</TABLE>
A-2
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
One South Street Two Portland Square
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 21201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling (800)
767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing
detailed financial information and, in the case of the annual report, a
discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal
year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-800-SEC-0330 to find out about the operation of the Public Reference
Room.) The Commission's Internet site at http://www.sec.gov has reports and
other information about the Fund. You may get copies of this information by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-5009. You will be charged for duplicating fees.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-3883
- --------------------------------------------------------------------------------
COMMIPRS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------
FLAG INVESTORS COMMUNICATIONS FUND, INC.
One South Street
Baltimore, Maryland 21202
--------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH A
PROSPECTUS WHICH MAY BE OBTAINED 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 May 1, 1999
relating to the Prospectuses Dated
May 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. General Information and History......................................................... 1
2. Investment Objective and Policies....................................................... 1
3. Valuation of Shares and Redemption...................................................... 7
4. Federal Tax Treatment of Dividends and Distributions.................................... 7
5. Management of the Fund.................................................................. 10
6. Investment Advisory and Other Services.................................................. 16
7. Distribution of Fund Shares............................................................. 17
8. Brokerage............................................................................... 21
9. Capital Stock........................................................................... 23
10. Semi-Annual Reports..................................................................... 23
11. Custodian, Transfer Agent and Accounting Services....................................... 23
12. Independent Accountants................................................................. 24
13. Legal Matters........................................................................... 24
14. Performance Information................................................................. 24
15. Control Persons and Principal Holders of Securities..................................... 27
16. Financial Statements ................................................................... 27
Appendix................................................................................ A-1
</TABLE>
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Flag Investors Communications Fund, Inc. (the "Fund") is an open-end
management investment company that was originally designed to provide both
convenience and professional investment management to shareholders of the former
American Telephone and Telegraph Company ("AT&T") after AT&T's divestiture and
reorganization in January 1984. Prior to May 1, 1998 the Fund was known as the
Flag Investors Telephone Income Fund, Inc.
The Fund currently offers four classes of shares: Flag Investors
Communications Fund Class A Shares ("Class A Shares"), Flag Investors
Communications Fund Class B Shares ("Class B Shares"), Flag Investors
Communications Fund Class C Shares ("Class C Shares") and Flag Investors
Communications Fund Institutional Shares ("Institutional Shares") (collectively,
the "Shares"). As used herein, the "Fund" refers to Flag Investors
Communications Fund, Inc. and specific references to any class of the Fund's
shares will be made using the name of such class.
Important information concerning the Fund is included in the Fund's
Prospectuses which may be obtained without charge from the Fund's distributor
(the "Distributor") or from Participating Dealers that offer Shares to
prospective investors. Some of the information required to be in this Statement
of Additional Information is also included in the Fund's 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 Fund and its business that is
contained in the Registration Statement for the Fund and its 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 Fund was organized as a Maryland corporation on October 18, 1983 and
began operations on January 18, 1984. On May 20, 1985, the Fund reorganized as a
Massachusetts business trust and on January 19, 1989, it reorganized as a
Maryland corporation pursuant to an Agreement and Plan of Reorganization and
Liquidation approved by shareholders on December 6, 1988. The Fund began
offering the Class B Shares on January 3, 1995, the Institutional Shares on
February 26, 1998 and the Class C Shares on October 19, 1998.
Under a license agreement dated January 19, 1989 between the Fund and
Alex. Brown & Sons Incorporated (predecessor to BT Alex. Brown Incorporated),
Alex. Brown & Sons Incorporated licenses to the Fund the "Flag Investors" name
and logo but retains rights to the name and logo, including the right to permit
other investment companies to use them.
2. INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize total return. The Fund will
seek to achieve this objective through a combination of long-term growth of
capital and, to a lesser extent, current income. In seeking this objective, the
Fund invests primarily in common stock, securities convertible thereto and debt
obligations of companies in the communications field. For this purpose,
companies would be considered to be in the "communications field" if they were
engaged in the research, development, manufacture or sale of communications
services, technology, equipment or products. Companies would be considered to be
"engaged" in the research, development, manufacture or sale of communications
services, technology, equipment or products if they derived at least 50% of
their revenues from such activities.
<PAGE>
The Fund's investment advisor (the "Advisor") and sub-advisor (the
"Sub-Advisor"), collectively, (the "Advisors"), believe that investing in a
portfolio of securities of companies in the communications field affords an
attractive opportunity for achieving this investment objective. Effective
communication through the transmission of voice, pictures and data is becoming
increasingly important and the communications field now embraces a wide variety
of products and services, such as local and long distance telephone service,
wireless service (e.g., cellular telephone or paging services), video,
telecommunications equipment, media, and information technology. Information
technology combines data processing and telecommunications to support more
efficient and economical business processes and consumer activities. The rapidly
improving performance and declining cost of transmission have helped the global
expansion of information technology. For example, businesses have an increasing
need to connect to remote users such as employees, suppliers and customers.
Customers are increasingly relying on telephone-based applications like on-line
banking and shopping to save time and money. Worldwide telecommunications market
expansion will create opportunities for established and emerging providers of
telecommunications products and services. Although new, high growth technologies
are being adopted at an increasing rate, commercial acceptance still lags the
introduction of new products and services. Traditional communications companies,
such as telephone companies, are positioned to serve the existing and developing
needs of their customer base with a combination of current and new offerings.
Evolving user requirements have also led to the development of separate industry
segments, outside the local telephone and long distance businesses, which enable
non-traditional telecommunications providers a chance to benefit from the
growing worldwide demand for voice, data and video services.
There can be no assurance that the Fund's investment objective will be
achieved. The Fund's investment objective may not be changed by the Board of
Directors without shareholder approval.
Under normal market conditions at least 65% of the Fund's total assets
will be invested in common stock, securities convertible thereto and debt
obligations of companies in the communications field, as defined above.
Depending on the circumstances, the Fund may temporarily and for defensive
purposes invest up to 100% of its net assets in money market instruments and in
other income-producing securities.
Investments in Investment Grade Securities
In general, the Fund will invest in investment grade debt obligations that
are rated, at the time of purchase, BBB or higher by Standard and Poor's Ratings
Group ("S&P") or Baa or higher by Moody's Investors Service, Inc. ("Moody's"),
or, if unrated, determined to be of comparable quality by the Fund's investment
advisors, under criteria approved by the Fund's Board of Directors. Investment
grade securities (securities rated BBB or higher by S&P or Baa or higher by
Moody's) are generally thought to provide the highest credit quality and the
smallest risk of default. Securities rated BBB by S&P or Baa by Moody's have
speculative characteristics. Up to 10% of the Fund's total assets (measured at
the time of the investment) may be invested in lower quality debt obligations
(securities rated BB or lower by S&P or Ba or lower by Moody's and unrated
securities of comparable quality). Securities that were investment grade at the
time of purchase but are subsequently downgraded to BB/Ba or lower will be
included in the 10% category. In the event any security owned by the Fund is
downgraded, the Advisors will review the situation and take appropriate action,
but will not be automatically required to sell the security. If such a downgrade
causes the 10% limit to be exceeded, the Fund will be precluded from investing
further in debt obligations that are below investment grade. (See "Investments
in Non-investment Grade Securities" below.)
Below Investment Grade Securities
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The Fund may purchase debt obligations that carry ratings lower than those
assigned to investment grade bonds by Moody's or S&P, or that are unrated if
such bonds, in the Advisors' judgment, meet the quality criteria established by
the Board of Directors. These bonds are generally known as "junk bonds." These
securities may trade at substantial discounts from their face values.
Accordingly, if the Fund is successful in meeting its objectives, investors may
receive a total return consisting of both income and capital gains. Appendix A
to this Statement of Additional Information sets forth a description of the S&P
and Moody's rating categories, which indicate the rating agency's opinion as to
the probability of timely payment of interest and principal. These ratings range
in descending order of quality from AAA to D (though the Fund will not purchase
securities rated, at the time of purchase, below C), in the case of S&P, and
from Aaa to C, in the case of Moody's.
Ratings of S&P and Moody's represent their opinions of the quality of
bonds and other debt securities they undertake to rate at the time of issuance.
However, these ratings are not absolute standards of quality and may not reflect
changes in an issuer's creditworthiness. Accordingly, the Advisors do not rely
exclusively on ratings issued by S&P or Moody's in selecting portfolio
securities but supplement such ratings with independent and ongoing review of
credit quality. In addition, the total return the Fund may earn from investments
in high-yield securities will be significantly affected not only by credit
quality but by fluctuations in the markets in which such securities are traded.
Accordingly, selection and supervision by the Advisors of investments in lower
rated securities involves continuous analysis of individual issuers, general
business conditions, activities in the high-yield bond market and other factors.
The analysis of issuers may include, among other things, historic and current
financial conditions, strength of management, responsiveness to business
conditions, credit standing and current and anticipated results of operations.
Analysis of general business conditions and other factors may include
anticipated changes in economic activity in interest rates, the availability of
new investment opportunities and the economic outlook for specific industries.
Investing in higher yield, lower rated bonds entails substantially greater
risk than investing in investment grade bonds, including not only credit risk,
but potentially greater market volatility and lower liquidity. Yields and market
values of high-yield bonds will fluctuate over time, reflecting not only
changing interest rates but also the bond market's perception of credit quality
and the outlook for economic growth. When economic conditions appear to be
deteriorating, lower rated bonds may decline in value due to heightened concern
over credit quality, regardless of prevailing interest rates. In addition,
adverse economic developments could disrupt the high-yield market, affecting
both price and liquidity, and could also affect the ability of issuers to repay
principal and interest, thereby leading to a default rate higher than has been
the case historically. Even under normal conditions, the market for junk bonds
may be less liquid than the market for investment grade corporate bonds. There
are fewer securities dealers in the high-yield market and purchasers of
high-yield bonds are concentrated among a smaller group of securities dealers
and institutional investors. In periods of reduced market liquidity, the market
for junk bonds may become more volatile and there may be significant disparities
in the prices quoted for high-yield securities by various dealers. Under
conditions of increased volatility and reduced liquidity, it would become more
difficult for the Fund to value its portfolio securities accurately because
there might be less reliable objective data available.
Investment in Securities of Foreign Issuers
From time to time, the Fund may invest in American Depositary Receipts
("ADRs"), which are interests in securities of foreign companies, and up to 10%
of the Fund's total assets in debt and equity securities of issuers not publicly
traded in the United States, when the Advisors believe that such investments
provide good opportunities for achieving income and capital gains without undue
risk.
Restricted Securities
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The Fund may invest in securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, as amended ("Rule 144A Securities") that
have been determined to be liquid by the Fund's advisors under standards
approved by the Fund's Board of Directors, and may invest up to 10% of its net
assets in Rule 144A Securities that are illiquid (see "Investment Restrictions"
in the Statement of Additional Information). Rule 144A Securities may become
illiquid if qualified institutional buyers are not interested in acquiring the
securities.
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic banks or
broker-dealers deemed to be creditworthy by the Advisors, under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the obligation at a future time and set price,
usually not more than seven days from the date of purchase, thereby determining
the yield during the Fund's holding period. The value of underlying securities
will be at least equal at all times to the total amount of the repurchase
obligation, including the interest factor. The Fund makes payment for such
securities only upon physical delivery or evidence of book-entry transfer to the
account of a custodian or bank acting as agent. The underlying securities, which
in the case of the Fund are securities of the U.S. Government only, may have
maturity dates exceeding one year. The Fund does not bear the risk of a decline
in value of the underlying securities unless the seller defaults under its
repurchase obligation. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience both delays in liquidating
the underlying securities and loss including (a) possible decline in the value
of the underlying security while the Fund seeks to enforce its rights thereto,
(b) possible subnormal levels of income and lack of access to income during this
period, and (c) expenses of enforcing its rights.
Lending of Portfolio Securities
The Fund 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, the 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. The 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 which 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, subject to review by the Board of
Directors of the Fund.
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
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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 will occur affecting an investment on loan, the loan must be called and
the securities voted.
Covered Call Options
In an attempt to earn additional income, and as a means of protecting the
Fund's assets against market declines, the Fund may, to a limited extent, write
covered call option contracts on certain of its securities and purchase call
options for the purpose of eliminating outstanding contracts.
When the Fund writes a call option on securities that it owns, it gives
the purchaser of the option the right to buy the securities at the price
specified in the option (the "Exercise Price") at any time prior to the
expiration of the option. In the strategy to be employed by the Fund, the
Exercise Price, plus the option premium paid by the purchaser, is almost always
greater than the market price of the underlying security at the time the option
is written. If any option is exercised, the Fund will realize the long-term or
short-term gain or loss from the sale of the underlying security and the
proceeds of the sale will be increased by the net premium originally received.
By writing a covered option, the Fund may forego, in exchange for the net
premium, the opportunity to profit from an increase in value of the underlying
security above the Exercise Price. Thus, options will be written when the
Advisors believe the security should be held for the long term but expect no
appreciation or only moderate appreciation within the option period. The Fund
also may write covered options on securities that have a current value above the
original purchase price but which, if then sold, would not normally qualify for
a long-term capital gains treatment. Such activities will normally take place
during periods when market volatility is expected to be high.
Only call options that are traded on a national securities exchange will
be written. Call options are issued by the Options Clearing Corporation, which
also serves as the clearing house for transactions with respect to options. The
price of a call option is paid to the writer without refund on expiration or
exercise, and no portion of the price is retained by The Options Clearing
Corporation or the exchanges. Writers and purchasers of options pay the
transaction costs, which may include commissions charged or incurred in
connection with such option transactions.
The Fund may write options contracts on its securities up to 20% of the
value of its net assets at the time such options are written. The Fund will not
sell the securities against which options have been written (uncover the
options) until after the option period has expired, the option has been
exercised or a closing purchase has been executed.
Call options may be purchased by the Fund, but only to terminate an
obligation as a writer of a call option. This is accomplished by making a
closing purchase transaction, that is, the purchase of a call option on the same
security with the same Exercise Price and expiration date as specified in the
existing call option. A closing purchase transaction with respect to calls
traded on a national securities exchange has the effect of extinguishing the
obligation of a writer. Although the cost to the Fund of such a transaction may
be greater than the net premium received by the Fund upon writing the original
option, the Board of Directors believes that it is appropriate for the Fund to
have the ability to make closing purchase transactions in order to prevent its
portfolio securities from being purchased pursuant to the exercise of a call.
The Advisors may also permit the call option to be exercised. A profit or loss
from a closing purchase transaction will be realized depending on whether the
amount paid to purchase a call to close a position is less or more than the
amount received from writing the call. A profit or loss from an option exercised
will be realized depending upon whether the cost of the stock sold through the
exercise, minus the premium received on the option, is less or more than the
proceeds of the exercise.
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Investment Restrictions
The Fund's investment program is 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 in
addition to those described in the Fund's Prospectus, and are matters of
fundamental policy 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. The Fund will not:
1. Invest less than 65% of its total assets in the communications field,
[except as described in the Prospectus] (otherwise the Fund will not concentrate
more than 25% of its total assets in securities of issuers in any industry);
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;
3. Borrow money, except as a temporary measure for extraordinary or
emergency purposes and then only from banks and in an amount not exceeding 10%
of the value of the total assets of the Fund at the time of such borrowing,
provided that, while borrowings by the Fund equaling 5% or more of the Fund's
total assets are outstanding, the Fund will not purchase securities for
investment;
4. Invest in real estate or mortgages on real estate;
5. Purchase or sell commodities or commodities contracts;
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;
7. Issue senior securities;
8. 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;
9. Effect short sales of securities;
10. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
11. Purchase participations or other interests in oil, gas or other
mineral exploration or development programs; or
12. Invest more than 10% of the value of its net assets in illiquid
securities (as defined under federal and state securities laws), including
repurchase agreements with remaining maturities in excess of seven days.
The following investment restriction may be changed by a vote of the
majority of the Board of Directors. The Fund will not:
1. Invest in shares of any other investment company registered under the
1940 Act, except as permitted by federal law.
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3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined daily as of the close of the
New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time) each day
on which the New York Stock Exchange is open for business (a "Business Day").
The New York Stock Exchange is open for business on all weekdays except for the
following holidays (or the days on which they 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.
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 which is ordinarily 4:00 p.m. (Eastern Time). 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 shareholders placing orders with third parties to place
orders up to the same time as other shareholders.
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 "Valuation of Shares," 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 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.
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectuses is not intended as a substitute
for careful tax planning. For example, under certain specified circumstances,
state income tax laws may exempt from taxation distributions of a regulated
investment company to the extent that such distributions are derived from
interest on federal obligations. Investors are urged to consult with their tax
advisor regarding whether such exemption is available.
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The following general discussion of certain federal income tax
consequences is based on the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
Qualification as a Regulated Investment Company
The Fund intends to qualify and elect to be treated for each taxable year
as a regulated investment company ("RIC") under Subchapter M of the Code.
Accordingly, the Fund must, among other things, (a) derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, and certain other related income, including,
generally, certain gains from options, futures and forward contracts; and (b)
diversify its holdings so that, at the end of each fiscal quarter of the Fund's
taxable year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash and cash items, United States Government securities,
securities of other RICs, and other securities, with such other securities
limited, in respect to any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets or 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities (other than United States Government securities or
securities of other RICs) of any one issuer or two or more issuers that the Fund
controls and which are engaged in the same, similar, or related trades or
business. For purposes of the 90% gross income requirement described above,
foreign currency gains that are not directly related to the Fund's principal
business of investing in stock or securities (or options or futures with respect
to stock or securities) may be excluded from income that qualifies under the 90%
requirement.
In addition to the requirements described above, in order to qualify as a
RIC, the Fund must distribute at least 90% of its net investment income (that
generally includes dividends, taxable interest, and the excess of net short-term
capital gains over net short-term capital losses less operating expenses) and at
least 90% of its net tax-exempt interest income, for each tax year, if any, to
its shareholders. If the Fund meets all of the RIC requirements, it will not be
subject to federal income tax on any of its net investment income or capital
gains that it distributes to shareholders.
Although the Fund intends to distribute substantially all of its net
investment income and may distribute its capital gains for any taxable year, the
Fund will be subject to federal income taxation to the extent any such income or
gains are not distributed.
If the Fund fails to qualify for any taxable year as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate income tax rates without any deduction for distributions to
shareholders, and such distributions generally will be taxable to shareholders
as ordinary dividends to the extent of the Fund's current and accumulated
earnings and profits. In this event, such distributions generally will be
eligible for the dividends-received deduction for corporate shareholders.
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Fund Distributions
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year.
The Fund may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders that are individuals at a maximum rate of 20%,
regardless of the length of time the shareholder has held Shares. If any such
gains are retained, the Fund will pay federal income tax thereon, and, if the
Fund makes an election, the shareholders will include such undistributed gains
in their income, will increase their basis in Fund shares by the difference
between the amount of such includable gains and the tax deemed paid by such
shareholder and will be able to claim their share of the tax paid by the Fund as
a refundable credit.
In the case of corporate shareholders, Fund distributions (other than
capital gains distributions) generally qualify for the dividends-received
deduction to the extent of the gross amount of qualifying dividends received by
the Fund for the year. Generally, and subject to certain limitations, a dividend
will be treated as a qualifying dividend if it has been received from a domestic
corporation. Accordingly, distributions from the Fund will qualify for the
corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the year
of payment. However, dividends declared payable to shareholders of record in
December of one year, but paid in January of the following year, will be deemed
for tax purposes to have been received by the shareholder and paid by the Fund
in the year in which the dividends were declared.
Investors should be careful to consider the tax implications of purchasing
Shares just prior to the ex-dividend date of any ordinary income dividend or
capital gains distribution. Those investors will be taxable on the entire amount
of the dividend or distribution received, even though some or all of the amount
distributed may have been realized by the Fund prior to the investor's purchase.
The Fund will provide an annual statement to shareholders describing the
federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year, including the amount of dividends eligible for the corporate
dividends-received deduction.
Sale or Exchange of Fund Shares
The sale or exchange of a share is a taxable event for the shareholder.
Generally, gain or loss on the sale or exchange of a Share will be capital gain
or loss that will be long-term if the Share has been held for more than twelve
months and otherwise will be short-term. For individuals, long-term capital
gains are currently taxed at a rate of 20% and short-term capital gains are
currently taxed at ordinary income tax rates. However, if a shareholder realizes
a loss on the sale, exchange or redemption of a Share held for six months or
less and has previously received a capital gains distribution with respect to
the Share (or any undistributed net capital gains of the Fund with respect to
such Share are included in determining the shareholder's long-term capital
gains), the shareholder must treat the loss as a long-term capital loss to the
extent of the amount of the prior capital gains distribution (or any
undistributed net capital gains of the Fund that have been included in
determining such shareholder's long-term capital gains). In addition,
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any loss realized on a sale or other disposition of Shares will be disallowed to
the extent an investor repurchases (or enters into a contract or option to
repurchase) Shares within a period of 61 days (beginning 30 days before and
ending 30 days after the disposition of the Shares). This loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.
In certain cases, the Fund will be required to withhold and remit to the
United States Treasury 31% of distributions payable to any shareholder who (1)
has failed to provide a correct tax identification number, (2) is subject to
backup withholding by the Internal Revenue Service for failure to properly
report receipt of interest or dividends, or (3) has failed to certify to the
Fund that such shareholder is not subject to backup withholding.
Federal Excise Tax; Miscellaneous Considerations; Effect of Future Legislation
If the Fund fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term capital gains over short and long term capital losses)
for the one-year period ending on October 31 of that year (and any retained
amount from the prior calendar year), the Fund will be subject to a
nondeductible 4% Federal excise tax on the undistributed amounts. The Fund
intends to make sufficient distributions to avoid imposition of this tax, or to
retain, at most, its net capital gains and pay tax thereon.
