<PAGE>
As Filed With the Securities and Exchange Commission on April 28, 2000
Registration No. 2-87336
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 23 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 25 [X]
FLAG INVESTORS COMMUNICATIONS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, MD 21202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (410) 727-1700
Edward J. Veilleux
One South Street
Baltimore, MD 21202
-------------------
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
----------------------
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
_X_ on May 1, 2000 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a) of Rule 485.
<PAGE>
[GRAPHIC OMITTED]
Communications Fund, Inc.
(Class A, Class B, and Class C Shares)
Prospectus
May 1, 2000
The Securities and Exchange Commission has neither approved nor disapproved
these securities nor has it passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
[GRAPHIC OMITTED]
This mutual fund (the "Fund") is designed to maximize total return.
The Fund will seek to achieve this objective through a combination of long-term
growth of capital and, to a lesser extent, current income. The Fund invests
primarily in common stocks of companies in the communications field.
The Fund offers shares through securities dealers and through financial
institutions that act as shareholder servicing agents. You may also buy shares
through the Fund's Transfer Agent. This Prospectus describes Flag Investors
Class A Shares ("Class A Shares"), Flag Investors Class B Shares ("Class B
Shares"), and Flag Investors Class C Shares ("Class C Shares") of the Fund.
These separate classes give you a choice of sales charges and fund expenses.
(Refer to the section on sales charges.)
TABLE OF CONTENTS
- -----------------
Investment Summary ........................................ 1
Fees and Expenses of the Fund ............................. 2
Investment Program ........................................ 3
The Fund's Net Asset Value ................................ 4
How to Buy Shares ......................................... 4
How to Redeem Shares ...................................... 5
Telephone Transactions .................................... 5
Sales Charges ............................................. 6
How to Choose the Class
That Is Right for You .................................. 8
Dividends and Taxes ....................................... 8
Investment Advisor and Sub-Advisor ........................ 9
Financial Highlights ...................................... 10
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
<PAGE>
INVESTMENT SUMMARY
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Objectives and Strategies
The Fund seeks to maximize total return. The Fund will seek to achieve
this objective through a combination of long-term growth of capital and, to a
lesser extent, current income. In selecting investments, the Fund's investment
advisor and sub-advisor (the "Advisors") will choose securities of companies
that are engaged in the research, development, manufacture, or sale of
communications services, technology, equipment, or products. The Advisors
emphasize both traditional communications companies and those that engage in
new information based applications. The Advisors believe that investing in a
portfolio of common stocks of companies in the communications field offers an
attractive opportunity for maximizing total return.
Risk Profile
The Fund may be suited for you if you are willing to accept the risks and
uncertainties of investing in the common stocks of companies in the
communications field in the hope of achieving above-average total return while
diversifying your investment portfolio.
General Stock Risk. The value of an investment in the Fund will vary from
day to day based on changes in the prices of the securities the Fund holds.
Those prices, in turn, reflect investor perceptions of the economy, the
markets, and the companies represented in the Fund's portfolio.
Market Sector and Non-Diversification Risks. Because the Fund
concentrates its investments in the communications field, it may be affected by
risks associated with this field, such as regulatory or technological change.
These risks may result in greater fluctuations in the Fund's value than would
be experienced in less concentrated investment portfolios. In addition, the
Fund may invest in securities of a relatively limited number of issuers. As a
result, the performance of one or a small number of portfolio holdings can
affect overall performance more than if the Fund were diversified.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year by year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of investing in
the Fund. This is an historical record and does not necessarily indicate how
the Fund will perform in the future.
<TABLE>
<CAPTION>
Class A Shares*
For years ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(7.55%) 23.27% 12.45% 18.11% (6.32%) 33.44% 13.46% 37.36% 85.30% 45.47%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
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* The bar chart does not reflect sales charges. If it did, returns would be
less than those shown. For the period from December 31, 1999 through March
31, 2000, the year-to-date return for Class A Shares was (0.41)%.
During the 10-year period shown in the bar chart, the highest return for a
quarter was 51.19% (quarter ended 12/31/98) and the lowest return for a quarter
was (6.62%) (quarter ended 9/30/99).
1
<PAGE>
Average Annual Total Return (for periods ended December 31, 1999)
<TABLE>
<CAPTION>
Class A Shares(1) S&P 500(2)
----------------- ----------
<S> <C> <C>
Past One Year ............ 37.47% 21.04%
Past Five Years .......... 39.58% 28.56%
Past Ten Years ........... 22.84% 18.17%
Since Inception .......... 22.27%(1/18/84) 18.21%(3)
<CAPTION>
Class B Shares(1) S&P 500(2) Class C Shares(1) S&P 500(2)
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Past One Year ............ 37.20% 21.04% 42.89% 21.04%
Past Five Years .......... N/A N/A N/A N/A
Past Ten Years ........... N/A N/A N/A N/A
Since Inception .......... 39.63%(1/3/95) 28.51%(4) 84.14%(10/28/98) 29.87%(5)
</TABLE>
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(1) These figures assume the reinvestment of dividends and capital gains
distributions and include the impact of the current maximum sales charges,
which increased on January 18, 2000.
(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 12/31/99.
(4) For the period from 12/31/94 through 12/31/99.
(5) For the period from 10/31/98 through 12/31/99.
FEES AND EXPENSES OF THE FUND
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This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
Initial Sales Deferred Deferred
Charge Sales Charge Sales Charge
Shareholder Fees: Alternative Alternative Alternative
(fees paid directly from your investment) --------------- -------------- ----------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price) .......................................................... 5.50%* None None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, whichever is lower) ............... 1.00%* 5.00%** 1.00%***
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ............... None None None
Redemption Fee ............................................................ None None None
Exchange Fee .............................................................. None None None
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees ........................................................... 0.58% 0.58% 0.58%
Distribution and/or Service (12b-1) Fees .................................. 0.25% 0.75% 0.75%
Other Expenses (including a 0.25% shareholder servicing fee for Class B and
Class C Shares) .......................................................... 0.13% 0.38% 0.37%
------ ------ ------
Total Annual Fund Operating Expenses ...................................... 0.96% 1.71% 1.70%
====== ====== ======
</TABLE>
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* You will pay no sales charge on purchases of $1 million or more of Class A
Shares, but unless you are otherwise eligible for a sales charge waiver or
reduction, you may pay a contingent deferred sales charge when you redeem
your shares. (See "Sales Charges -- Redemption Price.")
** Contingent deferred sales charges decline over time and reach zero after
six years. After seven years, Class B Shares convert automatically to Class
A Shares. (See "Sales Charges" and "How to Choose the Class That Is Right
for You.")
*** You will be required to pay a contingent deferred sales charge if you
redeem your Class C Shares within one year after purchase. (See "Sales
Charges -- Redemption Price.")
2
<PAGE>
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.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A Shares ....................................................... $643 $839 $1,052 $1,663
Class B Shares ....................................................... $674 $839 $1,128 $1,727
Class C Shares ....................................................... $273 $536 $ 923 $2,021
You would pay the following expenses if you did not redeem your shares:
Class A Shares ....................................................... $643 $839 $1,052 $1,663
Class B Shares ....................................................... $174 $539 $ 928 $1,727
Class C Shares ....................................................... $173 $536 $ 923 $2,021
</TABLE>
Federal regulations require that the table above reflect the maximum sales
charge. However, you may qualify for reduced sales charges or no sales charge
at all. (Refer to the section on sales charges.) If you hold your shares for a
long time, the combination of the initial sales charge you paid and the
recurring 12b-1 fees may exceed the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
INVESTMENT PROGRAM
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Investment Objective, Policies, and
Risk Considerations
The Fund is designed to maximize total return. The Fund will seek to
achieve this objective through a combination of long-term growth of capital
and, to a lesser extent, current income. The Fund invests primarily in common
stocks of companies in the communications field.
