FLAG INVESTORS COMMUNICATIONS FUND INC
DEFS14A, 2000-07-19
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<PAGE>
                    FLAG INVESTORS COMMUNICATIONS FUND, INC.
                                ONE SOUTH STREET
                           BALTIMORE, MARYLAND 21202

                            ------------------------

                                                                   July 19, 2000

Dear Shareholder:

    The Board of Directors of Flag Investors Communications Fund, Inc. (the
"Fund") is pleased to invite you to a Special Meeting of shareholders to be held
at 2:15 p.m. (Eastern time) on August 31, 2000, at the offices of the Fund's
advisor, Investment Company Capital Corp. ("ICCC"), One South Street, Baltimore,
Maryland. At this meeting you will be asked to approve several important
proposals affecting your Fund.

    Enclosed is further information relating to these proposals, including a
Question and Answer section, proxy statement and proxy card. The proxy statement
discusses each proposal in detail.

    THE BOARD BELIEVES THAT EACH OF THE PROPOSALS IS IMPORTANT AND
    RECOMMENDS THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE
    FOR ALL PROPOSALS.

    Two proposals seek approval for changes to the Fund's fee arrangements. The
new fee arrangements serve two primary purposes. First, they compensate the
Fund's advisor for its management efforts and for taking on responsibility for a
variety of administrative and management services, some of which were previously
handled by third-party vendors. Second, they provide for an increase in
compensation to the Fund's advisor and sub-advisor in recognition of the
expertise they provide, as reflected in the Fund's superior long-term returns.
Even with the proposed new fee arrangements in place, the Fund's expense ratio
will remain very competitive within its peer group.

    - As the Fund has grown, the advisor has made significant investments to
      enhance its administrative and shareholder service capability. Additional
      staff has been added in key areas, and dedicated in-house groups have been
      created to handle legal services, performance measurement, technology
      management, tax services and financial reporting. The advisor believes
      this change will benefit shareholders in at least two ways. The new in-
      house capability replaces or extends the range of services offered by
      third-party vendors. Previously, the Fund paid fees directly to third
      parties for certain of these administrative services. By building and
      maintaining an in-house staff to deliver these services, the advisor
      believes it will be able to provide certain services more efficiently than
      third parties could, as well as reduce the fees paid to these parties for
      these services over time. In addition, the advisor believes that a
      dedicated in-house staff will allow it to
<PAGE>
      provide a higher quality and a fuller range of services for the Fund.
      Further, the advisor's enhanced capabilities allow it to better manage the
      increasing complexity of the Fund's administration.

    - The Fund's advisor will use part of its additional compensation to
      increase the fees paid to the Fund's sub-advisor. The Board believes that
      this change is appropriate in recognition of two critical factors in the
      pursuit of superior long-term returns. The sub-advisor has invaluable
      expertise and unusual experience in the communications sector. In
      addition, producing superior returns for the Fund will require even more
      sophisticated, insightful, and demanding research analysis and portfolio
      management skill as the communications industry continues to see rapid
      acceleration both in the pace of change and degree of complexity.

    As noted, with the new fee arrangements in place, the advisor believes that
overall fees will remain very competitive as compared to comparable
communications funds. Based on data for the 12 months ended May 31, 2000, if the
change in the Fund's fee arrangements had been in place, the Fund's expense
ratio would have been 1.09% (after fee waivers) and 1.24% (without fee waivers)
for its Class A shares. Based on data for only the month of May 2000, these pro
forma expense ratios would be 1.02% (after fee waivers) and 1.17% (without fee
waivers). These expense ratios compare favorably with the 1.22% average expense
ratio of "A" class shares of all other specialty communications funds tracked by
Morningstar as of May 31, 2000. Please see the proxy statement for additional
information about this comparative data.

    Shareholders are also being asked to provide advance approval for a proposed
sub-advisory agreement that will reflect a change in control of the sub-advisor
scheduled for March 2001. This change of control is not expected to have any
impact on the quality and nature of the services that the sub-advisor provides
to the Fund.

    Finally, shareholders are being asked to approve restructuring the Fund from
a "stand alone" fund to a feeder fund in a "master-feeder" fund format. This
restructuring is intended to allow the Fund to benefit from economies of scale
and possible cost savings if additional assets can be attracted to the new
master-feeder structure. The new structure 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.

                                       2
<PAGE>
    What you need to do:

    - Please read all enclosed materials, including the Question & Answer
      section.

    - Vote in one of the following ways:

        1.  By Internet: Logon to www.proxyvote.com and follow the on-screen
            instructions.

        2.  By Telephone: Call Toll-Free 1-800-690-6903.

        3.  By Mail: Complete the enclosed proxy card and return it in the pre-
            paid envelope provided.

        4.  Attend the shareholder meeting (details enclosed).

    Thank you for voting on these important matters.

                                  Sincerely,

                                  [/S/ TRUMAN T. SEMANS]

                                  Truman T. Semans
                                  Chairman
                                  Flag Investors Communications Fund, Inc.

                                       3
<PAGE>
                                                                   July 19, 2000

                             QUESTIONS AND ANSWERS
                              FOR SHAREHOLDERS OF
                    FLAG INVESTORS COMMUNICATIONS FUND, INC.

    Here is a brief overview of the primary matters affecting the Fund that
require a shareholder vote. We encourage you to also read the full text of the
enclosed proxy statement.

Q.  What are shareholders being asked to vote on?

A.  At the Meeting, shareholders are voting to approve the following matters:

    - 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.

    - A proposed sub-advisory agreement to reflect an expected change of control
      of the Fund's sub-advisor.

    - The restructuring of the Fund into a master-feeder format under which the
      Fund would become a "feeder" fund investing all of its assets in a
      "master" portfolio, and related proposals to put that new structure in
      place.

Q.  Why is the Board recommending changes to the Fund's fee arrangements?

A.  The new fee arrangements will increase compensation to the Fund's advisor
    and sub-advisor. These increases recognize the additional administrative
    services and the increased expertise, experience and effort necessary to
    administer the Fund and manage the Fund's investments in an increasingly
    complex and demanding environment. The advisor's and sub-advisor's expertise
    is reflected in the Fund's superior long-term returns.

Q.  What additional services is the advisor providing?

A.  The advisor has made significant, on-going investments in staff and
    infrastructure to enhance its administrative and shareholder services, and
    to handle the increasing complexity of the mutual fund business. The
    advisor's investments include investments in technology, as well as the
    creation of legal, tax, performance measurement and financial reporting
    groups. As a result of these investments, the advisor now provides
    additional services, including some for which the Fund previously paid fees
    directly to third party vendors. The advisor believes that these investments
    will enable it to provide various Fund services more efficiently than could
    third party vendors, thereby reducing the fees paid to these parties for
    these services over time. There can be no assurances, however, that such
    cost savings can be achieved.
<PAGE>
Q.  Why is the Board recommending a new sub-advisory agreement that increases
    the fees paid by the advisor to the sub-advisor?

A.  The Board believes that the proposed fees properly recognize the depth of
    experience and expertise the sub-advisor provides to the Fund in the
    increasingly complex and challenging communications sector. The sub-advisor
    has achieved excellent investment performance for the Fund over both short-
    term and long-term periods. As the pace of technological change and
    globalization continue to increase, the successful pursuit of superior long-
    term returns requires greater expertise and creates additional demand on the
    sub-advisor's research analysis and portfolio management abilities.

Q.  How are the Fund's fee arrangements changing?

A.  Currently, the Fund pays the advisor one fee for providing both advisory and
    administrative services to the Fund. This fee arrangement is set out in a
    single agreement. Under the new fee arrangements, the existing agreement
    will be replaced by two new agreements: 1) an advisory agreement that will
    increase the current advisory fee by 15 basis points (15 basis points equals
    0.15% of the Fund's average daily net assets), and 2) an administrative
    services agreement that will pay the advisor, in its capacity as Fund
    administrator, 15 basis points for providing administrative services. The
    advisor and administrator have agreed, however, to fee waivers aggregating
    15 basis points. The end result is that the Fund's fees would increase by 15
    basis points after the fee waiver.

Q.  How long will the fee waiver last?

A.  The advisor and administrator have agreed to maintain the waiver for a
    minimum of two years, and have advised the Board that they have no present
    intention to change the waiver thereafter. The advisor and administrator may
    continue the waiver indefinitely. Before eliminating or reducing the waiver,
    the advisor and administrator must give advance notice to the Board, which
    reviews the overall level of fees paid to the advisor and administrator.

Q.  If the recommended changes to the fee arrangements are approved, how will
    the Fund's expense ratio compare to those of other communications funds?

A.  Historically, the Fund's expense ratio has been very competitive. The
    advisor believes that at the Fund's current size, the Fund's expense ratio
    will remain competitive even if the proposed changes are approved. Assuming
    an approval of the proposed changes in the Fund's fee arrangements, the
    Fund's pro forma expense ratio for its Class A shares would have been 1.09%
    (after the fee waiver) and 1.24% (without the fee waiver) based on the
    advisor's analysis of assets and expenses for the 12 month period ended May
    31, 2000.

                                       2
<PAGE>
    Based on data for only the month of May 2000, these pro forma expense ratios
    would have been 1.02% (after fee waivers) and 1.17% (without fee waivers).
    These expense ratios would compare favorably with the 1.22% average expense
    ratio of "A" class shares of all other specialty communications funds
    tracked by Morningstar as of May 31, 2000. See the proxy statement for
    additional information about this comparative data.

Q.  Approval is also sought for a proposed sub-advisory agreement reflecting an
    expected change of control of the Fund's sub-advisor in March 2001. How will
    this expected change in control affect the Fund?

A.  The expected change in control of the Fund's sub-advisor is not expected to
    have any effect on the management of the Fund. The sub-advisor is currently
    owned by two partners, one of which is currently affiliated with the Fund's
    advisor. The unaffiliated partner is buying out the other. The Fund's
    current portfolio managers will still manage the Fund's assets, and the Fund
    will have the same investment objective, strategies, and risks.

Q.  How will the restructuring to a master-feeder format (the "Restructuring")
    affect my investment in the Fund?

A.  You will still own the same number of shares in the Fund as you did prior to
    the Restructuring. Your tax basis in the shares you currently own will
    remain the same. The Fund's current portfolio managers will still manage the
    Fund's assets, and the Fund will have the same investment objective,
    strategies, and risks. You will buy and sell shares in the same manner as
    before. The expenses paid by Fund shareholders will change, but only to the
    extent of the proposed new fee arrangements for the Fund. The Restructuring
    will not take place unless shareholders also approve the proposed new fee
    arrangements. See the proxy statement for further details discussing when
    the Restructuring, if approved, will take place.

Q.  What is a master-feeder format, and how is that format different from the
    Fund's current structure?

A.  The Fund currently invests its assets in a portfolio of securities selected
    by the Fund's portfolio managers. In a master-feeder format, the Fund would
    instead become a "feeder fund" and invest all of its assets in another fund,
    called a "master portfolio", which would invest its assets in a portfolio of
    securities selected by its portfolio managers. The master portfolio would be
    managed by the portfolio managers who currently manage the Fund. In the
    future, other feeder funds can also invest in the master portfolio. By
    allowing more than one fund to invest in the same master portfolio, common
    portfolio expenses can be shared, with the possible effect of lowering costs
    for each feeder fund.

                                       3
<PAGE>
Q.  Why is the Fund proposing to convert to a feeder fund in a master-feeder
    format?

A.  Since a master portfolio can have more than one feeder fund, a master-
    feeder fund arrangement has the potential to facilitate growth in the size
    of the assets held by the master portfolio. The advisor hopes that such
    growth would lead to economies of scale that could reduce the Fund's expense
    ratio. There can be no assurance, however, that such economies of scale will
    be realized.

Q.  How does the Board of Directors of the Fund recommend that I vote?

A.  AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS
    THAT YOU VOTE IN FAVOR OF ALL PROPOSALS ON THE ENCLOSED PROXY CARD.

Q.  Where can I get more information?

A.  If you need more information, please call Shareholder Communications
    Corporation, the Fund's information agent, at 1-877-504-7018.

Q.  How can I vote my shares?

A.  You may choose from one of the following options:

    - Through the Internet, by using www.proxyvote.com and following the on-
      screen instructions.

    - By telephone, by calling toll-free 1-800-690-6903.

    - By mail, with the enclosed proxy card and return envelope.

    - In person at the shareholder meeting (see details enclosed in the proxy
      statement).

    Please vote on all issues on each proxy card that you receive. Thank you for
voting promptly.

                                       4
<PAGE>
                    FLAG INVESTORS COMMUNICATIONS FUND, INC.
                                ONE SOUTH STREET
                           BALTIMORE, MARYLAND 21202
                            ------------------------

                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                                   TO BE HELD
                                AUGUST 31, 2000

TO THE SHAREHOLDERS OF FLAG INVESTORS COMMUNICATIONS FUND, INC.:

You are cordially invited to a special meeting (the "Meeting") of the
shareholders of Flag Investors Communications Fund, Inc. (the "Fund"). The
Meeting will be held on August 31, 2000, at 2:15 p.m. Eastern time at the
offices of the Fund's advisor, Investment Company Capital Corp., in the
conference room on the 30th Floor of One South Street, Baltimore, Maryland
21202. The purpose of the Meeting is to consider the proposals set forth below
and to transact such other business as may be properly brought before the
Meeting:

PROPOSAL 1A:    To approve a new investment advisory agreement between the Fund
                and its investment advisor, Investment Company Capital Corp.
                ("ICCC"), increasing the advisory fee paid by the Fund to ICCC;
                and

PROPOSAL 1B:    To approve a new investment sub-advisory agreement among the
                Fund, ICCC and the Fund's sub-advisor, Alex. Brown Investment
                Management ("ABIM"), increasing the sub-advisory fee paid by
                ICCC to ABIM.