State and Local Tax Considerations
Rules of state and local taxation of dividend and capital gains
distributions from regulated investment companies often differ from the rules
for federal income taxation described above. Shareholders are urged to consult
their tax advisors as to the consequences of these and other state and local tax
rules affecting an investment in the Fund.
5. MANAGEMENT OF THE FUND
Directors and Officers
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, sub-advisor, distributor, custodian and
transfer agent.
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.
*TRUMAN T. SEMANS, Chairman (10/27/26)
Vice Chairman, Brown Investment Advisory & Trust Company (formerly, Alex.
Brown Capital Advisory & Trust Company); Director, Investment Company
Capital Corp. (registered investment advisor) and Virginia Hot Springs
Inc. (property management); Formerly, Managing Director and Vice Chairman,
Alex. Brown Incorporated (now BT Alex. Brown Incorporated).
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*RICHARD T. HALE, Director (7/17/45)
Managing Director, BT Alex. Brown Incorporated; Director and President,
Investment Company Capital Corp. (registered investment advisor); and
Chartered Financial Analyst.
JAMES J. CUNNANE, Director (3/11/38)
60 Seagate Drive, Unit P106, Naples, Florida 34103. Managing Director, CBC
Capital (merchant banking), 1993-Present and Director, Net.World
(telecommunications), 1998-Present. Formerly, Senior Vice President and
Chief Financial Officer, General Dynamics Corporation (defense),
1989-1993; and Director, The Arch Fund (registered investment company).
JOSEPH R. HARDIMAN, Director (5/27/37)
8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor and
Capital Markets Consultant; Director, The Nevis Fund (registered
investment company) and Circon Corp. (medical instruments); Formerly,
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 BT Alex.
Brown Incorporated), 1985-1987; General Partner, Alex. Brown & Sons
Incorporated (now BT Alex. Brown Incorporated) 1976-1985.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director, Kimberly-Clark
Corporation (personal consumer products) and Household International
(banking and finance); Chairman of the Quality Control Inquiry Committee,
American Institute of Certified Public Accountants; Formerly, Trustee,
Merrill Lynch Funds for Institutions, 1991-1993; Adjunct Professor,
Columbia University-Graduate School of Business, 1991-1992; and Partner,
KPMG Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main Street,
Durham, North Carolina 27705. President, Duke Management Company
(investments); Executive Vice President, Duke University (education,
research and health care); Executive Vice Chairman and Director, Central
Carolina Bank & Trust (banking) and Director, Victory Funds (registered
investment companies). Formerly, Director AMBAC Treasurers Trust
(registered investment company) and DP Mann Holdings (insurance).
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; Director and Executive Vice President,
The Glenmede Trust Company; Formerly, Executive Director, The Pew
Charitable Trusts.
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) and American Science & Engineering
(x-ray detection equipment); Formerly, Chairman and Member, National
Transportation Safety Board; Director, National Railroad Passenger
Corporation (Amtrak); and Director and Member, Aviation System Capacity
Advisory Committee (Federal Aviation Administration).
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<PAGE>
HARRY WOOLF, President (8/12/23)
Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; Director, ATL
and Spacelabs Medical Corp. (medical equipment); and Family Health
International (non-profit research and education); Director, Research
America (non-profit medical research); Formerly, Director, Merrill Lynch
Cluster C Funds and Flag Investors/ISI and BT Alex. Brown Cash Reserve
Fund, Inc. Family of Funds, (registered investment companies); and
Trustee, Reed College (education) and Rockefeller Foundation.
AMY M. OLMERT, Secretary (5/14/63)
Vice President, BT Alex. Brown Incorporated, 1997-Present. Formerly,
Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP),
1988-1997.
JOSEPH A. FINELLI, Treasurer (1/24/57)
Vice President, BT Alex. Brown Incorporated and Vice President, Investment
Company Capital Corp. (registered investment advisor), 1995-Present;
Formerly, Vice President and Treasurer, The Delaware Group of Funds
(registered investment companies) and Vice President, Delaware Management
Company, Inc. (investments), 1980-1995.
SCOTT J. LIOTTA, Assistant Secretary (3/18/65)
Assistant Vice President, BT Alex. Brown Incorporated, 1996-Present;
Formerly, Manager and Foreign Markets Specialist, Putnam Investments Inc.
(registered investment companies), 1994- 1996; Supervisor, Brown Brothers
Harriman & Co. (domestic and global custody), 1991-1994.
- -------------------
* Messrs. Semans and Hale are directors who are "interested persons," as
defined in the 1940 Act.
Directors and officers of the Fund are also directors and officers of some
or all of the other investment companies managed, administered or advised by BT
Alex. Brown Incorporated ("BT Alex. Brown") or its affiliates. There are
currently 12 funds in the Flag Investors/ISI Funds and BT Alex. Brown Cash
Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Hale serves as
Chairman of three funds and Director of seven other funds in the Fund Complex.
Mr. Semans serves as Chairman of five funds and as a Director of five other
funds in the Fund Complex. Messrs. Cunnane, Hardiman, Levy, McDonald and Vogt
serve as Directors of each fund in the Fund Complex. Ms. Rimel serves as
Director of eleven funds in the Fund Complex. Mr. Woolf serves as President of
seven funds in the Fund Complex. Ms. Olmert serves as Secretary, Mr. Finelli
serves as Treasurer and Mr. Liotta serves as Assistant Secretary of each of the
funds in the Fund Complex.
Some of the Directors of the Fund are customers of, and have had normal
brokerage transactions with, BT Alex. Brown or its affiliates 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.
With the exception of the Fund's President, officers of the Fund receive
no direct remuneration in such capacity from the Fund. Officers and Directors of
the Fund who are officers or directors of BT Alex. Brown or its affiliates may
be considered to have received remuneration indirectly. As compensation for his
or her services as director, each Director who is not an "interested person" of
the Fund (as defined in the 1940 Act) (an "Independent Director") and Mr. Woolf,
the Fund's President, 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
-12-
<PAGE>
allocated among all such funds described above in direct proportion to their
relative net assets. For the fiscal year ended December 31, 1998, Independent
Directors' fees attributable to the assets of the Fund totaled $34,921.
The following table shows aggregate compensation payable to each of the
Fund's Directors by the Fund and the Fund Complex, respectively, and pension or
retirement benefits accrued as part of Fund expenses in the fiscal year ended
December 31, 1998.
-13-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name of Person, Position Aggregate Compensation Pension or Retirement Total Compensation
From the Fund Payable to Benefits Accrued As From the Fund
Directors for the Fiscal Year Part of Fund Expenses and Fund Complex
Ended December 31, 1998 Payable to Directors
for the Fiscal Year
Ended December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truman T. Semans, Chairman(1) $0 $0 $0
Richard T. Hale, Director(1) $0 $0 $0
James J. Cunnane, Director $4,358(2) 3 $39,000 for service on 13(4)
Boards in the Fund Complex
Joseph R. Hardiman(5) $2,472(2) 3 $19,500 for service on 11(6)
Boards in the Fund Complex
John F. Kroeger, Director(7) $5,475 3 $49,000 for service on 13(4)
Boards in the Fund Complex
Louis E. Levy, Director $4,960(2) 3 $44,000 for service on 13(4)
Boards in the Fund Complex
Eugene J. McDonald, Director $4,358(2) 3 $39,000 for service on 13(4)
Boards in the Fund Complex
Rebecca W. Rimel, Director $4,429(2) 3 $39,000 for service on 12(4,6)
Boards in the Fund Complex
Carl W. Vogt, Esq., Director $4,461(2) 3 $39,000 for service on 13(4,6)
Boards in the Fund Complex
- -----------------
</TABLE>
(1) A Director who is an "interested person" as defined in the 1940 Act.
(2) Of amounts payable to Messrs. Cunnane, Levy, McDonald and Vogt, and to Ms.
Rimel, $4,358, $0, $4,358, $4,461 and $4,429, respectively, was deferred
pursuant to a deferred compensation plan.
(3) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund for
the year ended December 31, 1998 was approximately $12,735.
(4) One of these funds ceased operations on July 29, 1998.
(5) Elected to the Fund's Board of Directors on September 27,1998.
(6) Ms. Rimel and Mr. Hardiman receive and Mr. Vogt received proportionately
higher compensation from each fund for which they serve.
(7) Retired effective September 27, 1998.
The Fund Complex has adopted a Retirement Plan (the "Retirement Plan")
for Directors who are not employees of the Fund, the Advisors or their
respective affiliates (the "Participants"). After completion of six years of
service, each Participant 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 Retirement Plan is
unfunded and unvested. The Fund has two Participants, a Director who retired
effective December 31, 1994, and Mr. Woolf who retired effective December 31,
1996, who have qualified for the Retirement Plan by serving thirteen and
fourteen years, respectively, as Directors in the Fund Complex and each of whom
will be paid a quarterly fee of $4,875
-14-
<PAGE>
by the Fund Complex for the rest of his life. Such fees are allocated to each
fund in the Fund Complex based upon the relative net assets of such fund to the
Fund Complex.
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, 1998 are as follows: for Mr. Cunnane, 4 years; for Mr. Levy, 4
years; for Mr. McDonald, 6 years; for Ms. Rimel, 3 years; for Mr. Vogt, 3 years;
and for Mr. Hardiman, 0 years.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- --------------------------------------------------------------------------
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>
Any Director who receives fees from the Fund is permitted to defer 50%
to 100% of his or her annual compensation pursuant to a Deferred Compensation
Plan. Messrs. Cunnane, Levy, McDonald and Vogt and Ms. Rimel have each executed
a Deferred Compensation Agreement. Currently, the deferring Directors may select
from among various Flag Investors funds, BT Alex. Brown Cash Reserve Fund, Inc.
and BT International Equity Fund 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.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Code of Ethics applies to the
personal investing activities of all the directors and officers of the Fund, as
well as to designated officers, directors and employees of the Advisors and the
Distributor. As described below, the Code of Ethics imposes additional
restrictions on the Advisors' investment personnel, including the portfolio
managers and employees who execute or help execute a portfolio manager's
decisions or who obtain contemporaneous information regarding the purchase or
sale of a security by the Fund.
The Code of Ethics requires that any officer, director or employee of
the Fund, or the Advisors preclear any personal securities investments (with
certain exceptions, such as non-volitional purchases or purchases that are part
of an automatic dividend reinvestment plan). The foregoing would apply to any
officer, director or employee of the Distributor that is an access person. The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and special preclearance of the
acquisition
-15-
<PAGE>
of securities in private placements. Furthermore, the Code of Ethics provides
for trading "blackout periods" that prohibit trading by investment personnel and
certain other employees within periods of trading by the Fund in the same
security. Trading by investment personnel and certain other employees of the
Advisor or Sub-Advisor, as appropriate, would be exempt from this "blackout
period" provided that (1) the market capitalization of a particular security
exceeds $2 billion; and (2) orders of such entity (including trades of both
clients and covered persons) do not exceed ten percent of the daily average
trading volume of the security for the prior 15 days. Officers, directors and
employees of the Advisors and the Distributor may comply with codes instituted
by those entities so long as they contain similar requirements and restrictions.
6. INVESTMENT ADVISORY AND OTHER SERVICES
On June 17, 1997, the Board of Directors of the Fund, including a
majority of the Independent Directors, approved an Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. ("ICC" or the "Advisor")
and a Sub-Advisory Agreement among the Fund, ICC and Alex. Brown Investment
Management ("ABIM" or the "Sub-Advisor"), both of which contracts are described
in greater detail below. The Investment Advisory Agreement and the Sub-Advisory
Agreement were approved by a vote of shareholders of the Fund on August 14,
1997. ICC, the investment advisor, is an indirect subsidiary of Bankers Trust
Corporation. ABIM is a limited partnership affiliated with the Advisor. Buppert,
Behrens & Owens, Inc. a company organized and owned by three employees of ABIM,
owns a 49% limited partnership interest and a 1% general partnership interest in
ABIM. BT Alex. Brown owns a 1% general partnership interest in ABIM and BT Alex.
Brown Holdings, Inc. owns the remaining limited partnership interest. ICC also
serves as investment advisor and ABIM serves as sub-advisor to other funds in
the Flag Investors family of funds.
Under the Investment Advisory Agreement, ICC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. ICC has delegated this responsibility to ABIM
provided that ICC continues to supervise the performance of ABIM and report
thereon to the Fund's Board of Directors. Any investment program undertaken by
ICC or ABIM will at all times be subject to policies and control of the Fund's
Board of Directors. ICC will provide the Fund with office space for managing its
affairs, with the services of required executive personnel and with certain
clerical and bookkeeping services and facilities. These services are provided by
ICC without reimbursement by the Fund for any costs. Neither ICC nor ABIM shall
be liable to the Fund or its shareholders for any act or omission by ICC or ABIM
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 ICC and ABIM to the Fund are not exclusive and ICC and ABIM are
free to render similar services to others.
As compensation for its services, ICC is entitled to receive a fee from
the Fund, calculated daily and paid monthly, at the following annual rates based
upon the Fund's average daily net assets: 0.85% of the first $100 million, 0.75%
of the next $100 million, 0.70% of the next $100 million, 0.65% of the next $200
million, 0.58% of the next $500 million, 0.53% of the next $500 million and
0.50% of that portion exceeding $1.5 billion. Prior to April 11, 1995, the
annual rates based upon the Fund's average daily net assets were: 0.65% of the
first $100 million, 0.55% of the next $100 million, 0.50% of the next $100
million and 0.45% of that portion in excess of $300 million. As compensation for
its services, ABIM is entitled to receive a fee from ICC, payable from its
advisory fee, calculated daily and paid monthly, at the following annual rates
based upon the Fund's average daily net assets: 0.60% of the first $100 million,
0.55% of the next $100 million, 0.50% of the next $100 million, 0.45% of the
next $200 million, 0.40% of the next $500 million, 0.37% of the next $500
million and 0.35% of that portion in excess of $1.5 billion.
-16-
<PAGE>
Each of the Investment Advisory Agreement and the Sub-Advisory
Agreement has an initial term of two years and will continue in effect from year
to year thereafter if such continuance is specifically approved at least
annually by the Fund's Board of Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
agreements, by votes cast in person at a meeting called for such purpose, and by
a vote of a majority of the outstanding Shares (as defined under "Capital
Stock"). The Fund or ICC may terminate the Investment Advisory Agreement on
sixty days' written notice without penalty. The Investment Advisory Agreement
will terminate automatically in the event of assignment (as defined in the 1940
Act). The Sub-Advisory Agreement has similar termination provisions.
Advisory fees paid by the Fund to ICC and sub-advisory fees paid by ICC
to ABIM for the last three fiscal years were as follows:
Year Ended December 31,
- --------------------------------------------------------------------------------
Fees Paid to: 1998 1997 1996
- --------------------------------------------------------------------------------
ICC $5,927,518 $ 4,172,769 $ 3,562,609
- --------------------------------------------------------------------------------
ABIM $4,132,229 $ 2,944,897 $ 2,430,407
- --------------------------------------------------------------------------------
ICC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Fund. An affiliate of ICC serves as the
Fund's custodian. See "Custodian, Transfer Agent and Accounting Services."
7. DISTRIBUTION OF FUND SHARES
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves
as the distributor of each class of the Fund's Shares pursuant to a Distribution
Agreement (the "Distribution Agreement") effective August 31, 1997.
The Distribution Agreement provides that ICC Distributors shall; (i)
use reasonable efforts to sell Shares upon the terms and conditions contained in
the Distribution Agreement and the Fund's then current Prospectus; (ii) use its
best efforts to conform with the requirements of all federal and state laws
relating to the sale of the Shares; (iii) adopt and follow procedures as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. and any other applicable self-regulatory organization;
(iv) perform its duties under the supervision of and in accordance with the
directives of the Fund's Board of Directors and the Fund's Articles of
Incorporation and By-Laws; and (v) provide the Fund's Board of Directors with a
written report of the amounts expended in connection with the Distribution
Agreement. ICC Distributors shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of ICC Distributors are not exclusive and ICC Distributors
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment, or for any action
or inaction of ICC Distributors in the absence of bad faith, willful misfeasance
or gross negligence in the performance of its duties or obligations under the
Distribution Agreement or by reason of its reckless disregard of its duties and
obligations under the Distribution Agreement. The Distribution Agreement further
provides that the Fund and ICC Distributors will mutually indemnify each other
for losses relating to disclosures in the Fund's registration statement.
The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a
-17-
<PAGE>
majority of the Fund's outstanding Shares of the related class (as defined under
"Capital Stock") or upon 60 days' written notice by the Distributor and shall
automatically terminate in the event of an assignment. The Distribution
Agreement has an initial term of one year from the date of effectiveness. It
shall continue in effect thereafter with respect to each class of the Fund
provided that it is approved at least annually by (i) a vote of a majority of
the outstanding voting securities of the related class of the Fund or (ii) a
vote of a majority of the Fund's Board of Directors including a majority of the
Independent Directors and, with respect to each class of the Fund for which
there is a plan of distribution, so long as such plan of distribution is
approved at least annually by the Independent Directors in person at a meeting
called for the purpose of voting on such approval. The Distribution Agreement,
including the form of Sub-Distribution Agreement, was most recently approved by
the Board of Directors, including a majority of the Independent Directors, on
September 29, 1998.
ICC Distributors and certain broker-dealers ("Participating Dealers")
have entered into Sub-Distribution Agreements under which such broker-dealers
have agreed to process investor purchase and redemption orders and respond to
inquiries from Fund shareholders concerning the status of their accounts and the
operations of the Fund. Any Sub-Distribution Agreement may be terminated in the
same manner as the Distribution Agreement and shall automatically terminate in
the event of an assignment.
With respect to Class A Shares, Class B Shares and Class C Shares, the
Fund may enter into Shareholder Servicing Agreements with certain financial
institutions, such as BT Alex. Brown and certain banks, to act as Shareholder
Servicing Agents, pursuant to which ICC Distributors will allocate a portion of
its distribution fee as compensation for such financial institutions' ongoing
shareholder services. The Fund may also enter into Shareholder Servicing
Agreements pursuant to which the Advisor, the Distributor or their respective
affiliates will provide compensation out of their own resources for ongoing
shareholder services. Although banking laws and regulations prohibit banks from
distributing shares of open-end investment companies such as the Fund, according
to interpretations by various bank regulatory authorities, financial
institutions are not prohibited from acting in other capacities for investment
companies, such as the shareholder servicing capacities described above. Should
future legislative, judicial or administrative action prohibit or restrict the
activities of the Shareholder Servicing Agents in connection with the
Shareholder Servicing Agreements, the Fund may be required to alter materially
or discontinue its arrangements with the Shareholder Servicing Agents. Such
financial institutions may impose separate fees in connection with these
services.
As compensation for providing distribution services as described above,
the Fund will pay ICC Distributors, an annual fee, paid monthly equal to 0.25%
of the average daily net assets of the Class A Shares, 0.75% of the average
daily net assets of the Class B Shares and 0.75% of the average daily net assets
of the Class C Shares. With respect to the Class A Shares, ICC Distributors
expects to allocate up to all of its fee to Participating Dealers and
Shareholder Servicing Agents. With respect to the Class B Shares and the Class C
Shares, ICC Distributors expects to retain the entire distribution fee as
reimbursement for front-end payments to Participating Dealers. In addition, with
respect to the Class B Shares and the Class C Shares, the Fund will pay ICC
Distributors a shareholder servicing fee at an annual rate of 0.25% of the
average daily net assets of the respective class. (See the Prospectus.) ICC
Distributors expects to allocate most of its shareholder servicing fee to
Participating Dealers and Shareholder Servicing Agents. ICC Distributors does
not receive compensation for distributing Institutional Shares.
As compensation for providing distribution and shareholder services to
the Fund for the last three fiscal years, the Fund's distributor received
aggregate fees in the following amounts:
-18-
<PAGE>
----------------------------------------------
Fiscal Year Ended December 31,
- -------------------------------------------------------------------------------
Fees
1998 1997 1996
- --------------------------------------------------------------------------------
12b-1 Fees $2,717,467(1) $ 1,545,188(2) $ 1,350,396(4)
- --------------------------------------------------------------------------------
Shareholder Servicing Fee
(Class B and Class C Shares) $180,687(1) $ 59,629(3,5) $ 32,943(4,5)
- --------------------------------------------------------------------------------
- -------------------------------------------------------
(1) Fees received by ICC Distributors, the Fund's distributor.
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $974,875 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $570,313.
(3) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $35,479 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $24,150.
(4) Fees received by Alex. Brown, the Fund's distributor. 5 For Class B
Shares only.
Pursuant to Rule 12b-1 under the 1940 Act, which provides that
investment companies may pay distribution expenses, directly or indirectly, only
pursuant to a plan adopted by the investment company's board of directors and
approved by its shareholders, the Fund has adopted a Plan of Distribution for
each class of Shares (except Institutional Shares) (the "Plans"). Under the
Plans, the Fund pays a fee to ICC Distributors for distribution and other
shareholder servicing assistance as set forth in the Distribution Agreement, and
ICC Distributors is authorized to make payments out of its fees to Participating
Dealers and Shareholder Servicing Agents. The Plans remain in effect from year
to year thereafter as specifically approved (a) at least annually by the Fund's
Board of Directors and (b) by the affirmative vote of a majority of the
Independent Directors, by votes cast in person at a meeting called for such
purpose. The Plans were most recently approved by the Board of Directors,
including a majority of the Independent Directors, on September 29, 1998.
In approving the Plans, the Directors concluded, in the exercise of
reasonable business judgment, that there was a reasonable likelihood that the
Plans would benefit the Fund and its shareholders. The Plans will be renewed
only if the Directors make a similar determination in each subsequent year. The
Plans may not be amended to increase materially the fee to be paid pursuant to
the Distribution Agreement without the approval of the shareholders of the Fund.
The Plans may be terminated at any time upon sixty days' notice, in either case
without penalty, by the vote of a majority of the Independent Directors or by a
vote of a majority of the outstanding Shares of the related class (as defined
under "Capital Stock").