The Advisors are responsible for managing the Fund's investments. (Refer
to the section on Investment Advisor and Sub-Advisor.) In selecting investments
for the Fund, the Advisors choose securities of companies that are engaged in
the research, development, manufacture, or sale of communications services,
technology, equipment, or products. The Advisors emphasize investment in
companies offering products and services that both support traditional
communications and facilitate new information based applications. They believe
that worldwide telecommunications market expansion will create new
opportunities for both established and emerging providers of telecommunications
products and services. As a result, the Advisors believe that investing in a
portfolio of common stocks of companies in the communications field offers an
attractive opportunity for maximizing total return.
An investment in the Fund involves risk. Over time, common stocks have
shown greater potential for growth than other types of securities, but in the
short run, stocks can be more volatile than other types of securities. In
general, stock prices are sensitive to developments affecting particular
companies and to general economic conditions that affect particular industry
sectors or the securities markets as a whole. No one can predict how the
markets will behave in the future. In addition, the Fund concentrates its
investments in common stocks of companies in the communications field. As a
result, market price movements, regulatory or technological changes, or
economic conditions affecting companies in this field will have a significant
impact on the Fund's performance. In addition, the Fund is non-diversified.
This means that it may invest in securities of a relatively limited number of
issuers. Thus, the performance of one or a small number of portfolio holdings
can affect overall performance more than if the Fund was diversified. There can
be no guarantee that the Fund will achieve its goals.
To reduce the Fund's risk under adverse market conditions, the Advisors
may make temporary defensive investments in money market instruments and other
investment grade income-producing securities, investments that would not
ordinarily be consistent with the Fund's objectives. While engaged in a
temporary defensive strategy, the Fund may not achieve its investment
objective. The Advisors would follow such a strategy only if they believed the
risk of loss in pursuing the Fund's primary investment strategies outweighed
the opportunity for gain.
3
<PAGE>
THE FUND'S NET ASSET VALUE
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The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. When you buy Class A Shares,
the price you pay may be increased by a sales charge. When you redeem any class
of shares, the amount you receive may be reduced by a sales charge. Read the
section on sales charges for details on how and when these charges may or may
not be imposed.
The net asset value per share of the Fund is determined at the close of
regular trading on the New York Stock Exchange on each day the Exchange is open
for business. While regular trading ordinarily closes at 4:00 p.m. Eastern
Time, it could be earlier on the day before a holiday. Contact the Transfer
Agent to determine whether the Fund will close early before a particular
holiday. The net asset value is calculated by subtracting the liabilities
attributable to a class from its proportionate share of the Fund's assets and
dividing the result by the outstanding shares of the class. Because the
different classes have different distribution or service fees, their net asset
values may differ.
In valuing the Fund's assets, its investments are priced at their market
value. When price quotes for a particular security are not readily available,
the security is priced at its "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem shares on any day the New York Stock Exchange is
open for business (a "Business Day"). If your order is entered before the net
asset value per share is determined for that day, the price you pay or receive
will be based on that day's net asset value per share. If your order is entered
after the net asset value per share is determined for that day, the price you
pay or receive will be based on the next Business Day's net asset value per
share.
The following sections describe how to buy and redeem shares.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may buy any class of the Fund's shares through your securities dealer
or through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy shares by sending your check (along with a completed
Application Form) directly to the Fund.
You may invest in Class A Shares unless you are a defined contribution
plan with assets of $75 million or more.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment may be
as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your initial
investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be as low as $250. If you participate in the
monthly plan, your subsequent investments may be as low as $100. If you
participate in the quarterly plan, your subsequent investments may be
as low as $250. Refer to the section on the Fund's Automatic Investing
Plan for details.
o There is no minimum investment requirement for qualified retirement
plans such as 401(k), pension, or profit sharing plans.
Investing Regularly
You may make regular investments in the Fund through any of the following
methods. If you wish to enroll in any of these programs or if you need any
additional information, complete the appropriate section of the Application
Form or contact your securities dealer, your servicing agent, or the Transfer
Agent.
Automatic Investing Plan. You may elect to make a regular monthly or
quarterly investment in any class of shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
money is received by
4
<PAGE>
the Transfer Agent, it will be invested in the class of shares selected at that
day's offering price. Either you or the Fund may discontinue your participation
upon 30 days' notice.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares at net
asset value. You may elect to receive your distributions in cash or to have
your distributions invested in shares of other Flag Investors funds. To make
either of these elections or to terminate automatic reinvestment, complete the
appropriate section of the Application Form or notify the Transfer Agent, your
securities dealer, or your servicing agent at least five days before the date
on which the next dividend or distribution will be paid.
Systematic Purchase Plan. You may also purchase any class of shares
through a Systematic Purchase Plan. Contact your securities dealer or servicing
agent for details.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem any class of the Fund's shares through your securities
dealer or servicing agent. Contact them for details on how to enter your order
and for information as to how you will be paid. If you have an account with the
Fund that is in your name, you may also redeem shares by contacting the
Transfer Agent by mail or (if you are redeeming less than $50,000) by
telephone. The Transfer Agent will mail your redemption check within seven days
after it receives your order in proper form. Refer to the section on telephone
transactions for more information on this method of redemption.
Your securities dealer, your servicing agent, or the Transfer Agent may
require the following documents before they redeem your shares:
1) A letter of instructions specifying your account number and the number
of shares or dollar amount you wish to redeem. The letter must be signed by all
owners of the shares exactly as their names appear on the account.
2) If you are redeeming more than $50,000, a guarantee of your signature.
You can obtain one from most banks or securities dealers.
3) Any stock certificates representing the shares you are redeeming. The
certificates must be either properly endorsed or accompanied by a duly executed
stock power.
4) Any additional documents that may be required if your account is in
the name of a corporation, partnership, trust, or fiduciary.
Other Redemption Information
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be paid to you in cash whether or not that is the payment
option you have selected.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice. The Fund reserves the right to redeem shares in kind under
certain circumstances.
If you own Fund shares having a value of at least $10,000, you may
arrange to have some of your shares redeemed monthly or quarterly under the
Fund's Systematic Withdrawal Plan. Each redemption under this plan involves all
the tax and sales charge implications normally associated with Fund
redemptions. Contact your securities dealer, your servicing agent, or the
Transfer Agent for information on this plan.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You are automatically entitled
to telephone transaction privileges, but you may specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and
5
<PAGE>
before you effect each telephone transaction. You may be required to provide
additional telecopied instructions. If these procedures are employed, neither
the Fund nor the Transfer Agent will bear any liability for following telephone
instructions that either reasonably believes to be genuine. Your telephone
transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event,
you should make your request by mail or facsimile. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
SALES CHARGES
- --------------------------------------------------------------------------------
Purchase Price
The price you pay to buy shares will be the Fund's offering price which
is calculated by adding any applicable sales charges to the net asset value per
share of the class you are buying. The amount of any sales charge included in
your purchase price will be according to the following schedule:
<TABLE>
<CAPTION>
Class A
Sales Charge
as a % of
------------------------- Class B Class C
Offering Net Amount Sales Sales
Amount of Purchase Price Invested Charge Charge
- ------------------------------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C>
Less than $ 50,000 ......... 5.50% 5.82% None None
$ 50,000 - $ 99,999 ......... 4.50% 4.71% None None
$ 100,000 - $249,999 ......... 3.50% 3.63% None None
$ 250,000 - $499,999 ......... 2.50% 2.56% None None
$ 500,000 - $999,999 ......... 2.00% 2.04% None None
$1,000,000 and over ........... None None None None
</TABLE>
Although you do not pay an initial sales charge when you invest
$1,000,000 or more in Class A Shares or when you buy any amount of Class B or
Class C Shares, you may pay a sales charge when you redeem your shares. Refer
to the section on redemption price for details. Your securities dealer may be
paid a commission at the time of your purchase.
The sales charge you pay on your current purchase of Class A Shares may
be reduced under the circumstances listed below.
Rights of Accumulation. If you are purchasing additional Class A Shares
of this Fund or Class A shares of any other Flag Investors fund or if you
already have investments in Class A shares, you may combine the value of your
purchases with the value of your existing investments to determine whether you
qualify for reduced sales charges. (For this purpose your existing investments
will be valued at the higher of cost or current value.) You may also combine
your purchases and investments with those of your spouse and your children
under the age of 21 for this purpose. You must be able to provide sufficient
information to verify that you qualify for this right of accumulation.