PROPOSAL 2:     To approve a proposed sub-advisory agreement among the Fund,
                ICCC and ABIM, effective March 2001, reflecting an expected
                change in control of ABIM.

PROPOSAL 3:     To approve the restructuring of the Fund into a feeder fund in a
                master-feeder format.

Proposals 1A, 1B and 3 are mutually contingent. Unless all of these proposals
are approved, none will take effect.

Only shareholders of the Fund at the close of business on July 5, 2000, are
entitled to notice of, and to vote at, this meeting or any adjournment thereof.
<PAGE>
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE VOTE NOW.

YOU MAY COMPLETE AND RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.

YOU MAY ALSO VOTE EASILY AND QUICKLY BY TELEPHONE OR THROUGH THE INTERNET. TO DO
SO, PLEASE FOLLOW THE INSTRUCTIONS INCLUDED ON YOUR ENCLOSED PROXY CARD.

YOUR PROXY IS REVOCABLE AT ANY TIME PRIOR TO THE MEETING.

NO MATTER HOW MANY SHARES YOU OWN, YOUR VOTE IS IMPORTANT AND WILL ENSURE THAT A
QUORUM WILL BE PRESENT AT THE MEETING.

                                        Thank you.

                                        [/S/ AMY M. OLMERT]

                                        Amy M. Olmert
                                        Secretary

Dated: July 19, 2000

                                       2
<PAGE>
                    FLAG INVESTORS COMMUNICATIONS FUND, INC.
                                ONE SOUTH STREET
                           BALTIMORE, MARYLAND 21202

                            ------------------------

                                PROXY STATEMENT

                            ------------------------

                   SPECIAL MEETING OF SHAREHOLDERS TO BE HELD

                                AUGUST 31, 2000
                                   2:15 P.M.

    This Proxy Statement is furnished by the Board of Directors of Flag
Investors Communications Fund, Inc. (the "Fund") in connection with the
solicitation of proxies for use at the Special Meeting of shareholders of the
Fund to be held on August 31, 2000, at 2:15 p.m. Eastern time, or at any
adjournment thereof (the "Meeting"), at the offices of the Fund's advisor,
Investment Company Capital Corp., in the conference room on the 30th Floor of
One South Street, Baltimore, Maryland 21202. It is expected that the Notice of
Meeting, the Proxy Statement and a Proxy Card will be mailed to shareholders on
or about July 19, 2000.

                                    SUMMARY

    At the Meeting, shareholders will be asked to approve several proposals.

    Proposal 1A asks shareholders of the Fund to approve a new investment
advisory agreement between the Fund and its investment advisor, Investment
Company Capital Corp. ("ICCC"), increasing the advisory fee paid by the Fund to
ICCC.

    Proposal 1B asks shareholders of the Fund to approve a new investment sub-
advisory agreement among the Fund, ICCC and the Fund's investment sub-advisor,
Alex. Brown Investment Management ("ABIM"), increasing the sub-advisory fee paid
by ICCC to ABIM.

    Proposal 2 asks shareholders of the Fund to approve a proposed sub-advisory
agreement among the Fund, ICCC and ABIM, effective March 2001, reflecting an
expected change in control of ABIM.

    Proposal 3 asks shareholders of the Fund to approve the restructuring of the
Fund into a feeder fund in a master-feeder format.

    If you do not expect to be present at the Meeting and wish your shares to be
voted, please vote your proxy (the "Proxy") by mail, telephone or the Internet,

                                       1
<PAGE>
allowing sufficient time for the Proxy to be received and processed on or before
2:15 p.m. Eastern time on August 31, 2000. If your Proxy is properly returned,
shares represented by it will be voted at the Meeting in accordance with your
instructions. However, if no instructions are specified on your signed Proxy
with respect to a specific Proposal, the Proxy will be voted FOR the approval of
such Proposal and in accordance with the judgment of the persons appointed as
proxies upon any other matter that may properly come before the Meeting.
Shareholders may revoke their Proxies at any time prior to the time they are
voted by giving written notice to the Secretary of the Fund, by delivering a
subsequently dated Proxy or by attending and voting at the Meeting.

    The close of business on July 5, 2000, has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to notice of,
and to vote at, the Meeting and at any adjournment thereof. On that date, the
Fund had 66,748,330 shares outstanding. Each full share will be entitled to one
vote at the Meeting and each fraction of a share will be entitled to the
fraction of a vote equal to the proportion of a full share represented by the
fractional share. All classes of the Fund's shares will vote together on each
Proposal.

    The expenses of the Meeting will be shared by ICCC and ABIM (collectively,
the "Advisors"), and will include reimbursement to brokerage firms and others
for expenses in forwarding proxy solicitation materials to beneficial owners.
The solicitation of Proxies will be largely by mail, but may include telephonic,
Internet or face-to-face meetings by employees and officers of the Advisors.
Additional solicitation will be made by Shareholder Communications Corporation
("Shareholder Communications"), a solicitation firm located in New York, New
York, that has been engaged by the Advisors to assist in proxy solicitation.

    Upon request, the Fund will furnish to shareholders, without charge, a copy
of the Fund's Annual Report for its fiscal year ended December 31, 1999 and the
Semi-annual Report for the period ended June 30, 2000, when available. These
reports of the Fund may be obtained by written request to the Fund, One South
Street, Mail Stop BAL01 - 1208, Attention: Kelli Hurdle, Baltimore, Maryland
21202, or by calling 1-800-767-3524.

    The Fund is registered as an open-end, non-diversified management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered under the Securities Act of 1933, as amended.

                                       2
<PAGE>

PROPOSAL 1A:    TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN THE FUND
                AND ITS INVESTMENT ADVISOR, INVESTMENT COMPANY CAPITAL CORP.
                ("ICCC" OR THE "ADVISOR"), INCREASING THE ADVISORY FEES PAID BY
                THE FUND TO ICCC.

    The Board has unanimously approved, and is recommending that shareholders
approve, a new investment advisory agreement between the Fund and ICCC that
would increase the rate of the fee payable to ICCC, the Fund's advisor. A
portion of the new fees would provide ICCC with funds to increase ABIM's sub-
advisory fee. The rationale for the proposed increase in ABIM's fee is discussed
under Proposal 1B. The fee increases for ICCC and ABIM will not go into effect
unless both proposals, as well as Proposal 3, are approved by shareholders. Each
fee increase will go into effect immediately upon shareholder approval.

REASONS FOR THE NEW AGREEMENTS

    INTRODUCTION.  As investment advisor to the Fund, ICCC is responsible for
supervising and managing almost all aspects of the Fund's operations. Under the
terms of the current investment advisory agreement between the Fund and ICCC
(the "Current Advisory Agreement"), ICCC pays its own expenses in connection
with the services ICCC provides, and the Fund is responsible for paying for all
Fund expenses. Over time, however, managing the Fund has become more complicated
and costly, both in terms of providing support services to shareholders as the
Fund has grown, and as a result of the increasing complexity of the mutual fund
business.

    In recent years as the Fund has grown, ICCC has made substantial investments
in the infrastructure of its business to enable it to better manage the
increasing complexity of the Fund's administration. These investments also
provide ICCC with new in-house capabilities that replace or extend the range of
services that the Fund formerly paid third party vendors to provide. By building
and maintaining an in-house staff to deliver these services, ICCC believes it
will be able to provide certain services more efficiently than third parties
could, as well as reduce the fees paid to these parties for these services over
time. ICCC also believes that a dedicated in-house staff allows it to provide a
higher quality and a fuller range of services for the Fund.

    In recognition of (1) ICCC's efforts in managing the Fund in light of its
growth and (2) the increased level of administrative and management services the
Fund now receives from ICCC, the Board approved, subject to shareholder
approval, a change in the Fund's fee arrangements, essentially splitting the
Current Advisory Agreement into two new agreements: a new investment advisory
agreement (the "New Advisory Agreement") and a new administrative services
agreement (the "Administrative Services Agreement"). The purpose of

                                       3
<PAGE>
using two agreements rather than one is to recognize and clarify these two types
of services that ICCC provides to the Fund, and appropriately compensate ICCC
for each type of service provided. The Board believes that the New Advisory
Agreement and Administrative Services Agreement are in the best interests of the
shareholders of the Fund and are reasonable in light of the nature, scope and
quality of services that ICCC provides, the Fund's performance, the fees and
expenses paid by comparable funds and ICCC's expenses and profitability in
managing the Fund. While the Administrative Services Agreement does not require
shareholder approval, it will not be implemented unless shareholders approve the
New Advisory Agreement and Proposals 1B and 3.

    Some of the key factors considered by the Board in approving the New
Advisory Agreement and Administrative Services Agreement are discussed below.
For a detailed discussion of the various factors addressed by the Board when
considering and approving these agreements, see "Board Considerations."

    INFRASTRUCTURE INVESTMENTS.  The Board considered information on the many
investments ICCC has made to enhance the infrastructure of its business,
including:

    - Establishment of a legal group to perform in-house some of the work
      formerly handled by outside law firms that were paid directly by the Fund.

    - Creation of a performance measurement group, resulting in earlier and more
      detailed performance reporting.

    - Development of a technology group to reduce manual work and the potential
      for errors, and to improve the timeliness of data and reports.

    - Various software investments, including recent purchases of software for
      tax work, sales tracking, and to supplement the portfolio accounting and
      performance reporting systems.

    - Establishment of a tax department to perform in-house much of the Fund's
      tax work previously performed by outside firms that were paid directly by
      the Fund.

    - Development of a financial reporting group to handle production of
      shareholder reports and prospectuses, which is expected to result in
      faster production and may also generate future savings in printing costs.

    - Ongoing development of the Flag Investors web-site
      (www.flaginvestors.com), which, among other things, is expected in early
      2001 to offer the Fund's shareholders secure, 24-hour access to their
      account information. There can be no assurances, however, that such access
      will become operational.

                                       4
<PAGE>
    ICCC also advised the Board that ICCC expects to make further investments in
its business to improve the level of services provided to the Fund. The Board
concluded that these past and on-going investments should permit ICCC to provide
better support to the Fund's growing shareholder base, both now and in the
future. For example, the cost and complexity of handling a mutual fund relates
to the number of its shareholder accounts, among other things. As of January 31,
2000, the Fund had nearly 100,000 shareholder accounts, with the number of
shareholders increasing by over 49,000 during the previous 12-month period
alone. The Board also noted that while the benefits of these investments accrue
to all funds in the Flag Investors Fund Complex (the "Fund Complex"), the Fund
is one of the largest in the complex and thus a major beneficiary.

    FUND PERFORMANCE.  The Board also considered ICCC's past performance as
advisor to the Fund, as reflected in the Fund's rating and the returns provided
to Fund shareholders as of March 31, 2000. The Fund has a Five-Star overall
rating from Morningstar, Inc. ("Morningstar"), which is the highest rating
awarded. As the following table shows, each class of shares of the Fund also has
consistently performed well as compared to its benchmark over prescribed time
periods. Past performance, of course, is no indication or guarantee of future
returns.

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDED MARCH 31, 2000)

<TABLE>
<CAPTION>
                         CLASS A         S&P         CLASS B         S&P         CLASS C         S&P        CLASS I         S&P
                       SHARES (1)      500 (2)     SHARES (1)      500 (2)     SHARES (1)      500 (2)       SHARES       500 (2)
                       -----------   -----------   -----------   -----------   -----------   -----------   ----------   -----------
<S>                    <C>           <C>           <C>           <C>           <C>           <C>           <C>          <C>
Past One Year             17.39%      17.94%          17.13%      17.94%          21.98%      17.94%         24.59%      17.94%

Past Five Years           38.21%      26.76%          38.17%      26.76%           N/A        26.76%          N/A        26.76%

Past Ten Years            23.08%      18.84%           N/A        18.84%           N/A        18.84%          N/A        18.84%

Since Inception           21.86%      18.09%(3)       37.53%      27.58%(4)       64.77%      26.09%(5)      55.56%      20.49%(6)
                        (1/18/84)                   (1/3/95)                   (10/28/98)                   (6/4/98)
</TABLE>

----------------------------------------

(1) These figures assume the reinvestment of dividends and capital gains
    distributions and include the impact of the current maximum sales charges.

(2) The Standard & Poor's 500 Index is an unmanaged index that is a widely
    recognized benchmark of general market performance. The index does not
    factor in the costs of buying, selling, and holding securities -- costs
    which are reflected in the Fund's results.

(3) For the period from 1/31/84 through 3/31/2000.

(4) For the period from 12/31/94 through 3/31/2000.

(5) For the period from 10/31/98 through 3/31/2000.

(6) For the period from 5/31/98 through 3/31/2000.

                                       5
<PAGE>
    NEW FEE ARRANGEMENTS.  The use of two new agreements to replace the Current
Advisory Agreement alters the Fund's current advisory fee arrangements, as shown
in the following table:

                    COMPARISON OF ADVISORY FEE ARRANGEMENTS

<TABLE>
<CAPTION>
                                       CURRENT    PROPOSED
                                       --------   --------
<S>                                    <C>        <C>
Advisory Fee                            0.58%      0.73%
Administrative Services Fee                0       0.15%
Fee Waiver                                 0      (0.15%)
                                        ----      -----
TOTAL                                   0.58%      0.73%
</TABLE>

    The end result is that the overall fees paid by the Fund to ICCC would
increase by 0.15% of the Fund's average daily net assets, which equals the fees
the Fund would pay under the new Administrative Services Agreement. Although
fees to ICCC would rise, ICCC, in its capacity as the Fund's advisor and
administrator, has agreed to an aggregate fee waiver equal to 0.15% of the
Fund's average daily net assets. These fee waivers will last for a minimum of
two years, and ICCC has no current intention to change the waiver thereafter.
Before eliminating or reducing the waiver after two years, ICCC must give
advance notice to the Board, which reviews the overall level of fees paid to the
advisor and administrator. The practical effect is that ICCC, in its dual
capacities as the Fund's advisor and administrator, will receive only one-half
of the combined fee increase unless and until the fee waiver is eliminated or
reduced after notice to and further consideration by the Board, or the Board
approves changes to the Administrative Services Agreement.

