<PAGE>
SUPPLEMENT DATED AUGUST 31, 2000
TO THE PROSPECTUS DATED MAY 1, 2000
OF FLAG INVESTORS COMMUNICATIONS FUND, INC.
(CLASS A, CLASS B, AND CLASS C SHARES)
The Prospectus dated May 1, 2000 of Flag Investors Communications Fund, Inc.
(Class A, Class B, and Class C Shares) is hereby amended and supplemented by
the following:
THE FUND'S NEW FEE ARRANGEMENTS
At a Special Meeting of shareholders held on August 31, 2000, Fund
shareholders approved changes to the Fund's fee arrangements, including new
advisory and sub-advisory agreements for the Fund that increase the fees paid
to the Fund's advisor and sub-advisor. The new fee arrangements also include
a new administrative services agreement between the Fund and Investment
Company Capital Corp. ("ICCC"), the Fund's administrator, pursuant to which
ICCC will provide administrative services to the Fund. The new fee
arrangements go into effect on September 1, 2000, and change the prospectus
disclosure as shown below.
The following table replaces the Annual Fund Operating Expenses portion of
the table appearing under "Fees And Expenses Of The Fund" on page 2 of the
prospectus and the Example that follows it:
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES**** CLASS A CLASS B CLASS C
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) SHARES SHARES SHARES
-------- -------- --------
<S> <C> <C> <C>
Management Fees 0.73% 0.73% 0.73%
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) 0.28% 0.53% 0.52%
-------- -------- --------
Total Annual Fund Operating Expenses 1.26% 2.01% 2.00%
Less Fee Waivers***** (0.15%) (0.15%) (0.15%)
-------- -------- --------
Total Annual Fund Operating Expenses 1.11% 1.86% 1.85%
======== ======== ========
</TABLE>
**** The Fund's fees for the period ended 12/31/99 have been
restated to reflect current fees. Information on the annual operating
expenses reflects the Fund's expenses. On October 2, 2000, the Fund will
be restructured into a master-feeder format (the "Restructuring") under
which the Fund will become a "feeder" fund investing all of its assets in
a "master" portfolio (the "Portfolio"). The Restructuring will not change
the overall level of annual operating expenses shown in the table, and as
of October 2, 2000, this information will reflect the expenses of both the
Fund and the Portfolio.
*****The Fund's Advisor and Administrator have contractually agreed
to an aggregate fee waiver equal to 0.15% of the Fund's average daily net
assets. This agreement will continue until at least September 30, 2002.
-------------------------
EXAMPLE:
This Example is intended to help you compare the cost of investing in each
class of the Fund with the cost of investing in other mutual funds. This
is a hypothetical example only, and is not intended to suggest that the
Fund's future performance will match the assumptions used in the example.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return
each year, the Fund's operating expenses remain the same, the fee waiver
applies during the first
<PAGE>
two years only and all expenses reflect the maximum applicable sales
charges. 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>
Class A Shares $657 $899 $1,176 $1,963
Class B Shares $689 $901 $1,255 $2,028
Class C Shares $288 $598 $1,049 $2,302
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $657 $899 $1,176 $1,963
Class B Shares $189 $601 $1,055 $2,028
Class C Shares $188 $598 $1,049 $2,302
</TABLE>
The following disclosure replaces the second and third paragraphs appearing
under "Investment Advisor and Sub-Advisor" on page 9 of the prospectus:
ICCC is responsible for supervising and managing all of the Portfolio's
operations, including overseeing the performance of ABIM. ABIM is
responsible for decisions to buy and sell securities for the Portfolio,
for broker-dealer selection, and for negotiation of commission rates.
ICCC serves as investment advisor and ABIM serves as investment
sub-advisor to the Fund, and after October 2, 2000, each will provide
these same services to the Portfolio. As compensation for its services
for the fiscal year ended December 31, 1999, ICCC received from the Fund
a fee equal to 0.58% of the Fund's average daily net assets. At a Special
Meeting of Shareholders held on August 31, 2000, shareholders voted to
approve a new investment advisory agreement (the "Advisory Agreement")
between the Fund (or Portfolio, as applicable) and ICCC and a new
sub-advisory agreement (the "Sub-Advisory Agreement) among the Fund (or
Portfolio, as applicable), ICCC and ABIM. Under the Advisory Agreement,
the investment advisor is entitled to receive a fee, calculated daily and
paid monthly, at the following annual rates based upon the Fund's (or
Portfolio's) average daily net assets: 1.00% of the first $100 million,
0.90% of the next $100 million, 0.85% of the next $100 million, 0.80% of
the next $200 million, 0.73% of the next $500 million, 0.68% of the next
$500 million and 0.65% of that portion exceeding $1.5 billion. ICCC, in
its capacity as the Advisor and Administrator, has contractually agreed
to waive 0.15% of its fees until at least September 30, 2002. ICCC
compensates ABIM out of its advisory fee.
THE FUND RESTRUCTURING
At a Special Meeting of shareholders held on August 31, 2000, Fund
shareholders also approved the restructuring of the Fund into a master-feeder
format (the "Restructuring") under which the Fund would become a "feeder"
fund investing all of its assets in a "master" portfolio (the "Portfolio").
The Restructuring will take place on or about October 2, 2000.
The Portfolio is a mutual fund with the same investment objective as the
Fund. The Restructuring will not change the Fund's investment objective,
strategies and risks. The investment advisor and sub-advisor who are
currently responsible for managing the Fund's assets will remain the same, as
these advisers will be responsible for managing the Portfolio's investments.