<PAGE>
Letter of Intent. If you anticipate making additional purchases of Class
A Shares over the next 13 months, you may combine the value of your current
purchase with the value of your anticipated purchases to determine whether you
qualify for a reduced sales charge. You will be required to sign a letter of
intent specifying the total value of your anticipated purchases and to
initially purchase at least 5% of the total. When you make each purchase during
the period, you will pay the sales charge applicable to their combined value.
If, at the end of the 13-month period, the total value of your purchases is
less than the amount you indicated, you will be required to pay the difference
between the sales charges you paid and the sales charges applicable to the
amount you actually did purchase. Some of the shares you own will be redeemed
to pay this difference.
Purchases at Net Asset Value. You may buy Class A Shares without paying a
sales charge under the following circumstances:
1) If you are reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the last 90 days.
2) If you are exchanging an investment in another Flag Investors fund for an
investment in this Fund (see "Purchases by Exchange" for a description of
the conditions).
3) If you are a current or retired Director of this or any affiliated Fund, a
director, an employee, or a member of the immediate family of an employee
of any of the following (or their respective affiliates): the Fund's
distributor, the Advisors, or a broker-dealer authorized to sell shares of
the Fund.
4) If you are buying shares in any of the following types of accounts:
(i) A qualified retirement plan;
(ii) A Flag Investors fund payroll savings plan
program;
(iii) A fiduciary or advisory account with a bank, bank trust department,
registered investment advisory company, financial planner, or
securities dealer purchasing shares on your behalf.
6
<PAGE>
To qualify for this provision, you must be paying an account
management fee for the fiduciary or advisory services. You may be
charged an additional fee by your securities dealer or servicing
agent if you buy shares in this manner.
Purchases by Exchange
You may exchange Class A, B, or C shares of any other Flag Investors fund
for an equal dollar amount of Class A, B, or C Shares, respectively, without
payment of the sales charges described above or any other charge, up to four
times a year. You may not exchange shares of a Flag Investors money market fund
unless you acquired those shares through a prior exchange from shares of
another Flag Investors Fund. You may enter both your redemption and purchase
orders on the same Business Day or, if you have already redeemed the shares of
the other fund, you may enter your purchase order within 90 days of the
redemption. The Fund may modify or terminate these offers of exchange upon 60
days' notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
Redemption Price
The amount of any sales charge deducted from your redemption price will
be determined according to the following schedule.
Sales Charge as a Percentage
of the Dollar Amount
Subject to Charge
(as % of Cost or Value)
---------------------------------------------------
Class A Shares Class B Shares Class C Shares
Years Since Purchase Sales Charge Sales Charge Sales Charge
- ---------------------------------------------------------------------------
First ................ 1.00%* 5.00% 1.00%
Second ............... 0.50%* 4.00% None
Third ................ None 3.00% None
Fourth ............... None 3.00% None
Fifth ................ None 2.00% None
Sixth ................ None 1.00% None
Thereafter ........... None None None
- ---------------------------------------------------------------------------
* You will pay a sales charge when you redeem Class A Shares only if your
shares were purchased at net asset value because they were part of an
investment of $1 million or more.
Determination of Sales Charge. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:
1) No sales charge will be applied to shares you own as a result of reinvesting
dividends or distributions.
<PAGE>
2) If you have purchased shares at various times, the sales charge will be
applied first to shares you have owned for the longest period of time.
3) If you acquired your shares through an exchange of shares of another Flag
Investors fund, the period of time you held the original shares will be
combined with the period of time you held the shares being redeemed to
determine the years since purchase. If you bought your shares prior to
January 18, 2000, you will pay the sales charge that was in effect at the
time of your original purchase.
4) The sales charge is applied to the lesser of the cost of the shares or their
value at the time of your redemption.
Waiver of Sales Charge. You may redeem shares without paying a sales
charge under any of the following circumstances:
1) If you are exchanging your shares for shares of another Flag Investors fund
of the same class.
2) If your redemption represents the minimum required distribution from an
individual retirement account or other retirement plan.
3) If your redemption represents a distribution from a Systematic Withdrawal
Plan. This waiver applies only if the annual withdrawals under your Plan
are 12% or less of your share balance.
4) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under the
following conditions:
(i) The account is registered in your name either individually, as a
joint tenant with rights of survivorship, as a participant in
community property, or as a minor child under the Uniform Gifts or
Uniform Transfers to Minors Acts.
(ii) Either you or your representative notifies your securities dealer,
servicing agent, or the Transfer Agent that such circumstances
exist.
5) If you are redeeming Class A Shares, your original investment was at least
$3,000,000, and your securities dealer has agreed to return to the Fund's
distributor any payments received when you bought your shares.
Automatic Conversion of Class B Shares. Your Class B Shares, along with
any reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares seven years after your purchase. If
you purchased your shares
7
<PAGE>
prior to January 18, 2000, your Class B Shares will be converted to Class A
Shares six years after your purchase. This conversion will be made on the basis
of the relative net asset values of the classes and will not be a taxable event
to you.
HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU
- --------------------------------------------------------------------------------
Your decision as to which class of the Fund's shares is best for you
should be based upon a number of factors including the amount of money you
intend to invest and the length of time you intend to hold your shares.
If you choose Class A Shares, you will pay a sales charge when you buy
your shares, but the amount of the charge declines as the amount of your
investment increases. You will pay lower expenses while you hold the shares
and, except in the case of investments of $1,000,000 or more, no sales charge
if you redeem them.
If you choose Class B Shares, you will pay no sales charge when you buy
your shares, but your annual expenses will be higher than Class A Shares. You
will pay a sales charge if you redeem your shares within six years of purchase,
but the amount of the charge declines the longer you hold your shares and, at
the end of seven years, your shares convert to Class A Shares, thus eliminating
the higher expenses.
If you choose Class C Shares, you will pay no sales charge when you buy
your shares or if you redeem them after holding them for at least a year. On
the other hand, expenses on Class C Shares are the same as those on Class B
Shares and, since there is no conversion to Class A Shares at the end of seven
years, the higher expenses continue for as long as you own your shares.
Your securities dealer is paid a fee when you buy shares. In addition,
your securities dealer is paid an annual fee as long as you hold your shares.
For Class A and Class B Shares, this fee begins when you purchase your shares.
For Class C Shares, this fee begins one year after you purchase your shares. In
addition to these payments, the Fund's investment advisor may provide
significant compensation to securities dealers and servicing agents for
distribution, administrative and promotional services.
Your securities dealer or servicing agent may receive different levels of
compensation depending upon which class of shares you buy.
Distribution Plans
The Fund has adopted plans under Rule 12b-1 that allow the Fund to pay
your securities dealer or shareholder servicing agent distribution and other
fees for the sale of its shares and for shareholder service. Class A Shares pay
an annual distribution fee equal to 0.25% of average daily net assets. Class B
and Class C Shares pay an annual distribution fee equal to 0.75% of average
daily net assets and an annual shareholder servicing fee equal to 0.25% of
average daily net assets. Because these fees are paid out of net assets on an
on-going basis, they will, over time, increase the cost of your investment and
may cost you more than paying other types of sales charges.
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its net investment income in the form of quarterly dividends and to distribute
net capital gains on an annual basis.
Certain Federal Income Tax Consequences
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its net income and capital
gains. The dividends and distributions you receive are subject to federal,
state and local taxation, depending upon your tax situation. The tax treatment
of dividends and distributions is the same whether or not you reinvest them.
Each sale or exchange of the Fund's shares is generally a taxable event.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state, and local income taxes.
8
<PAGE>
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICCC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the "Sub-
Advisor") is the Fund's sub-advisor. ICCC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and to Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $14 billion of net assets as of March 31, 2000. ABIM is a
registered investment advisor with approximately $11.3 billion under management
as of March 31, 2000. ABIM is a limited partnership affiliated with the
Advisor. Buppert, Behrens & Owen, Inc., a company organized and owned by three
employees of ABIM, owns a 49% limited partnership interest and a 1% general
partnership interest in ABIM. DB Alex. Brown LLC owns a 1% general partnership
interest in ABIM and DB Alex. Brown Holdings, Inc. owns the remaining 49%
limited partnership interest.