    EXPENSE RATIO COMPARISON.  The Fund's expense ratio has historically been
very competitive. Based on data for the 12 months ended May 31, 2000, and
assuming the proposed change in the Fund's fee arrangements is approved by
shareholders, the Fund's pro forma expense ratio for its Class A shares would
have been 1.09% (after the fee waiver) and 1.24% (without the fee waiver). Based
on data for only the month of May 2000, these pro forma expense ratios would
have been 1.02% (after the fee waivers) and 1.17% (without the fee waivers).
These expense ratios compare favorably with the 1.22% average expense ratio of
"A" class shares of all specialty communications funds tracked by Morningstar as
of May 31, 2000. (Please note that the data Morningstar provides on each fund it
tracks is based on publicly available information contained in the fund's annual
shareholder report and reported by each fund to Morningstar. This information
does not reflect more current data as of a date after the date of the fund's
most recent annual report. For example, if after the distribution of a fund's
most recent annual report, the fund's assets grow and its expenses remain the

                                       6
<PAGE>
same, the fund's current expense ratio may be lower than the expense ratio
included in that fund's most recent annual report. As a result, Morningstar data
does not necessarily reflect each fund's most current expense ratio. The Fund's
pro forma expense ratios described above, however, are based on current data as
of May 2000, as considered by the Board.)

    The following table and example provide a comparison of the Fund's average
annual operating expenses for the fiscal year ended December 31, 1999, as
reported in the Fund's most recent annual report, and the pro forma expenses
showing these same expenses adjusted for the Fund's new fee arrangements. The
figures shown below differ from those discussed in the preceding paragraph as a
result of the growth of Fund assets during 1999 and 2000, which caused Fund
expenses, as a percentage of Fund assets, to decline over time.

<TABLE>
<CAPTION>
  ANNUAL FUND OPERATING       CLASS A SHARES         CLASS B SHARES         CLASS C SHARES         CLASS I SHARES
   EXPENSES (DEDUCTED      --------------------   --------------------   --------------------   --------------------
    FROM FUND ASSETS)      CURRENT    PRO FORMA   CURRENT    PRO FORMA   CURRENT    PRO FORMA   CURRENT    PRO FORMA
-------------------------  --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                        <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Management Fees             0.58%       0.73%      0.58%       0.73%      0.58%       0.73%      0.58%       0.73%
Distribution and/or
  Service (12b-1) Fees      0.25%       0.25%      0.75%       0.75%      0.75%       0.75%     None        None
Other Expenses              0.13%       0.28%      0.38%       0.53%      0.37%       0.52%      0.14%       0.29%
                            ----       -----       ----       -----       ----       -----       ----       -----
Total Annual Fund
  Operating Expenses        0.96%       1.26%      1.71%       2.01%      1.70%       2.00%      0.72%       1.02%
Less Fee Waivers              --       (0.15%)       --       (0.15%)       --       (0.15%)       --       (0.15%)
                            ----       -----       ----       -----       ----       -----       ----       -----
Net Expenses                0.96%       1.11%      1.71%       1.86%      1.70%       1.85%      0.72%       0.87%
</TABLE>

------------------------

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 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
                           --------------------   --------------------   --------------------   --------------------
                           CURRENT    PRO FORMA   CURRENT    PRO FORMA   CURRENT    PRO FORMA   CURRENT    PRO FORMA
                           --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                        <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Class A Shares               $643       $657        $839       $899       $1,052     $1,176      $1,663     $1,963
Class B Shares               $674       $689        $839       $901       $1,128     $1,255      $1,727     $2,028
Class C Shares               $273       $288        $536       $598       $  923     $1,049      $2,021     $2,302
Class I Shares               $ 73       $ 89        $227       $299       $  391     $  533      $  851     $1,220
</TABLE>

                                       7
<PAGE>
    You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
                                  1 YEAR                3 YEARS                5 YEARS                10 YEARS
                           --------------------   --------------------   --------------------   --------------------
                           CURRENT    PRO FORMA   CURRENT    PRO FORMA   CURRENT    PRO FORMA   CURRENT    PRO FORMA
                           --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                        <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Class A Shares               $643       $657        $839       $899       $1,052     $1,176      $1,663     $1,963
Class B Shares               $174       $189        $539       $601       $  928     $1,055      $1,727     $2,028
Class C Shares               $173       $188        $536       $598       $  923     $1,049      $2,021     $2,302
Class I Shares               $ 73       $ 89        $227       $299       $  391     $  533      $  851     $1,220
</TABLE>

THE CURRENT ADVISORY AGREEMENT

    ICCC serves as investment advisor to the Fund pursuant to the Current
Advisory Agreement between ICCC and the Fund, dated as of June 4, 1999.
Shareholders of the Fund last approved the Current Advisory Agreement on October
7, 1999, in connection with the merger of ICCC's corporate parent with Deutsche
Bank AG. The Board, including a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund (the "Independent
Directors"), approved the Current Advisory Agreement for an initial two-year
term on March 30, 1999.

    FEES.  ICCC receives a fee from the Fund, calculated daily and paid at the
end of each calendar month. The annual rate of the advisory fee under the
Current and New Advisory Agreements is as follows:

<TABLE>
<CAPTION>
     AVERAGE DAILY          CURRENT          NEW
       NET ASSETS         ADVISORY FEE   ADVISORY FEE
------------------------  ------------   ------------
<S>                       <C>            <C>
    0 - $100 Million         0.85%          1.00%
   Next $100 Million         0.75%          0.90%
   Next $100 Million         0.70%          0.85%
   Next $200 Million         0.65%          0.80%
   Next $500 Million         0.58%          0.73%
   Next $500 Million         0.53%          0.68%
Excess over $1.5 Billion     0.50%          0.65%
</TABLE>

    For the year ended December 31, 1999, the Fund paid ICCC $11,892,502 in
advisory fees. If the Fund's new fee arrangements (including fee waivers) had
been in place instead, the Fund would have paid ICCC advisory and administrative
services fees of $14,998,488, which represents an increase of 26%. Without fee
waivers, the Fund would have paid ICCC advisory and administrative services fees
of $17,248,261, which represents an increase of 45%.

THE NEW ADVISORY AGREEMENT AND ADMINISTRATIVE SERVICES AGREEMENT

    The New Advisory Agreement is identical to the Current Advisory Agreement,
except as follows: the New Advisory Agreement includes the change in

                                       8
<PAGE>
fees, and does not require the Advisor to provide certain administrative
services to the Fund or to provide the Fund with or obtain for it office space,
equipment and services that will now be provided pursuant to the Administrative
Services Agreement. The New Advisory Agreement also requires the Advisor to
maintain certain books and records. Additionally, the dates of execution,
effectiveness and initial term of the New Agreement differ from those of the
Current Advisory Agreement. The terms of the New Advisory Agreement are
summarized below and are qualified by reference to Exhibit A.

    THE NEW ADVISORY AGREEMENT.  The New Advisory Agreement provides that the
Advisor, in return for its fee, will (a) supervise and manage all aspects of the
Fund's investment program; (b) formulate and implement continuing programs for
the purchase and sale of securities consistent with the investment objective and
policies of the Fund; (c) provide the Fund with such executive, administrative
and clerical services as are deemed advisable by the Fund's Board of Directors
and as might not otherwise be provided under the Fund's other agreements; (d)
obtain and evaluate pertinent information about significant developments and
economic, statistical and financial data; (e) determine which issuers and
securities shall be represented in the Fund's portfolio and regularly report
thereon to the Fund's Board of Directors; (f) take all actions necessary to
implement the Fund's purchase and sale programs; and (g) maintain such books and
records, in cooperation with the Fund's administrator and the Fund's
distributor, as may be required by law or deemed advisable by the Board of
Directors. Subject to the approval of the Board of Directors and the Fund's
shareholders, the Advisor may delegate certain of its duties enumerated above to
a sub-advisor.

    As described above, under the New Advisory Agreement the Fund will pay ICCC
an annual fee based on the Fund's average daily net assets. Further, ICCC may,
from time to time, voluntarily waive a portion of its advisory fee.

    The New Advisory Agreement provides that the Advisor will furnish, at its
expense and without cost to the Fund, the services of one or more officers of
the Fund to the extent that such officers may be required by the Fund for the
proper conduct of its affairs. The Fund assumes and pays all other expenses of
the Fund. These expenses include, but are not limited to, payments to the Fund's
distributor under the Fund's plans of distribution and to the Fund's
administrator under the Administrative Services Agreement; 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

                                       9
<PAGE>
expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and maintenance
of registration 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 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 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; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and 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.

    The services of the Advisor are not to be deemed exclusive, and the Advisor
is free to render investment advisory or other services to others (including
other investment companies), and to engage in other activities, so long as its
services under the agreement are not impaired thereby. The Advisor's officers or
directors may serve as officers or directors of the Fund, and the Fund's
officers or directors may serve as officers or directors of the Advisor.

    Following the expiration of its initial two-year term, the New Advisory
Agreement continues in full force and effect from year to year, provided that
such continuance is approved at least annually by the Fund's Board or by the
vote of a majority of the Fund's outstanding voting securities, and by the
affirmative vote of a majority of the Directors who are not parties to the
agreement or "interested persons" of a party to the agreement (other than as
Directors of the Fund) by votes cast in person at a meeting specifically called
for such purpose.

    The New Advisory Agreement may be terminated at any time, on waivable
written notice within 60 days and without any penalty, by vote of the Fund's
Board of Directors, by vote of a majority of the Fund's outstanding voting
securities, or by the Advisor. The agreement automatically terminates in the
event of its assignment.

    The New Advisory Agreement obligates the Advisor to exercise care and
diligence and to act in good faith and to use its best efforts within reasonable

                                       10
<PAGE>
limits to ensure the accuracy of all services performed under the agreement, but
the Advisor is not liable for any act or omission that does not constitute
willful misfeasance, bad faith or gross negligence on the part of the Advisor or
its officers, directors or employees, or reckless disregard by the Advisor of
its duties under the agreement.

    As discussed in Proposal 3, the Board of Directors has approved agreements
for a master portfolio, including an advisory agreement with a fee that is the
same as the proposed advisory fee for the Fund, but contingent on shareholder
approval of the New Advisory Agreement. If shareholders approve the New Advisory
Agreement and the reorganization of the Fund into a feeder fund, the contractual
fee at the master level will be the same as the proposed fee at the feeder
level.

    The Directors have also approved (contingent upon shareholder approval of
this Proposal and Proposals 1B and 3) a new Administrative Services Agreement
for the Fund. If shareholders approve the New Advisory Agreement (and Proposals
1B and 3), the Advisor and the Administrator will waive a portion of their
respective fees, for a period of at least two years, in an amount equal to the
increase in advisory fees. If the New Advisory Agreement (and Proposals 1B and
3) is not approved, the Fund's current fee arrangements will remain in place at
the current level.

    THE ADMINISTRATIVE SERVICES AGREEMENT.  The Administrative Services
Agreement provides that the Administrator, in return for its fee, will (a)
supervise and manage all aspects of the Fund's operations, other than portfolio
management and distribution; (b) provide the Fund with such executive,
administrative, clerical and bookkeeping services as are deemed advisable by the
Fund's Board of Directors; (c) provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services including all items
for any offices as are deemed advisable by the Fund's Board of Directors; (d)
supervise the operations of the Fund's transfer and dividend disbursing agent;
and (e) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and State Blue Sky
authorities.

    Under the Administrative Services Agreement, the Fund pays ICCC an annual
fee based on the Fund's average daily net assets. This fee is calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly, at
the annual rate of 0.15% of the Fund's average daily net assets. The
Administrator may from time to time voluntarily waive a portion of its
administrative services fee.

    The Administrative Services Agreement provides that the Administrator will
furnish, at its expense and without cost to the Fund, the services of one or
more

                                       11
<PAGE>
officers of the Fund to the extent that such officers may be required by the
Fund for the proper conduct of its affairs. The Fund assumes and pays all other
expenses of the Fund. (See "The New Advisory Agreement" above for a list of
these expenses.)

    The services of the Administrator are not to be deemed exclusive, and the
Administrator is free to render corporate, administrative or other services to
others (including other investment companies), and to engage in other
activities, so long as its services under the agreement are not impaired
thereby. The Administrator's officers or directors may serve as officers or
directors of the Fund, and the Fund's officers or directors may serve as
officers or directors of the Administrator.

    The Administrative Services Agreement continues in full force and effect
until terminated.

    The Administrative Services Agreement may be terminated at any time, on
waivable written notice within 60 days and without any penalty, by vote of the
Fund's Board of Directors or by the Administrator. The agreement automatically
terminates in the event of its assignment.

    The Administrative Services Agreement obligates the Administrator to
exercise care and diligence and to act in good faith and to use its best efforts
within reasonable limits in performing the services provided for under the
agreement, but the Administrator is not liable for any act or omission which
does not constitute willful misfeasance, bad faith or gross negligence on the
part of the Administrator.

    BOARD CONSIDERATIONS.  The Board held meetings on March 21-22, 2000, and
June 21-22, 2000 to consider the New Advisory Agreement and the Administrative
Services Agreement. In addition, the Independent Directors also discussed
approval of the New Advisory Agreement and the Administrative Services Agreement
with their independent counsel.