During the continuance of the Plans, the Fund's Board of Directors will
be provided for their review, at least quarterly, a written report concerning
the payments made under the Plans to ICC Distributors pursuant to the
Distribution Agreement and to broker-dealers pursuant to any Sub-Distribution
Agreements. Such reports shall be made by the persons authorized to make such
payments. In addition, during the continuance of the Plans, the selection and
nomination of the Fund's Independent Directors shall be committed to the
discretion of the Independent Directors then in office.
If a Plan is terminated in accordance with its terms, the obligation of
the Fund to make payments to ICC Distributors pursuant to the Plan will cease
and the Fund will not be required to make any payments past the date the
Distribution Agreement terminates with respect to that class. In return for
payments received pursuant to the Plans for the Class A Shares and the Class B
Shares for the last three fiscal years, the Fund's distributor paid the
distribution related expenses of the related
-19-
<PAGE>
classes including one or more of the following: printing and mailing of
prospectuses to other than current shareholders; compensation to dealers and
sales personnel; and interest, carrying, or other financing charges.
The Fund's distributor received commissions on the sale of Class A
Shares and contingent deferred sales charges on the Class B and Class C Shares
and from such commissions and sales charges retained the following amounts:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------
Class 1998 1997 1996
-------------------------------------------------------------------------------------------------
Received Retained Received Retained Received Retained
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A $2,696,511(1) $ 0 $469,945(2) $ 61,823(4) $717,441(6) $255,062(6)
Commissions
- -----------------------------------------------------------------------------------------------------------------------
Class B $3,281,541(1) $ 0 $350,133(3) $ 34,414(5) $377,125(6) $377,125(6)
Contingent
Deferred Sales
Charge
- -----------------------------------------------------------------------------------------------------------------------
Class C $ 24,636(1) $ 0 N/A N/A N/A N/A
Contingent
Deferred Sales
Charge
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------
(1) By ICC Distributors, the Fund's distributor.
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $307,092 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $66,419.
(3) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $202,841 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $147,292.
(4) Retained by Alex. Brown.
(5) Retained by Alex. Brown.
(6) Retained by Alex. Brown..
The Fund will pay all costs associated with its organization and
registration under the Securities Act of 1933 and the 1940 Act. Except as
described elsewhere, the Fund pays or causes to be paid all continuing expenses
of the Fund, including, without limitation: investment advisory and distribution
fees; the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of cash, portfolio securities and
other property, and any transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions chargeable to the Fund in connection
with portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing Shares; all costs and
expenses in connection with the registration and maintenance of the Fund and its
Shares with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the
-20-
<PAGE>
Fund's shareholders; all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Directors and Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; fees and
expenses of legal counsel, including counsel to the Independent Directors, and
of independent certified public accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including Officers and Directors) of the Fund that inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
assumed by ICC, ABIM, or ICC Distributors.
The address of ICC Distributors is Two Portland Square, Portland, Maine
04101.
8. BROKERAGE
ABIM is responsible for decisions to buy and sell securities for the
Fund, for the broker-dealer selection and for negotiation of commission rates,
subject to the supervision of ICC. 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
ABIM and the broker-dealers. ABIM may direct purchase and sale orders to any
broker-dealer, including, to the extent and in the manner permitted by
applicable law, its 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. The Fund will not deal with
affiliates of the Advisors in any transaction in which affiliates of the
Advisors act as a principal.
If affiliates of the Advisors are participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with rules of the SEC. The Fund believes that the limitation will
not affect its ability to carry out its present investment objective.
ABIM's primary consideration in effecting securities transactions is to
obtain best price and execution of orders on an overall basis. As described
below, however, ABIM may, in its discretion, effect transactions with dealers
that furnish statistical, research or other information or services that are
deemed by ABIM to be beneficial to the Fund's investment program. Certain
research services furnished by broker-dealers may be useful to ABIM with clients
other than the Fund. Similarly, any research services received by ABIM through
placement of portfolio transactions of other clients may be of value to ABIM in
fulfilling its obligations to the Fund. No specific value can be determined for
research and statistical services furnished without cost to ABIM by a
broker-dealer. ABIM is of the opinion that because the material must be analyzed
and reviewed by its staff, its receipt does not tend to reduce expenses, but may
be beneficial in supplementing ABIM's research and analysis. Therefore, it may
tend to benefit the Fund by improving ABIM's investment advice. In
over-the-counter transactions, ABIM will not pay any commission or other
remuneration for research services. ABIM's policy is to pay a broker-dealer
higher commissions for particular transactions than might be charged if a
different broker-dealer had been chosen when, in ABIM's opinion, this policy
furthers the overall objective of obtaining best price and execution. Subject to
periodic review by the Fund's Board of Directors, ABIM is also authorized to pay
broker-dealers (other than affiliates of the Advisors) higher
-21-
<PAGE>
commissions than another broker might have charged on brokerage transactions for
the Fund for brokerage or research services. The allocation of orders among
broker-dealers and the commission rates paid by the Fund will be reviewed
periodically by the Board.
Subject to the above considerations, the Board of Directors has
authorized the Fund 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 the 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 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 ICC and ABIM to furnish reports and to
maintain records in connection with such reviews.
ABIM manages other investment accounts. It is possible that, at times,
identical securities will be acceptable for the Fund and one or more of such
other accounts; however, the position of each account in the securities of the
same issuer may vary and the length of time that each account may choose to hold
its investment in such securities may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of the
Fund or one or more of these accounts is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by ABIM. ABIM may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Such simultaneous transactions, however, could adversely
affect the ability of the Fund to obtain or dispose of the full amount of a
security that it seeks to purchase or sell.
ABIM directed transactions to broker-dealers and paid related
commissions because of research services in the following amounts:
- --------------------------------------------------------------------------------
Fiscal Year Ended December 31,
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Transactions Directed $244,993,558 $312,672,931 $ 191,851,754
- --------------------------------------------------------------------------------
Commissions Paid $ 275,519 $ 406,249 $ 396,046
- --------------------------------------------------------------------------------
For the fiscal year ended December 31, 1998, the Fund paid $4,500 in
brokerage commissions to BT Alex Brown or its affiliates. For the fiscal year
ended December 31, 1997, the Fund paid no brokerage commissions to BT Alex.
Brown or its affiliates. For the fiscal year ended December 31, 1996, the Fund
paid Alex. Brown brokerage commissions in the aggregate amount of $7,000, which
represented 1.9% of the Fund's aggregate brokerage commissions for the period
and which were paid on transactions that represented 2.9% of the aggregate
dollar amount of transactions that incurred commissions paid by the Fund during
the period. The Fund is required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the 1940 Act) that the Fund has
acquired during its most recent fiscal year. As of December 31, 1998, the Fund
held a 4.5% repurchase agreement issued by Goldman Sachs & Co. valued at
$60,306,067. Goldman Sachs & Co. is a "regular broker or dealer" of the Fund.
-22-
<PAGE>
9. CAPITAL STOCK
Under the Fund's Articles of Incorporation, the Fund has 110 million
authorized Shares of common stock, with a par value of $.001 per share. The
Board of Directors may increase or decrease the number of authorized Shares
without shareholder approval. On October 11, 1989, the Fund declared a two for
one stock dividend payable to shareholders of record on October 27, 1989.
The Fund's Articles of Incorporation provide for the establishment of
separate series and separate classes of Shares by the Directors at any time. The
Fund currently has one Series and the Board has designated four classes of
Shares: Flag Investors Communications Fund Class A Shares, Flag Investors
Communications Fund Class B Shares, Flag Investors Communications Fund Class C
Shares; and Flag Investors Communications Fund Institutional Shares. In the
event separate series are established, all Shares of the Fund, 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. In
general, 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, the series would be treated as separate entities. Generally, each
class of Shares issued by a particular series would be identical to every other
class and expenses of the Fund (other than 12b-1 fees and any applicable
services fees) are prorated between all classes of a series based upon the
relative net assets of each class. Any matters affecting any class exclusively
will be voted on by the holders of such class.
Shareholders of the Fund 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 Fund. There are no preemptive, conversion or exchange rights applicable to
any of the Shares. The issued and outstanding Shares are fully paid and
non-assessable. In the event of liquidation or dissolution of the Fund, each
Share is entitled to its portion of the Fund'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 a 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.
10. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-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 Fund's independent accountants.
11. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Bankers Trust Company ("Bankers Trust") 130 Liberty Street, New York,
New York 10006, has been retained to act as custodian of the Fund's investments.
Bankers Trust receives such compensation from the Fund for its services as
custodian as may be agreed to from time to time by Bankers Trust and the Fund.
For the fiscal year ended December 31, 1998, Bankers Trust was paid $101,903 as
compensation for providing custody services to the Fund. Investment Company
Capital Corp. has been retained to act as transfer and dividend disbursing
agent. As
-23-
<PAGE>
compensation for providing these services, the Fund pays ICC up to
$15.12 per account per year, plus reimbursement for out-of-pocket expenses. For
the fiscal year ended December 31, 1998, ICC received transfer agency fees of
$577,983.
ICC also provides certain accounting services to the Fund under a
Master Services Agreement between the Fund and ICC. As compensation for these
services, ICC receives an annual fee, calculated daily and paid monthly as shown
below.
Average Daily Net Assets Incremental Annual Accounting Fee
------------------------ ---------------------------------
$ 0 - $ 10,000,000 $13,000(fixed fee)
$ 10,000,000 - $ 20,000,000 .100%
$ 20,000,000 - $ 30,000,000 .080%
$ 30,000,000 - $ 40,000,000 .060%
$ 40,000,000 - $ 50,000,000 .050%
$ 50,000,000 - $ 60,000,000 .040%
$ 60,000,000 - $ 70,000,000 .030%
$ 70,000,000 - $ 100,000,000 .020%
$100,000,000 - $ 500,000,000 .015%
$500,000,000 - $ 1,000,000,000 .005%
over $1,000,000,000 .001%
In addition, the Fund reimburses ICC for certain out-of-pocket
expenses.
As compensation for providing accounting services to the Fund for the
fiscal year ended December 31, 1998, ICC received fees of $135,622.
12. INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland
21201, are independent accountants to the Fund.
13. LEGAL MATTERS
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
14. PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the Fund to
that of other open-end diversified management investment companies and to stock
or other relevant indices in advertisements
-24-
<PAGE>
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(l + 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)
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 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 Fund's registration statement (or the later commencement of
operations of the series or class).
Calculated according to SEC rules, the ending redeemable value and
average annual total return of a hypothetical $1,000 payment for the periods
ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
One-Year Period Five-Year Period Ten-Year Period
Ended Ended Ended
December 31, December 31, December 31, Inception Through
1998 1998 1998 December 31, 1998
----- ----- ---- -----------------
Average Average Average
Ending Ending Annual Ending Annual Ending Annual
Redeemable Total Redeemable Total Redeemable Total Redeemable Total
Class Value Return Value Return Value Return Value Return
----- ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $1,769 76.96% $3,446 28.08% $7,766 22.75% $1,750* 21.10%*
January 18, 1984+
Class B $1,799 79.91% N/A N/A N/A N/A $3,709 38.87%
January 3, 1995+
Class C N/A N/A N/A N/A N/A N/A $1,410 40.09%
November 1,
1998+
Institutional N/A N/A N/A N/A N/A N/A $1,540 53.99%
May 1, 1998+
</TABLE>
+ Inception Date.
* Not required since more than ten years have elapsed since inception.
The 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
in order to compare more accurately the Fund's
-25-
<PAGE>
performance with other measures of investment return. For example, in comparing
the Fund's total return with data published by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc. or Morningstar Inc., or with the performance
of the Lehman Brothers Government Corporate Bond Index, the Consumer Price
Index, the return on 90-day U.S. Treasury bills, the Standard and Poor's 500
Stock Index or the Dow Industrial Average, 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, the Fund assumes that the $10,000 invested in Shares is
net of all sales charges. The 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.
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 and short-term
securities) may vary from year to year, as well as within a year, depending on
market conditions. The Fund's portfolio turnover rate in fiscal year 1998 was
14% and in fiscal year 1997 was 26%.
Morningstar Mutual Fund Advisory Service ("Morningstar") assigned the
Fund their "5" Best in Category, rating among the ten funds in the
communications funds category for the three-year period ended December 31, 1998.
As of December 31, 1998, Morningstar assigned the Fund a weighted overall
risk-adjusted rating of five stars based on the three-, five- and ten-year
ratings (see explanation below). As of December 31, 1998, the Fund's ratings for
separate periods within its investment category of domestic equity funds, were
five stars among 2,802 funds for three years, five stars among 1,702 funds for
five years and five stars among 732 funds for ten years.
The Morningstar risk-adjusted rating is expressed on a scale of 1 to 5
stars. The star rating is neither a predictive measure nor a "buy/sell"
recommendation. It is a purely descriptive representation of how well a fund has
balanced risk and return in the past. If the fund scores in the top 10% of its
investment category, it receives 5 stars (Highest); if it falls in the next
22.5%, it receives 4 stars (Above Average); if it falls in the middle 35%, it
receives 3 stars (Neutral or Average); if it falls in the next 22.5%, it
receives two stars (Below Average); and if it falls in the bottom 10%, it
receives 1 star (Lowest). The star ratings are recalculated monthly. The Fund's
overall risk-adjusted star rating is a weighted average of the Fund's three-,
five-, and 10-year histories, relative to other funds in its broad investment
category (i.e, equity). The three time periods are combined as a weighted
average. The 10-year rating accounts for 50% of the overall rating, the
five-year figure for 30%, and the three-year period 20%.
-26-
<PAGE>
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, the following persons owned of record
or beneficially 5% or more of the outstanding shares of a class of the Fund, as
of February 1, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Owned of Beneficially
Name and Address Record Owned Percentage Owned
- --------------------------------------------------------------------------------------------------------
<S> <C>
Brown Investment Advisory X 26.76% of Institutional Shares
FBO 01-01-170-7033070
FBO 01-01-170-7132000
19 South Street
Baltimore, Maryland 21202
- --------------------------------------------------------------------------------------------------------
</TABLE>
As of February 1, 1999, the Directors and officers as a group owned
less than 1% of the Fund's total outstanding shares. [Confirm]
16. FINANCIAL STATEMENTS
See next page.
-27-
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- -----------------------------------------------------------------------
STATEMENT OF NET ASSETS December 31, 1998
Shares Security Market Value
- -----------------------------------------------------------------------
COMMON STOCK -- 86.2%
REGIONAL BELL OPERATING COMPANIES -- 22.1%
1,100,000 Ameritech Corp. ......................... $ 69,712,500
833,216 Bell Atlantic Corp. ..................... 47,337,084
3,089,520 SBC Communications, Inc. ................ 165,675,510
573,000 U.S. West Incorporated .................. 37,030,125
------------
319,755,219
------------
INDEPENDENT LOCAL EXCHANGE CARRIERS -- 6.3%
480,000 ALLTEL Corp. ............................ 28,710,000
1,668,000 Cincinnati Bell, Inc. ................... 63,071,250
------------
91,781,250
------------
TELECOMMUNICATION - LONG DISTANCE -- 12.2%
924,200 Frontier ................................ 31,422,800
500,000 General Communication, Inc. * ........... 2,031,250
1,650,080 MCI Worldcom, Inc.* ..................... 118,393,240
150,000 Pacific Gateway Exchange, Inc.* ......... 7,209,375
200,000 Sprint Corp. (FON Group) ................ 16,825,000
------------
175,881,665
------------
SPECIALTY TELECOMMUNICATION SERVICES -- 31.4%
270,408 Airtouch Communications, Inc.* .......... 19,503,177
1,827,000 America Online* ......................... 292,320,000
417,800 Comsat .................................. 15,040,800
470,300 First Data Corp. ........................ 14,902,631
2,055,000 Novell, Inc.* ........................... 37,246,875
645,347 Orbital Sciences Corp.* ................. 28,556,605
514,400 Qwest Communications International, Inc.* 25,720,000
405,000 Skytel Communications* .................. 8,960,625
100,000 Sprint Corp (PCS Group)* ................ 2,312,500
225,000 WinStar Communications, Inc.* ........... 8,775,000
------------
453,338,213
------------
-28-
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS(concluded) December 31, 1998
Shares/
Par (000) Security Market Value
- --------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 8.8%
509,000 3Com Corp.* ................................. $ 22,809,563
733,500 Alcatel Alsthom - ADR* ...................... 17,924,906
666,428 Black Box Corp.* ............................ 25,240,961
345,000 CellStar Corp.* ............................. 2,350,313
530,470 Lucent Technologies, Inc. ................... 58,351,700
--------------
126,677,443
--------------
FOREIGN TELEPHONE COMPANIES -- 3.6%
850,000 Clearnet Communications - Class A* .......... 6,906,250
128,000 Telefonica de Espana ADR .................... 17,328,000
285,000 Telefonos de Mexico SA ADR .................. 13,875,937
368,200 Teleglobe, Inc. ............................. 13,255,200
--------------
51,365,387
--------------
NON-TELEPHONE INDUSTRY COMMON STOCK -- 1.8%
626,900 Centertrust Retail Properties ............... 7,679,525
620,548 Conseco, Inc. ............................... 18,965,498
--------------
26,645,023
--------------
TOTAL COMMON STOCK (Cost $408,200,797) ....................... 1,245,444,200
--------------
REPURCHASE AGREEMENT -- 4.2%
60,305 Goldman Sachs & Co., 4.50% dated 12/31/98,
to be repurchased on 01/04/99, collateralized by
U.S.Treasury Note with a par value of $54,741,000,
coupon rate of 6.50%, due 8/15/05, with a market
value of 60,306,067 (Cost $60,305,000) ........ 60,305,000
--------------
U.S. TREASURY BILL -- 2.1%
30,000 U.S. Treasury Bill, dated 12/31/98, to mature
on 01/21/99, 3.88%
(Cost $29,926,750) ........................... 29,926,750
--------------
-29-
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- ------------------------------------------------------------------------------------
Shares/
Par (000) Security Market Value
- ------------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER -- 6.9%
50,000 American Express Credit Corp., dated 12/31/98,
to mature on 01/07/99, 5.00%..................... $ 49,956,250
50,000 Ford Motor Credit Corp., dated 12/31/98,
to mature on 01/05/99, 5.00%..................... 49,972,222
---------------
TOTAL COMMERCIAL PAPER (Cost $99,928,472)........................... 99,928,472
---------------
TOTAL INVESTMENTS -- 99.4%
(Cost $598,361,019)** ............................................. $1,435,604,422
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.6%........................ 9,538,753
---------------
TOTAL NET ASSETS-- 100.0% .......................................... $1,445,143,175
===============
NET ASSET VALUE AND REDEMPTION PRICE PER:
Class A Share
($1,275,775,433 divided 37,273,431 shares)..................... $34.23
======
Class B Share
($165,307,878 divided 4,891,128 shares)........................ $33.80***
======
Class C Share
($3,246,874 divided 95,961 shares)............................. $33.84****
======
Institutional Share
($812,990 divided 23,722 shares)............................... $34.27
======
MAXIMUM OFFERING PRICE PER:
Class A Share ($34.23 O 0.955)................................... $35.84
======
Class B Share ................................................... $33.80
======
Class C Share.................................................... $33.84
======
Institutional Share.............................................. $34.27
======
</TABLE>
- -----------
* Non-income producing security.
** Aggregate cost for federal tax purposes was $594,838,164.
*** Redemption value is $32.45 following a 4% maximum contingent deferred sales
charge.
**** Redemption value is $33.50 following a 1% maximum contingent deferred sales
charge.
See Notes to Financial Statements.
-30-
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the
Year Ended
December 31,
- --------------------------------------------------------------------------------
1998
<S> <C>
Investment Income:
Dividends .................................................... $ 11,274,810
Interest ..................................................... 2,433,424
Less: Foreign taxes withheld ............................... (12,313)
-------------
Total income ........................................ 13,695,921
-------------
Expenses:
Investment advisory fee ...................................... 5,927,518
Distribution fee ............................................. 2,898,154
Transfer agent fee ........................................... 577,983
Professional fees ............................................ 159,337
Printing and postage ......................................... 140,755
Accounting fee ............................................... 135,622
Custodian fee ................................................ 101,903
Registration fees ............................................ 97,337
Directors' fees .............................................. 34,921
Miscellaneous ................................................ 17,193
-------------
Total expenses ...................................... 10,090,723
-------------
Net investment income ........................................ 3,605,198
-------------
Realized and unrealized gain on investments:
Net realized gain from security transactions ................. 109,209,276
Change in unrealized appreciation/depreciation of investments. 510,943,527
-------------
Net gain on investments ...................................... 620,152,803
-------------
Net increase in net assets resulting from operations ............ $ 623,758,001
=============
</TABLE>
See Notes to Financial Statements.
-31-
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- -----------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,
- -----------------------------------------------------------------------------------
1998 1997
<S> <C> <C>
Increase/(Decrease) in Net Assets:
Operations:
Net investment income ..................... $ 3,605,198 $ 6,150,046
Net realized gain from security
transactions ............................ 109,209,276 53,763,750
Change in unrealized appreciation/
depreciation of investments ............. 510,943,527 132,712,907
--------------- ---------------
Net increase in net assets resulting
from operations ......................... 623,758,001 192,626,703
--------------- ---------------
Distributions to Shareholders from:
Net investment income and short-term gains:
Class A Shares .......................... (13,223,970) (12,292,592)
Class B Shares .......................... (1,158,104) (438,661)
Class C Shares .......................... (8,002) --
Class D Shares .......................... (216,796) (560,042)
Institutional Class ..................... (3,699) --
Net realized mid-term and long-term gains:
Class A Shares .......................... (31,466,328) (45,697,778)
Class B Shares .......................... (3,523,412) (2,233,281)
Class C Shares .......................... (25,235) --
Class D Shares .......................... (397,182) (2,314,208)
Institutional Class ..................... (10,896) --
--------------- ---------------
Total distributions ....................... (50,033,624) (63,536,562)
--------------- ---------------
Capital Share Transactions
Proceeds from sale of shares .............. 298,419,515 32,057,019
Value of shares issued in reinvestment
of dividends ............................ 42,901,943 52,863,614
Cost of shares repurchased ................ (156,173,099) (78,344,677)
--------------- ---------------
Increase in net assets derived from
capital share transactions .............. 185,148,359 6,575,956
--------------- ---------------
Total increase in net assets .............. 758,872,736 135,666,097
Net Assets:
Beginning of period ....................... 686,270,439 550,604,342
--------------- ---------------
End of period ............................. $ 1,445,143,175 $ 686,270,439
=============== ===============
</TABLE>
See Notes to Financial Statements.