ICCC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.
As compensation for its services for the fiscal year ended December 31,
1999, ICCC received from the Fund a fee equal to 0.58% of the Fund's average
daily net assets. ICCC compensates ABIM out of its advisory fee.
The Advisor is an indirect, wholly owned subsidiary of Deutsche Bank,
A.G. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking, and insurance. The
Advisor was formerly an indirect subsidiary of Bankers Trust Corporation.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICCC became a subsidiary of Bankers Trust Corporation in a
merger that occurred after these events took place. Bankers Trust plead guilty
to misstating entries in the bank's books and records and agreed to pay a $63.5
million fine to state and federal authorities. On July 26, 1999, the federal
criminal proceedings were concluded with Bankers Trust's formal sentencing. The
events leading up to the guilty pleas did not arise out of the investment
advisory or mutual fund management activities of Bankers Trust or its
affiliates.
<PAGE>
As a result of the plea, absent an order from the SEC, ICCC and ABIM may
not be able to continue to provide advisory services to the Fund. The SEC has
granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Managers
Messrs. Bruce E. Behrens and Liam D. Burke have shared primary
responsibility for managing the Fund's assets since May 1, 1997. Prior to May
1, 1997, Mr. Behrens shared primary responsibility with Mr. Hobart C. Buppert.
Mr. Behrens, who has 32 years of investment experience, has been a Vice
President and Principal of ABIM since 1981. Prior to joining ABIM, he was a
Senior Vice President and Principal of Corbyn Associates from 1978 to 1981 and
a Vice President at Investment Counselors of Maryland from 1972 to 1978. Prior
thereto, he was a Securities Analyst at Citibank from 1968 to 1972. Mr. Behrens
received his B.A. from Denison University in 1966 and an M.B.A. from the
University of Michigan in 1968. He is a member and past president of the
Baltimore Security Analysts Society and a member of the Financial Analysts
Federation.
Mr. Burke, who has 11 years of investment experience, joined ABIM in 1994
with primary responsibility as a telecommunications analyst for the Fund. Prior
to joining ABIM, he worked as a telecommunications industry analyst at a
regional broker-dealer, Ferris, Baker, Watts, Inc. from 1992 to 1994 and as a
managing director of Frey & Co., a Baltimore-based private investment bank,
from 1989 to 1992. Mr. Burke began his professional career at AT&T and spent
eight years in positions that included operations, regional staff management,
and national account sales. He is a graduate of Georgetown University and
received his M.B.A. from The George Washington University.
9
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the
Fund's financial performance for the past five fiscal years for Class A Shares
and since the commencement of operations for Class B and Class C Shares.
Certain information reflects financial results for a single Fund share. The
total returns in the tables represent the rate that an investor would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information is part of the Fund's financial statements
which have been audited by PricewaterhouseCoopers LLP. These financial
statements are included in the Annual Report, which is available upon request.
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------
For the Year Ended December 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
year ................................... $ 34.23 $ 19.37 $ 15.59 $ 14.87 $ 12.30
----------- --------- --------- --------- ---------
Income from Investment Operations:
Net investment income ................... 0.23 0.12 0.27 0.27 0.40
Net realized and unrealized
gain on investments .................... 14.83 16.05 5.41 1.67 3.58
----------- --------- --------- --------- ---------
Total from Investment
Operations ............................. 15.06 16.17 5.68 1.94 3.98
----------- --------- --------- --------- ---------
Less Distributions:
Distributions from net
investment income and net
realized short-term gains .............. (0.33) (0.40) (0.40) (0.38) (0.41)
Distributions from net realized
long-term gains ........................ (5.31) (0.91) (1.50) (0.84) (1.00)
------------ --------- --------- --------- ---------
Total distributions ..................... (5.64) (1.31) (1.90) (1.22) (1.41)
------------ --------- --------- --------- ---------
Net asset value at end of year .......... $ 43.65 $ 34.23 $ 19.37 $ 15.59 $ 14.87
============ ========= ========= ========= =========
Total Return(1)........................... 45.47% 85.30% 37.36% 13.46% 33.44%
Ratios to Average Daily Net
Assets:
Expenses ................................ 0.96% 1.05% 1.11% 1.14% 0.93%(2)
Net investment income ................... 0.62% 0.48% 1.07% 1.74% 2.85%
Supplemental Data:
Net assets at end of year (000) ......... $ 2,115,885 $1,275,775 $ 622,865 $ 505,371 $ 492,454
Portfolio turnover rate ................. 17% 14% 26% 20% 24%
</TABLE>
- -----------
(1) Total return excludes the effect of sales charge.
(2) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 0.99% for the year ended December 31, 1995.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares
- ----------------------------------------------------------------------------------------------------------------
For the Period
January 3, 1995(1)
through
For the Year Ended December 31, December 31,
---------------------------------------------------- ---------------
1999 1998 1997 1996 1995
----------- ----------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................... $ 33.80 $ 19.22 $ 15.51 $ 14.83 $ 12.28
-------- -------- -------- ------- -------
Income from Investment
Operations:
Net investment income/(loss)....... (0.03) (0.02) 0.18 0.19 0.30
Net realized and unrealized
gain on investments .............. 14.58 15.83 5.34 1.63 3.56
-------- -------- -------- ------- -------
Total from Investment
Operations ....................... 14.55 15.81 5.52 1.82 3.86
-------- -------- -------- ------- -------
Less Distributions:
Distributions from net
investment income and net
realized short-term gains ........ (0.19) (0.32) (0.31) (0.30) (0.31)
Distributions from net realized
long-term gains .................. (5.31) (0.91) (1.50) (0.84) (1.00)
-------- -------- -------- ------- -------
Total distributions ............... (5.50) (1.23) (1.81) (1.14) (1.31)
-------- -------- -------- ------- -------
Net asset value at end of
period ........................... $ 42.85 $ 33.80 $ 19.22 $ 15.51 $ 14.83
======== ======== ======== ======= =======
Total Return(2) .................... 44.42% 83.91% 36.36% 12.60% 32.42%
Ratios to Average Daily Net
Assets:
Expenses .......................... 1.71% 1.80% 1.86% 1.92% 1.70%(3,4)
Net investment income/(loss)....... (0.15)% (0.35%) 0.29% 0.95% 2.13%(3)
Supplemental Data:
Net assets at end of period
(000) ............................ $592,520 $165,308 $ 32,474 $17,661 $ 7,504
Portfolio turnover rate ........... 17% 14% 26% 20% 24%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------
For the Period
For the Year November 1, 1998(1)
Ended December 31, through December 31,
-------------------- ---------------------
1999 1998
-------------------- ---------------------
<S> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................... $ 33.84 $ 25.50
------- -------
Income from Investment
Operations:
Net investment income/(loss)....... (0.02) (0.01)
Net realized and unrealized
gain on investments .............. 14.56 9.21
------- -------
Total from Investment
Operations ....................... 14.54 9.20
------- -------
Less Distributions:
Distributions from net
investment income and net
realized short-term gains ........ (0.19) (0.21)
Distributions from net realized
long-term gains .................. (5.31) (0.65)
------- -------
Total distributions ............... (5.50) (0.86)
------- -------
Net asset value at end of
period ........................... $ 42.88 $ 33.84
======= =======
Total Return(2) .................... 44.33% 36.70%
Ratios to Average Daily Net
Assets:
Expenses .......................... 1.70% 1.85%(3)
Net investment income/(loss)....... (0.20)% (0.61)%(3)
Supplemental Data:
Net assets at end of period
(000) ............................ $91,176 $ 3,247
Portfolio turnover rate ........... 17% 14%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.
(4) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.74% (annualized) for the period ended December
31, 1995.
11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Investment Sub-Advisor
ALEX. BROWN INVESTMENT MANAGEMENT
One South Street
Baltimore, Maryland 21202
Distributor
ICC DISTRIBUTORS, INC.