    To assist the Directors in their consideration of the New Advisory Agreement
and the Administrative Services Agreement at the Board meetings, ICCC presented
a comparative analysis, under the existing and pro forma advisory fees, of the
performance and expenses of the Fund. The Directors considered (1) the nature
and quality of the advisory services rendered and the results achieved by ICCC
in the management of the Fund, giving due consideration to (i) the likely impact
of the proposed fee on relative performance and (ii) the significant and
on-going infrastructure investments made by ICCC to enable it to better provide
services to the Fund's shareholders and the increased complexity of the mutual
fund business in general; (2) the relationship of the proposed fee arrangements
to the fees of comparable mutual funds, the impact of the proposed increase in
fees

                                       12
<PAGE>
on the Fund's expense ratio and the relationship of the Fund's pro forma expense
ratio to the expense ratios of comparable mutual funds; (3) the costs borne by
ICCC in providing investment advisory and other services to the Fund, including
the proposed additional payments to the Fund's sub-advisor; (4) the profits of
ICCC in providing services to the Fund; (5) the extent to which the economies of
scale that ICCC might experience as a result of growth in the Fund's assets
would be shared with the Fund; (6) the terms and conditions of the voluntary fee
waiver provided by ICCC; and (7) research services received in return for
allocation of brokerage. With respect to the nature and quality of services and
the results achieved, the Directors were presented with information about the
success of the Fund since inception (1984) in maintaining highly competitive
portfolio performance.

    After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the Independent
Directors, unanimously approved the New Advisory Agreement and Administrative
Services Agreement, and voted to recommend approval of the New Advisory
Agreement to the shareholders of the Fund.

INFORMATION ABOUT ICCC

    ICCC is a registered investment advisor with assets under management as of
December 31, 1999, of approximately $11 billion, including the assets of ICCC's
other clients. ICCC is a wholly owned subsidiary of BT Alex. Brown Holdings,
Inc., and an indirect wholly owned subsidiary of Deutsche Bank AG. The principal
address of ICCC is One South Street, Baltimore, Maryland, 21202. The principal
address of Deutsche Bank is Deutsche Bank Aktiengesellschaft, Taunusalage 12,
D-60262 Frankfurt am Main, Federal Republic of Germany.

    The following information is provided for each Director and the principal
executive officer of ICCC. The address for each is One South Street, Baltimore,
Maryland 21202.

<TABLE>
<CAPTION>
NAME AND POSITION WITH ICCC  PRINCIPAL OCCUPATION
---------------------------  ------------------------------------------------------
<S>                          <C>
Richard T. Hale, Director    - Managing Director, Deutsche Asset Management
  and President              - Managing Director, DB Alex. Brown LLC

Ross Youngman, Director      - Managing Director, Deutsche Asset Management

Steven A. Schneider,
  Director                   - Managing Director, Deutsche Asset Management
</TABLE>

    Additionally, Mr. Hale is a director of the Fund and Daniel O. Hirsch is an
officer of the Fund and ICCC.

                                       13
<PAGE>
    For the fiscal year ended December 31, 1999, the Fund paid ICCC aggregate
fees of $1,639,648 for transfer agency services and $153,996 for accounting
services provided to the Fund. The Fund also paid Bankers Trust Company, an
affiliate of ICCC, $146,539 for custody services provided to the Fund. The Fund
also paid $7,200 in brokerage commissions to DB Alex. Brown LLC ("DBAB") an
affiliate of ICCC. The Fund will continue to receive these services if the
Fund's new fee arrangements are approved.

    In addition, on May 17, 2000, DBAB, an affiliate of ICCC, entered into an
agreement to sell its 50% general partnership interest in the Fund's sub-advisor
to the Fund's sub-advisor, subject to certain conditions. If these conditions
are met, the sale becomes effective in March 2001. In connection with this sale,
the Fund's sub-advisor also entered into a trademark license agreement with BT
Alex Brown Holdings, Inc. ("BTAB Holdings"), another affiliate of ICCC. Under
these agreements, the Fund's sub-advisor agreed to pay DBAB and BTAB Holdings a
total of 78% of its sub-advisory fees earned during calendar years 2000, 2001,
and 2002 in connection with providing sub-advisory services to the Fund and two
other funds in the Fund Complex, less certain deductions. (See Proposal 2 for
further information about this transaction.)

OTHER FUNDS ADVISED BY ICCC WITH SIMILAR INVESTMENT OBJECTIVES

    A number of funds in the Fund Complex invest primarily in equity securities
and accordingly seek capital appreciation, either in and of itself, or along
with income. However, each of these funds employs widely differing investment
policies and styles in seeking these objectives. The following table provides
comparative information on fees paid to ICCC pursuant to advisory agreements in
effect for such funds.

<TABLE>
<CAPTION>
                                         AVERAGE NET        MANAGEMENT FEE
                                           ASSETS         (AS A PERCENTAGE OF
                 FUND                      (000S)      AVERAGE DAILY NET ASSETS)
---------------------------------------  -----------   -------------------------
<S>                                      <C>           <C>
Flag Investors Emerging Growth
  Fund, Inc.                               $139,710(1)        0.85%(1)
Flag Investors Equity Partners
  Fund, Inc.                               $433,828(2)        0.78%(2)
Flag Investors Real Estate Securities
  Fund, Inc.                               $ 25,246(3)        0.35%(3)
Flag Investors Value Builder
  Fund, Inc.                               $967,181(4)        0.73%(4)
</TABLE>

------------------------

(1)   Information given for the fiscal year ended October 31, 1999.

(2)   Information given for the fiscal year ended May 31, 2000.

(3)   Information given for the fiscal year ended December 31, 1999 (net of fee
    waivers). Absent fee waivers, management fees would be 0.65% of the fund's
    average daily net assets.

(4)   Information given for the fiscal year ended March 31, 2000.

                                       14
<PAGE>
    In conjunction with the proposal of the New Advisory Agreement, and the
related new sub-advisory agreement for ABIM discussed in Proposal 1B, and
contingent upon Fund shareholder approval of each, ABIM agreed to lower the
sub-advisory fees it charges ICCC for providing sub-advisory services to Flag
Investors Equity Partners Fund, Inc. and Flag Investors Value Builder
Fund, Inc. by ten basis points at each breakpoint. This change has no impact on
the advisory fees either of these funds pays to ICCC, because ICCC, not the
funds themselves, pays ABIM. Nevertheless, the ultimate impact of this change is
to increase the net fees ICCC earns by providing advisory services to each of
these funds.

SHAREHOLDER APPROVAL OF THE NEW ADVISORY AGREEMENT

    Approval of the New Advisory Agreement requires the affirmative vote of a
majority of the outstanding voting securities of the Fund, as defined in the
1940 Act. In the event that shareholders of the Fund do not approve the New
Advisory Agreement, the Current Advisory Agreement will remain in effect. In
addition, the Board will not implement any of the Fund's new fee arrangements
and will take such other action as it deems in the best interest of the Fund and
its shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE NEW ADVISORY AGREEMENT.

PROPOSAL 1B:    TO APPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT AMONG THE
                FUND, INVESTMENT COMPANY CAPITAL CORP. ("ICCC") AND ALEX. BROWN
                INVESTMENT MANAGEMENT ("ABIM"), INCREASING THE SUB-ADVISORY
                FEE PAID BY ICCC TO ABIM.

    The Board has unanimously approved, and is recommending that shareholders
approve, a new sub-advisory agreement among the Fund, ICCC and ABIM (the "New
Sub-Advisory Agreement") that would increase the fee paid by ICCC to ABIM by
0.05% of the Fund's average daily net assets at each breakpoint. As discussed
below, the Board believes that the New Sub-Advisory Agreement is appropriate
because it properly recognizes the services and expertise that the sub-advisor
provides to the Fund as the sub-advisor pursues superior long-term returns in
today's complex and rapidly changing global telecommunications industry. The New
Sub-Advisory Agreement will not go into effect unless Proposals 1A and 3 are
also approved by shareholders.

REASONS FOR THE NEW SUB-ADVISORY AGREEMENT

    At meetings held on March 21-22, 2000, and June 21-22, 2000, the Board
considered the New Sub-Advisory Agreement. Two of the key factors the Board

                                       15
<PAGE>
considered are summarized below. For a detailed discussion of the various
factors addressed by the Board when considering and approving the New
Sub-Advisory Agreement, see "Board Considerations."

    FUND PERFORMANCE.  As sub-advisor to the Fund, ABIM is responsible for,
among other things, managing the Fund's investment portfolio, which includes
making all decisions with respect to the securities the Fund will buy, sell and
hold. In this connection, ABIM has invaluable expertise and unusual experience
in the telecommunications industry. The quality of the services and expertise
that ABIM provides to the Fund is evidenced by the Fund's performance over both
short-term and long-term periods.

    As discussed under "Fund Performance" in Proposal 1A, the Fund has the
highest overall rating (Five Stars) from Morningstar, and has outperformed the
S&P 500, its benchmark, for the period starting at its inception and ended
March 31, 2000. Additionally, over the one-, three- and five-year periods ended
March 31, 2000, excluding the impact of sales charges, the Fund has outperformed
the S&P 500. The Board believes that the New Sub-Advisory Agreement properly
recognizes the high quality of services and expertise that ABIM provides to the
Fund's shareholders.

    INCREASED COMPLEXITY OF THE FUND.  The Fund originally started in 1984 as a
vehicle that mostly held shares of AT&T and the seven Regional Bell Operating
Companies (the so-called "baby Bells"). Since that time, the Fund has evolved
into a more complex mutual fund, seeking investments in securities of domestic
and foreign companies that are engaged in the research, development, manufacture
or sale of communications services, technology, equipment or products. For
example, as of May 31, 2000, the Fund's portfolio included securities of
communication equipment companies (20% of the Fund's portfolio), software and
applications providers (7% of the Fund's portfolio), media companies (15% of the
Fund's portfolio) and international network operators (12% of the Fund's
portfolio). Moreover, the worldwide expansion of the telecommunications field
has increased both the number and nature of the companies involved, which has
increased the complexity of managing the Fund's investment portfolio. As the
pace of technological change and globalization continue to increase, the
successful pursuit of superior long-term returns requires greater expertise and
creates additional demand on the sub-advisor's research analysis and portfolio
management abilities.

THE CURRENT SUB-ADVISORY AGREEMENT

    ABIM serves as sub-advisor to the Fund pursuant to a sub-advisory agreement
among the Fund, ICCC and ABIM, dated as of June 4, 1999 (the "Current

                                       16
<PAGE>
Sub-Advisory Agreement"). The Current Sub-Advisory Agreement was initially
approved by the shareholders of the Fund on October 7, 1999. The Current Sub-
Advisory Agreement was approved by the Fund's Board of Directors, including a
majority of the Independent Directors, for an initial two-year term on
March 30, 1999.

    FEES.  ABIM receives a fee from ICCC, calculated daily and paid at the end
of each calendar month. The annual rate of the sub-advisory fee under the
Current and New Sub-Advisory Agreements is as follows:

<TABLE>
<CAPTION>
     AVERAGE DAILY            CURRENT            PROPOSED
       NET ASSETS         SUB-ADVISORY FEE   SUB-ADVISORY FEE
------------------------  ----------------   ----------------
<S>                       <C>                <C>
    0 - $100 Million           0.60%              0.65%
   Next $100 Million           0.55%              0.60%
   Next $100 Million           0.50%              0.55%
   Next $200 Million           0.45%              0.50%
   Next $500 Million           0.40%              0.45%
   Next $500 Million           0.37%              0.42%
Excess over $1.5 Billion       0.35%              0.40%
</TABLE>

    For the year ended December 31, 1999, ICCC paid ABIM $8,337,647 in sub-
advisory fees. If the New Advisory Agreement had been in place instead, ICCC
would have paid ABIM $9,364,454, which represents an increase of 12%.

THE NEW SUB-ADVISORY AGREEMENT

    Other than the fees and the dates of execution, effectiveness and initial
term, the New Sub-Advisory Agreement is identical to the Current Sub-Advisory
Agreement. The terms of the New Sub-Advisory Agreement are summarized below and
are qualified by reference to Exhibit B.

    THE NEW SUB-ADVISORY AGREEMENT.  The New Sub-Advisory Agreement provides
that ABIM, in return for its fee, will (a) provide the Fund with executive,
administrative and clerical services; (b) determine which issuers and securities
shall be represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors; (c) formulate and implement continuing programs for
the purchase and sale of the securities and regularly report thereon to the
Fund's Board of Directors; (d) take, on behalf of the Fund, all actions
necessary to effect the purchase and sale programs, including placing orders;
and (e) obtain and evaluate pertinent information about significant developments
and economic, statistical and financial data, with respect to securities
considered desirable for inclusion in the Fund's portfolio.

                                       17
<PAGE>
    The New Sub-Advisory Agreement provides that ABIM will furnish at its
expense, the services of one or more officers of the Fund, to the extent that
such officers may be required by the Fund for the proper conduct of its affairs.
ABIM will maintain at its expense, a trading function in order to place orders
for the purchase and sale of portfolio securities of the Fund. The Fund assumes
and pays all of its other expenses.

    The services of ABIM are not to be deemed totally exclusive. ABIM is free to
render investment advisory or other services to others, so long as its services
under the agreement are not impaired thereby. Partners of ABIM may serve as
officers or Directors of the Fund, the Fund's officers or Directors may serve as
officers or partners of ABIM, and partners of ABIM are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, trustees or directors of any
other firm, trust or corporation, including other investment companies.