-32-
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the
Year Ended
December 31, For the Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year ........................ $ 19.37 $ 15.59 $ 14.87 $ 12.30 $ 13.70
------------ ----------- ---------- ---------- ---------
Income from Investment Operations:
Net investment income ....................................... 0.12 0.27 0.27 0.40 0.41
Net realized and unrealized gain/(loss) on investments ...... 16.05 5.41 1.67 3.58 (1.27)
------------ ------------ ---------- ---------- ---------
Total from Investment Operations ............................ 16.17 5.68 1.94 3.98 (0.86)
------------ ------------ ---------- ---------- ---------
Less Distributions:
Distributions from net investment income
and net realized short-term gains ......................... (0.40) (0.40) (0.38) (0.41) (0.44)
Distributions from net realized mid-term and long-term gains. (0.91) (1.50) (0.84) (1.00) (0.10)
------------ ------------ ---------- ---------- ---------
Total distributions ......................................... (1.31) (1.90) (1.22) (1.41) (0.54)
------------ ------------ ---------- ---------- ---------
Net asset value at end of year .............................. $ 34.23 $ 19.37 $ 15.59 $ 14.87 $ 12.30
============ ============ ========== ========== =========
Total Return(1)................................................. 85.30% 37.36% 13.46% 33.44% (6.32)%
Ratios to Average Daily Net Assets:
Expenses .................................................... 1.05% 1.11% 1.14% 0.93%(2) 0.92%(2)
Net investment income ....................................... 0.48% 1.07% 1.74% 2.85%(3) 3.14%(3)
Supplemental Data:
Net assets at end of year (000) ............................. $ 1,275,775 $ 622,865 $ 505,371 $ 492,454 $ 435,805
Portfolio turnover rate ..................................... 14% 26% 20% 24% 23%
</TABLE>
- ------------
1 Total return excludes the effect of sales charge.
2 Without the waiver of advisory fees (Note 2), the ratio of expenses to average
daily net assets would have been 0.99% and 0.99% for the years ended December
31, 1995 and 1994, respectively.
3 Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 2.79% and 3.07% for the
years ended December 31, 1995 and 1994, respectively.
See Notes to Financial Statements.
33 and 34
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the For the Period
Year Ended For the Years January 3, 1995(1)
December 31, Ended December 31, through December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......... $ 19.22 $ 15.51 $ 14.83 $ 12.28
-------------- ------------- ------------- ------------
Income from Investment Operations:
Net investment income/(loss) ................... (0.02) 0.18 0.19 0.30
Net realized and unrealized gain on investments. 15.83 5.34 1.63 3.56
-------------- ------------- ------------- ------------
Total from Investment Operations ............... 15.81 5.52 1.82 3.86
-------------- ------------- ------------- ------------
Less Distributions:
Distributions from net investment income
and net realized short-term gains ............ (0.32) (0.31) (0.30) (0.31)
Distributions from net realized long-term gains. (0.91) (1.50) (0.84) (1.00)
-------------- ------------- ------------- ------------
Total distributions ............................ (1.23) (1.81) (1.14) (1.31)
-------------- ------------- ------------- ------------
Net asset value at end of period ............... $ 33.80 $ 19.22 $ 15.51 $ 14.83
============== ============= ============= ============
Total Return(2).................................... 83.91% 36.36% 12.60% 32.42%
Ratios to Average Daily Net Assets:
Expenses ....................................... 1.80% 1.86% 1.92% 1.70%(3,5)
Net investment income/(loss) ................... (0.35)% 0.29% 0.95% 2.13%(4,5)
Supplemental Data:
Net assets at end of period (000) .............. $ 165,308 $ 32,474 $ 17,661 $ 7,504
Portfolio turnover rate ........................ 14% 26% 20% 24%
</TABLE>
- -----------------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Without the waiver of advisory fees (Note 2), the ratio of expenses to average
daily net assets would have been 1.74% (annualized) for the period ended
December 31, 1995.
4 Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 2.09% (annualized) for the
period ended December 31, 1995.
5 Annualized.
See Notes to Financial Statements.
35 and 36
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- -----------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the period
Nov. 1, 1998(1)
Through Dec. 31,
- -----------------------------------------------------------------------------------
1998
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period .................... $ 25.50
------------
Income from Investment Operations:
Net investment income/(loss) .............................. (0.01)
Net realized and unrealized gain on investments ........... 9.21
------------
Total from Investment Operations .......................... 9.20
------------
Less Distributions:
Distributions from net investment income
and net realized short-term gains ....................... (0.21)
Distributions from net realized long-term gains ........... (0.65)
------------
Total distributions ....................................... (0.86)
------------
Net asset value at end of period .......................... $ 33.84
============
Total Return(2)............................................... 36.70%
Ratios to Average Daily Net Assets:
Expenses .................................................. 1.85%(3)
Net investment income/(loss) .............................. (0.61)%(3)
Supplemental Data:
Net assets at end of year (000) ........................... $ 3,247
Portfolio turnover rate ...................................... 14%
</TABLE>
- --------------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Annualized.
See Notes to Financial Statements.
37
<PAGE>
This page intentionally left blank.
38
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS D SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the Period
January 1, 1998
through
November 20,(1) For the Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year .................. $ 19.36 $ 15.59 $ 14.87 $ 12.30 $ 13.67
----------- ------------- ------------- ------------ ----------
Income from Investment Operations:
Net investment income ................................. 0.09 0.23 0.22 0.34 0.37
Net realized and unrealized gain/(loss) on investments. 9.43 5.40 1.67 3.58 (1.20)
----------- ------------- ------------- ------------ ----------
Total from Investment Operations ...................... 9.52 5.63 1.89 3.92 (0.83)
----------- ------------- ------------- ------------ ----------
Less Distributions:
Distributions from net investment income
and net realized short-term gains ................... (0.15) (0.36) (0.33) (0.35) (0.42)
Distributions in excess of net investment income ...... -- -- -- -- (0.02)
Distributions from net realized long-term gains ....... (0.26) (1.50) (0.84) (1.00) (0.10)
----------- ------------- ------------- ------------ ----------
Total distributions ................................... (0.41) (1.86) (1.17) (1.35) (0.54)
----------- ------------- ------------- ------------ ----------
Net asset value at end of period ...................... $ 28.47 $ 19.36 $ 15.59 $ 14.87 $ 12.30
=========== ============= ============= ============ ==========
Total Return(2)........................................... 49.49% 36.94% 13.00% 32.91% (6.13)%
Ratios to Average Daily Net Assets:
Expenses .............................................. 1.44%(5) 1.46% 1.49% 1.28%(3) 1.27%(3)
Net investment income ................................. 0.23%(5) 0.73% 1.40% 2.50%(4) 2.81%(4)
Supplemental Data:
Net assets at end of year (000) ....................... $ -- $ 30,931 $ 27,573 $ 31,317 $ 31,696
Portfolio turnover rate ............................... 14% 26% 20% 24% 23%
</TABLE>
- -------------------
1 Class D shares were converted to Class A Shares on November 20,1998.
2 Total return excludes the effect of sales charge.
3 Without the waiver of advisory fees (Note 2), the ratio of expenses to average
daily net assets would have been 1.34% and 1.34% for the years ended December
31, 1995 and 1994, respectively.
4 Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 2.44% and 2.74% for the
years ended December 31, 1995 and 1994, respectively.
5 Annualized
See Notes to Financial Statements.
39 and 40
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS COMMUNICATIONS FUND
- -----------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the Period
June 4, 1998(1)
through
December 31,
- -----------------------------------------------------------------------------------
1998
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period ........................ $ 23.26
----------
Income from Investment Operations:
Net investment income ......................................... 0.06
Net realized and unrealized gain on investments ............... 12.17
----------
Total from Investment Operations .............................. 12.23
----------
Less Distributions:
Distributions from net investment income and net realized
short-term gains ............................................ (0.31)
Distributions from net realized long-term gains ............... (0.91)
----------
Total distributions ........................................... (1.22)
----------
Net asset value at end of period .............................. $ 34.27
==========
Total Return(2)................................................... 53.95%
Ratios to Average Net Assets:
Expenses ...................................................... 0.83%(3)
Net investment income ......................................... 0.49%(3)
Supplemental Data:
Net assets at end of period (000) ............................. $ 813
Portfolio turnover rate ....................................... 14%
</TABLE>
- --------------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Annualized.
See Notes to Financial Statements.
41
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies
Flag Investors Communications Fund, Inc. (the "Fund"), previously named
Flag Investors Telephone Income Fund, which is organized as a Maryland
Corporation and commenced operations January 18, 1984, is registered under the
Investment Company Act of 1940 as a non-diversified, open-end investment
management company. On January 18, 1984 (the exchange date), investors received
five Fund shares for each American Telephone & Telegraph Company (AT&T) share,
with rights to the divested Bell regional operating companies attached, in a
tax-free exchange. The Fund's objective is to maximize total return.
The Fund consists of four share classes: Class A Shares, which commenced
January 18, 1984; Class B Shares, which commenced January 3, 1995; Class C
Shares, which commenced November 1, 1998; and Institutional Shares, which
commenced June 4, 1998. Class D Shares were converted to Class A Shares on
November 20, 1998.
The Class A, Class B and Class C Shares are subject to different sales
charges. The Class A Shares have a front-end sales charge and the Class B and
Class C Shares have a contingent deferred sales charge. The Institutional Shares
are not subject to sales charges. In addition, each class has a different
distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions in accordance with generally accepted accounting principles.
These estimates affect 1) the assets and liabilities that we report at the date
of the financial statements; 2) the contingent assets and liabilities that we
disclose at the date of the financial statements; and 3) the revenues and
expenses that we report for the period. Our estimates could be different from
the actual results. The Fund's significant accounting policies are:
A. SECURITY VALUATION--The Fund values a portfolio security that is
primarily traded on a national exchange by using the last price
reported for the day. If there are no sales or the security is not
traded on a listed exchange, the Fund values the security at the
average of the last bid and asked prices in the over-the-counter
market. When a market quotation is unavailable, the Investment Advisor
determines a fair value using procedures that the Board of Directors
establishes and monitors.
42
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
NOTE 1--continued
At December 31, 1998, there were no Board valued securities. The Fund
values short-term obligations with maturities of 60 days or less at
amortized cost.
B. REPURCHASE AGREEMENTS--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
collateral in a separate account until the repurchase agreement
matures. The agreement requires that the collateral's market value,
including any accrued interest, exceed the brokers repurchase
obligation. The Fund's access to the collateral may be delayed or
limited if the broker defaults and the value of the collateral declines
or if the broker enters into an insolvency proceeding.
C. FEDERAL INCOME TAX--The Fund determines its distributions according
to income tax regulations, which may be different from generally
accepted accounting principles. As a result, the Fund occasionally
makes reclassifications within its capital accounts to reflect income
and gains that are available for distribution under income tax
regulations.
The Fund is organized as a regulated investment company. As long as it
maintains this status and distributes to its shareholders substantially
all of its taxable net investment income and net realized capital
gains, it will be exempt from most, if not all, federal income and
excise taxes. As a result, the Fund has made no provisions for federal
income taxes.
D. SECURITIES TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND
OTHER--The Fund uses the trade date to account for security
transactions and the specific identification method for financial
reporting and income tax purposes to determine the cost of investments
sold or redeemed. Interest income is recorded on an accrual basis and
includes amortization of premiums and accretion of discounts when
appropriate. Income and common expenses are allocated to each class
based on its respective average net assets. Class specific expenses are
charged directly to each class. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
43
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTE 2--INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust Corporation, is the Fund's investment advisor. As compensation for its
advisory services, the Fund pays ICC an annual fee based on the Fund's average
daily net assets. This fee is calculated daily and paid monthly at the following
annual rates: 0.85% of the first $100 million, 0.75% of the next $100 million,
0.70% of the next $100 million, 0.65% of the next $200 million, 0.58% of the
next $500 million, 0.53% of the next $500 million and 0.50% of the amount over
$1.5 billion.
For the year ended December 31,1998, ICC's advisory fee was $5,927,518 of
which $687,079 was payable at the end of the period.
ICC also provides accounting services to the Fund for which the Fund pays
ICC an annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets. For the year ended December 31, 1998 ICC's fee was
$135,622 of which $13,611 was payable at the end of the period.
ICC also provides transfer agency services to the Fund for which the Fund
pays ICC a per account fee that is calculated and paid monthly. For the year
ended December 31, 1998 ICC's fee was $577,983 of which $58,469 was payable at
the end of the period.
Certain officers and directors of the Fund are also officers or directors
of ICC.
Bankers Trust Corporation became the Fund's custodian on September 22,
1997. Prior to September 22, 1997, PNC Bank served as the Fund's custodian. For
the year ended December 31, 1998, custody fees amounted to $101,903, of which
$15,904 was payable at the end of the period.
Alex. Brown Investment Management ("ABIM") is the Fund's sub-advisor. As
compensation for its sub-advisory services, ICC pays ABIM a fee based on the
Fund's average daily net assets. This fee is calculated daily and paid monthly
at the following annual rates:0.60% of the first $100 million, 0.55% of the next
$100 million, 0.50% of the next $100 million, 0.45% of the next $200 million,
0.40% of the next $500 million, 0.37% of the next $500 million and 0.35% of the
amount over $1.5 billion.
44
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS(continued)
NOTE 2--continued
ICC Distributors, Inc., a member of the Forum Group of companies, provides
distribution services to the Fund for which the Fund pays ICC Distributors an
annual fee pursuant to Rule 12b-1, that is calculated daily and paid monthly at
the following annual rates:0.25% of the Class A Shares' average daily net assets
and 1.00% of the Class B and Class C Shares' average daily net assets. The fees
for the Class B and Class C Shares include a 0.25% shareholder servicing fee.
Prior to September 1, 1997, Alex. Brown & Sons Incorporated served as the Fund's
distributor for the same compensation and on substantially the same terms as ICC
Distributors.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
December 31, 1998 was $34,921 and the accrued liability was $1,671.
Note 3--Capital Share Transactions
The Fund is authorized to issue up to 110 million shares of $.001 par value
capital stock (63 million Class A Shares, 15 million Class B Shares, 15 million
Class C Shares, 15 million Institutional Shares, and 2 million undesignated).
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
Class A Shares
-----------------------------
For the For the
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
-------------- -------------
<S> <C> <C>
Shares sold ................................... 7,977,108 1,332,424
Shares issued to shareholders on
reinvestment of dividends .................. 1,383,390 2,595,376
Shares redeemed ............................... (4,236,213) (4,200,351)
------------- -------------
Net increase/(decrease) in shares outstanding.. 5,124,285 (272,551)
============= =============
Proceeds from sale of shares .................. $ 208,050,462 $ 23,153,177
Value of reinvested dividends ................. 37,846,228 47,729,473
Cost of shares redeemed ....................... (100,876,700) (71,340,867)
------------- -------------
Net increase/(decrease) from
capital share transactions ................. $ 145,019,990 $ (458,217)
============= =============
</TABLE>
45
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTE 3-continued
Class B Shares
------------------------------
For the For the
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
-------------- -------------
Shares sold ................................ 3,461,232 506,254
Shares issued to shareholders on
reinvestment of dividends ............... 162,054 138,015
Shares redeemed ............................ (421,723) (93,315)
------------ ------------
Net increase in shares outstanding ......... 3,201,563 550,954
============ ============
Proceeds from sale of shares ............... $ 86,906,479 $ 8,903,842
Value of reinvested dividends .............. 4,455,460 2,533,345
Cost of shares redeemed .................... (10,210,390) (1,625,592)
------------ ------------
Net increase from capital share
transactions ............................. $ 81,151,549 $ 9,811,595
============ ============
Class C Shares
---------------------
For the period
Nov. 1, 19981 through
Dec. 31, 1998
----------------------
Shares sold ........................................... 96,807
Shares issued to shareholders on
reinvestment of dividends .......................... 1,030
Shares redeemed ....................................... (1,875)
-----------
Net increase in shares outstanding .................... 95,962
===========
Proceeds from sale of shares .......................... $ 2,839,788
Value of reinvested dividends ......................... 29,394
Cost of shares redeemed ............................... (54,186)
-----------
Net increase from capital share transactions .......... $ 2,814,996
===========
- -----------
1 Commencement of operations.
46
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS(CONCLUDED)
Note 3-concluded
Class D Shares 1
--------------------------------
For the period
Jan. 1,1998 For the
through Year Ended
Nov. 20, 1998 Dec. 31, 1997
--------------- --------------
Shares sold ................................ -- --
Shares issued to shareholders on
reinvestment of dividends ............... 22,620 141,577
Shares redeemed ............................ (1,620,465) (312,350)
------------ ------------
Net decrease in shares outstanding ......... (1,597,845) (170,773)
============ ============
Proceeds from sale of shares ............... $ -- $ --
Value of reinvested dividends .............. 556,267 2,600,796
Cost of shares redeemed .................... (45,031,824) (5,378,218)
------------ ------------
Net decrease from capital share
transactions ............................. $(44,475,557) $ (2,777,422)
============ ============
- ---------------
1 Converted to Class A Shares on November 20, 1998.
<TABLE>
<CAPTION>
Institutional
Shares
---------------------
For the period
June 4, 19981 through
Dec. 31, 1998
---------------------
<S> <C>
Shares sold ................................................... 23,201
Shares issued to shareholders on
reinvestment of dividends .................................. 521
Shares redeemed ............................................... --
--------
Net increase in shares outstanding ............................ 23,722
========
Proceeds from sale of shares .................................. $622,784
Value of reinvested dividends ................................. 14,595
Cost of shares redeemed ....................................... --
--------
Net increase from capital share transactions .................. $637,379
========
</TABLE>
- ---------------
1 Commencement of operations.
47
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
NOTE 4--Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $119,103,526 and sales of investment securities
aggregated $172,504,529 for the year ended December 31, 1998.
At December 31, 1998, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $843,920,462
and aggregate unrealized depreciation for all securities in which there is an
excess of tax cost over value was ($6,677,059).
NOTE 5--Net Assets
On December 31, 1998, net assets consisted of:
Paid-in capital:
Class A Shares ............................................ $ 423,771,671
Class B Shares ............................................ 107,580,197
Class C Shares ............................................ 2,814,996
Institutional Shares ...................................... 637,379
Accumulated net realized gain from security transactions ..... 73,095,529
Net unrealized appreciation of investments ................... 837,243,403
--------------
$1,445,143,175
==============
48
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of
Flag Investors Communications Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Communications Fund, Inc. (the "Fund") at December 31, 1998, and
the results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Baltimore, Maryland
February 5, 1999
49
<PAGE>
APPENDIX A
CORPORATE BOND RATINGS
Standard & Poor's Bond Ratings
AAA -- The highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
AA -- Very strong capacity to pay interest and repay principal and, in
the majority of instances, differs from the higher rated issues only in small
degree.
A -- Strong capacity to pay interest and repay principal although it is
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, B, CCC, CC and C -- Regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
C -- This rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but payments on this obligation
are being continued.
D -- In payment default. The D rating category is used when interest
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The D rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
Moody's Bond Ratings
Aaa -- Judged to be of the best quality. Carries the smallest degree of
investment risk and generally referred to as "gilt edge." Interest payments are
protected by a large or 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 Aaa bonds because margins of protection may not be as large as in Aaa
securities or the 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-1
<PAGE>
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 that
suggest a susceptibility to impairment some time in the future.
Baa -- Considered as medium-grade obligations, that is, 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; their 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 maintenance of other terms of
the contract over any long period of time may be small.
Caa -- Of poor standing. May be in default or there may be present
elements of danger with respect to principal or interest.
Ca -- Represent obligations that are speculative in a high degree.
Often in default or have other marked shortcomings.
C -- The lowest rated class of bonds. Can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
A-2
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) (1) Articles of Incorporation incorporated by
reference to Exhibit (1)(a) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(2) Articles Supplementary, as filed with the
Maryland Department of Assessments and
Taxation on September 13, 1990 incorporated
by reference to Exhibit (1)(b) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(3) Articles Supplementary, as filed with the
Maryland Department of Assessments and
Taxation on December 27, 1993 incorporated
by reference to Exhibit (1)(c) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(4) Articles Supplementary, as filed with the
Maryland Department of Assessments and
Taxation on November 18, 1994 incorporated
by reference to Exhibit (1)(d) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(5) Articles Supplementary, as filed with the
Maryland Department of Assessments and
Taxation on January 20, 1998 (adding the
Flag Investors Institutional Shares)
incorporated by reference to Exhibit (1)(e)
to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
(6) Articles Supplementary, as filed with the
Maryland Department of Assessments and
Taxation on September 29, 1998 (adding the
Flag Investors Class C Shares), filed
herewith.
(7) Articles Supplementary, as filed with the
Maryland Department of Assessments and
Taxation on November 19, 1998, filed
herewith.
<PAGE>
(8) Articles of Amendment, as filed with the
Maryland Department of Assessments and
Taxation on November 20, 1998, filed
herewith.