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201
Custodian
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006
Fund Counsel
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
<PAGE>
[GRAPHIC OMITTED]
Flag Investors o P.O. Box 515 o Baltimore, MD 21203 o (800) 767-FLAG
www.flaginvestors.com
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling (800)
767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-202-942-8090 to find out about the operation of the Public Reference
Room.) The EDGAR Database on the Commission's Internet site at
http://www.sec.gov has reports and other information about the Fund. Copies of
this information may be obtained, upon payment of a duplicating fee, by
electronic request at the following email address: [email protected], or by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-0102.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-3883 COMMPRS (5/00)
<PAGE>
[GRAPHIC OMITTED]
Communications Fund, Inc.
(Institutional Shares)
Prospectus
May 1, 2000
The Securities and Exchange Commission has neither approved nor disapproved
these securities nor has it passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
[GRAPHIC OMITTED]
This mutual fund (the "Fund") is designed to maximize total return.
The Fund will seek to achieve this objective through a combination of long-term
growth of capital and, to a lesser extent, current income. The Fund invests
primarily in common stocks of companies in the communications field.
The Fund offers shares through securities dealers and through financial
institutions that act as shareholder servicing agents. You may also buy shares
through the Fund's Transfer Agent. This Prospectus describes Flag Investors
Institutional Shares (the "Institutional Shares") of the Fund. Institutional
Shares may be purchased only by eligible institutions, by certain qualified
retirement plans, or by investment advisory affiliates of DB Alex. Brown LLC or
the Flag Investors family of funds on behalf of their clients.
TABLE OF CONTENTS
Investment Summary ........................................................... 1
Fees and Expenses of the
Institutional Shares ...................................................... 2
Investment Program ........................................................... 2
The Fund's Net Asset Value ................................................... 3
How to Buy Institutional Shares .............................................. 3
How to Redeem Institutional Shares ........................................... 4
Telephone Transactions ....................................................... 4
Dividends and Taxes .......................................................... 5
Investment Advisor and Sub-Advisor ........................................... 5
Financial Highlights ......................................................... 7
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
<PAGE>
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Objective and Strategies
The Fund seeks to maximize total return. The Fund will seek to achieve
this objective through a combination of long-term growth of capital and, to a
lesser extent, current income. In selecting investments, the Fund's investment
advisor and sub-advisor (the "Advisors") will choose securities of companies
that are engaged in the research, development, manufacture, or sale of
communications services, technology, equipment or products. The Advisors
emphasize both traditional communications companies and those that engage in
new information based applications. The Advisors believe that investing in a
portfolio of common stocks of companies in the communications field offers an
attractive opportunity for maximizing total return.
Risk Profile
The Fund may be suited for you if you are willing to accept the risks and
uncertainties of investing in the common stocks of companies in the
communications field in the hope of achieving above-average total return and
diversifying your investment portfolio.
General Stock Risk. The value of an investment in the Fund will vary from
day to day based on changes in the prices of the securities the Fund holds.
Those prices, in turn, reflect investor perceptions of the economy, the markets
and the companies represented in the Fund's portfolio.
Market Sector and Non-Diversification Risks. Because the Fund concentrates
its investments in the communications field, it may be affected by risks
associated with this field, such as regulatory or technological change. These
risks may result in greater fluctuations in the Fund's value than would be
experienced in less concentrated investment portfolios. In addition, the Fund
may invest in securities of a relatively limited number of issuers. As a result,
the performance of one or a small number of portfolio holdings can affect
overall performance more than if the Fund were diversified.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year by year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of investing in
the Fund. This is an historical record and does not necessarily indicate how
the Fund will perform in the future.
Institutional Shares*
For the year ended December 31, **
45.88%
1999
- -----------
* For the period from December 31, 1999 through March 31, 2000, the year-to-date
return for Institutional Shares was (0.34)%.
During the 1-year period shown in the bar chart, the highest return for a
quarter was 27.32% (quarter ended 12/31/99) and the lowest return for a quarter
was (6.55)% (quarter ended 9/30/99).
1
<PAGE>
Average Annual Total Return (for periods ended December 31, 1999)
Institutional Shares(1) S&P 500(2)
-------------------------- -----------
Past One Year ............ 45.88% 21.04%
Since Inception .......... 67.19%(6/4/98) 22.20%(3)
- ------------------------
(1) These figures assume the reinvestment of dividends and capital gains
distributions.
(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 5/31/98 through 12/31/99.
FEES AND EXPENSES OF THE INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and
hold Institutional Shares.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment):
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases ............................ None
Maximum Deferred Sales Charge (Load) ........................................ None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ................. None
Redemption Fee .............................................................. None
Exchange Fee ................................................................ None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees ............................................................. 0.58%
Distribution and/or Service (12b-1) Fees .................................... None
Other Expenses .............................................................. 0.14%
-----
Total Annual Fund Operating Expenses ........................................ 0.72%
=====
</TABLE>
Example:
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Institutional Shares
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares .......... $73 $227 $391 $851
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies, and
Risk Considerations
The Fund is designed to maximize total return. The Fund will seek to
achieve this objective through a combination of long-term growth of capital
and, to a lesser extent, current income. The Fund invests primarily in common
stocks of companies in the communications field.
The Advisors are responsible for managing the Fund's investments. (Refer
to the section on Investment Advisor and Sub-Advisor.) In selecting investments
for the Fund, the Advisors choose securities of companies that are engaged in
the research, development, manufacture, or sale of communications services,
technology, equipment or products. The Advisors emphasize investment in
companies offering products and services that both support traditional
communications and facilitate new information based applications. They believe
that worldwide telecommunications market expansion will create new
opportunities for both established and emerging providers of telecommunications
products and services. As a result, the Advisors believe that investing in a
portfolio of common stocks of companies in the communications field offers an
attractive opportunity for maximizing total return.
2
<PAGE>
An investment in the Fund involves risk. Over time, common stocks have
shown greater potential for growth than other types of securities, but in the
short run, stocks can be more volatile than other types of securities. In
general, stock prices are sensitive to developments affecting particular
companies and to general economic conditions that affect particular industry
sectors or the securities markets as a whole. No one can predict how the
markets will behave in the future. In addition, the Fund concentrates its
investments in common stocks of companies in the communications field. As a
result, market price movements, regulatory or technological changes or economic
conditions affecting companies in this field will have a significant impact on
the Fund's performance. In addition, the Fund is non-diversified. This means
that it may invest in securities of a relatively limited number of issuers.
Thus, the performance of one or a small number of portfolio holdings can affect
overall performance more than if the Fund was diversified. There can be no
guarantee that the Fund will achieve its goals.
To reduce the Fund's risk under adverse market conditions, the Advisors
may make temporary defensive investments in money market instruments and other
investment grade income-producing securities, investments that would not
ordinarily be consistent with the Fund's objectives. While engaged in a
temporary defensive strategy, the Fund may not achieve its investment
objective. The Advisors would follow such a strategy only if they believed the
risk of loss in pursuing the Fund's primary investment strategies outweighed
the opportunity for gain.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. The net asset value per share
of the Fund is determined at the close of regular trading on the New York Stock
Exchange on each day the Exchange is open for business. While regular trading
ordinarily closes at 4:00 p.m. Eastern Time, it could be earlier on a day
before a holiday. Contact the Transfer Agent to determine whether the Fund will
close early before a particular holiday. The net asset value is calculated by
subtracting the liabilities attributable to the Institutional Shares from its
proportionate share of the Fund's assets and dividing the result by the
outstanding Institutional Shares.
In valuing the Fund's assets, its investments are priced at their market
value. When price quotes for a particular security are not readily available,
the security is priced at its "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem Institutional Shares on any day the New York Stock
Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that
day, the price you pay or receive will be based on the next Business Day's net
asset value per share.
The following sections describe how to buy and redeem Institutional
Shares.
HOW TO BUY INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may buy Institutional Shares if you are any of the following:
o An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or
charitable institution or a qualified retirement plan other than a
defined contribution plan).
o A defined contribution plan with assets of at least $75 million.
o An investment advisory affiliate of DB Alex. Brown LLC or the Flag
Investors family of funds purchasing shares for the accounts of your
investment advisory clients.