    Following the expiration of its initial two-year term, the New Sub-Advisory
Agreement continues in full force and effect from year to year, provided that
such continuance is approved at least annually by the Fund's Board of Directors
or by the vote of a majority of the Fund's outstanding voting securities, and by
the affirmative vote of a majority of the Directors who are not parties to the
agreement or "interested parties" of a party to the agreement (other than as
Directors of the Fund) by votes cast in person at a meeting specifically called
for such purpose.

    The New Sub-Advisory Agreement may be terminated, without the payment of any
penalty, by the Fund upon a vote of the Fund's Board of Directors, by a vote of
a majority of the Fund's outstanding voting securities or by ABIM, upon 60 days'
waivable written notice to the other parties. The agreement automatically
terminates in the event of its assignment.

    The New Sub-Advisory Agreement obligates ABIM to exercise care and diligence
and to act in good faith and to use its best efforts within reasonable limits to
ensure the accuracy of all services performed under the agreement, but ABIM is
not liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of ABIM or its officers,
partners or employees or reckless disregard by ABIM of its duties under the
agreement.

    BOARD CONSIDERATIONS.  At meetings on March 21-22, 2000, and June 21-22,
2000, the Board considered the New Sub-Advisory Agreement. In addition, the
Independent Directors also discussed approval of the New Sub-Advisory Agreement
with their independent counsel.

                                       18
<PAGE>
    To assist the Directors in their consideration of the New Sub-Advisory
Agreement, ICCC and ABIM presented a comparative analysis, under the existing
and pro forma advisory fees, of the performance and expenses of the Fund. The
Directors took into account (1) the nature and quality of the sub-advisory
services rendered and the results achieved by ABIM in the management of the
Fund, giving due consideration to the likely impact of the proposed fee on
relative performance; (2) the relationship of the proposed sub-advisory fee
schedule to the fee schedules of comparable mutual funds, the impact of the
proposed increase in advisory fees on the Fund's expense ratio and the
relationship of the Fund's pro forma expense ratio to the expense ratios of
comparable mutual funds; (3) the costs borne by ABIM in providing investment
sub-advisory services to the Fund, including the expansion of ABIM's research
and administrative efforts and the increased complexities associated with the
global telecommunications industry; (4) the profits of ABIM in providing
services to the Fund; (5) the extent to which the economies of scale that ABIM
might experience as a result of growth in the Fund's assets would be shared with
ICCC and the Fund; and (6) research services received in return for allocation
of brokerage. With respect to the nature and quality of services and the results
achieved, the Directors were presented with information about the success of the
Fund since inception (1984) in maintaining highly competitive portfolio
performance.

    After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the Independent
Directors, unanimously approved the New Sub-Advisory Agreement and voted to
recommend its approval to the shareholders of the Fund.

ADDITIONAL INFORMATION ABOUT ABIM

    ABIM, a limited partnership, is a registered investment advisor with assets
under management as of June 30, 2000, of approximately $10.4 billion, including
assets of the Fund and the assets of ABIM's other clients. Buppert, Behrens &
Owen, Inc. ("BB&O"), a company organized and owned by three employees of ABIM,
owns a 49% limited partnership interest and a 1% general partnership interest in
ABIM. DB Alex. Brown LLC ("DBAB"), an affiliate of ICCC, owns the remaining 50%
general partnership interest in ABIM. The address of each of the foregoing
entities is One South Street, Baltimore, Maryland 21202.

                                       19
<PAGE>
    The following information is provided for each general partner and the
principal executive officer of ABIM. The address for each is One South Street,
Baltimore, Maryland 21202.

<TABLE>
<CAPTION>
       NAME AND POSITION WITH ABIM             PRINCIPAL OCCUPATION
-----------------------------------------  -----------------------------
<S>                                        <C>
Buppert, Behrens & Owen, Inc.                           N/A
  General Partner
DB Alex. Brown LLC                                      N/A
  General Partner
J. Dorsey Brown, III                       Chief Executive Officer, ABIM
  Chief Executive Officer
</TABLE>

    ABIM is an affiliate of ICCC. For the fiscal year ended December 31, 1999,
the Fund paid to ICCC or ICCC's affiliates the amounts described in Proposal 1A
for the advisory, transfer agency, accounting and custody services provided to
the Fund.

OTHER FUNDS WITH SIMILAR INVESTMENT OBJECTIVES SUB-ADVISED BY ABIM

    ABIM acts as sub-advisor to two other funds that invest primarily in equity
securities and accordingly seek capital appreciation, either in and of itself,
or along with income. However, each of these funds employs widely differing
investment policies and styles in seeking these objectives.

    The following table provides comparative information on fees paid by ICCC to
ABIM pursuant to sub-advisory agreements in effect for such funds.

<TABLE>
<CAPTION>
                                          AVERAGE NET       SUB-ADVISORY FEE
                                           ASSETS OF       (AS A PERCENTAGE OF
                  FUND                    FUND (000S)   AVERAGE DAILY NET ASSETS)
----------------------------------------  -----------   -------------------------
<S>                                       <C>           <C>
Flag Investors Equity Partners
  Fund, Inc.                              $433,828(1)            0.56 %(1)
Flag Investors Value Builder Fund, Inc.   $967,181(2)            0.53 %(2)
</TABLE>

--------------------------

(1)   Information given for the fiscal year ended May 31, 2000.

(2)   Information given for the fiscal year ended March 31, 2000.

    In conjunction with the proposal of the New Sub-Advisory Agreement, and the
related New Advisory Agreement for ICCC discussed in Proposal 1A, ABIM agreed to
lower the sub-advisory fees it charges ICCC for providing advisory services to
Flag Investors Equity Partners Fund, Inc. and Flag Investors Value Builder Fund,
Inc. by ten basis points at each breakpoint. This change would be effective only
upon shareholder approval of the New Sub-Advisory Agreement and the New Advisory
Agreement for ICCC.

                                       20
<PAGE>
SHAREHOLDER APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT

    Approval of the New Sub-Advisory Agreement requires the affirmative vote of
a majority of the outstanding voting securities of the Fund (as defined in the
1940 Act). In the event that shareholders of the Fund do not approve the New
Sub-Advisory Agreement, the Board will take such action as it deems in the best
interest of the Fund and its shareholders, which may include proposing that
shareholders approve an agreement in lieu of the New Sub-Advisory Agreement.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.

PROPOSAL 2:     TO APPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT AMONG THE
                FUND, INVESTMENT COMPANY CAPITAL CORP. ("ICCC") AND ALEX. BROWN
                INVESTMENT MANAGEMENT ("ABIM"), EFFECTIVE MARCH 2001, REFLECTING
                AN EXPECTED CHANGE OF CONTROL OF ABIM.

    As described below, ABIM and one of its current 50% owners have entered into
an agreement to purchase the interest of the remaining 50% owner, effective
March 2001. This expected change of control of ABIM may be considered an
assignment and termination of any sub-advisory agreement that ABIM has with ICCC
and the Fund at that time. In anticipation of this transaction, the Board has
unanimously approved, and is recommending that shareholders approve, a new
sub-advisory agreement among the Fund, ICCC and ABIM, which reflects the change
of control of ABIM (the "Proposed Sub-Advisory Agreement"). The change of
control of ABIM is not expected to impact the nature or quality of the services
to be provided by ABIM to ICCC or the Fund.

THE PROPOSED SUB-ADVISORY AGREEMENT

    The terms of the Proposed Sub-Advisory Agreement will be identical to the
sub-advisory agreement in place in March 2001 when the change of control of ABIM
takes effect. If Proposals 1A and 1B (or substantially similar proposals) are
approved, the Proposed Sub-Advisory Agreement will be identical to the New
Sub-Advisory Agreement; otherwise, the Proposed Sub-Advisory Agreement will be
identical to the Current Sub-Advisory Agreement. See Proposal 1B for a detailed
discussion of the terms of both the Current and New Sub-Advisory Agreements and
related information.

CHANGE OF CONTROL OF ABIM

    ABIM currently is a limited partnership affiliated with ICCC. Buppert,
Behrens & Owen, Inc. ("BB&O"), a company organized and owned by three employees
of ABIM, owns a 49% limited partnership interest and a 1% general

                                       21
<PAGE>
partnership interest in ABIM. DB Alex. Brown LLC ("DBAB"), an affiliate of ICCC,
owns the remaining 50% general partnership interest in ABIM.

    On May 17, 2000, ABIM and BB&O entered into an Agreement of Sale of
Partnership Interests ("Sale Agreement") with DBAB that will result in BB&O
holding all partnership interests in ABIM, effective as of a March 2001 closing
date. In connection with this sale, ABIM also entered into a Trademark License
Agreement (the "License Agreement") with BT Alex. Brown Holdings, Inc. ("BTAB
Holdings") that will permit ABIM to continue to use the "Alex. Brown" name from
the March 2001 closing date until December 31, 2005. Under the terms of these
agreements, ABIM has agreed to pay DBAB and BTAB Holdings an amount equal to 60%
and 18%, respectively, of the sub-advisory fees earned during calendar years
2000, 2001 and 2002 by ABIM for providing advisory services to ICCC on behalf of
the Fund, and two other funds in the Fund Complex: Flag Investors Equity
Partners Fund, Inc. ("Equity Partners") and Flag Investors Value Builder Fund,
Inc. ("Value Builder"). If one or more of these funds converts to a feeder fund
in a master-feeder format, as described in Proposal 3, this calculation would
include sub-advisory fees earned in connection with providing sub-advisory
services to any master portfolio in which a fund invests. All amounts due will
be paid on eight installments on a quarterly basis beginning April 30, 2001,
with the last installment due January 31, 2003. Amounts due DBAB will be offset
by ABIM partnership distributions payable to DBAB in April 2001.

    The March 2001 closing date for the Sale Agreement is contingent upon, among
other events, the approval of the Proposed Sub-Advisory Agreement by Fund
shareholders, and the approval of similar-type proposed sub-advisory agreements
by the shareholders of Equity Partners and Value Builder. The Sale Agreement
also includes a provision prohibiting ABIM, BB&O and its employees, partners,
officers, or directors from providing investment advisory services to any other
registered investment company pursuing the same investment strategies as the
Fund, Equity Partners or Value Builder. Consistent with the fiduciary duties
that ICCC owes the Fund as its advisor, the Sale Agreement and License Agreement
do not prevent ICCC from suggesting that the Fund terminate its relationship
with ABIM if ICCC believes such a suggestion is appropriate, but any such
termination must ultimately be recommended by a majority of the Fund's
Independent Directors and approved by the Fund's Board of Directors.

BOARD CONSIDERATIONS

    At meetings on March 21-22, 2000, the Board considered the Proposed Sub-
Advisory Agreement. The Board, including the Independent Directors, approved

                                       22
<PAGE>
the Proposed Sub-Advisory Agreement and recommended it for approval by the
shareholders of the Fund.

    In evaluating the Proposed Sub-Advisory Agreement, the Board considered
substantially the same factors that led it to approve the New Sub-Advisory
Agreement, as described in Proposal 1B under "Board Considerations," as well as
the continuity of services. The Board also took into account (1) the nature and
quality of services expected to be provided by ABIM after the change of control;
and (2) the potential impact of the terms and conditions of the Sale Agreement
and License Agreement on ABIM's financial standing and profitability,
particularly as these factors affect ABIM's ability to provide the services
required under the Proposed Sub-Advisory Agreement. In these regards, the Board
concluded that the change of control of ABIM was not expected to have any
adverse material impact on the nature and quality of services to be provided by
ABIM.

    The Board also was advised that ICCC, ABIM and BB&O intended to comply with
the requirements of Section 15(f) of the 1940 Act. Section 15(f) provides a
non-exclusive safe harbor for an investment advisor to an investment company or
any of its affiliated persons to receive any amount or benefit in connection
with a change in control of the investment advisor that results in an assignment
so long as two conditions are met:

    1.  For a period of three years after the change of control, at least 75% of
        the board members of the investment company must not be interested
        persons of the acquired advisor or the acquirer (ABIM and BB&O,
        respectively, in this case). The Board of Directors of the Fund
        currently is in compliance with this provision of Section 15(f) and
        expects to remain so in the future.

    2.  An "unfair burden" must not be imposed upon the investment company as a
        result of such transaction or any express or implied terms, conditions
        or understandings applicable thereto. The term "unfair burden" is
        defined in Section 15(f) to include any arrangement during the two-year
        period after the change of control of ABIM whereby the investment
        advisor, or any interested person of any such advisor (among others,
        ICCC) receives or is entitled to receive any compensation, directly or
        indirectly, from the investment company or its shareholders (other than
        fees for bona fide investment advisory or other services) or from any
        person in connection with the purchase or sale of securities or other
        property to, from or on behalf of the investment company (other than
        bona fide ordinary compensation as principal underwriter for such
        investment company). ICCC, ABIM, and BB&O are not aware of any express
        or implied term, condition, arrangement or understanding that would
        impose an "unfair burden" on the Fund as a result of the change

                                       23
<PAGE>
        of control of ABIM. ICCC, ABIM, and BB&O have agreed that they, and
        their affiliates, will take no action that would have the effect of
        imposing an "unfair burden" on the Fund as a result of the change of
        control of ABIM. In particular, they believe that the advisory fee
        increase reflects a fee for bona fide advisory services and not an undue
        burden.

SHAREHOLDER APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT

    Approval of the Proposed Sub-Advisory Agreement requires the affirmative
vote of a majority of the outstanding voting securities of the Fund (as defined
in the 1940 Act). In the event that shareholders of the Fund do not approve the
Proposed Sub-Advisory Agreement, or the shareholders of Value Builder and Equity
Partners do not approve their respective sub-advisory agreements, the Board will
take such action as it deems in the best interest of the Fund and its
shareholders, which may include proposing that shareholders approve an agreement
in lieu of the Proposed Sub-Advisory Agreement.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE PROPOSED SUB-ADVISORY AGREEMENT.