The Portfolio may accept investments from other feeder funds. A feeder fund
bears the Portfolio's expenses in proportion to its assets. Each feeder fund
can set its own transaction minimums, fund-specific expenses, and other
conditions. The Fund would be able to withdraw its investment in the
Portfolio at any time if the Board determined that doing so would be in the
shareholder's best interests. Upon any such withdrawal, the Board would
consider what action might be taken, subject to shareholder approval. The
Fund could retain advisers to manage the Fund's assets directly, as it did
prior to the Restructuring, or invest its assets in another master portfolio.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
<PAGE>
SUPPLEMENT DATED AUGUST 31, 2000
TO THE PROSPECTUS DATED MAY 1, 2000
OF FLAG INVESTORS COMMUNICATIONS FUND, INC.
(INSTITUTIONAL SHARES)
The Prospectus dated May 1, 2000 of Flag Investors Communications Fund, Inc.
(Institutional Shares) is hereby amended and supplemented by the following:
THE FUND'S NEW FEE ARRANGEMENTS
At a Special Meeting of shareholders held on August 31, 2000, Fund
shareholders approved changes to the Fund's fee arrangements, including new
advisory and sub-advisory agreements for the Fund that increase the fees paid
to the Fund's advisor and sub-advisor. The new fee arrangements also include
a new administrative services agreement between the Fund and Investment
Company Capital Corp. ("ICCC"), the Fund's administrator, pursuant to which
ICCC will provide administrative services to the Fund. The new fee
arrangements go into effect on September 1, 2000, and change the prospectus
disclosure as shown below.
The following table replaces the Annual Fund Operating Expenses portion of
the table appearing under "Fees And Expenses Of The Fund" on page 2 of the
prospectus and the Example that follows it:
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<S> <C>
Management Fees 0.73%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.29%
-------
Total Annual Fund Operating Expenses 1.02%
Less Fee Waivers** (0.15%)
-------
Total Annual Fund Operating Expenses 0.87%
=======
</TABLE>
* The Fund's fees for the period ended 12/31/99 have been restated
to reflect current fees. Information on the annual operating expenses
reflects the Fund's expenses. On October 2, 2000, the Fund will be
restructured into a master-feeder format (the "Restructuring") under which
the Fund will become a "feeder" fund investing all of its assets in a
"master" portfolio (the "Portfolio"). The Restructuring will not change
the overall level of annual operating expenses shown in the table, and as
of October 2, 2000, this information will reflect the expenses of both the
Fund and the Portfolio.
**The Fund's Advisor and Administrator have contractually agreed to
an aggregate fee waiver equal to 0.15% of the Fund's average daily net
assets. This agreement will continue until at least September 30, 2002.
-------------------------
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. This is a
hypothetical example only, and is not intended to suggest that the Fund's
future performance will match the assumptions used in the example.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return
each year, the Fund's operating expenses remain the same, and the fee
waiver applies during the
<PAGE>
first two years only. 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 $89 $299 $533 $1,220
</TABLE>
The following disclosure replaces the second and third paragraphs appearing
under "Investment Advisor and Sub-Advisor" on page 5 of the prospectus:
ICCC is responsible for supervising and managing all of the Portfolio's
operations, including overseeing the performance of ABIM. ABIM is
responsible for decisions to buy and sell securities for the Portfolio,
for broker-dealer selection, and for negotiation of commission rates.
ICCC serves as investment advisor and ABIM serves as investment
sub-advisor to the Fund, and after October 2, 2000, each will provide
these same services to the Portfolio. As compensation for its services for
the fiscal year ended December 31, 1999, ICCC received from the Fund a fee
equal to 0.58% of the Fund's average daily net assets. At a Special
Meeting of Shareholders held on August 31, 2000, shareholders voted to
approve a new investment advisory agreement (the "Advisory Agreement")
between the Fund (or Portfolio, as applicable) and ICCC and a new
sub-advisory agreement (the "Sub-Advisory Agreement) among the Fund (or
Portfolio, as applicable), ICCC and ABIM. Under the Advisory Agreement,
the investment advisor is entitled to receive a fee, calculated daily and
paid monthly, at the following annual rates based upon the Fund's (or
Portfolio's) average daily net assets: 1.00% of the first $100 million,
0.90% of the next $100 million, 0.85% of the next $100 million, 0.80% of
the next $200 million, 0.73% of the next $500 million, 0.68% of the next
$500 million and 0.65% of that portion exceeding $1.5 billion. ICCC, in
its capacity as the Advisor and Administrator, has contractually agreed to
waive 0.15% of its fees until at least September 30, 2002. ICCC
compensates ABIM out of its advisory fee.
THE FUND RESTRUCTURING
At a Special Meeting of shareholders held on August 31, 2000, Fund
shareholders also approved the restructuring of the Fund into a master-feeder
format (the "Restructuring") under which the Fund would become a "feeder"
fund investing all of its assets in a "master" portfolio (the "Portfolio").
The Restructuring will take place on or about October 2, 2000.
The Portfolio is a mutual fund with the same investment objective as the
Fund. The Restructuring will not change the Fund's investment objective,
strategies and risks. The investment advisor and sub-advisor who are
currently responsible for managing the Fund's assets will remain the same, as
these advisers will be responsible for managing the Portfolio's investments.
The Portfolio may accept investments from other feeder funds. A feeder fund
bears the Portfolio's expenses in proportion to its assets. Each feeder fund
can set its own transaction minimums, fund-specific expenses, and other
conditions. The Fund would be able to withdraw its investment in the
Portfolio at any time if the Board determined that doing so would be in the
shareholder's best interests. Upon any such withdrawal, the Board would
consider what action might be taken, subject to shareholder approval. The
Fund could retain advisers to manage the Fund's assets directly, as it did
prior to the Restructuring, or invest its assets in another master portfolio.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