You may buy Institutional Shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy Institutional Shares by sending your check (along with
a completed Application Form) directly to the Fund.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
3
<PAGE>
Investment Minimums
Your initial investment must be at least $500,000.
The following are exceptions to this minimum:
o There is no minimum initial investment for investment advisory
affiliates of DB Alex. Brown LLC or the Flag Investors family of funds
purchasing shares for the accounts of their investment advisory clients.
o There is no minimum initial investment for defined contribution plans
with assets of at least $75 million.
o The minimum initial investment for all other qualified retirement plans
is $1 million.
There are no minimums for subsequent investments.
Purchases by Exchange
You may exchange Institutional shares of any other Flag Investors fund
for an equal dollar amount of Institutional Shares of the Fund up to four times
a year. The Fund may modify or terminate this offer of exchange upon 60 days'
notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may redeem Institutional Shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid. If your shares are in an account with
the Fund, you may also redeem them by contacting the Transfer Agent by mail or
(if you are redeeming less than $500,000) by telephone. You will be paid for
redeemed shares by wire transfer of funds to your securities dealer, servicing
agent or bank upon receipt of a duly authorized redemption request as promptly
as feasible and, under most circumstances, within three Business Days.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be paid to you in cash whether or not that is the payment
option you have selected.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice. The Fund reserves the right to redeem shares in kind under
certain circumstances.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $500,000 or exchange them for Institutional shares of
another Flag Investors fund by calling the Transfer Agent on any Business Day
between the hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges but you may
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that either reasonably believes to be genuine.
Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail or facsimile. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
4
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its net investment income in the form of quarterly dividends and to distribute
net capital gains on an annual basis.
Dividend Reinvestment
Unless you elect otherwise, all income and capital gains distributions
will be reinvested in additional Fund Shares at net asset value. You may elect
to receive your distributions in cash or to have your distributions invested in
shares of other Flag Investors funds. To make either of these elections or to
terminate automatic reinvestment, complete the appropriate section of the
Application Form or notify the Transfer Agent, your securities dealer, or your
servicing agent at least five days before the date on which the next dividend
or distribution will be paid.
Certain Federal Income Tax Consequences
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its net income and capital
gains. The dividends and distributions you receive are subject to federal,
state and local taxation, depending upon your tax situation. The tax treatment
of dividends and distributions is the same whether or not you reinvest them.
Each sale or exchange of the Fund's shares is generally a taxable event.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state, and local income taxes.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICCC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the
"Sub-Advisor") is the Fund's sub-advisor. ICCC is also the investment advisor
to other mutual funds in the Flag Investors family of funds and to Deutsche
Banc Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund,
had approximately $14 billion of net assets as of March 31, 2000. ABIM is a
registered investment advisor with approximately $11.3 billion under management
as of March 31, 2000. ABIM is a limited partnership affiliated with the
Advisor. Buppert, Behrens & Owen, Inc., a company organized and owned by three
employees of ABIM, owns a 49% limited partnership interest and a 1% general
partnership interest in ABIM. DB Alex. Brown LLC owns a 1% general partnership
interest in ABIM and DB Alex. Brown Holdings, Inc. owns the remaining 49%
limited partnership interest.
ICCC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.
As compensation for its services for the fiscal year ended December 31,
1999, ICCC received from the Fund a fee equal to 0.58% of the Fund's average
daily net assets. ICCC compensates ABIM out of its advisory fee. ICCC also may
provide significant compensation to securities dealers and servicing agents for
distribution, administrative and promotional services.
The Advisor is an indirect, wholly owned subsidiary of Deutsche Bank,
A.G. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking, and insurance. The
Advisor was formerly an indirect subsidiary of Bankers Trust Corporation.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICCC became a subsidiary of Bankers Trust Corporation in a
merger that occurred after these events took place. Bankers Trust plead guilty
to misstating entries in
5
<PAGE>
the bank's books and records and agreed to pay a $63.5 million fine to state
and federal authorities. On July 26, 1999, the federal criminal proceedings
were concluded with Bankers Trust's formal sentencing. The events leading up to
the guilty pleas did not arise out of the investment advisory or mutual fund
management activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICCC and ABIM may
not be able to continue to provide advisory services to the Fund. The SEC has
granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Managers
Messrs. Bruce E. Behrens and Liam D. Burke have shared primary
responsibility for managing the Fund's assets since May 1, 1997. From the
Fund's inception to May 1, 1997, Mr. Behrens shared primary responsibility with
Mr. Hobart C. Buppert.
Mr. Behrens, who has 32 years of investment experience, has been a Vice
President and Principal of ABIM since 1981. Prior to joining ABIM, he was a
Senior Vice President and Principal of Corbyn Associates from 1978 to 1981 and
a Vice President at Investment Counselors of Maryland from 1972 to 1978. Prior
thereto, he was a Securities Analyst at Citibank from 1968 to 1972. Mr. Behrens
received his B.A. from Denison University in 1966 and an M.B.A. from the
University of Michigan in 1968. He is a member and past president of the
Baltimore Security Analysts Society and a member of the Financial Analysts
Federation.
Mr. Burke, who has 11 years of investment experience, joined ABIM in 1994
with primary responsibility as a telecommunications analyst for the Fund. Prior
to joining ABIM, he worked as a telecommunications industry analyst at a
regional broker-dealer, Ferris, Baker, Watts, Inc. from 1992 to 1994 and as a
managing director of Frey & Co., a Baltimore-based private investment bank,
from 1989 to 1992. Mr. Burke began his professional career at AT&T and spent
eight years in positions that included operations, regional staff management
and national account sales. He is a graduate of Georgetown University and
received his M.B.A. from The George Washington University.
6
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Fund's financial performance since it began operations. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information is part of the Fund's financial statements which have been audited
by PricewaterhouseCoopers LLP. These financial statements are included in the
Annual Report, which is available upon request.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Shares
--------------------------------
For the Period
For the Year June 4, 1998(1)
Ended through
December 31, December 31,
------------- --------------
1999 1998
------------- --------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............................. $ 34.27 $ 23.26
------- -------
Income from Investment Operations:
Net investment income .............................................. 0.27 0.06
Net realized and unrealized gain on investments .................... 14.93 12.17
------- -------
Total from Investment Operations ................................... 15.20 12.23
------- -------
Less Distributions:
Distributions from net investment income and net realized short-term
gains ............................................................ ( 0.40) ( 0.31)
Distributions from net realized long-term gains .................... ( 5.31) ( 0.91)
------- -------
Total distributions ................................................ ( 5.71) ( 1.22)
------- -------
Net asset value at end of period ................................... $ 43.76 $ 34.27
======= =======
Total Return ........................................................ 45.89% 53.95%
Ratios to Average Daily Net Assets:
Expenses ........................................................... 0.72% 0.83%(2)
Net investment income .............................................. 0.86% 0.49%(2)
Supplemental Data:
Net assets at end of period (000) .................................. $28,153 $ 813
Portfolio turnover rate ............................................ 17% 14%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Annualized.
7
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Investment Sub-Advisor
ALEX. BROWN INVESTMENT MANAGEMENT
One South Street
Baltimore, Maryland 21202
Distributor
ICC DISTRIBUTORS, INC.
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201
Custodian
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006
Fund Counsel
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
<PAGE>
[GRAPHIC OMITTED]
Flag Investors o P.O. Box 515 o Baltimore, MD 21203 o (800) 767-FLAG
www.flaginvestors.com
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling (800)
767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-202-942-8090 to find out about the operation of the Public Reference
Room.) The EDGAR Database on the Commission's Internet site at
http://www.sec.gov has reports and other information about the Fund. Copies of
this information may be obtained, upon payment of a duplicating fee, by
electronic request at the following email address: [email protected], or by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-0102.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-3883 COMMIPRS (5/00)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------
FLAG INVESTORS COMMUNICATIONS FUND, INC.