PROPOSAL 3:     TO APPROVE THE RESTRUCTURING OF THE FUND INTO A FEEDER FUND IN A
                MASTER-FEEDER FORMAT.

OVERVIEW

    The Board has unanimously approved, and is recommending that shareholders
approve, restructuring the Fund into a feeder fund in a master-feeder format
(the "Restructuring"). The Restructuring would result in the Fund investing all
of its assets in the Communications Portfolio (the "Portfolio" or "master
portfolio") of the Flag Investors Portfolios Trust ("Master Trust"), which will
have substantially the same investment objective, policies and restrictions as
the Fund. The Restructuring will not change the advisor or sub-advisor
ultimately responsible for managing the Fund's assets. As described below,
participation in the Restructuring requires approval of certain related changes
to the Fund's fundamental investment policies.

    The Restructuring will not take place unless shareholders approve this
proposal as well as the Fund's new fee arrangements, discussed previously in
Proposals 1A and 1B. If approved, the Restructuring is expected to take effect
on or before October 2, 2000.

                                       24
<PAGE>
THE MASTER-FEEDER STRUCTURE

    If the Restructuring is approved, the Fund would seek to achieve its
investment objective by investing in the Portfolio, rather than investing
directly in securities. The Portfolio in turn would invest in securities in
accordance with its investment objective, policies and restrictions. As a
result, investment advisory services will be provided to the Fund at the master
portfolio (i.e., Portfolio) level. Because the Portfolio will have substantially
the same investment objective, policies and restrictions as the Fund, and will
hire the Fund's current advisor and sub-advisor, this structure is not expected
to impact the manner in which the Fund's assets are ultimately invested.

    After the Restructuring, Fund shareholders will continue to hold the same
number of shares of the Fund. The value of the shareholder's investment in the
Fund will be the same immediately after the Fund's investment in the Portfolio
as it was before that investment. Going forward, the value of the Fund's shares
will be based directly upon the investment performance of the Portfolio.

    Other feeder funds may invest in the Portfolio in the future. A goal of a
master-feeder fund arrangement is to achieve operational efficiencies through
economies of scale thereby achieving a lower ratio of operating expenses to net
assets, assuming that the assets of the Portfolio are greater than the assets of
any individual feeder fund. There can be no assurance, however, that such
economies of scale will be realized.

    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 best interests of the
Fund and its shareholders. Upon any such withdrawal, the Board of Directors
would consider what action might be taken. In accordance with the Fund's
investment objective, policies and restrictions, the Board could invest the
Fund's assets in another master portfolio, or retain an investment advisor to
manage the Fund's assets directly (as is currently the case).

IMPACT ON FEES AND EXPENSES

    The Restructuring will not take place unless shareholders also approve the
Fund's new fee arrangements. These new fee arrangements are discussed in
Proposals 1A and 1B, which include a comparison of the Fund's current fees to
those applicable under the proposed new fee arrangements. If the Restructuring
takes place, any agreements that the Portfolio enters into as part of the
Restructuring will reflect these new fee arrangements. That portion of the fees
for administrative services will be split between the Portfolio and the Fund,
reflecting the different services provided at each level.

                                       25
<PAGE>
    As a general matter, although advisory and custodial fees will become an
obligation of the Portfolio, the Fund will still pay for these services
indirectly. The Portfolio will allocate these fees to each feeder fund based on
the fund's relative net assets. Distribution, transfer agency, shareholder
servicing and other administrative fees will continue to be a direct obligation
of the Fund.

    As noted previously, one goal of the master-feeder structure is to increase
the assets under management at the Portfolio level in hopes of achieving
economies of scale, and possibly cost savings, for investors in the Portfolio,
including the Fund. While there can be no assurance that such economies of scale
will be realized, the Portfolio anticipates adding other feeder funds in the
future.

TAX CONSEQUENCES

    The Restructuring is not expected to have adverse tax consequences for Fund
shareholders. The Restructuring will not change the tax basis of Fund shares
held by shareholders, and distributions from the Fund will continue to be
taxable to Fund shareholders as ordinary income or capital gain, as the case may
be. Further, as part of the transaction, the Fund and its shareholders are not
expected to recognize any gain or loss for federal income tax purposes. The
Portfolio and the Fund are organized and intend to conduct their respective
operations in a manner such that both the Portfolio and Fund, by investing all
of its investable assets in the Portfolio, will not be required to pay any
federal income or excise taxes.

RISKS OF A MASTER-FEEDER STRUCTURE

    The Fund's investment in the Portfolio poses certain potential risks. Large-
scale redemptions by other feeder funds could have adverse effects on the Fund,
such as requiring the liquidation of a significant portion of the Portfolio's
holdings at a time when it could be disadvantageous to do so. In the future,
other feeder funds could have a greater ownership interest in the Portfolio than
the Fund's interest and, therefore, could have effective voting control over the
operation of the Portfolio. Finally, if the Fund is required to redeem its
interests in the Portfolio for any reason (for instance, because its
shareholders did not approve changes to the Fund's investment policies parallel
to changes approved for the Portfolio), the Fund's Board may be unable to find
an appropriate substitute investment vehicle for the Fund's assets, which could
have a significant effect on the Fund's shareholders.

MANAGEMENT OF THE FUND AFTER THE RESTRUCTURING

    The Portfolio will be advised by Investment Company Capital Corp. ("ICCC"),
the Fund's current advisor. The Portfolio will be sub-advised by Alex.

                                       26
<PAGE>
Brown Investment Management, the Fund's current sub-advisor. After the
Restructuring, ICCC also will provide administrative services to the Portfolio
and the Fund.

    The Portfolio is a separate series of the Master Trust, an open-end
management investment company registered under the 1940 Act and organized as a
New York Business Trust. The Portfolio has been established to serve as the
investment portfolio for various investment companies and other types of
institutional accounts. Portfolio shares are not offered for sale directly to
the public. While no other feeder funds currently invest in the Portfolio, such
feeders may so invest in the future. To the extent that such feeders' expense
structures differ from the Fund's, their investment returns will be different as
well.

    The Master Trust has its own Board of Trustees, including a majority of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Portfolio. All Fund Board members currently serve as Trustees of the Master
Trust.

THE PORTFOLIO'S INVESTMENT POLICIES

    The investment objective of the Portfolio is the same as the investment
objective of the Fund. The Portfolio seeks to achieve its investment objective
through investments limited to the types of securities in which the Fund is
authorized to invest. The investment restrictions or policies of the Portfolio
prohibit it from investing in any security or engaging in any transaction in
which the Fund currently could not directly invest or engage.

    The investment objective of the Portfolio is not a fundamental policy. The
approval of the Portfolio's investors (i.e., the Fund and other holders of
interests in the Portfolio, if any) would be required to change any of its
fundamental investment policies or restrictions. Any change in non-fundamental
investment policies or restrictions would not require such approval.

CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES

    In conjunction with the Restructuring, the Board approved related changes to
the Fund's fundamental investment policies necessary to permit the Fund to
invest all of its assets in the Portfolio. Shareholder approval is also required
to effect these changes. These changes will have no impact on the Fund's
investment objective, strategies and risks, but, as described below, are needed
for the Fund to become a feeder fund in a master-feeder format. Accordingly, in
approving the Restructuring, shareholders are approving related changes to each
of the following fundamental investment policies of the Fund. Since the
Portfolio's investment polices include restrictions similar in nature to the
Funds' current policies,

                                       27
<PAGE>
approving the modified policies will not permit the Portfolio to engage in any
investment activity that the Fund could not currently undertake.

A. DIVERSIFICATION

    Under the Fund's current diversification policy, the Fund can invest only
10% of its assets in any one company, such as the Portfolio. The modified policy
makes clear that investment companies (i.e., the Portfolio) are not included for
the purposes of the 10% test. As a result, the Fund, as a feeder fund, will be
permitted to invest all of its assets in the Portfolio. The specific changes to
put the modified policy in place are described below.

    The Fund's fundamental policy regarding diversification currently states
that the Fund is not permitted to:

    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.

    If the Proposal is approved, this policy would be eliminated and replaced
with the following:

    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, except that the Fund's assets may be invested in the securities
    of one or more management investment companies to the extent permitted
    by the 1940 Act and the rules and regulations thereunder.

B. CONCENTRATION

    Under the current concentration policy, the Fund can, if it wishes, invest
up to 25% of its assets in any one industry other than the communications
industry. Since the Portfolio could be viewed as a single company in one
industry, this policy must be changed if the Fund is to invest all of its assets
in the Portfolio. Accordingly, the modified policy makes clear that investment
companies (i.e., the Portfolio) are not included for purposes of the 25% test.
The specific changes to put the modified policy in place are described below.

    The Fund's fundamental policy regarding concentration currently states that
the Fund is not permitted to:

    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).

                                       28
<PAGE>
    If the Proposal is approved, this policy would be eliminated and replaced
with the following:

    Invest less than 65% of its total assets in the communications field,
    except as described in the Prospectus, provided that: (a) otherwise the
    Fund will not concentrate more than 25% of its total assets in
    securities of issuers in any industry and (2) notwithstanding this
    limitation or any other fundamental investment limitation, assets may be
    invested in the securities of one or more management investment
    companies to the extent permitted by the 1940 Act and the rules and
    regulations thereunder.

C. UNDERWRITING

    Under the Fund's current underwriting policy, the Fund cannot underwrite
securities. Since the Fund will be investing in (i.e., buying and selling)
shares of the Portfolio, the Fund could be viewed as acting as an underwriter
for the Portfolio. The modified policy makes clear that the Fund's on-going
investment in the Portfolio is not considered to be the underwriting of
securities. The specific changes to put the modified policy in place are
described below.

    The Fund's fundamental policy regarding underwriting currently states that
the Fund is not permitted to:

    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.

    If the Proposal is approved, this policy would be eliminated and replaced
with the following:

    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. This
    restriction shall not limit the Fund's ability to invest in securities
    issued by one or more management investment companies to the extent
    permitted by the 1940 Act and the rules and regulations thereunder.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The Board of Directors has carefully considered Proposal 3, which will
authorize the Restructuring, including necessary changes to the Fund's
fundamental investment policies. At meetings held on December 15, 1999, and
June 21-22, 2000, the Board approved this proposal and determined to seek

                                       29
<PAGE>
shareholder authorization of the actions necessary for the Fund to invest all
its investable assets in the Portfolio. In approving this Proposal, the Board
considered the experience and performance record of ABIM's communications equity
team, the Fund's new fee arrangements, and the opportunity that the
Restructuring provides to pursue additional distribution outlets and potential
cost savings for the Fund over time. Based on the factors discussed above and
others, the Board determined that the Restructuring is in the best interests of
the Fund and its shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE RESTRUCTURING OF THE FUND INTO A FEEDER FUND IN A MASTER-FEEDER
FORMAT.

ADDITIONAL INFORMATION

BENEFICIAL OWNERS

    To the knowledge of Fund management, as of the Record Date, there were no
beneficial owners holding 5% or more of the outstanding shares of the Fund. As
of the Record Date, the Directors and officers of the Fund as a group
beneficially owned an aggregate of less than 1% of the outstanding shares of the
Fund.

SUBMISSION OF SHAREHOLDER PROPOSALS

    The Fund is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act,
such as the Fund, is not required to hold an annual meeting in any year in which
the election of Directors is not required to be acted upon under the 1940 Act.
The Fund has availed itself of this provision and achieves cost savings by
eliminating printing costs, mailing charges and other expenses involved in
routine annual meetings.

    Even with the elimination of routine annual meetings, the Board of Directors
may call special meetings of shareholders for action by shareholder vote as may
be required by the 1940 Act, or as required or permitted by the Articles of
Incorporation and By-Laws of the Fund. As described above, shareholder meetings
will be held, in compliance with the 1940 Act, to elect Directors under certain
circumstances. Shareholder meetings may also be held by the Fund for other
purposes, such as the approval of investment policy changes, a new investment
advisory or sub-advisory agreement or other matters requiring shareholder action
under the 1940 Act. In addition, Maryland General Corporation Law provides for
the calling of a special meeting by the written request of shareholders holding
at least 25% of the shares entitled to vote at the meeting.

                                       30
<PAGE>
    A meeting may also be called by shareholders holding at least 10% of the
shares entitled to vote at the meeting for the purpose of voting upon the
removal of Directors. Upon written request by ten or more shareholders, who have
been such for at least six months and who hold shares constituting at least 1%
of the outstanding shares, stating that such shareholders wish to communicate
with the other shareholders for the purpose of obtaining the signatures
necessary to demand a meeting to consider removal of a Director, the Fund has
undertaken to provide a list of shareholders or to disseminate appropriate
materials.

    Shareholders who wish to present a proposal for action at the next meeting
or suggestions as to nominees for the Board of Directors should submit the
proposal or suggestions to be considered to the Fund 60 days in advance of any
such meeting for inclusion in the Fund's proxy statement and form of proxy for
such meeting as is held. The Nominating Committee of the Board of Directors will
give consideration to shareholder suggestions as to nominees for the Board of
Directors.

REQUIRED VOTE

    Approval of each of the Proposals requires the affirmative vote of a
majority of the outstanding voting securities of the Fund. As defined in the
1940 Act, the vote of a "majority of the outstanding voting securities" of the
Fund means the vote of (i) 67% or more of the Fund's outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares, whichever is less.

    Abstentions and "broker non-votes" will not be counted for or against the
Proposals but will be counted for purposes of determining whether a quorum is
present. Abstentions will be counted as votes present for purposes of
determining a "majority of the outstanding voting securities" present at the
Meeting and will therefore have the effect of counting against each of the
Proposals.