(b) By-Laws, as amended through December 18, 1996
incorporated by reference to Exhibit 2 to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and Exchange
Commission via EDGAR (Accession No.
950116-97-000792) on April 28, 1997.
(c) Instruments Defining Rights of Security Holders
incorporated by reference to Exhibit 1 (Articles of
Incorporation), as amended to date to Post-Effective
Amendments Nos. 19 and 21 to Registrant's
Registration Statement (Registration No. 2-87336),
filed with the Securities and Exchange Commission via
EDGAR (Accession Nos. 950116-96-000068 and
950116-98-000501, respectively) on February 8, 1996
and February 27, 1998 and Exhibit 2 (By-Laws) as
amended to date, to Post-Effective Amendment No. 20
to such Registration Statement, filed with the
Securities and Exchange Commission via EDGAR
(Accession No. 950116-97-000792) on April 28, 1997.
(d) (1) Investment Advisory Agreement dated as of
September 1, 1997 between Registrant and
Investment Company Capital Corp.
incorporated by reference to Exhibit (5)(a)
to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
<PAGE>
(2) Sub-Advisory Agreement dated as of
September 1, 1997 among Registrant,
Investment Company Capital Corp. and Alex.
Brown Investment Management incorporated by
reference to Exhibit (5)(b) to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
(e) (1) Distribution Agreement dated as of August
31, 1997 between Registrant and ICC
Distributors, Inc. incorporated by
reference to Exhibit (6)(a) to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
(2) Form of Sub-Distribution Agreement between
ICC Distributors, Inc. and Participating
Broker-Dealers incorporated by reference to
Exhibit (6)(b) to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession
No. 950116-98-000501) on February 27, 1998.
(3) Form of Shareholder Servicing Agreement
between Registrant and Shareholder
Servicing Agents incorporated by reference
to Exhibit (6)(c) to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the
Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
(f) None.
(g) (1) Custodian Agreement between Registrant and
Bankers Trust Company dated June 5, 1998,
filed herewith.
(2) Master Services Agreement between
Registrant and Investment Company Capital
Corp. with Appendices for the provision of
Accounting and Transfer Agency Services
incorporated by reference to Exhibit (8)(b)
to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
<PAGE>
(h) Group Purchase Plan Application
incorporated by reference to Exhibit (9) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with
the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(i) Opinion of counsel incorporated by
reference to Exhibit (10) to Post-
Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the
Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(j) (1) Consent of PricewaterhouseCoopers LLP,
filed herewith.
(2) Consents to being named as Director
incorporated by reference to Exhibit
(11)(b) to Post-Effective Amendment No. 19
to Registrant's Registration Statement on
Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-96-000068)
on February 8, 1996.
(k) None.
(l) Subscription Agreement re: initial $100,000
capital incorporated by reference to
Exhibit (13) to Post-Effective Amendment
No. 19 to Registrant's Registration
Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession
No. 950116-96-000068) on February 8, 1996.
(m) (1) Distribution Plan incorporated by reference
to Exhibit (15)(a) to Post-Effective
Amendment No. 19 to Registrant's
Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the
Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(2) Distribution Plan with respect to the Flag
Investors Telephone Income Fund Class B
Shares incorporated by reference to Exhibit
(15)(c) to Post-Effective Amendment No. 19
to Registrant's Registration Statement on
Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-96-000068)
on February 8, 1996.
(3) Amended Distribution Plan (Flag Investors
Class A Shares) incorporated by reference to
Exhibit (15)(d) to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998.
(4) Amended Distribution Plan (Flag Investors
Class B Shares) incorporated by reference to
Exhibit (15)(e) to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998.
<PAGE>
(5) Distribution Plan (Flag Investors Class C
Shares), filed herewith.
(n) Financial Data Schedule, filed herewith as EX-27.
(o) (1) Rule 18f-3 Plan incorporated by reference
to Exhibit (18)(a) to Post-Effective
Amendment No. 19 to Registrant's
Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the
Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(2) Amended Rule 18f-3 Plan, as amended through
March 26,1997 incorporated by reference to
Exhibit (18)(b) to Post-Effective Amendment
No. 20 to Registrant's Registration
Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession
No. 950116-97-000792) on April 28, 1997.
(3) Amended Rule 18f-3 Plan, filed herewith.
(p) Powers of Attorney, filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
Furnish a list or diagram of all persons directly or
indirectly controlled by or under common control with the Registrant and as to
each such person indicate (1) if a company, the state or other sovereign power
under the laws of which it is organized, and (2) the percentage of voting
securities owned or other basis of control by the person, if any, immediately
controlling it.
None.
Item 25. Indemnification.
State the general effect of any contract, arrangements or
statute under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified in any manner against any liability
incurred in their official capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own protection.
Sections 1, 2, 3 and 4 of Article VIII of Registrant's
Articles of Incorporation, included as Exhibit a to this Registration Statement
and incorporated herein by reference, provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of
the Corporation shall have any liability to the Corporation or
its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such
person is a director or officer at the time of any proceeding
in which liability is asserted.
<PAGE>
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to
the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents
in the By-Laws of the Corporation or by resolution or
agreement to the fullest extent permitted by the Maryland
General Corporation law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time
amended. No further amendment to the Charter of the
Corporation shall decrease, but may expand, any right of any
person under this Article VIII based on any event, omission or
proceeding prior to such amendment.
Insofar as indemnification for liability arising under the
Securities Act of 1933 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 and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event of a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a 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 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 Advisor.
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment
advisor of the Registrant, and each director, officer or
partner of any such investment advisor, is or has been, at any
time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee,
partner or trustee. (Disclose the name and principal business
address of any company for which a person listed above serves
in the capacity of director, officer, employee, partner or
trustee, and the nature of the relationship.)
During the past two fiscal years, no director or officer of
Investment Company Capital Corp., the Registrant's investment
advisor, and no partner of Alex. Brown Investment Management,
the Registrant's 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.
<PAGE>
Item 27. Principal Underwriters.
(a) State the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing securities of the
Registrant also acts as a principal underwriter, depositor or investment
advisor.
ICC Distributors, Inc. acts as distributor for BT Alex. Brown Cash
Reserve Fund, Inc., Flag Investors International Fund, Inc., Flag
Investors Emerging Growth Fund, Inc., Flag Investors Total Return U.S.
Treasury Fund Shares of Total Return U.S. Treasury Fund, Inc., Flag
Investors Managed Municipal Fund Shares of Managed Municipal Fund,
Inc., Flag Investors Short-Intermediate Income Fund, Inc. (formerly
known as Flag Investors Intermediate-Term Income Fund, Inc.), Flag
Investors Value Builder Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc. and Flag Investors Equity Partners Fund, Inc.,
all registered open-end management investment companies.
(b) Provide the information with respect to each director, officer or partner of
each principal underwriter named in answer to Item 21.
Names and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
------------------- -------------------------- ---------------
John Y. Keffer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
---------------------
* Two Portland Square
Portland, Maine 04101
(c) Not Applicable.
Item 28. Location of Accounts and Records.
State the name and address of each person maintaining
principal possession of each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act [15 U.S.C.
80a-30(a)] and the Rules [17 CFR 270.31a-1 to 31a-3] thereunder.
Investment Company Capital Corp., Registrant's investment
advisor, transfer agent, dividend disbursing agent and accounting
services provider, One South Street, Baltimore, Maryland 21202,
maintains physical possession of each such account, book or other
document of the Fund, except for those maintained by Alex. Brown
Investment Management, Registrant's sub-advisor, One South Street,
Baltimore, Maryland 21202, by Registrant's distributor, ICC
Distributors, Inc., Two Portland Square, Portland, Maine 04101, or by
the Registrant's custodian, Bankers Trust Company, 130 Liberty Street,
New York, New York 10006.
<PAGE>
Item 29. Management Services.
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
See Exhibit g.
Item 30. Undertakings.
Furnish the following undertakings in substantially the
following form in all initial Registration Statements filed under the 1933 Act:
(a) Not Applicable.
(b) Not Applicable.
(c) A copy of the Registrant's latest Annual Report to
Shareholders is available upon request, without charge by contacting Registrant
at (800) 767-3524.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 22 to the Registration Statement to be signed on
its behalf by the undersigned thereto duly authorized in the City of Baltimore,
in the State of Maryland, on the 26th day of February, 1999.
FLAG INVESTORS COMMUNICATIONS FUND,
INC.
By: /s/ Harry Woolf
------------------------------
Harry Woolf
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities on the date(s) indiciated:
* Chairman and Director February 26, 1999
- --------------------- -----------------
Truman T. Semans Date
* Director February 26, 1999
- --------------------- -----------------
James J. Cunnane Date
* Director February 26, 1999
- --------------------- -----------------
Richard T. Hale Date
* Director February 26, 1999
- --------------------- -----------------
Joseph R. Hardiman Date
* Director February 26, 1999
- --------------------- -----------------
Louis E. Levy Date
* Director February 26, 1999
- --------------------- -----------------
Eugene J. McDonald Date
* Director February 26, 1999
- --------------------- -----------------
Rebecca W. Rimel Date
* Director February 26, 1999
- --------------------- -----------------
Carl W. Vogt Date
/s/ Harry Woolf President February 26, 1999
- --------------------- -----------------
Harry Woolf Date
/s/ Joseph A. Finelli Chief Financial February 26, 1999
- --------------------- and Accounting -----------------
Joseph A. Finelli Officer Date
*By: /s/ Amy M. Olmert
--------------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
-------------
EDGAR
Exhibit
Number Description
- ------ -----------
(a)(1)Articles of Incorporation incorporated by reference to
Exhibit (1)(a) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(a)(2)Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on September 13, 1990
incorporated by reference to Exhibit (1)(b) to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(a)(3)Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on December 27, 1993
incorporated by reference to Exhibit (1)(c) to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(a)(4)Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on November 18, 1994
incorporated by reference to Exhibit (1)(d) to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(a)(5)Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on January 20, 1998
(adding the Flag Investors Institutional Shares) incorporated by
reference to Exhibit (1)(e) to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-98-000501) on February 27, 1998.
EX-99.B (a)(6)Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on September 29, 1998
(adding the Flag Investors Class C Shares), filed herewith.
EX-99.B (a)(7)Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on November 19, 1998,
filed herewith.
EX-99.B (a)(8)Articles of Amendment, as filed with the Maryland
Department of Assessments and Taxation on November 20, 1998,
filed herewith.
(b)By-Laws, as amended through December 18, 1996 incorporated by
reference to Exhibit 2 to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-97-000792) on April 28, 1997.
<PAGE>
EDGAR
Exhibit
Number
(c)Instruments Defining Rights of Security Holders incorporated
by reference to Exhibit 1 (Articles of Incorporation), as amended
to date to Post-Effective Amendments Nos. 19 and 21 to
Registrant's Registration Statement (Registration No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR
(Accession Nos. 950116- 96-000068 and 950116-98-000501,
respectively) on February 8, 1996 and February 27, 1998 and
Exhibit 2 (By-Laws) as amended to date, to Post-Effective
Amendment No. 20 to such Registration Statement, filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-97-000792) on April 28, 1997.
(d)(1)Investment Advisory Agreement dated as of September 1, 1997
between Registrant and Investment Company Capital Corp.
incorporated by reference to Exhibit (5)(a) to Post-Effective
Amendment No. 21 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-98-000501)
on February 27, 1998.
(d)(2)Sub-Advisory Agreement dated as of September 1, 1997 among
Registrant, Investment Company Capital Corp. and Alex. Brown
Investment Management incorporated by reference to Exhibit (5)(b)
to Post-Effective Amendment No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998.
(e)(1)Distribution Agreement dated as of August 31, 1997 between
Registrant and ICC Distributors, Inc. incorporated by reference
to Exhibit (6)(a) to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-98-000501) on February 27, 1998.
(e)(2)Form of Sub-Distribution Agreement between ICC
Distributors, Inc. and Participating Broker- Dealers incorporated
by reference to Exhibit (6)(b) to Post-Effective Amendment No. 21
to Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-98-000501) on February 27, 1998.
<PAGE>
EDGAR
Exhibit
Number
(e)(3)Form of Shareholder Servicing Agreement between Registrant
and Shareholder Servicing Agents incorporated by reference to
Exhibit (6)(c) to Post-Effective Amendment No. 21 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-98-000501) on February 27, 1998.
(f)None.
EX-99.B (g)(1)Custodian Agreement between Registrant and Bankers Trust
Company dated June 5, 1998, filed herewith.
(g)(2)Master Services Agreement between Registrant and Investment
Company Capital Corp. with Appendices for the provision of
Accounting and Transfer Agency Services incorporated by reference
to Exhibit (8)(b) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-96-000068) on February 8, 1996.
(h)Group Purchase Plan Application incorporated by reference to
Exhibit (9) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(i)Opinion of counsel incorporated by reference to Exhibit (10)
to Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
EX-99.B (j)(1)Consent of PricewaterhouseCoopers LLP, filed herewith.
(j)(2)Consents to being named as Director incorporated by
reference to Exhibit (11)(b) to Post- Effective Amendment No. 19
to Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-96-000068) on February 8, 1996.
(k)None.
(l)Subscription Agreement re: initial $100,000 capital
incorporated by reference to Exhibit (13) to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-96-000068) on
February 8, 1996.
(m)(1)Distribution Plan incorporated by reference to Exhibit
(15)(a) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(m)(2)Distribution Plan with respect to the Flag Investors
Telephone Income Fund Class B Shares incorporated by reference to
Exhibit (15)(c) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (Registration
No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-96-000068) on February 8, 1996.
(m)(3)Amended Distribution Plan (Flag Investors Class A Shares)
incorporated by reference to Exhibit (15)(d) to Post-Effective
Amendment No. 21 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
<PAGE>
EDGAR
Exhibit
Number
(m)(4)Amended Distribution Plan (Flag Investors Class B Shares)
incorporated by reference to Exhibit (15)(e) to Post-Effective
Amendment No. 21 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-98-000501) on
February 27, 1998.
EX-99.B (m)(5)Distribution Plan (Flag Investors Class C Shares), filed
herewith.
EX-27 (n)Financial Data Schedule, filed herewith as EX-27.
(o)(1)Rule 18f-3 Plan incorporated by reference to Exhibit
(18)(a) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(o)(2)Amended Rule 18f-3 Plan, as amended through March 26,1997
incorporated by reference to Exhibit (18)(b) to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on Form
N-1A (Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-97-000792) on
April 28, 1997.
EX-99.B (o)(3)Amended Rule 18f-3 Plan, filed herewith.
EX-99.B (p)Powers of Attorney, filed herewith.
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS COMMUNICATIONS FUND, INC. (the "Corporation") having
its principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law at a meeting
duly convened and held on September 28,1998 has adopted a resolution
designating a new class of shares and increasing the total number of
shares of capital stock which the Corporation has the authority to
issue to one hundred million (100,000,000) shares of Common Stock, par
value $.001 per share, having an aggregate par value of one hundred
thousand dollars ($100,000.00), all of which shares are designated as
follows: sixty million (60,000,000) shares are designated "Flag
Investors Communications Fund Class A Shares" (the "Class A Shares"),
five million (5,000,000) shares are designated "Flag Investors
Communications Fund Class B Shares" (the "Class B Shares"), fifteen
million (15,000,000) shares are designated "Flag Investors
Communications Fund Class C Shares) (the "Class C Shares"), three
million (3,000,000) shares are designated "Flag Investors
Communications Fund Class D Shares (the "Class D Shares"), fifteen
million (15,000,000) shares are designated "Flag Investors
Communications Fund Institutional Shares" (the "Institutional Shares")
and two million (2,000,000) shares remain undesignated.
SECOND: Immediately before the increase in authorized shares
and the designation of the Class C Shares pursuant to these Articles
Supplementary, the Corporation was authorized to issue eighty-five
million (85,000,000) shares of Common Stock, par value $.001 per share,
having an aggregate par value of eighty-five thousand dollars
($85,000.00), of which sixty million (60,000,000) shares were
designated "Flag Investors Communications Fund Class A Shares", five
million (5,000,000) shares were designated "Flag Investors
Communications Fund Class B Shares", three million (3,000,0000) shares
were designated "Flag Investors Communications Fund Class D Shares",
fifteen million (15,000,000) shares were designated "Flag Investors
Communications Fund Institutional Shares" and two million (2,000,000)
shares remained undesignated.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors Communications Fund, Inc. has caused
these Articles Supplementary to be executed by its President and its corporate
seal to be affixed and attested by its Secretary on this 28th day of September,
1998.
[CORPORATE SEAL]
FLAG INVESTORS COMMUNICATIONS FUND, INC.
By: /s/Harry Woolf
------------------
Harry Woolf
President
Attest: /s/Amy M. Olmert
----------------
Amy M. Olmert
Secretary
The undersigned, President of FLAG INVESTORS COMMUNICATIONS FUND, INC.,
who executed on behalf of said corporation the foregoing Articles Supplementary
to the Articles of Incorporation of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/Harry Woolf
-----------------
Harry Woolf
President
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS COMMUNICATIONS FUND, INC. (the "Corporation") having its
principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law, by unanimous consent
dated November 16, 1998, adopted a resolution increasing the total number of
shares of capital stock which the Corporation has the authority to issue to one
hundred ten million (110,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of one hundred ten thousand dollars
($110,000.00), all of which shares are designated as follows: sixty million
(60,000,000) shares are designated "Flag Investors Communications Fund Class A
Shares" (the "Class A Shares"), fifteen million (15,000,000) shares are
designated "Flag Investors Communications Fund Class B Shares" (the "Class B
Shares"), fifteen million (15,000,000) shares are designated "Flag Investors
Communications Fund Class C Shares) (the "Class C Shares"), three million
(3,000,000) shares are designated "Flag Investors Communications Fund Class D
Shares (the "Class D Shares"), fifteen million (15,000,000) shares are
designated "Flag Investors Communications Fund Institutional Shares" (the
"Institutional Shares") and two million (2,000,000) shares remain undesignated.
SECOND: Immediately before the increase in authorized shares
pursuant to these Articles Supplementary, the Corporation was authorized to
issue one hundred million (100,000,000) shares of Common Stock, par value $.001
per share, having an aggregate par value of one hundred thousand dollars
($100,000.00), of which sixty million (60,000,000) shares were designated "Flag
Investors Communications Fund Class A Shares", five million (5,000,000) shares
were designated "Flag Investors Communications Fund Class B Shares", fifteen
million (15,000,000) shares were designated "Flag Investors Communications Fund
Class C Shares", three million (3,000,0000) shares were designated "Flag
Investors Communications Fund Class D Shares", fifteen million (15,000,000)
shares were designated "Flag Investors Communications Fund Institutional Shares"
and two million (2,000,000) shares remained undesignated.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors Communications Fund, Inc. has caused
these Articles Supplementary to be executed by its President and its corporate
seal to be affixed and attested by its Secretary on this 17th day of November,
1998.
[CORPORATE SEAL]
FLAG INVESTORS COMMUNICATIONS FUND, INC.
By: /s/Harry Woolf
----------------
Harry Woolf
President
Attest: /s/Amy M. Olmert
----------------
Amy M. Olmert
Secretary
The undersigned, President of FLAG INVESTORS COMMUNICATIONS FUND, INC.,
who executed on behalf of said corporation the foregoing Articles Supplementary
to the Articles of Incorporation of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/Harry Woolf
--------------
Harry Woolf
President
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
ARTICLES OF AMENDMENT
FLAG INVESTORS COMMUNICATIONS FUND, INC. (the "Corporation") having its
principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law, at a meeting duly
convened on September 28, 1998, has adopted a resolution redesignating the
Corporation's previously designated one hundred ten million (110,000,000) shares
of Common Stock, par value $.001 per share, having an aggregate par value of one
hundred ten thousand dollars ($110,000.00), as follows: sixty three million
(63,000,000) shares are designated "Flag Investors Communications Fund Class A
Shares," fifteen million (15,000,000) shares are designated "Flag Investors
Communications Fund Class B Shares," fifteen million (15,000,000) shares are
designated "Flag Investors Communications Fund Class C Shares," fifteen million
(15,000,000) shares are designated "Flag Investors Communications Fund
Institutional Shares," and two million (2,000,000) shares remain undesignated.
SECOND: Immediately before the redesignation of the Flag
Investors Communications Fund Class D Shares, pursuant to these Articles of
Amendment, the Corporation was authorized to issue one hundred ten million
(110,000,000) shares of Common Stock, par value one hundred ten thousand dollars
($110,000.00), of which sixty million (60,000,000) shares were designated "Flag
Investors Communications Fund Class A Shares," fifteen million (15,000,000)
shares were designated "Flag Investors Communications Fund Class B Shares,"
fifteen million (15,000,000) shares were designated "Flag Investors
Communications Fund Class C Shares," three million (3,000,000) shares were
designated "Flag Investors Communications Fund Class D Shares," fifteen million
(15,000,000) shares were designated "Flag Investors Communications Fund
Institutional Shares" and two million (2,000,000) shares remained undesignated.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
FOURTH: These Articles of Amendment shall be effective as of
the later of the time the State Department of Assessments and Taxation of
Maryland accepts these Articles of Amendment of record or November 24, 1998.
<PAGE>
IN WITNESS WHEREOF, Flag Investors Communications Fund, Inc. has caused
these Articles of Amendment to be executed by its President and its corporate
seal to be affixed and attested by its Secretary on this 18th day of November,
1998.
[CORPORATE SEAL]
FLAG INVESTORS COMMUNICATIONS FUND, INC.
By: /s/Harry Woolf
--------------
Harry Woolf
President
Attest: /s/Amy M. Olmert
----------------
Amy M. Olmert
Secretary
The undersigned, President of FLAG INVESTORS COMMUNICATIONS FUND, INC.,
who executed on behalf of said corporation the foregoing Articles of Amendment
to the Articles of Incorporation of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles of Amendment to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
By: /s/Harry Woolf
--------------
Harry Woolf
President
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT dated as of June 5, 1998 between BANKERS TRUST COMPANY (the
"Custodian") and FLAG INVESTORS COMMUNICATIONS FUND, INC. (the "Customer").