One South Street
Baltimore, Maryland 21202
--------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS. IT SHOULD BE READ IN
CONJUNCTION WITH A PROSPECTUS. THE AUDITED
FINANCIAL STATEMENTS FOR THE FUND ARE INCLUDED
IN THE FUND'S ANNUAL REPORT, WHICH HAS BEEN
FILED ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION AND IS
INCORPORATED BY REFERENCE INTO THIS
STATEMENT OF ADDITIONAL INFORMATION. A COPY OF
EACH PROSPECTUS AND THE ANNUAL REPORT MAY BE OBTAINED
WITHOUT CHARGE FROM YOUR SECURITIES DEALER OR
SHAREHOLDER SERVICING AGENT OR BY WRITING
OR CALLING THE FUND, ONE SOUTH STREET,
BALTIMORE, MARYLAND 21202, (800) 767-FLAG.
Statement of Additional Information Dated May 1, 2000,
relating to the Prospectuses Dated May 1, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
GENERAL INFORMATION AND HISTORY.......................................1
INVESTMENT OBJECTIVE AND POLICIES.....................................1
VALUATION OF SHARES AND REDEMPTION....................................6
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS..................7
MANAGEMENT OF THE FUND...............................................10
INVESTMENT ADVISORY AND OTHER SERVICES...............................17
DISTRIBUTION OF FUND SHARES..........................................18
BROKERAGE............................................................22
CAPITAL STOCK........................................................24
SEMI-ANNUAL REPORTS..................................................24
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES....................25
INDEPENDENT ACCOUNTANTS..............................................25
LEGAL MATTERS........................................................25
PERFORMANCE INFORMATION..............................................25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................27
FINANCIAL STATEMENTS.................................................28
APPENDIX A.................................................................29
<PAGE>
GENERAL INFORMATION AND HISTORY
Flag Investors Communications Fund, Inc. (the "Fund") is an open-end
management investment company that was originally designed to provide both
convenience and professional investment management to shareholders of the former
American Telephone and Telegraph Company ("AT&T") after AT&T's divestiture and
reorganization in January 1984. Prior to May 1, 1998 the Fund was known as the
Flag Investors Telephone Income Fund, Inc.
The Fund currently offers four classes of shares: Flag Investors
Communications Fund Class A Shares ("Class A Shares"), Flag Investors
Communications Fund Class B Shares ("Class B Shares"), Flag Investors
Communications Fund Class C Shares ("Class C Shares") and Flag Investors
Communications Fund Institutional Shares ("Institutional Shares") (collectively,
the "Shares"). As used herein, the "Fund" refers to Flag Investors
Communications Fund, Inc. and specific references to any class of the Fund's
shares will be made using the name of such class.
Important information concerning the Fund is included in the Fund's
Prospectuses, which may be obtained without charge from the Fund, the Fund's
distributor (the "Distributor") or from Participating Dealers that offer Shares
to prospective investors. Some of the information required to be in this
Statement of Additional Information is also included in the Fund's current
Prospectuses. To avoid unnecessary repetition, references are made to related
sections of the Prospectuses. In addition, the Prospectuses and this Statement
of Additional Information omit certain information about the Fund and its
business that is contained in the Registration Statement for the Fund and its
Shares filed with the Securities and Exchange Commission (the "SEC"). Copies of
the Registration Statement as filed, including such omitted items, may be
obtained from the SEC by paying the charges prescribed under its rules and
regulations.
The Fund was organized as a Maryland corporation on October 18, 1983
and began operations on January 18, 1984. On May 20, 1985, the Fund reorganized
as a Massachusetts business trust and on January 19, 1989, it reorganized as a
Maryland corporation pursuant to an Agreement and Plan of Reorganization and
Liquidation approved by shareholders on December 6, 1988. The Fund began
offering the Class B Shares on January 3, 1995, the Institutional Shares on
February 26, 1998 and the Class C Shares on October 19, 1998.
Under a license agreement dated January 19, 1989 between the Fund and
Alex. Brown & Sons Incorporated (predecessor to DB Alex. Brown LLC) ("DB Alex.
Brown"), Alex. Brown & Sons Incorporated licenses to the Fund the "Flag
Investors" name and logo but retains rights to the name and logo, including the
right to permit other investment companies to use them.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize total return. The Fund
will seek to achieve this objective through a combination of long-term growth of
capital and, to a lesser extent, current income. In seeking this objective, the
Fund invests primarily in common stock, securities convertible thereto and debt
obligations of companies in the communications field. For this purpose,
companies would be considered to be in the "communications field" if they were
engaged in the research, development, manufacture or sale of communications
services, technology, equipment or products. Companies would be considered to be
"engaged" in the research, development, manufacture or sale of communications
services, technology, equipment or products if they derived at least 50% of
their revenues from such activities.
-1-
<PAGE>
The Fund's investment advisor (the "Advisor") and sub-advisor (the
"Sub-Advisor"), collectively, (the "Advisors"), believe that investing in a
portfolio of securities of companies in the communications field affords an
attractive opportunity for achieving this investment objective. Effective
communication through the transmission of voice, pictures and data is becoming
increasingly important and the communications field now embraces a wide variety
of products and services, such as local and long distance telephone service,
wireless service (e.g., cellular telephone or paging services), video,
telecommunications equipment, media, and information technology. Information
technology combines data processing and telecommunications to support more
efficient and economical business processes and consumer activities. The rapidly
improving performance and declining cost of transmission have helped the global
expansion of information technology. For example, businesses have an increasing
need to connect to remote users such as employees, suppliers and customers.
Customers are increasingly relying on telephone-based applications like on-line
banking and shopping to save time and money. Worldwide telecommunications market
expansion will create opportunities for established and emerging providers of
telecommunications products and services. Although new, high growth technologies
are being adopted at an increasing rate, commercial acceptance still lags the
introduction of new products and services. Traditional communications companies,
such as telephone companies, are positioned to serve the existing and developing
needs of their customer base with a combination of current and new offerings.
Evolving user requirements have also led to the development of separate industry
segments, outside the local telephone and long distance businesses, which enable
non-traditional telecommunications providers a chance to benefit from the
growing worldwide demand for voice, data and video services.
There can be no assurance that the Fund's investment objective will be
achieved. The Fund's investment objective may not be changed by the Board of
Directors without shareholder approval.
Under normal market conditions at least 65% of the Fund's total assets
will be invested in common stock, securities convertible thereto and debt
obligations of companies in the communications field, as defined above.
Depending on the circumstances, the Fund may temporarily and for defensive
purposes invest up to 100% of its net assets in money market instruments and in
other income-producing securities.
Investments in Investment Grade Securities
In general, the Fund will invest in investment grade debt obligations
that are rated, at the time of purchase, BBB or higher by Standard and Poor's
Ratings Group ("S&P") or Baa or higher by Moody's Investors Service, Inc.
("Moody's"), or, if unrated, determined to be of comparable quality by the
Fund's investment advisors, under criteria approved by the Fund's Board of
Directors. Investment grade securities (securities rated BBB or higher by S&P or
Baa or higher by Moody's) are generally thought to provide the highest credit
quality and the smallest risk of default. Securities rated BBB by S&P or Baa by
Moody's have speculative characteristics. Up to 10% of the Fund's total assets
(measured at the time of the investment) may be invested in lower quality debt
obligations (securities rated BB or lower by S&P or Ba or lower by Moody's and
unrated securities of comparable quality). Securities that were investment grade
at the time of purchase but are subsequently downgraded to BB/Ba or lower will
be included in the 10% category. In the event any security owned by the Fund is
downgraded, the Advisors will review the situation and take appropriate action,
but will not be automatically required to sell the security. If such a downgrade
causes the 10% limit to be exceeded, the Fund will be precluded from investing
further in debt obligations that are below investment grade. (See "Investments
in Non-investment Grade Securities" below.)
-2-
<PAGE>
Below Investment Grade Securities
The Fund may purchase debt obligations that carry ratings lower than
those assigned to investment grade bonds by Moody's or S&P, or that are unrated
if such bonds, in the Advisors' judgment, meet the quality criteria established
by the Board of Directors. These bonds are generally known as "junk bonds."
These securities may trade at substantial discounts from their face values.