OTHER MATTERS

    No business other than the matters described above is expected to come
before the Meeting, but should any matter incident to the conduct of the Meeting
or any question as to an adjournment of the Meeting arise, the persons named in
the enclosed Proxy will vote thereon according to their best judgment in the
interest of the Fund.

                                       31
<PAGE>
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO HAVE
THEIR SHARES VOTED ARE REQUESTED TO VOTE BY MAIL, TELEPHONE OR INTERNET AS
EXPLAINED IN THE INSTRUCTIONS INCLUDED ON YOUR PROXY CARD.

                                        By Order of the Directors,

                                        [/S/ AMY M. OLMERT]

                                        Amy M. Olmert
                                        Secretary

Dated: July 19, 2000

                                       32
<PAGE>
                                                                       EXHIBIT A

                    FLAG INVESTORS COMMUNICATIONS FUND, INC.
                                    FORM OF
                         INVESTMENT ADVISORY AGREEMENT

    THIS AGREEMENT is made as of the    day of          , 2000 by and between
FLAG INVESTORS COMMUNICATIONS FUND, INC., a Maryland corporation (the "Fund"),
and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the "Advisor").

    WHEREAS, the Fund is registered as an open-end, non-diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

    WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and

    WHEREAS, the Fund and the Advisor desire to enter into an agreement to
provide investment advisory services for the Fund on the terms and conditions
hereinafter set forth.

    NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

    1.  APPOINTMENT OF INVESTMENT ADVISOR.  The Fund hereby appoints the Advisor
to act as the Fund's investment advisor. The Advisor shall supervise and manage
all aspects of the Fund's investment program including the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
assets, subject at all times to the policies and control of the Fund's Board of
Directors. The Advisor shall give the Fund the benefit of its best judgment,
efforts and facilities in rendering its services as Advisor.

    2.  DELIVERY OF DOCUMENTS.  The Fund has furnished the Advisor with copies
properly certified or authenticated of each of the following:

        (a) The Fund's Articles of Incorporation, filed with the State of
    Maryland on November 4, 1988 and all amendments thereto (such Articles of
    Incorporation, as presently in effect and as they shall from time to time be
    amended, are herein called the "Articles of Incorporation");

        (b) The Fund's By-Laws and all amendments thereto (such By-Laws, as
    presently in effect and as they shall from time to time be amended, are
    herein called the "By-Laws");

                                       1
<PAGE>
        (c) Resolutions of the Fund's Board of Directors and shareholders
    authorizing the appointment of the Advisor and approving this Agreement;

        (d) The Fund's Notification of Registration filed pursuant to
    Section 8(a) of the Investment Company Act of 1940 on Form N-8A under the
    1940 Act as filed with the Securities and Exchange Commission (the "SEC") on
    October 21, 1983;

        (e) The Fund's Registration Statement on Form N-1 under the Securities
    Act of 1933, as amended (the "1933 Act") (File No. 2-87336) and under the
    1940 Act as filed with the SEC on October 21, 1983 relating to the shares of
    the Fund, and all amendments thereto; and

        (f) The Fund's most recent prospectus (such prospectus, as presently in
    effect, and all amendments and supplements thereto are herein called
    "Prospectus").

    The Fund will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.

    3.  DUTIES OF INVESTMENT ADVISOR.  In carrying out its obligations under
Section I hereof, the Advisor shall:

        (a) supervise and manage all aspects of the Fund's investment program;

        (b) formulate and implement continuing programs for the purchases and
    sales of securities, consistent with the investment objective and policies
    of the Fund;

        (c) provide the Fund with such executive, administrative and clerical
    services as are deemed advisable by the Fund's Board of Directors and as
    might not otherwise be provided under the Fund's other agreements;

        (d) obtain and evaluate pertinent information about significant
    developments and economic, statistical and financial data, domestic, foreign
    or otherwise, whether affecting the economy generally or the Fund, and
    whether concerning the individual issuers whose securities are included in
    the Fund's portfolio or the activities in which they engage, or with respect
    to securities which the Advisor considers desirable for inclusion in the
    Fund's portfolio;

        (e) determine which issuers and securities shall be represented in the
    Fund's portfolio and regularly report thereon to the Fund's Board of
    Directors;

                                       2
<PAGE>
        (f) take all actions necessary to carry into effect the Fund's purchase
    and sale programs; and

        (g) maintain such books and records in cooperation with the Fund's
    administrator and distributor, as may be required by law or deemed advisable
    by the Fund's Board of Directors.

    4.  BROKER-DEALER RELATIONSHIPS.  In the event that the Advisor is
responsible for decisions to buy and sell securities for the Fund, broker-dealer
selection, and negotiation of its brokerage commission rates, the Advisor's
primary consideration in effecting a security transaction will be execution at
the most favorable price. In performing this function the Advisor shall comply
with applicable policies established by the Board of Directors and shall provide
the Board of Directors with such reports as the Board of Directors may require
in order to monitor the Fund's portfolio transaction activities. In certain
instances the Advisor may make purchases of underwritten issues at prices which
include underwriting fees. In selecting a broker-dealer to execute each
particular transaction, the Advisor will take the following into consideration:
the best net price available; the reliability, integrity and financial condition
of the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker-dealer that
provides brokerage and research services to the Advisor an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Fund. The Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such broker-dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the broker-dealers to whom such allocations
have been made and the basis therefor.

                                       3
<PAGE>
    Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking the most favorable price and execution
available and such other policies as the Board of Directors may determine, the
Advisor may consider services in connection with the sale of shares of the Fund
as a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund.

    Subject to the policies established by the Board of Directors in compliance
with applicable law, the Advisor may direct DB Alex. Brown LLC ("DB Alex.
Brown") to execute portfolio transactions for the Fund on an agency basis. The
commissions paid to DB Alex. Brown must be, as required by Rule 17e-1 under the
1940 Act, "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." If the purchase or sale of securities consistent with the investment
policies of the Fund or one or more other accounts of the Advisor is considered
at or about the same time, transactions in such securities will be allocated
among the accounts in a manner deemed equitable by the Advisor. DB Alex. Brown
and the Advisor may combine such transactions, in accordance with applicable
laws and regulations, in order to obtain the best net price and most favorable
execution.

    The Fund will not deal with the Advisor or DB Alex. Brown in any transaction
in which the Advisor or DB Alex. Brown acts as a principal with respect to any
part of the Fund's order. If DB Alex. Brown is participating in an underwriting
or selling group, the Fund may not buy portfolio securities from the group
except in accordance with policies established by the Board of Directors in
compliance with rules of the SEC.

    5.  CONTROL BY BOARD OF DIRECTORS.  Any management or supervisory activities
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.

    6.  COMPLIANCE WITH APPLICABLE REQUIREMENTS.  In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:

        (a) all applicable provisions of the 1940 Act and any rules and
    regulations adopted thereunder;

        (b) the provisions of the Registration Statement of the Fund under the
    1933 Act and the 1940 Act;

        (c) the provisions of the Articles of Incorporation;

                                       4
<PAGE>
        (d) the provisions of the By-Laws; and

        (e) any other applicable provisions of state and federal law.

    7.  EXPENSES.  The expenses connected with the Fund shall be allocable
between the Fund and the Advisor as follows:

        (a) The Advisor shall furnish, at its expense and without cost to the
    Fund, the services of one or more officers of the Fund, to the extent that
    such officers may be required by the Fund for the proper conduct of its
    affairs.

        (b) The Fund assumes and shall pay or cause to be paid all other
    expenses of the Fund, including, without limitation: payments to the Fund's
    distributor under the Fund's plans of distribution and to the Fund's
    administrator under the Fund's administrative services agreement; 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 the registration and
    maintenance of registration 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 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 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

                                       5
<PAGE>
    charges and costs of the Fund's operation unless otherwise explicitly
    provided herein.

    8. DELEGATION OF RESPONSIBILITIES.

        (a) Subject to the approval of the Board of Directors and shareholders
    of the Fund, the Advisor may delegate to a sub-advisor certain of its duties
    enumerated in Section 2 hereof, provided that the Advisor shall continue to
    supervise the performance of any such sub-advisor and shall report regularly
    thereon to the Fund's Board of Directors. The Advisor shall not be
    responsible for any such sub-advisor's performance under a sub-advisory
    agreement.

        (b) The Advisor may, but shall not be under any duty to, perform
    services on behalf of the Fund which are not required by this Agreement upon
    the request of the Fund's Board of Directors. Such services will be
    performed on behalf of the Fund and the Advisor's charge in rendering such
    services may be billed monthly to the Fund, subject to examination by the
    Fund's independent certified public accountants. Payment or assumption by
    the Advisor of any Fund expense that the Advisor is not required to pay or
    assume under this Agreement shall not relieve the Advisor of any of its
    obligations to the Fund nor obligate the Advisor to pay or assume any
    similar Fund expenses on any subsequent occasions.

    9.  COMPENSATION.  For the services to be rendered and the expenses assumed
by the Advisor, the Fund shall pay to the Advisor monthly compensation equal to
the sum of the amounts determined by applying the following annual rates to the
Fund's average daily net assets: 1.00% of the first $100 million of the Fund's
average daily net assets, 0.90% of the next $100 million of the Fund's average
daily net assets, 0.85% of the next $100 million of the Fund's average daily net
assets, 0.80% of the next $200 million of the Fund's average daily net assets,
0.73% of the next $500 million of the Fund's average daily net assets, 0.68% of
the next $500 million of the Fund's average daily net assets, and 0.65% of that
portion of the Fund's average daily net assets in excess of $1.5 billion.

    Except as hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Advisor's compensation for the preceding month shall be made as promptly as
possible.

                                       6
<PAGE>
    10.  NON-EXCLUSIVITY.  The services of the Advisor to the Fund are not to be
deemed to be exclusive, and the Advisor shall be free to render investment
advisory or other services to others (including other investment companies) and
to engage in other activities, so long as its services under this Agreement are
not impaired thereby. It is understood and agreed that officers or directors of
the Advisor may serve as officers or Directors of the Fund, and that officers or
Directors of the Fund may serve as officers or directors of the Advisor to the
extent permitted by law; and that the officers and directors of the Advisor are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, trustees or
directors of any other firm, trust or corporation, including other investment
companies.

    11.  TERM.  This Agreement shall become effective at 12:01 a.m. on the date
hereof and shall continue in force and effect, subject to Section 13 hereof, for
two years from the date hereof.

    12.  RENEWAL.  Following the expiration of its initial two-year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:

        (a) (i) by the Fund's Board of Directors or (ii) by the vote of a
    majority of the outstanding voting securities of the Fund (as defined in
    Section 2(a)(42) of the 1940 Act); and

        (b) by the affirmative vote of a majority of the Directors who are not
    parties to this Agreement or "interested persons" of a party to this
    Agreement (other than as Directors of the Fund) by votes cast in person at a
    meeting specifically called for such purpose.

    13.  TERMINATION.  This Agreement may be terminated, without the payment of
any penalty, by the Fund upon a vote of the Fund's Board of Directors or a vote
of a majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act) or by the Advisor, upon sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment (as defined in Section 2(a)(4) of the 1940 Act).

    14.  LIABILITY OF ADVISOR.  In the performance of its duties hereunder, the
Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.

                                       7
<PAGE>
    15.  NOTICES.  Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be One South Street, Baltimore, Maryland
21202.

    16.  QUESTIONS OF INTERPRETATION.  Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.

[SEAL]                            FLAG INVESTORS
                                  COMMUNICATIONS FUND, INC.

Attest:                              By:
        ------------------------     ----------------------
Name:                                Name:
                                     Title:

[SEAL]                            INVESTMENT COMPANY CAPITAL
                                  CORP.

Attest:                              By:
        ------------------------     ----------------------
Name:                                Name:
                                     Title:

                                       8
<PAGE>
                                                                       EXHIBIT B

                    FLAG INVESTORS COMMUNICATIONS FUND, INC.
                             SUB-ADVISORY AGREEMENT

    THIS AGREEMENT is made as of the    day of               , by and among FLAG
INVESTORS COMMUNICATIONS FUND, INC., a Maryland corporation (the "Fund"),
INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the "Advisor"), and
ALEX. BROWN INVESTMENT MANAGEMENT, a Maryland limited partnership (the
"Sub-Advisor").

    WHEREAS, the Advisor is the investment advisor to the Fund, which is an
open-end, non-diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and

    WHEREAS, the Fund and the Advisor wish to retain the Sub-Advisor for
purposes of rendering advisory services to the Fund and the Advisor in
connection with the Advisor's responsibilities to the Fund on the terms and
conditions hereinafter set forth.

    NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

    1.  APPOINTMENT OF SUB-ADVISOR.  The Fund hereby appoints the Sub-Advisor to
act as the Fund's Sub-Advisor under the supervision of the Fund's Board of
Directors and the Advisor, and the Sub-Advisor hereby accepts such appointment,
all subject to the terms and conditions contained herein.

    2.  DELIVERY OF DOCUMENTS.  The Fund has furnished the Sub-Advisor with
copies properly certified or authenticated of each of the following:

        (a) The Fund's Articles of Incorporation, filed with the State of
    Maryland on November 4, 1988 and all amendments thereto (such Articles of
    Incorporation, as presently in effect and as they shall from time to time be
    amended, are herein called the "Articles of Incorporation");

        (b) The Fund's By-Laws and all amendments thereto (such By-Laws, as
    presently in effect and as they shall from time to time be amended, are
    herein called the "By-Laws");

        (c) Resolutions of the Fund's Board of Directors and shareholders
    authorizing the appointment of the Sub-Advisor and approving this Agreement;

                                       1
<PAGE>
        (d) The Fund's Notification of Registration filed pursuant to
    Section 8(a) of the Investment Company Act of 1940 on Form N-8A under the
    1940 Act as filed with the Securities and Exchange Commission (the "SEC") on
    October 21, 1983;

        (e) The Fund's Registration Statement on Form N-1 under the Securities
    Act of 1933, as amended (the "1933 Act") (File No. 2-87336) and under the
    1940 Act as filed with the SEC on October 21, 1983 relating to the shares of
    the Fund, and all amendments thereto; and

        (f) The Fund's most recent prospectus (such prospectus, as presently in
    effect, and all amendments and supplements thereto are herein called
    "Prospectus").