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Customer under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of the Customer which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4)
("Property") pursuant to the terms and conditions set forth herein. For purposes
of this Agreement, "delivery" of Property shall include the acquisition of a
security entitlement (as that term is defined in the New York Uniform Commercial
Code ("UCC")) with respect thereto. Without limitation, such Property shall
include stocks and other equity interests of every type, evidences of
indebtedness, other instruments representing same or rights or obligations to
receive, purchase, deliver or sell same and other non-cash investment property
of the Customer ("Securities") and cash from any source and in any currency
("Cash"), provided that the Custodian shall have the right, in its sole
discretion, to refuse to accept as Property any property of a Customer that the
Custodian considers not to be appropriate or in proper form for deposit for any
reason. The Custodian shall not be responsible for any property of the Customer
held or received by the Customer or others and not delivered to the Custodian or
any Subcustodian.
2. Maintenance of Property at Custodian and Subcustodian Locations.
Pursuant to Instructions, the Customer shall direct the Custodian to (a) settle
Securities transactions and maintain cash in the country or other jurisdiction
in which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are acquired
and (b) maintain Cash and Cash equivalents in such countries in amounts
reasonably necessary to effect the Customer's transactions in such Securities.
Instructions to settle Securities transactions in any country shall be deemed to
authorize the holding of such Property in that country.
3. Custody Account. The Custodian agrees to establish and maintain a
custody account or accounts on its books in the name of the Customer (the
"Account") for any and all Property received and accepted by the Custodian or
any Subcustodian for the account of the Customer. The Customer acknowledges its
responsibility as a principal for all of its obligations to the Custodian
arising under or in connection with this Agreement, warrants its authority to
deposit in the Account any Property received therefor by the Custodian or a
Subcustodian and to give, and authorize others
- 1 -
<PAGE>
to give, instructions relative thereto. The Custodian may deliver securities of
the same class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for
Account, on behalf of the Customer, all Property in such Account and, to the
extent such Property constitutes financial assets for purposes of the New York
UCC, shall maintain those financial assets in such Account as security
entitlements in favor of the Customer. All transactions, including, but not
limited to, foreign exchange transactions, involving the Property shall be
executed or settled solely in accordance with Instructions, except that until
the Custodian receives Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the Account;
(b) present for payment all Securities held in the Account which
are called, redeemed or retired or otherwise become payable
and all coupons and other income items which call for payment
upon presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and hold
the cash received in the Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
the Account, endeavor to receive Instructions, provided that
if such Instructions are not received in time for the
Custodian to take timely action, no action shall be taken with
respect thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for the Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Custodian to take timely
action or if actual notice of such actions was received too
late to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby authorizes the
Custodian to make) such rights entitlement or fractional
interest and credit the Account with the net proceeds of such
sale;
(e) execute in the Customer's name for the Account, whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in the Account;
- 2 -
<PAGE>
(f) pay for the Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in the Account by any
governmental authority. In the event there is insufficient
Cash available in the Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in the Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with the
payment of any such taxes to cooperate with the Custodian in
furnishing information, executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to maintain the Property in the Account directly in one
of its U.S. branches or indirectly through custody accounts which have been
established by the Custodian with the following other securities intermediaries:
(a) one of its U.S. branches or another U.S. bank or trust company or branch
thereof located in the U.S. which is itself qualified under the Investment
Company Act of 1940, as amended ("1940 Act"), to act as custodian (individually,
a "U.S. Subcustodian"), or a U.S. securities depository or clearing agency or
system in which the Custodian or a U.S. Subcustodian participates (individually,
a "U.S. Securities System") or (b) one of its non-U.S. branches or
majority-owned non-U.S. subsidiaries, a non-U.S. branch or majority-owned
subsidiary of a U.S. bank or a non-U.S. bank or trust company, acting as
custodian (individually, a "non-U.S. Subcustodian"; U.S. Subcustodians and
non-U.S. Subcustodians, collectively, "Subcustodians"), or a non-U.S. depository
or clearing agency or system in which the Custodian or any Subcustodian
participates (individually, a "non-U.S. Securities System"; U.S. Securities
System and non-U.S. Securities System, collectively, "Securities System"),
provided that in each case in which a U.S. Subcustodian or U.S. Securities
System is employed, each such Subcustodian or Securities System shall have been
approved by Instructions; provided further that in each case in which a non-U.S.
Subcustodian or non-U.S. Securities System is employed, (a) such Subcustodian or
Securities System either is (i) a "qualified U.S. bank" as defined by Rule 17f-5
under the 1940 Act ("Rule 17f- 5") or (ii) an "eligible foreign custodian"
within the meaning of Rule 17f-5 or such Subcustodian or Securities System is
the subject of an order granted by the U.S. Securities and Exchange Commission
("SEC") exempting such agent or the subcustody arrangements thereto from all or
part of the provisions of Rule 17f-5 and (b) the agreement between the Custodian
and such non-U.S. Subcustodian has been approved by Instructions; it being
understood that the Custodian shall have no liability or responsibility for
determining whether the approval of any Subcustodian or Securities System has
been proper under the 1940 Act or any rule or regulation thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable,
- 3 -
<PAGE>
appoint a replacement subcustodian or securities system in accordance with the
provisions of this Section. In addition, the Custodian may, at any time in its
discretion, upon written notification to the Customer, terminate the employment
of any Subcustodian or Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S. Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Directors to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities Systems as may reasonably be requested by
the Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires the Customer's Board of Directors to directly approve its foreign
custody arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the normal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in the Account which
is maintained by the Custodian through a Subcustodian employed pursuant to
Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer, any Property maintained through such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its
agents.
(c) Property deposited with a Subcustodian will be maintained in
an account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a
Subcustodian with respect to maintaining Property shall
require that (i) the Account will be adequately indemnified or
its losses adequately insured; (ii) the Securities so
maintained will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of such
Subcustodian or its creditors except a claim for payment in
accordance with such agreement for their safe custody or
administration and expenses related thereto, (iii) beneficial
ownership of such Securities will be freely transferable
without the payment of money or value other than for safe
custody or administration and expenses related thereto; and
(iv) adequate records will be maintained identifying the
- 4 -
<PAGE>
Property maintained pursuant to such agreement as belonging to
the Custodian, on behalf of its customers and (v) to the
extent permitted by applicable law, officers of or auditors
employed by, or other representatives of or designated by, the
Custodian, including the independent public accountants of or
designated by, the Customer be given access to the books and
records of such Subcustodian relating to its actions under its
agreement pertaining to any Property held by it thereunder or
confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by
the Custodian.
6. Use of Securities System. With respect to Property in the Account
which is maintained by the Custodian or any Subcustodian through a Securities
System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian shall be required by
its agreement with the Custodian to, identify on its books
such Property as being maintained for the account of the
Custodian or Subcustodian for its customers.
(b) Any Property maintained through a Securities System for the
account of the Custodian or a Subcustodian will be subject
only to the instructions of the Custodian or such
Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether maintained directly by the
Custodian or indirectly through a Subcustodian or a Securities System as
authorized herein, shall be clearly recorded on the Custodian's books as
belonging to the Account and not for the Custodian's own interest. The Custodian
shall keep accurate and detailed accounts of all investments, receipts,
- 5 -
<PAGE>
disbursements and other transactions for the Account. All accounts, books and
records of the Custodian relating thereto shall be open to inspection and audit
at all reasonable times during normal business hours by any person designated by
the Customer. All such accounts shall be maintained and preserved in the form
reasonably requested by the Customer. The Custodian will supply to the Customer
from time to time, as mutually agreed upon, a statement in respect to any
Property in the Account maintained by the Custodian or by a Subcustodian. In the
absence of the filing in writing with the Custodian by the Customer of
exceptions or objections to any such statement within sixty (60) days of the
mailing thereof, the Customer shall be deemed to have approved such statement
and in such case or upon written approval of the Customer of any such statement,
such statement shall be presumed to be for all purposes correct with respect to
all information set forth therein.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Property,
including Property deposited and/or maintained in a securities system or with a
Subcustodian. Such report shall be of sufficient scope and in sufficient detail
as may reasonably be required by the Customer and as may reasonably be obtained
by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on a hard copy various reports of Account activity and of Property being
held in the Account. To the extent that such service shall include market values
of Securities in the Account, the Customer hereby acknowledges that the
Custodian now obtains and may in the future obtain information on such values
from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service nor the accuracy or completeness of any
such information furnished or obtained by or through such service and (ii) shall
be without liability in selecting and utilizing such service or furnishing any
information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in the Account
which are maintained by the Custodian or any Subcustodian may be held directly
by such entity in the name of the Customer or in bearer form or maintained in
the Custodian's or Subcustodian's name, or in the name of the Custodian's or
Subcustodian's nominee. Securities that are maintained through a Subcustodian or
which are eligible for deposit in a Securities System as provided above may be
maintained with the Subcustodian or the Securities System in an account for the
Custodian's or Subcustodian's
- 6 -
<PAGE>
customers, unless prohibited by law, rule, or regulation. The Custodian or
Subcustodian, as the case may be, may combine certificates representing
Securities held in the Account with certificates of the same issue held by it as
fiduciary or as a custodian. In the event that any Securities in the name of the
Custodian or its nominee or held by a Subcustodian and registered in the name of
such Subcustodian or its nominee are called for partial redemption by the issuer
of such Security, the Custodian may, subject to the rules or regulations
pertaining to allocation of any Securities System in which such Securities have
been deposited, allot, or cause to be allotted, the called portion of the
respective beneficial holders of such class of Security in any manner the
Custodian deems to be fair and equitable. Securities maintained with a
Securities System shall be maintained subject to the rules of that Securities
System governing the rights and obligations among the Securities System and its
participants.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in the Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit A
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") or (iii) as may otherwise be agreed upon between the
Custodian and the Customer. The liability and responsibility of the Custodian in
connection with the Proxy Service referred to in (ii) of the immediately
preceding sentence and in connection with any additional services which the
Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in the
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of the Customer.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for the Account and delivery of Securities
out of the Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for
- 7 -
<PAGE>
that jurisdiction or market. The Custodian shall not be liable for any loss
which results from effecting transactions in accordance with the customary or
established securities trading or securities processing practices and procedures
in the applicable jurisdiction or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, the Account, on a contractual basis, as outlined
in the applicable Service Standards as defined below and provided to the
Customer by the Custodian, the Custodian may, at its sole option, reverse such
credits or debits to the Account in the event that the transaction does not
settle, or the income is not received in a timely manner, and the Customer
agrees to hold the Custodian harmless from any losses which may result
therefrom.
The applicable Service Standards shall be defined as the Global Guide,
the Policies and Standards Manual, and any other documents issued by the
Custodian from time to time specifying the procedures for communicating with the
Customer, the terms of any additional services to be provided to the Customer,
and such other matters as may be agreed between the Customer and the Custodian
from time to time.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the
Custodian shall not be required to comply with any Instructions to settle the
purchase of any securities for the Account, unless there are sufficient
immediately available funds in the relevant currency in the Account, provided
that, if, after all expenses, debits and withdrawals of Cash in the relevant
currency ("Debits") applicable to the Account have been made and if after all
Conditional Credits, as defined below, applicable to the Account have been made
final entries as set forth in (c) below, the amount of immediately available
funds in the relevant currency in such Account is at least equal to the
aggregate purchase price of all Securities for which the Custodian has received
Instructions to settle on that date ("Settlement Date"), the Custodian, upon
settlement, shall credit the Securities to the Account by making a final entry
on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable to
the Account have been made, there remains outstanding any Conditional Credit (as
defined below) applicable to the Account or the amount of immediately available
funds in a given currency in such Account are less than the aggregate purchase
price in such currency of all securities for which the Custodian has received
Instructions to settle on the Settlement Date, the Custodian, upon settlement,
may provisionally credit the Securities to the Account by making a conditional
entry on its books and records ("Conditional Credit"), pending receipt of
sufficient immediately available funds in the relevant currency in the Account.
(c) If, within a reasonable time after the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds in the relevant currency at least equal to the
aggregate purchase price in such currency of all securities subject to
- 8 -
<PAGE>
a Conditional Credit on a Settlement Date are deposited into the Account, the
Custodian shall make the Conditional Credit a final entry on its books and
records. In such case, the Customer shall be liable to the Custodian only for
late charges at a rate which the Custodian customarily charges for similar
extensions of credit.
(d) If (i) within a reasonable time from the posting of a Conditional
Credit, immediately available funds at least equal to the resultant Debit on a
Settlement Date are not on deposit in the Account, or (ii) any Proceeding shall
occur, the Custodian may sell such of the Securities subject to the Conditional
Credit as it selects in its sole discretion and shall apply the net proceeds of
such sale to cover such Debit, including related late charges, and any remaining
proceeds shall be credited to the Account. If such proceeds are insufficient to
satisfy such debt in full, the Customer shall continue to be liable to the
Custodian for any shortfall. The Custodian shall make the Conditional Credit a
final entry on its books as to the Securities not required to be sold to satisfy
such Debit. Pending payment in full by the Customer of the purchase price for
Securities subject to a Conditional Credit, and the Custodian's making a
Conditional Credit a final entry on its books, and unless consented to by the
Custodian, the Customer shall have no right to give further Instructions in
respect of Securities subject to a Conditional Credit. The Custodian shall have
the sole discretion to determine which Securities shall be deemed to have been
paid for by the Customer out of funds available in the Account. Any such
Conditional Credit may be reversed (and any corresponding Debit shall be
canceled) by the Custodian unless and until the Custodian makes a final entry on
its books crediting such Securities to the Account. The term "Proceeding" shall
mean any insolvency, bankruptcy, receivership, reorganization or similar
proceeding relating to the Customer, whether voluntary or involuntary.
(e) The Customer agrees that it will not intentionally use the Account
to facilitate the purchase of securities without sufficient funds in the Account
(which funds shall not include the expected proceeds of the sale of the
purchased securities).
14. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance Section 15 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
- 9 -
<PAGE>
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed or in order
to satisfy requirements for additional or substitute collateral.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Portfolio's investment advisor and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commission or of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
broker. The Custodian will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section 21.
(o) For other proper purposes.
- 10 -
<PAGE>
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian in accordance with Section 22 below (i) in writing
(including, without limitation, facsimile transmission) or by tested telex
signed or given by such one or more person or persons as the Customer shall have
from time to time authorized in writing to give the particular class of
Instructions in question and whose name and (if applicable) signature and office
address have been filed with the Custodian, or (ii) which have been transmitted
electronically through an electronic on-line service and communications system
offered by the Custodian or other electronic instruction system acceptable to
the Custodian, or (iii) a telephonic or oral communication by one or more
persons as the Customer shall have from time to time authorized to give the
particular class of Instructions in question and whose name has been filed with
the Custodian; or (iv) upon receipt of such other form of instructions as the
Customer may from time to time authorize in writing and which the Custodian has
agreed in writing to accept. Instructions in the form of oral communications
shall be confirmed by the Customer by tested telex or writing in the manner set
forth in clause (i) above, but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral instructions
prior to the Custodian's receipt of such confirmation. Instructions may relate
to specific transactions or to types or classes of transactions, and may be in
the form of standing instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
16. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in the Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for
- 11 -
<PAGE>
any act or omission to act of any Subcustodian to the same extent as if the
Custodian committed such act itself. With respect to a Securities System, the
Custodian shall only be responsible or liable for losses arising from employment
of such Securities System caused by the Custodian's own failure to exercise
reasonable care. In the event of any loss to the Customer by reason of the
failure of the Custodian or a Subcustodian to utilize reasonable care, the
Custodian shall be liable to the Customer to the extent of the Customer's actual
damages at the time such loss was discovered without reference to any special
conditions or circumstances. In no event shall the Custodian be liable for any
consequential or special damages. The Custodian shall be entitled to rely, and
may act, on advice of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in the Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in the Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian or hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
- 12 -
<PAGE>
The provisions of this Section shall survive termination of this
Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer pursuant to any contract or any law or regulation.
The provisions of this Section shall survive termination of this Agreement.
18. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit B. Such fees will not be abated by, nor shall the Custodian be required
to account for, any profits or commissions received by the Custodian in
connection with its provision of custody services under this Agreement. The
Customer hereby agrees to hold the Custodian harmless from any liability or loss
resulting from any taxes or other governmental charges, and any expense related
thereto, which may be imposed, or assessed with respect to any Property in the
Account and also agrees to hold the Custodian, its Subcustodians, and their
respective nominees harmless from any liability as a record holder of Property
in the Account. The Custodian is authorized to charge the Account for such items
and the Custodian shall have a lien on the Property in the Account for any
amount payable to the Custodian under this Agreement, including but not limited
to amounts payable pursuant to Section 13 and pursuant to indemnities granted by
the Customer under this Agreement. The provisions of this Section shall survive
the termination of this Agreement.
19. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in the Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit C attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit C. Such standard of care shall not be
affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
21. Termination. This Agreement may be terminated by the Customer or
the Custodian by ninety (90) days' written notice to the other; provided that
notice by the Customer shall specify
- 13 -
<PAGE>
the names of the persons to whom the Custodian shall deliver the Securities in
the Account and to whom the Cash in the Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall, within ninety (90)
days following the giving of such notice, deliver to the Custodian a written
notice specifying the names of the persons to whom the Custodian shall deliver
the Securities in the Account and to whom the Cash in the Account shall be paid.
In either case, the Custodian will deliver such Property to the persons so
specified, after deducting therefrom any amounts which the Custodian determines
to be owed to it hereunder. In addition, the Custodian may in its discretion
withhold from such delivery such Property as may be necessary to settle
transactions pending at the time of such delivery. The Customer grants to the
Custodian a lien and right of setoff against the Account and all Property held
therein from time to time in the full amount of the foregoing obligations. If
within ninety (90) days following the giving of a notice of termination by the
Custodian, the Custodian does not receive from the Customer a written notice
specifying the names of the persons to whom the Custodian shall deliver the
Securities in the Account and to whom the Cash in the Account shall be paid, the
Custodian, at its election, may deliver such Securities and pay such Cash to a
bank or trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or may continue to
hold such Securities and Cash until a written notice as aforesaid is delivered
to the Custodian, provided that the Custodian's obligations shall be limited to
safekeeping.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by
registered mail, telex or facsimile addressed to such other address as shall
have been furnished by the receiving party pursuant to the provisions hereof and
(b) shall be deemed effective when received, or, in the case of a telex, when
sent to the proper number and acknowledged by a proper answerback.
23. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to the Custodian a continuing security
interest in and right of setoff against the Account and all Property held
therein from time to time in the full amount of such obligations. Should the
Customer fail to pay promptly any amounts owed hereunder, the Custodian shall be
entitled to use available Cash in the Account, and to dispose of Securities in
the Account as is necessary. In any such case and without limiting the
foregoing, the Custodian shall be entitled to take such other actions or
exercise such other options, powers and rights as the Custodian now or hereafter
has as a secured creditor under the New York UCC or any other applicable law.
24. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian
that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to the Account as herein provided, is not
prohibited by law or any governing documents or contracts to which it is
subject;
- 14 -
<PAGE>
(ii) the terms of this Agreement do not violate any obligation
by which it is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon it in accordance
with its terms; and
(iv) it will deliver to the Custodian a duly executed
Secretary's Certificate in the form of Exhibit D attached hereto or such other
evidence of such authorization as the Custodian may reasonably require, whether
by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any obligation
by which it is bound, whether arising by contract, operation of law or
otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon it in accordance
with its terms;
(iii) it will deliver to the Customer such evidence of such
authorization as the Customer may reasonably require, whether by way of a
certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so qualified or upon ceasing to
be so qualified shall promptly notify the Customer in writing.
25. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
26. Publicity. Customer shall furnish to Custodian in accordance with
Section 22 above, prior to any distribution thereof, copies of any material
prepared for distribution to any persons who are not parties hereto that refer
in any way to the Custodian. Customer shall not distribute or permit the
distribution of such materials if Custodian reasonably objects in writing within
ten (10) business days of receipt thereof (or such other time as may be mutually
agreed) after receipt thereof. The provisions of this Section shall survive the
termination of this Agreement.
27. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any
- 15 -
<PAGE>
such suit, action or proceeding brought in such a court and any claim that such
suit, action or proceeding was brought in an inconvenient forum.
28. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
29. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation. The
provisions of this Section shall survive the termination of this Agreement.
30. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
31. Entire Agreement. This Agreement together with any Exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior writings
with respect thereto.
32. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
33. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
- 16 -
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
signatories to execute this Agreement as of the date first written above.
` FLAG INVESTORS COMMUNICATIONS
FUND, INC.
By: /s/ Amy M. Olmert
-------------------------
Name: Amy M. Olmert
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ Richard Fogarty
-------------------------
Name: Richard Fogarty
Title: Vice President
- 17 -
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and Flag Investors Communications Fund, Inc.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in the countries specified in the applicable Service Standards.
For the United States and Canada, the term "corporate communications" means the
proxy statements or meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries other than the United
States and Canada, the term "corporate communications" means the meeting agenda
only and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
<PAGE>
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account unless other
arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
applicable Service Standards. The Custodian will notify the Customer as to the
inclusion of additional countries or deletion of existing countries after their
inclusion or deletion and this Exhibit A will be deemed to be automatically
amended to include or delete such countries as the case may be.
- 2 -
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and Flag Investors Communications Fund, Inc.