    The Fund will furnish the Sub-Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.

    3.  DUTIES OF SUB-ADVISOR.  In carrying out its obligations under Section 1
hereof, the Sub-Advisor shall:

        (a) provide the Fund with such executive, administrative and clerical
    services as are deemed advisable by the Fund's Board of Directors;

        (b) determine which issuers and securities shall be represented in the
    Fund's portfolio and regularly report thereon to the Fund's Board of
    Directors;

        (c) formulate and implement continuing programs for the purchases and
    sales of the securities of such issuers and regularly report thereon to the
    Fund's Board of Directors;

        (d) take, on behalf of the Fund, all actions which appear to the Fund
    necessary to carry into effect such purchase and sale programs as aforesaid,
    including the placing of orders for the purchase and sale of securities of
    the Fund; and

        (e) obtain and evaluate pertinent information about significant
    developments and economic, statistical and financial data, domestic, foreign
    or otherwise, whether affecting the economy generally or the Fund, and
    whether concerning the individual issuers whose securities are included in
    the Fund's portfolio or the activities in which they engage, or with respect
    to securities which the Advisor considers desirable for inclusion in the
    Fund's portfolio.

    4.  BROKER-DEALER RELATIONSHIPS.  In circumstances when the Sub-Advisor is
responsible for decisions to buy and sell securities for the Fund, broker-dealer

                                       2
<PAGE>
selection, and negotiation of its brokerage commission rates, the Sub-Advisor's
primary consideration in effecting a security transaction will be execution of
orders at the most favorable price on an overall basis. In performing this
function the Sub-Advisor shall comply with applicable policies established by
the Board of Directors and shall provide the Board of Directors with such
reports as the Board of Directors may require in order to monitor the Fund's
portfolio transaction activities. In selecting a broker-dealer to execute each
particular transaction, the Sub-Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Directors may determine, the Sub-Advisor shall
not be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the Fund to
pay a broker-dealer that provides brokerage and research services to the
Sub-Advisor an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction, if the Sub-Advisor determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the Sub-Advisor's
overall responsibilities with respect to the Fund. The Sub-Advisor is further
authorized to allocate the orders placed by it on behalf of the Fund to such
broker-dealers who also provide research or statistical material or other
services to the Fund or the Sub-Advisor. Such allocation shall be in such
amounts and proportions as the Sub-Advisor shall determine and the Sub-Advisor
will report on said allocation regularly to the Board of Directors of the Fund,
indicating the brokers to whom such allocations have been made and the basis
therefor.

    Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking the most favorable price and execution
available and such other policies as the Board of Directors may determine, the
Sub-Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.

    Subject to the policies established by the Board of Directors in compliance
with applicable law, the Advisor may direct DB Alex. Brown LLC ("DB Alex.
Brown") to execute portfolio transactions for the Fund on an agency basis. The
commissions paid to DB Alex. Brown must be, as required by Rule 17e-1 under

                                       3
<PAGE>
the 1940 Act, "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." If the purchase or sale of securities consistent with the investment
policies of the Fund or one or more other accounts of the Sub-Advisor is
considered at or about the same time, transactions in such securities will be
allocated among the accounts in a manner deemed equitable by the Sub-Advisor. DB
Alex. Brown and the Sub-Advisor may combine such transactions, in accordance
with applicable laws and regulations, in order to obtain the best net price and
most favorable execution.

    The Fund will not deal with the Sub-Advisor or DB Alex. Brown in any
transaction in which the Sub-Advisor or DB Alex. Brown acts as a principal with
respect to any part of the Fund's order. If DB Alex. Brown is participating in
an underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with rules of the SEC.

    5.  CONTROL BY FUND'S BOARD OF DIRECTORS.  Any recommendations concerning
the Fund's investment program for the Fund proposed by the Sub-Advisor to the
Fund and the Advisor pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Advisor on behalf of the Fund pursuant hereto, shall at
all times be subject to any applicable directives of the Board of Directors of
the Fund.

    6.  COMPLIANCE WITH APPLICABLE REQUIREMENTS.  In carrying out its
obligations under this Agreement, the Sub-Advisor shall at all times conform to:

        (a) all applicable provisions of the 1940 Act and any rules and
    regulations adopted thereunder, as amended;

        (b) the provisions of the Registration Statement of the Fund under the
    1933 Act and the 1940 Act;

        (c) the provisions of the Articles of Incorporation;

        (d) the provision of the By-Laws; and

        (e) any other applicable provisions of state and federal law.

    7.  EXPENSES.  The expenses connected with the Fund shall be allocable
between the Fund, the Sub-Advisor and the Advisor as follows:

        (a) The Sub-Advisor shall, subject to compliance with applicable banking
    regulations, furnish, at its expense and without cost to the Fund, the
    services of the President and certain Vice Presidents of the Fund, to the

                                       4
<PAGE>
    extent that such officers may be required by the Fund for the proper conduct
    of its affairs.

        (b) The Sub-Advisor shall maintain, at its expense and without cost to
    the Fund, a trading function in order to carry out its obligations under
    Section 3 hereof to place orders for the purchase and sale of portfolio
    securities for the Fund.

        (c) The Fund assumes and shall pay or cause to be paid all other
    expenses of the Fund, including, without limitation: payments to the Advisor
    under the Investment Advisory Agreement between the Fund and the Advisor;
    payments to the Fund's distributor under the Fund's plan of distribution;
    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 the
    registration and maintenance of registration 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 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 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
<PAGE>
    8.  COMPENSATION.  For the services to be rendered hereunder by the Sub-
Advisor, the Advisor shall pay to the Sub-Advisor monthly compensation equal to
the sum of the amounts determined by applying the following annual rates to the
Fund's average daily net assets: 0.65% of the first $100 million of the Fund's
average daily net assets, 0.60% of the next $100 million of the Fund's average
daily net assets, 0.55% of the next $100 million of the Fund's average daily net
assets, 0.50% of the next $200 million of the Fund's average daily net assets,
0.45% of the next $500 million of the Fund's average daily net assets, 0.42% of
the next $500 million of the Fund's average daily net assets, and 0.40% of that
portion of the Fund's average daily net assets in excess of $1.5 billion. Except
as hereinafter set forth, compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals paid monthly. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculations of the fees as set forth above. Payment of the Sub-Advisor's
compensation for the preceding month shall be made as promptly as possible.

    9.  DELEGATION OF RESPONSIBILITIES.  The Sub-Advisor may, but shall not be
under any duty to, perform services on behalf of the Fund which are not required
by this Agreement upon the request of the Fund's Board of Directors. Such
services will be performed on behalf of the Fund and the Sub-Advisor's charges
in rendering such services will be billed monthly to the Fund, subject to
examination by the Fund's independent certified public accountants. Payment or
assumption by the Sub-Advisor of any Fund expense that the Sub-Advisor is not
required to pay or assume under this Agreement shall not relieve the Sub-Advisor
of any of its obligations to the Fund nor obligate the Sub-Advisor to pay or
assume any similar Fund expenses on any subsequent occasions.

    10.  TERM.  This Agreement shall become effective at 12:01 a.m. on the date
hereof and shall remain in force and effect, subject to Section 12 hereof, for
two years from the date hereof.

    11.  RENEWAL.  Following the expiration of its initial two-year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:

        (a) (i) by the Fund's Board of Directors or (ii) by the vote of a
    majority of the outstanding voting securities of the Fund (as defined in
    Section 2(a)(42) of the 1940 Act); and

                                       6
<PAGE>
        (b) by the affirmative vote of a majority of the Directors who are not
    parties to this Agreement or "interested persons" of a party to this
    Agreement (other than as Directors of the Fund) by votes cast in person at a
    meeting specifically called for such purpose.

    12.  TERMINATION.  This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund (as defined in Section
2(a)(42) of the 1940 Act), on sixty (60) days' written notice to the Advisor and
the Sub-Advisor. This Agreement may be terminated at any time, without the
payment of any penalty, by the Sub-Advisor on sixty (60) days' written notice to
the Fund and the Advisor. The notice provided for herein may be waived by any
person to whom such notice is required. This Agreement shall automatically
terminate in the event of its assignment (as defined in Section 2(a)(4) of the
1940 Act).

    13.  NON-EXCLUSIVITY.  The services of the Sub-Advisor to the Advisor and
the Fund are not to be deemed to be totally exclusive, and the Sub-Advisor shall
be free to render investment advisory or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that partners of the Sub-Advisor may serve as officers or Directors of
the Fund, and that officers or Directors of the Fund may serve as officers or
partners of the Sub-Advisor to the extent permitted by law; and that the
partners of the Sub-Advisor are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies.

    14.  LIABILITY OF SUB-ADVISOR.  In the performance of its duties hereunder,
the Sub-Advisor shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Sub-Advisor
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Sub-Advisor or its
officers, directors or employees, or reckless disregard by the Sub-Advisor of
its duties under this Agreement.

    15.  NOTICES.  Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the
Sub-Advisor, of the Advisor and of the Fund for this purpose shall be One South
Street, Baltimore, Maryland 21202.

                                       7
<PAGE>
    16.  QUESTIONS OF INTERPRETATION.  Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.

[SEAL]                               FLAG INVESTORS COMMUNICATIONS FUND,
                                     INC.

Attest:                              By:
        ------------------------     ----------------------
Name:                                Name:
                                     Title:

[SEAL]                               INVESTMENT COMPANY CAPITAL CORP.

Attest:                              By:
        ------------------------     ----------------------
Name:                                Name:
                                     Title:

[SEAL]                               ALEX. BROWN INVESTMENT MANAGEMENT

Attest:                              By:
        ------------------------     ----------------------
Name:                                Name:
                                     Title:

                                       8
<PAGE>

[LOGO]

FLAG INVESTORS FUNDS
MUTUAL FUND SERVICES
MS 1-18-8
ONE SOUTH STREET
BALTIMORE, MD 21202-3220




TO VOTE BY TOUCH-TONE TELEPHONE

1) Read the Proxy Statement and have the Proxy card below at hand.

2) Call 1-800-690-6903

3) Enter the 12-digit control number set forth on the Proxy card and follow the
   simple instructions.

TO VOTE BY INTERNET

1) Read the Proxy Statement and have the Proxy card below at hand.

2) Go to Website www.proxyvote.com

3) Enter the 12-digit control number set forth on the Proxy card and follow the
   simple instructions.

For more information call 1-877-504-7018


                    FLAG INVESTORS COMMUNICATIONS FUND, INC.


                 PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS

                                 AUGUST 31, 2000

      THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FLAG INVESTORS
                            COMMUNICATIONS FUND, INC.


This proxy is for your use in voting on various matters relating to Flag
Investors Communications Fund, Inc. (the "Fund"). The undersigned
shareholder(s) of the Fund, revoking previous proxies,hereby appoint(s) Bruce
A. Rosenblum, Jeffrey A. Engelsman and Kathy L. Churko and each of them (with
full power of substitution) the proxies of the undersigned to attend the
Special Meeting of Shareholders of the Fund to be held on August 31, 2000
(the "Special Meeting") and any adjournments thereof, to vote all of the
shares of the Fund that the signer would be entitled to vote if personally
present at the Special Meeting and on any matter incident to the conduct of
the Special Meeting, all as set forth in the Notice of Special Meeting of
Shareholders and Proxy Statement of the Board of Directors. Said proxies are
directed to vote or refrain from voting pursuant to the Proxy Statement as
indicated upon the matters set forth below.

This proxy will be voted as indicated below. If no indication is made, this
proxy will be voted FOR the proposals set forth below. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.

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<S><C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:                 FLICFI                KEEP THIS PORTION FOR YOUR RECORDS
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                                                                                                 DETACH AND RETURN THIS PORTION ONLY
                        THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

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                                  THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL.
                                                                           ---

Vote On Proposals                                                                             For            Against       Abstain

1A.  To approve a new Investment Advisory Agreement between the Fund and                      / /              / /            / /
     its investment advisor, Investment Company Capital Corp., increasing
     the advisory fee paid by the Fund.

1B.  To approve a new Sub-Advisory Agreement among the Fund, Investment Company               / /              / /            / /
     Capital Corp. and Alex. Brown Investment Management, increasing the
     sub-advisory fee paid by Investment Company Capital Corp. to the Fund's
     sub-advisor.

2.   To approve a proposed Sub-Advisory Agreement among the Fund, Investment                  / /              / /            / /
     Company Capital Corp. and Alex. Brown Investment Management, effective
     March 2001, reflecting an expected change in control of the Fund's
     sub-advisor.

3.   To approve the restructuring of the Fund into a feeder fund in a master-feeder           / /              / /            / /
     format.


Please print and sign your name in the space provided to authorize the voting of your shares as indicated and return promptly.
When signing on behalf of a corporation, partnership, estate, trust or in any other representative capacity please sign your name
and title. For joint accounts, each joint owner must sign.


           UNLESS VOTING BY TELEPHONE OR INTERNET, PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
                                           USING THE ENCLOSED ENVELOPE.
                                NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.


-----------------------------------------------            ---------------------------------------

-----------------------------------------------            ---------------------------------------
Signature [PLEASE SIGN WITHIN BOX]   Date                  Signature (Joint Owners)    Date
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