BANKERS TRUST CUSTODY FEE SCHEDULE
FOR
BT ALEX. BROWN MUTUAL FUNDS
(FLAG INVESTORS FUNDS AND ISI FUNDS)
Effective October 1, 1997
CUSTODY FEES
1. DOMESTIC SAFEKEEPING FEES
ANNUAL ASSET FEE (BY FUND- EXCEPT CASH RESERVE)
Market Value Basis Point
$0 - $100 million 1.00
Over $100 million 0.75
ANNUAL ASSET FEE (CASH RESERVE FUND)
Market Value Basis Point
$0 - $1 billion 1.00
$1 billion - $3 billion 0.75
Over $3 billion 0.50
2. DOMESTIC TRANSACTION FEES
================================================================================
TRANSACTION TYPE $USD
- --------------------------------------------------------------------------------
AUTOMATED DEPOSITORY: DTC/PTC/FED 10.00
- --------------------------------------------------------------------------------
MANUAL DEPOSITORY: DTC/PTC/ FED 15.00
- --------------------------------------------------------------------------------
PHYSICAL AUTOMATED 15.00
- --------------------------------------------------------------------------------
PHYSICAL MANUAL 20.00
- --------------------------------------------------------------------------------
P&I PAYMENTS 5.00
- --------------------------------------------------------------------------------
REDEMPTIONS 10.00
- --------------------------------------------------------------------------------
REORGANIZATIONS Included in safekeeping charge
================================================================================
<PAGE>
3. GLOBAL SAFEKEEPING AND ASSET FEES
================================================================================
Receive and
Annual Deliver
Country Asset Fee Transactions
================================================================================
Argentina 35 Basis Points $100
- --------------------------------------------------------------------------------
Australia 3 Basis Points $50
- --------------------------------------------------------------------------------
Austria 5 Basis Points $75
- --------------------------------------------------------------------------------
Bangladesh 40 Basis Points $150
- --------------------------------------------------------------------------------
Belgium 4 Basis Points $60
- --------------------------------------------------------------------------------
Botswana 50 Basis Points $150
- --------------------------------------------------------------------------------
Brazil 30 Basis Points $70
- --------------------------------------------------------------------------------
Canada 2 Basis Points $20
- --------------------------------------------------------------------------------
Cedel/Euroclear 3 Basis Points $20
- --------------------------------------------------------------------------------
Chile 30 Basis Points $80
- --------------------------------------------------------------------------------
China 30 Basis Points $75
- --------------------------------------------------------------------------------
Columbia 35 Basis Points $100
- --------------------------------------------------------------------------------
Czech Republic 20 Basis Points $70
- --------------------------------------------------------------------------------
Denmark 4 Basis Points $50
- --------------------------------------------------------------------------------
Ecuador 45 Basis Points $100
- --------------------------------------------------------------------------------
Egypt 45 Basis Points $80
- --------------------------------------------------------------------------------
Finland 10 Basis Points $75
- --------------------------------------------------------------------------------
France 5 Basis Points $50
- --------------------------------------------------------------------------------
Germany 3 Basis Points $30
- --------------------------------------------------------------------------------
Ghana 50 Basis Points $150
- --------------------------------------------------------------------------------
Greece 35 Basis Points $120
- --------------------------------------------------------------------------------
Hong Kong 5 Basis Points $30
- --------------------------------------------------------------------------------
Hungary 45 Basis Points $150
- --------------------------------------------------------------------------------
India (Physical) 60 Basis Points $200
- --------------------------------------------------------------------------------
India (Dematerialized) 25 Basis Points $140
- --------------------------------------------------------------------------------
Indonesia 8 Basis Points $35
- --------------------------------------------------------------------------------
Ireland 5 Basis Points $50
- --------------------------------------------------------------------------------
Israel 40 Basis Points $50
- --------------------------------------------------------------------------------
Italy 3 Basis Points $50
- --------------------------------------------------------------------------------
Japan 3 Basis Points $35
- --------------------------------------------------------------------------------
Jordan 30 Basis Points $100
- --------------------------------------------------------------------------------
Kenya 50 Basis Points $150
- --------------------------------------------------------------------------------
Luxembourg 4 Basis Points $60
- --------------------------------------------------------------------------------
Malaysia 7 Basis Points $50
- --------------------------------------------------------------------------------
- 2 -
<PAGE>
- --------------------------------------------------------------------------------
Mauritius 50 Basis Points $140
- --------------------------------------------------------------------------------
Mexico 5 Basis Points $30
- --------------------------------------------------------------------------------
Morocco 30 Basis Points $130
- --------------------------------------------------------------------------------
Netherlands 4 Basis Points $45
- --------------------------------------------------------------------------------
New Zealand 4 Basis Points $50
- --------------------------------------------------------------------------------
Norway 5 Basis Points $50
- --------------------------------------------------------------------------------
Pakistan 30 Basis Points $150
- --------------------------------------------------------------------------------
Peru 50 Basis Points $100
- --------------------------------------------------------------------------------
Philippines 8 Basis Points $30
- --------------------------------------------------------------------------------
Poland 45 Basis Points $100
- --------------------------------------------------------------------------------
Portugal 4 Basis Points $75
- --------------------------------------------------------------------------------
Russia 50 Basis Points $300
- --------------------------------------------------------------------------------
Singapore 7 Basis Points $50
- --------------------------------------------------------------------------------
Slovakia 25 Basis Points $100
- --------------------------------------------------------------------------------
South Africa 5 Basis Points $30
- --------------------------------------------------------------------------------
South Korea 15 Basis Points $50
- --------------------------------------------------------------------------------
Spain 6 Basis Points $50
- --------------------------------------------------------------------------------
Sri Lanka 12 Basis Points $60
- --------------------------------------------------------------------------------
Sweden 4 Basis Points $50
- --------------------------------------------------------------------------------
Switzerland 3 Basis Points $50
- --------------------------------------------------------------------------------
Taiwan 15 Basis Points $100
- --------------------------------------------------------------------------------
Thailand 7 Basis Points $100
- --------------------------------------------------------------------------------
Tunisia 45 Basis Points $50
- --------------------------------------------------------------------------------
Turkey 15 Basis Points $50
- --------------------------------------------------------------------------------
United Kingdom 2 Basis Points $15
- --------------------------------------------------------------------------------
Venezuela 35 Basis Points $100
- --------------------------------------------------------------------------------
Zambia 50 Basis Points $150
- --------------------------------------------------------------------------------
Zimbabwe 50 Basis Points $150
- --------------------------------------------------------------------------------
4. DDA RELATED CHARGES
Cash Connector Services $25 per month per account
(MTC, MTD, EBR, BTC Reporting)
Statement Rendition (CDS) Services
Account Maintenance $50 per month per account
Debit Postings $0.35 per posting
Credit Postings $0.35 per posting
Money Transfer Charges*
- 3 -
<PAGE>
Outgoing Payments $6.00
Incoming Payments No Charge
Book to Book Transfers No Charge
*Above Money Transfer Charges assume electronic instruction via bank-provided
software. Manual instructions received via facsimile, etc. will incur a charge
of $25 per transaction.
Overdraft Rate: Prime + 1.00%
NOTES
o Market Values will be provided by the Fund Accountant at
month-end to determine monthly assets for billing purposes.
o A manual transaction is an instruction that is received in
writing, i.e. facsimile.
o The standard Global Custody Service includes: asset
safekeeping, trade settlement, income collection, corporate
action processing including proxy voting and tax reclaims
where appropriate.
o Third party FX transactions and other cash movements with no
associated security transaction (e.g. free payments/receipts)
are charged at $10 per U.S. wire and $25 per non-U.S. wire. No
fee is levied for FX transactions executed with Bankers Trust.
o Fees are billed monthly in arrears.
This Exhibit B shall be amended upon delivery by the Custodian of a new Exhibit
B to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
- 4 -
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and Flag Investors Communications Fund, Inc.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in the Account in
the countries specified in the applicable Service Standards. Terms used herein
as defined terms shall unless otherwise defined have the meanings ascribed to
them in the above referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other
<PAGE>
professional tax advisers and shall be without liability to the Customer for any
action reasonably taken or omitted pursuant to information contained in such
services or such advice.
<PAGE>
EXHIBIT D
[Name of Entity]
Certificate of the Secretary
I, [Name of Secretary], hereby certify that I am the Secretary
of [Name of Entity], a ______________________[type of entity] organized under
the laws of ________________________[jurisdiction] (the "Customer"), and as such
I am duly authorized to, and do hereby, certify that:
1. Good Standing. The Customer's organizational documents, and
all amendments thereto, have been filed with the appropriate governmental
officials of _____________________[jurisdiction], the Customer continues to be
in existence and is in good standing, and no action has been taken to repeal
such organizational documents, the same being in full force and effect on the
date hereof.
2. Organizational Documents. The Customer's [name of
organizational documents - i.e., Bylaws, Articles of Incorporation, etc.] have
been duly adopted and no action has been taken to repeal such [name of
organizational documents], the same being in full force and effect.
3. Resolutions. Resolutions have been duly adopted on behalf
of the Customer, which resolutions (i) have not in any way been revoked or
rescinded, (ii) have been in full force and effect since their adoption, to and
including the date hereof, and are now in full force and effect, and (iii) are
the only corporate proceedings of the Customer now in force relating to or
affecting the matters referred to therein, including, without limitation,
confirming that the Customer is duly authorized to appoint Bankers Trust Company
as Custodian of assets delivered to it by the Customer and enter into a certain
custody agreement with Bankers Trust Company (the "Agreement") setting forth the
terms and conditions of such appointment, and that certain designated officers,
including those identified in paragraph 4 of this Certificate, are authorized to
(a) execute said Agreement in such form as the officers executing the same have
approved, such approval to be conclusively evidenced by their execution and
delivery thereof, and (b) execute any instructions in connection with the
Agreement, in conformity with the requirements of the Customer's [name of
organizational documents], and other pertinent documents to which the Customer
may be bound.
4. Incumbency. The following named individuals are duly
elected (or appointed), qualified and acting officers of the Customer holding
those offices set forth opposite their respective names as of the date hereof,
each having full authority, acting individually, to bind the Customer, as a
legal matter, with respect to all matters pertaining to the Agreement, and to
execute and deliver said
<PAGE>
Agreement on behalf of the Customer, and the signatures set forth opposite the
respective names and titles of said officers are their true, authentic
signatures:
Name Title Signature
---- ----- ---------
- -------------------- -------------------- --------------------
- -------------------- -------------------- --------------------
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day
of _______________[Date], 1997.
By: __________________________________
Name: __________________________________
Title: Secretary
I, __________________________[Name of Confirming Officer],
__________________[Title] of the Customer, hereby certify that on this ___ day
of _______________[Date], 19__, _____________________[NAME OF SECRETARY] is the
duly elected Secretary of the Customer and that the signature above is his/her
genuine signature.
By:_________________________________
Name:_______________________________
Title:________________________________
- 2 -
<PAGE>
EXHIBIT E
CASH MANAGEMENT ADDENDUM (this "Addendum") to the CUSTODIAN
AGREEMENT (the "Agreement") between BANKERS TRUST COMPANY (the "Custodian") and
FLAG INVESTORS COMMUNICATIONS FUND, INC. (the "Customer").
WHEREAS, the Custodian will provide cash management services
to the Customer, and the Custodian and the Customer desire to confirm their
understanding with respect to such services;
NOW, THEREFORE, the Custodian and the Customer agree as
follows:
1. Until the Custodian receives Instructions to the contrary,
the Custodian will hold all Cash received for the Account in deposit accounts
maintained with Subcustodians for the benefit of the Custodian's clients, will
credit to the Account interest on such Cash at rates and times the Custodian
shall from time to time determine and will receive compensation therefor out of
any amounts paid by Subcustodians in respect of such Cash.
2. To the extent the Custodian may from time to time inform
the Customer with respect to one or more currencies, the Custodian will sweep
Cash in such currencies to deposit accounts maintained with one or more
Subcustodians until the Custodian notifies the Customer otherwise or receives
Instructions to the contrary.
3. The Customer acknowledges that it has received and reviewed
the current policies of the Custodian regarding cash management services, which
are attached to this Addendum.
4. Capitalized terms used but not defined in this Addendum are
used with the respective meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, this Addendum has been executed as of the
date of the Agreement.
BANKERS TRUST COMPANY
By: /s/ Richard Fogarty
--------------------------
FLAG INVESTORS COMMUNICATIONS
FUND, INC.
By: /s/ Amy M. Olmert
--------------------------
<PAGE>
Global Custody Cash Management Program
In the Global Custody cash management program, currencies on
which Bankers Trust pays interest are divided into two categories: (1)
currencies on which we pay interest based on a market benchmark rate for
overnight deposits, and (2) currencies on which we pay interest based on a rate
paid by the London branch of Bankers Trust Company or the local subcustodian.
Currencies on which we pay interest based on a market
benchmark rate for overnight deposits (which we call "Benchmark Rate
Currencies"):
o For each of these currencies, the interest rate we pay is
based on a specific market benchmark (such as Effective Fed
Funds) and is calculated by taking an average of the benchmark
rate and subtracting a spread. (See Schedule A)
o Currently, the only Benchmark Rate Currency is the U.S.
Dollar. Over time we will be considering additional currencies
to include in this category.
o Operationally, most balances in Benchmark Rate Currencies are
swept overnight into deposits at the London branch of Bankers
Trust Company. Where you have selected a short-term investment
fund, your U.S. Dollar balances in the U.S. will be swept
overnight in accordance with your instructions.
Currencies on which we pay interest based on a rate paid by
the London branch of Bankers Trust Company or the local subcustodian (which we
call "Base Rate Currencies"):
o For each of these currencies, the interest rate we pay is
based on the rate paid by the London branch or the local
subcustodian on overnight deposits in the currency. In either
case, interest is calculated by using the overnight rate
(which will be the actual overnight, a weekly average, or
monthly average rate, depending on the currency) and
subtracting a spread. (See Schedule A)
o Currencies that are part of the sweep program will earn
interest based on the base rate, which will be the higher of
the rate offered by the London branch of Bankers Trust Company
or the local subcustodian.
o Currencies that are not part of the sweep program will
generally earn interest based on the rate paid by the local
subcustodian. We may at times be able to sweep certain
currency balances into deposits of Bankers Trust Company's
London branch in order to be able to earn a higher rate for
you. On those days, any such currency will be
<PAGE>
treated as part of the sweep program, and you will earn
interest on all of your balances in that currency at the
higher rate for that day.
o Currently, there are 39 Base Rate Currencies, 21 of which are
included in our sweep program to the London branch.
o Operationally, most balances in Base Rate Currencies that are
part of our sweep program are swept overnight into deposits at
the London branch, while balances in Base Rate Currencies that
are not part of our sweep program remain with the local
subcustodian.
For each currency on which we pay interest:
o We will notify you periodically in writing of changes in
spreads and updates to the cash management program. These
program updates also will be available through Global Custody
Flash Notices.
o You earn interest at the calculated rate on your entire
contractual balance without any action on your part and
without any minimum balance requirements. This is the case
regardless of whether we are able to invest your balances at
or near the applicable benchmark or base rate and regardless
of whether your contractual balance may exceed your actual
balance.
o Our program generally requires that overnight balances in each
currency remain with (or are swept to) a subcustodian we
designate for that currency. Nevertheless, we pay our stated
rate of interest on any balances that, because of transactions
in your account, are held overnight with an alternate
subcustodian if we receive interest on that currency from that
subcustodian. If the alternate subcustodian does not pay
interest, however, these balances are excluded from our
program.
o The minimum rate paid is 0.50%, except for the Japanese Yen
(for which it is 0.05%) and the Singapore Dollar (for which it
is 0.25%). Please note that this is also subject to change as
appropriate for any currency.
o You will have continuous access through GlobeView, BTWorld, or
GlobeLink or other agreed electronic on-line system to the
interest rate earned during the previous "rate averaging
period". Because we may use weekly or monthly average rates to
calculate the interest you earn, we do not know the actual
interest rate until the weekly or monthly period is completed.
o For swept currencies, from time to time we may not be able to
sweep the full amount of your balances to the London branch
because of operational constraints
- 2 -
<PAGE>
or because your balance on a contractual basis temporarily
exceeds your actual balance. You will, however, always receive
credit for interest based on your entire contractual balance.
To the extent you would have earned a lower rate on balances
not swept, we will make up the difference. To the extent that
actual balances are higher than contractually posted balances
due to purchase fails or otherwise, we will retain the
interest earned as compensation.
o The effective rate we pay on overnight balances will generally
differ from the effective rate we receive (whether from the
London branch or the local subcustodian). Any difference
between the effective rate we receive and the effective rate
we pay (which may be positive or negative, but is generally
positive) is kept by us and covers our fee for running the
cash management program and the related costs we absorb.
Obviously, there will be currencies on which we will not pay
interest because of local regulations, insufficient scale, or other reasons.
However, we hope to identify additional currencies where we can begin paying
interest and we will announce those to you as soon as practical.
Although currently most cash balances in our overnight sweep
program are swept into deposits at the London branch of Bankers Trust Company,
we reserve the right to utilize other branches or affiliates for the overnight
sweep program.
As you know, overdrafts are not permitted in the normal course
of business in any currency. Should they occur in any currency, your account
will be charged a fee to settle transactions in advance of receipt of funds. If
the overdraft is not promptly cured (and in any event upon the expiration of 30
days) after the investment manager has been notified of the outstanding
overdraft, the account's home currency will be used to cure the overdraft and
the associated foreign exchange will be done by Bankers Trust at market rates.
(Other currencies may be utilized to the extent the home currency is
insufficient.) Investment managers that have not cured overdrafts within such
period will be deemed to have directed such foreign exchange transaction.
Accounts subject to ERISA will be deemed to have engaged in the transaction
under the authority of the class exemptions available to qualified professional
asset managers and in-house investment managers. To the extent that the
overdraft is less than the U.S. dollar equivalent of $50,000, Bankers Trust's
foreign exchange desk will bundle the transaction with other small amounts for
other clients.
- 3 -
<PAGE>
Schedule A
New Cash Management Program - Global Custody
Overnight Uninvested Cash Balances
(* - Denotes currencies in sweep program)
Currencies Rates
---------- -----
Argentine Peso Base Rate less 100
Australian Dollar* Base Rate less 130
Austrian Schilling* Base Rate less 125
Belgian Franc* Base Rate less 225
British Pound Sterling* Base Rate less 165
Canadian Dollar* Base Rate less 150
Czech Koruna Base Rate less 75
Danish Krone* Base Rate less 100
Deutsche Mark* Base Rate less 150
Dutch Guilder* Base Rate less 175
European Currency Unit* Base Rate less 125
Finnish Markka* Base Rate less 150
French Franc* Base Rate less 110
Greek Drachma Base Rate less 75
Hong Kong Dollar* Base Rate less 225
Hungarian Forint Base Rate less 75
Indonesian Rupiah Base Rate less 100
Irish Punt* Base Rate less 100
Israeli Shekel Base Rate less 75
Italian Lira* Base Rate less 125
Japanese Yen Base Rate less 75
Jordanian Dinar Base Rate less 150
Korean Won Base Rate less 75
Malaysian Ringgit Base Rate less 150
Mexican Peso Base Rate less 150
New Taiwan Dollar Base Rate less 75
New Zealand Dollar* Base Rate less 100
Norwegian Krone* Base Rate less 150
Philippine Peso Base Rate less 100
Polish Zloty Base Rate less 150
Portuguese Escudo* Base Rate less 125
- 4 -
<PAGE>
Singapore Dollar Base Rate less 150
Slovak Koruna Base Rate less 100
South African Rand* Base Rate less 200
Spanish Peseta* Base Rate less 200
Swedish Krona* Base Rate less 200
Swiss Franc* Base Rate less 100
Thai Baht Base Rate less 150
Turkish Lira Base Rate less 75
U.S. Dollar* Effective Fed Funds less 100(1)
We reserve the right, in our sole discretion, to adjust the base rates and
benchmark rates used and the spreads charged at any time and for any reason. We
will notify you periodically in writing of changes in spreads and updates to the
cash management program. These program updates also will be available through
Global Custody Flash Notices.
(1) Not applicable if U.S. Dollars are swept to a short-term investment fund.
- 5 -
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 22 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 5, 1999, relating to the financial statements and financial highlights
of the Flag Investors Communications Fund, Inc., which appears in such Statement
of Additional Information, and the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "Independent Accountants"
in such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/PRICEWATERHOUSECOOPERS LLP
- -----------------------------
PRICEWATERHOUSECOOPERS LLP
Baltimore, Maryland
February 26, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
FLAG INVESTORS CLASS C SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Class C Shares (the "Shares")
of Flag Investors Communications Fund, Inc. (the "Fund"). Other capitalized
terms herein have the meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement with respect to distribution of the
Shares which is an annual fee, calculated on an average daily net basis and paid
monthly, equal to 0.75% of the average daily net assets of the Shares of the
Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and the Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not interested persons (as defined in the
1940 Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and
<PAGE>
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> COMMUNICATIONS A
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<EXPENSES-NET> 10,090,723
<NET-INVESTMENT-INCOME> 3,605,198
<REALIZED-GAINS-CURRENT> 109,209,276
<APPREC-INCREASE-CURRENT> 510,943,527
<NET-CHANGE-FROM-OPS> 623,758,001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,440,766
<DISTRIBUTIONS-OF-GAINS> 31,863,510
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<NUMBER-OF-SHARES-SOLD> 7,997,108
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<NET-CHANGE-IN-ASSETS> 758,872,736
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,314,676
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,927,518
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,090,723
<AVERAGE-NET-ASSETS> 794,760,899
<PER-SHARE-NAV-BEGIN> 19.37
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 16.05
<PER-SHARE-DIVIDEND> (0.40)
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<PER-SHARE-NAV-END> 34.23
<EXPENSE-RATIO> 1.05
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<AVG-DEBT-PER-SHARE> 0
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<PAID-IN-CAPITAL-COMMON> 107,580,197
<SHARES-COMMON-STOCK> 4,891,128
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73,095,529
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 837,243,403
<NET-ASSETS> 165,307,878
<DIVIDEND-INCOME> 11,262,497
<INTEREST-INCOME> 2,433,424
<OTHER-INCOME> 0
<EXPENSES-NET> 10,090,723
<NET-INVESTMENT-INCOME> 3,605,198
<REALIZED-GAINS-CURRENT> 109,209,276
<APPREC-INCREASE-CURRENT> 510,943,527
<NET-CHANGE-FROM-OPS> 623,758,001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,158,104
<DISTRIBUTIONS-OF-GAINS> 3,523,412
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,461,232
<NUMBER-OF-SHARES-REDEEMED> 421,723
<SHARES-REINVESTED> 162,054
<NET-CHANGE-IN-ASSETS> 758,872,736
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,314,676
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,927,518
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,090,723
<AVERAGE-NET-ASSETS> 72,087,267
<PER-SHARE-NAV-BEGIN> 19.22
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 15.83
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> (0.91)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 33.80
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> COMMUNICATIONS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 598,361,019
<INVESTMENTS-AT-VALUE> 1,435,604,422
<RECEIVABLES> 12,738,411
<ASSETS-OTHER> 177,982
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,448,520,815
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,377,640
<TOTAL-LIABILITIES> 3,377,640
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,814,996
<SHARES-COMMON-STOCK> 95,961
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73,095,529
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 3,246,874
<DIVIDEND-INCOME> 11,262,497
<INTEREST-INCOME> 2,433,424
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<EXPENSES-NET> 10,090,723
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<APPREC-INCREASE-CURRENT> 510,943,527
<NET-CHANGE-FROM-OPS> 623,758,001
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<DISTRIBUTIONS-OF-INCOME> 8,002
<DISTRIBUTIONS-OF-GAINS> 25,235
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96,807
<NUMBER-OF-SHARES-REDEEMED> 1,875
<SHARES-REINVESTED> 1,030
<NET-CHANGE-IN-ASSETS> 758,872,736
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,314,676
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,927,518
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,090,723
<AVERAGE-NET-ASSETS> 1,130,372
<PER-SHARE-NAV-BEGIN> 25.50
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 9.21
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (0.65)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 33.84
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 598,361,019
<INVESTMENTS-AT-VALUE> 1,435,604,422
<RECEIVABLES> 12,738,411
<ASSETS-OTHER> 177,982
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,448,520,815
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,377,640
<TOTAL-LIABILITIES> 3,377,640
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 637,379
<SHARES-COMMON-STOCK> 23,722
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73,095,529
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 837,243,403
<NET-ASSETS> 812,990
<DIVIDEND-INCOME> 11,262,497
<INTEREST-INCOME> 2,433,424
<OTHER-INCOME> 0
<EXPENSES-NET> 10,090,723
<NET-INVESTMENT-INCOME> 3,605,198
<REALIZED-GAINS-CURRENT> 109,209,276
<APPREC-INCREASE-CURRENT> 510,943,527
<NET-CHANGE-FROM-OPS> 623,758,001
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<DISTRIBUTIONS-OF-INCOME> 3,699
<DISTRIBUTIONS-OF-GAINS> 10,896
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,201
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 521
<NET-CHANGE-IN-ASSETS> 758,872,736
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,314,676
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,090,723
<AVERAGE-NET-ASSETS> 287,362
<PER-SHARE-NAV-BEGIN> 23.26
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 12.17
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> (0.91)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 34.27
<EXPENSE-RATIO> 0.83
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</TABLE>
<PAGE>
EX-99.B
Flag Investors Communications Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A, Class B and
Class C Shares and
Institutional Shares
Adopted December 13, 1995
Amended through August 4, 1997
With Exhibits through September 28, 1998
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of Flag Investors Communications
Fund, Inc. (the "Fund"), including a majority of the Directors of the Fund who
are not "interested persons" of the Fund (the "Independent Directors") pursuant
to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act").
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC-20813, IC-14695 and IC-15592, respectively) (collectively, the
"Order"). On December 13, 1995, the Fund elected to rely on Rule 18f-3 rather
than the Order, as permitted by Rule 18f-3 subject to certain conditions, and
created a multiple class distribution arrangement for three classes of shares of
the common stock of the Fund's one existing series (the "Series"). The multiple
class distribution arrangement will be effective on the date of effectiveness of
the post-effective amendment to the Fund's registration statement that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing (Flag Investors Class A (formerly known as the Flag
Investors Shares), Flag Investors Class B and Flag Investors Class C) and
Institutional Shares and future classes of Fund shares. The Flag Investors Class
A Shares have been offered since the Fund's inception on January 18, 1984, the
Flag Investors Class B Shares have been offered since January 3, 1995, the Flag
Investors Class C Shares have been offered since October 19, 1998 and the
Institutional Shares have been offered since February 26, 1998.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors after the date hereof. Before any
material amendment of the Plan, the Fund is required to obtain a finding by a
majority of the Board, and a majority of the Independent Directors, that the
Plan as proposed to be amended, including the expense allocations, is in the
best interests of each class individually and the Fund as a whole.
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
<PAGE>
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly attributable to such class ("Class
Expenses")(1); and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
III. Expense Allocations
Expenses of each class created after the date hereof must be
allocated as follows: (i) distribution and shareholder servicing payments
associated with any Rule 12b-1 Plan or servicing agreement, if any, relating to
each respective class of shares (including any costs relating to implementing
such plans or any amendment thereto) will be borne exclusively by that class;
(ii) any incremental transfer agency fees relating to a particular class will be
borne exclusively by that class; and (iii) Class Expenses relating to a
particular class will be borne exclusively by that class.
The methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes of shares of the
Fund and the proper allocation of income and expenses among the various classes
of shares of the Fund are required to comply with the Fund's internal control
structure pursuant to applicable auditing standards, including Statement on
Auditing Standards No. 55, and to be reviewed as part of the independent
accountants' review of such internal control structure. The independent
accountants' report on the Fund's system of internal controls required by Form
N-SAR, Item 77B, is not required to refer expressly to the procedures for
calculating the classes' net asset values.
- --------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
<PAGE>
BOARD APPROVALS
Approved: December 7, 1988
Approval of Distribution Agreement, Plan of Distribution, and Form of
Sub-Distribution Agreement
RESOLVED, that the proposed Distribution Agreement, between the Fund
and Alex. Brown & Sons Incorporated for distribution of the Fund's shares be,
and the same hereby is, approved, in substantially the form presented to this
meeting, and that the appropriate officers of the fund be, and they hereby are,
authorized and directed to enter into and execute such Distribution Agreemtnt
with such modifications as said officers shall deem necessary or appropriate or
as may be required to conform with the requirements of any applicable statute,
regulation or regulatory body;
FURTHER RESOLVED, that the proposed Plan of Distribution (the "Plan")
is determined to be reasonably likely to benefit the Fund to its shareholders;
FURTHER RESOLVED, that the Plan be, and the same hereby is, approved;
FURTHER RESOLVED, that the proposed form of Sub-Distribution Agreement
of the Fund be, and the same hereby is, approved.
Approved: March 23, 1993
Resolutions of Board Designating Flag Investors Class A Shares
and Creating Flag Investors Class B Shares (now known as Class D Shares)
WHEREAS, the Board of Directors of Flag Investors Telephone Income
Fund, Inc. has previously designated one class of the Fund's shares: "Flag
Investors Telephone Income Fund Shares";
NOW THEREFORE BE IT RESOLVED, that such Shares be, and they hereby are,
further designated and classified as the Fund's Class A Shares;
FURTHER RESOLVED, that in accordance with the authority granted to the
Board of Directors of the Fund pursuant to Article VI, Section 4 of the Fund's
Articles of Incorporation, a second class of the Fund's 40 million authorized
shares of common stock, par value $.001, be and hereby is, classified and
designated as the Fund's "Flag Investors Class B Shares" (the "Class B Shares");
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed in the name and on behalf of the Fund to
make all appropriate filings with the Securities and Exchange Commission (the
"Commission") with respect to the establishment of such new class of shares, the
related Distribution Agreement and Plan of Distribution under Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act") approved at this
meeting by this Board of Directors, including, if they deem it necessary or
appropriate, supplements and post-effective amendments under the Securities Act
of 1933 (the "1933 Act") and under the 1940 Act to the Fund's Registration
Statement on Form N-1A (Registration No. 2-87366), and all necessary exhibits
and other instruments relating thereto (collectively, the "Registration
Statement"), procuring all other necessary signatures thereon, and filing the
appropriate exhibits thereto with Commission under the 1933 Act and the 1940
Act;
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed in the name and on behalf of the Fund, to
take any other action that the officer so acting may deem necessary or
appropriate in connection with the establishment and registration of the Class B
Shares of the Fund, the taking of any such action to establish conclusively such
officer's authority therefore and the approval and ratification thereof by the
Fund.
<PAGE>
Approved: September 22, 1994
Resolutions of Board Reclassifying Old Flag Investors
Class B Shares and Creating New Flag Investors Class B Shares
RESOLVED, that all issued and outstanding Class B Shares of Flag
Investors Telephone Income Fund, Inc. (the "Fund") be, and they hereby are,
reclassified as Flag Investors Class D Shares (the "Class D Shares");
FURTHER RESOLVED, that the Board of Directors of the Fund, having
considered the growth in class assets, outlook for further growth and other
relevant considerations, have determined that the offering of the Class D Shares
should be terminated, such termination to be effective as of November 18, 1994;
FURTHER RESOLVED, that the proper officers of the Fund be, and each of
them hereby is, authorized and directed in the name and on behalf of the Fund,
to take any action that the officer so acting may deem necessary or appropriate,
to effect the termination of the offering of the Class D Shares;
FURTHER RESOLVED, that an additional class of shares of the Fund be,
and hereby is, classified and designated as the "Flag Investors Class B Shares"
(the "Class B Shares") and that unissued shares of common stock, par value $.001
per share of the Fund be, and the same hereby are, reclassified as follows:
Total # of Shares Class A Class B Class D Unclassified
- ----------------- ---------- --------- --------- ------------
70,000,000 60,000,000 5,000,000 3,000,000 2,000,000
FURTHER RESOLVED, that the proper officers of the Fund be, and each of
them hereby is, authorized and directed to file articles supplementary to the
Fund's Articles of Incorporation and to take such other action as may be
necessary to designate and reclassify shares in the foregoing manner.
RESOLVED, that the Distribution Agreement between the Fund and Alex.
Brown & Sons Incorporated for the Class B Shares of the Fund be, and the same
hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the Class B Shares
of the Fund is determined to be reasonably likely to benefit the Fund and its
shareholders; and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for similar plans;
FURTHER RESOLVED, that said Plan be, and the same hereby is, approved.
Date Approved: March 26, 1997
Approval of Amended Rule 18f-3 Plan
RESOLVED, based upon information presented to the Board of Directors of
Flag Investors Telephone Income Fund, Inc. (the "Fund"), that the Directors,
including a majority of the Directors who are not "interested persons" of the
Fund, have determined that the Fund's amended Rule 18f-3 Plan, including the
expense allocations described therein, is in the best interests of the fund and
each of its classes;
FURTHER RESOLVED, that the amended Rule 18f-3 Plan for the Fund be, and
hereby is, approved, in substantially the form presented to this meeting; and
<PAGE>
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed to take any and all actions necessary or
appropriate to cause the amended Rule 18f-3 Plan to be filed with the Securities
and Exchange Commission.
Date Approved: August 4, 1997
Resolutions Approving New Distribution
Agreement for Flag Investors Shares
RESOLVED, that ICC Distributors, Inc. ("ICC ") be, and it hereby is,
appointed distributor for all classes of Alex. Brown Cash Reserve Fund, Inc.,
Flag Investors Telephone Income Fund, Inc., Flag Investors International Fund,
Inc., Flag Investors Emerging Growth Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors
Real Estate Securities Fund, Inc. and Flag Investors Equity Partners Fund, Inc.,
and for the Flag Investors classes of each of Managed Municipal Fund, Inc. and
Total Return U.S. Treasury Fund, Inc., such appointment to be effective upon the
consummation of the merger of Alex. Brown Incorporated with and into a
subsidiary of Bankers Trust New York Corporation (the "Merger"), or at such
other time as the proper officers of the Fund shall determine.
FURTHER RESOLVED, that the proposed Distribution Agreement between
Alex. Brown Cash Reserve Fund, Inc. and ICC Distributors, Inc. with respect to
all shares except the Flag Investors Shares be, and the same hereby is, approved
in substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to
negotiate, enter into and execute such Distribution Agreement with such
modifications as said officers in consultation with counsel shall deem necessary
or appropriate or as may be required to conform with the requirements of any
applicable statute, regulation or regulatory body;
FURTHER RESOLVED, that the proposed Distribution Agreement between
Alex. Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income Fund, Inc.,
Flag Investors International Fund, Inc., Flag Investors Emerging Growth Fund,
Inc., Total Return U.S. Treasury Fund, Inc. (for Flag Investors Shares), Managed
Municipal Fund, Inc. (for the Flag Investors Shares), Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors
Real Estate Securities Fund, Inc., and Flag Investors Equity Partner Fund, Inc.,
and ICC Distributors, Inc. be, and the same hereby is, approved in substantially
the form presented to this meeting and that the appropriate officers of the
Funds be, and they hereby are, authorized and directed to negotiate, enter into
and execute such Distribution Agreement with such modifications as said officers
in consultation with counsel shall deem necessary or appropriate or as may be
required to conform with the requirements of any applicable statute, regulation
or regulatory body.
Date Approved: August 4, 1997
Resolutions Approving New Plan
of Distribution for Class A Shares
RESOLVED, that the Plan of Distribution for the Flag Investors Class A
Shares of Flag Investors Telephone Income Fund, Inc. be, and hereby is, amended
to reflect the change in distributor effected at this meeting, such amendment to
be effective upon the consummation of the Merger, or such other time as the
proper officers of the Fund shall determine;
FURTHER RESOLVED, that the amended Plan is determined to be reasonably
likely to benefit such Fund and its shareholders; and that based on information
reasonably available to the Directors, expenditures contemplated by such Plan
are comparable to expenditures for other similar plans;
<PAGE>
FURTHER RESOLVED, that the continuation of said Plan, as amended, be,
and the same hereby is, approved.
Date Approved: August 4, 1997
Resolutions Approving New Plan
of Distribution for Class B Shares
FURTHER RESOLVED, that the Plan of Distribution for the Flag Investors
Class B Shares of said Fund be, and hereby is, amended to reflect the change in
distributor effected at this meeting, such amendment to be effective upon the
consummation of the Merger, or such other time as the proper officers of the
Fund shall determine;
FURTHER RESOLVED, that the amended Plan is determined to be reasonably
likely to benefit such class and its shareholders; and that based on information
reasonably available to the Directors, expenditures contemplated by such Plan
are comparable to expenditures for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan, as amended, be,
and the same hereby is, approved.
Date Approved: March 27, 1998
Approval of Restated Distribution Agreements and Form
of Sub-Distribution and Shareholder Servicing Agreements
RESOLVED, that the proposed Restated Distribution Agreement between
Flag Investors Telephone Income Fund, Inc. and ICC Distributors, Inc. for each
class of the Fund's shares, be, and the same hereby is, approved in
substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to enter
into and execute such Distribution Agreement with such modifications as said
officers shall deem necessary or appropriate or as may be required to conform
with the requirements of any applicable statute, regulation or regulatory body.
RESOLVED, that the proposed form of Sub-Distribution Agreement for the
Flag Investors Family of Funds be, and hereby is, approved in substantially the
form presented to this meeting; and
FURTHER RESOLVED, that the proposed form of Shareholder Servicing
Agreement for the Flag Investors Family of Funds be, and the same hereby is,
approved in substantially the form submitted to this meeting.
FURTHER RESOLVED, that the proper officers of Flag Investors Telephone
Income Fund, Inc. be, and they hereby are, authorized and directed in the name
and on behalf of their respective Funds, to take all necessary or appropriate
actions to effect the purposes of the foregoing resolutions.
<PAGE>
Date Approved: September 28, 1998
Establishment of Flag Investors Class C
Shares, Authorization to Increase Authorized
Amounts, Designate New Shares, File Articles Supplementary
to the Fund's Articles of Incorporation and
Take Other Necessary or Appropriate Action
RESOLVED, that the total number of shares of common stock, par value
$.001 per share, that Flag Investors Communications Fund, Inc. is authorized to
issue be, and hereby is, increased from eighty-five million (85,000,000) shares,
having the aggregate par value of eighty-five thousand dollars ($85,000), to one
hundred million (100,000,000) shares, having the aggregate par value of one
hundred thousand dollars ($100,000), and that from such amount, fifteen million
(15,000,000) authorized and unissued shares be, and they hereby are, designated
and classified as the "Flag Investors Communications Fund Class C Shares" (the
"Flag Investors Class C Shares");
FURTHER RESOLVED, that the proper officers of Flag Investors
Communications Fund, Inc. be, and each of them hereby is, authorized and
directed to execute and file Articles Supplementary to the Fund's Articles of
Incorporation to effectuate the increase in authorized shares and to designate
and classify the Flag Investors Class C Shares;
FURTHER RESOLVED, that the proper officers of Flag Investors
Communications Fund, Inc. be, and they hereby are, authorized and directed in
the name and on behalf of the Fund to file with the Securities and Exchange
Commission a supplement to the Fund's prospectus and to take all other actions
and make all other filings that the officer so acting may deem necessary or
appropriate in connection with the establishment of the Flag Investors Class C
Shares, the taking of any such action to establish conclusively such officer's
authority therefor and the approval and ratification thereof by the Fund; and
FURTHER RESOLVED, that any and all actions heretofore or hereafter
taken by such officer or officers within the terms of the foregoing resolutions
be, and they hereby are, ratified and confirmed as the authorized act and deed
of Flag Investors Communications Fund, Inc.
<PAGE>
EXHIBIT A
Exhibits to Registrant's 18f-3 Plan
1. Articles of Incorporation filed as Exhibit (1)(a) to Post-Effective Amendment
No. 19 to Registrant's Registration Statement on Form N-1A (File No. 2-87336),
filed with the Securities and Exchange Commission via EDGAR (Accession No.
0000950116-96-000068) on February 8, 1996 is herein incorporated by reference.
2. Articles Supplementary filed as Exhibits (1)(b), (1)(c) and (1)(d) to
Post-Effective Amendment No. 19 to Registrant's Registration Statement on Form
N-1A (File No. 2-87336), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 0000950116-96-000068) on February 8, 1996 is herein
incorporated by reference.
3. Articles Supplementary filed as Exhibit (1)(e) to Post-Effective Amendment
No. 21 to Registrant's Registration Statement on Form N-1A (File No. 2-873376),
filed with the Securities and Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998 is herein incorporated by reference.
4. Articles Supplementary filed as Exhibits (a)(6) and (a)(8) to this
Post-Effective Amendment No. 22 to Registrant's Registration Statement on Form
N-1A (File No. 2-87336) filed herewith.
5. Articles of Amendment filed as Exhibit (a)(7) to this Post-Effective Amendent
No. 22 to Registrant's Registration Statement on Form N-1A (File No. 2-87336)
filed herewith.
6. By-Laws as amended through December 18, 1996 filed as Exhibit (2) to
Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form
N-1A (File No. 2-87336), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 0000950116-97-000792) on April 28, 1997 are herein
incorporated by reference.
7. Distribution Agreement dated August 31, 1997 between Registrant and ICC
Distributors, Inc. with respect to Flag Investors Shares filed as Exhibit (6)(a)
to Post-Effective Amendment No. 21 to Registrant's Registration Statement on
Form N-1A (File No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-98-000501) on February 27, 1998 is herein
incorporated by reference.
8. Distribution Plan with respect to Class A Shares filed as Exhibit (15)(d) to
Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form
N-1A (File No. 2-87336), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000501) on February 27, 1998 is herein
incorporated by reference.
9. Distribution Plan with respect to Class B Shares filed as Exhibit (15)(e) to
this Post-Effective Amendment No. 21 to Registrant's Registration Statement on
Form N-1A (File No. 2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-98-000501) on February 27, 1998 is herein
incorporated by reference.
10. Distribution Plan with respect to Class C Shares filed as Exhibit (m)(7) to
this Post-Effective Amendment No. 22 to Registrant's Registration Statement on
Form N-1A (File No. 2-87336), filed herewith and is herein incorporated by
reference.
11. Form of Sub-Distribution Agreement between ICC Distributors and
Participating Dealers filed as Exhibit (6)(b) to Post-Effective Amendment No. 21
to Registrant's Registration Statement on Form N-1A (File No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998 is herein incorporated by reference.
12. Prospectuses filed as part of this Registration Statement on Form N-1A (File
No. 2-87336) is herein incorporated by reference, as amended from time to time.
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Communications Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/James J. Cunnane
-------------------
James J. Cunnane
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Communications Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Richard T. Hale
------------------
Richard T. Hale
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Amy M.
Olmert, and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Flag Investors Communications Fund, Inc. (the "Fund")
to comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Carl W. Vogt
---------------
Carl W. Vogt
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph R. Hardiman, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Communications Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Joseph R. Hardiman
---------------------
Joseph R. Hardiman
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Communications Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Louis E. Levy
----------------
Louis E. Levy
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Communications Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Eugene J. McDonald
---------------------
Eugene J. McDonald
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND,INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Communications Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as Chairman and a director of the Fund
such Registration Statement and any and all such pre- and post-effective
amendments filed with the Securities and Exchange Commission under the 1933 Act
and the 1940 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorney-in-fact
and agent, or either of them or their substitute or substitutes, shall lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Truman T. Semans
-------------------
Truman T. Semans
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, her true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in her name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Communications Income Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/Rebecca W. Rimel
-------------------
Rebecca W. Rimel
Date: February 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND,INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Amy M.
Olmert, and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Flag Investors Communications Fund, Inc. (the "Fund")
to comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as President of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Harry Woolf
--------------
Harry Woolf
Date: February 25, 1999