Accordingly, if the Fund is successful in meeting its objectives, investors may
receive a total return consisting of both income and capital gains. Appendix A
to this Statement of Additional Information sets forth a description of the S&P
and Moody's rating categories, which indicate the rating agency's opinion as to
the probability of timely payment of interest and principal. These ratings range
in descending order of quality from AAA to D (though the Fund will not purchase
securities rated, at the time of purchase, below C), in the case of S&P, and
from Aaa to C, in the case of Moody's.
Ratings of S&P and Moody's represent their opinions of the quality of
bonds and other debt securities they undertake to rate at the time of issuance.
However, these ratings are not absolute standards of quality and may not reflect
changes in an issuer's creditworthiness. Accordingly, the Advisors do not rely
exclusively on ratings issued by S&P or Moody's in selecting portfolio
securities but supplement such ratings with independent and ongoing review of
credit quality. In addition, the total return the Fund may earn from investments
in high-yield securities will be significantly affected not only by credit
quality but also by fluctuations in the markets in which such securities are
traded. Accordingly, selection and supervision by the Advisors of investments in
lower rated securities involves continuous analysis of individual issuers,
general business conditions, activities in the high-yield bond market and other
factors. The analysis of issuers may include, among other things, historic and
current financial conditions, strength of management, responsiveness to business
conditions, credit standing and current and anticipated results of operations.
Analysis of general business conditions and other factors may include
anticipated changes in economic activity in interest rates, the availability of
new investment opportunities and the economic outlook for specific industries.
Investing in higher yield, lower rated bonds entails substantially
greater risk than investing in investment grade bonds, including not only credit
risk, but potentially greater market volatility and lower liquidity. Yields and
market values of high-yield bonds will fluctuate over time, reflecting not only
changing interest rates but also the bond market's perception of credit quality
and the outlook for economic growth. When economic conditions appear to be
deteriorating, lower rated bonds may decline in value due to heightened concern
over credit quality, regardless of prevailing interest rates. In addition,
adverse economic developments could disrupt the high-yield market, affecting
both price and liquidity, and could also affect the ability of issuers to repay
principal and interest, thereby leading to a default rate higher than has been
the case historically. Even under normal conditions, the market for junk bonds
may be less liquid than the market for investment grade corporate bonds. There
are fewer securities dealers in the high-yield market and purchasers of
high-yield bonds are concentrated among a smaller group of securities dealers
and institutional investors. In periods of reduced market liquidity, the market
for junk bonds may become more volatile and there may be significant disparities
in the prices quoted for high-yield securities by various dealers. Under
conditions of increased volatility and reduced liquidity, it would become more
difficult for the Fund to value its portfolio securities accurately because
there might be less reliable objective data available.
Investment in Securities of Foreign Issuers
From time to time, the Fund may invest in American Depositary Receipts
("ADRs"), which are interests in securities of foreign companies, and up to 10%
of the Fund's total assets in debt and equity securities of issuers not publicly
traded in the United States, when the Advisors believe that such investments
provide good opportunities for achieving income and capital gains without undue
risk.
-3-
<PAGE>
Restricted Securities
The Fund may invest in securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, as amended ("Rule 144A Securities") that
have been determined to be liquid by the Advisors under standards approved by
the Fund's Board of Directors, and may invest up to 10% of its net assets in
Rule 144A Securities that are illiquid (see "Investment Restrictions" ). Rule
144A Securities may become illiquid if qualified institutional buyers are not
interested in acquiring the securities.
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic banks or
broker-dealers deemed to be creditworthy by the Advisors. A repurchase agreement
is a short-term investment in which the Fund acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the Fund's holding period. The value of underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. The Fund makes payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of a custodian or bank acting as agent. The underlying
securities, which in the case of the Fund are securities of the U.S. Government
only, may have maturity dates exceeding one year. The Fund does not bear the
risk of a decline in value of the underlying securities unless the seller
defaults under its repurchase obligation. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and loss including (a) possible
decline in the value of the underlying security while the Fund seeks to enforce
its rights thereto, (b) possible subnormal levels of income and lack of access
to income during this period, and (c) expenses of enforcing its rights.
Lending of Portfolio Securities
The Fund may lend its investment securities to approved institutional
borrowers who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Fund attempts to increase its net investment income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would belong to
the Fund. The Fund may lend its investment securities so long as the terms,
structure and the aggregate amount of such loans are not inconsistent with the
Investment Company Act of 1940, as amended (the "1940 Act") or the Rules and
Regulations or interpretations of the SEC thereunder, which currently require
that (a) the borrower pledge and maintain with the Fund collateral consisting of
liquid, unencumbered assets having a value at all times not less than 100% of
the value of the securities loaned, (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the borrower "marks to
the market" on a daily basis), (c) the loan be made subject to termination by
the Fund at any time, and (d) the Fund receive reasonable interest on the loan
(which may include the Fund investing any cash collateral in interest bearing
short-term investments), and distributions on the loaned securities and any
increase in their market value. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the Advisors to be of good standing and when, in the judgment of the
Advisors, the consideration that can be earned from such securities loans
justifies the attendant risk. All relevant facts and circumstances, including
the creditworthiness of the borrower, will be considered in making decisions
with respect to the lending of securities, subject to review by the Board of
Directors of the Fund.
At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.
-4-
<PAGE>
Covered Call Options
In an attempt to earn additional income, and as a means of protecting
the Fund's assets against market declines, the Fund may, to a limited extent,
write covered call option contracts on certain of its securities and purchase
call options for the purpose of eliminating outstanding contracts.
When the Fund writes a call option on securities that it owns, it gives
the purchaser of the option the right to buy the securities at the price
specified in the option (the "Exercise Price") at any time prior to the
expiration of the option. In the strategy to be employed by the Fund, the
Exercise Price, plus the option premium paid by the purchaser, is almost always
greater than the market price of the underlying security at the time the option
is written. If any option is exercised, the Fund will realize the long-term or
short-term gain or loss from the sale of the underlying security and the
proceeds of the sale will be increased by the net premium originally received.
By writing a covered option, the Fund may forego, in exchange for the net
premium, the opportunity to profit from an increase in value of the underlying
security above the Exercise Price. Thus, options will be written when the
Advisors believe the security should be held for the long term but expect no
appreciation or only moderate appreciation within the option period. The Fund
also may write covered options on securities that have a current value above the
original purchase price but which, if then sold, would not normally qualify for
a long-term capital gains treatment. Such activities will normally take place
during periods when market volatility is expected to be high.
Only call options that are traded on a national securities exchange
will be written. Call options are issued by the Options Clearing Corporation,
which also serves as the clearinghouse for transactions with respect to options.
The price of a call option is paid to the writer without refund on expiration or
exercise, and no portion of the price is retained by The Options Clearing
Corporation or the exchanges. Writers and purchasers of options pay the
transaction costs, which may include commissions charged or incurred in
connection with such option transactions.
The Fund may write options contracts on its securities up to 20% of the
value of its net assets at the time such options are written. The Fund will not
sell the securities against which options have been written (uncover the
options) until after the option period has expired, the option has been
exercised or a closing purchase has been executed.
Call options may be purchased by the Fund, but only to terminate an
obligation as a writer of a call option. This is accomplished by making a
closing purchase transaction, that is, the purchase of a call option on the same
security with the same Exercise Price and expiration date as specified in the
existing call option. A closing purchase transaction with respect to calls
traded on a national securities exchange has the effect of extinguishing the
obligation of a writer. Although the cost to the Fund of such a transaction may
be greater than the net premium received by the Fund upon writing the original
option, the Board of Directors believes that it is appropriate for the Fund to
have the ability to make closing purchase transactions in order to prevent its
portfolio securities from being purchased pursuant to the exercise of a call.
The Advisors may also permit the call option to be exercised. A profit or loss
from a closing purchase transaction will be realized depending on whether the
amount paid to purchase a call to close a position is less or more than the
amount received from writing the call. A profit or loss from an option exercised
will be realized depending upon whether the cost of the stock sold through the
exercise, minus the premium received on the option, is less or more than the
proceeds of the exercise.
-5-
<PAGE>
Investment Restrictions
The Fund's investment program is subject to a number of investment
restrictions that reflect self-imposed standards as well as federal and state
regulatory limitations. The investment restrictions recited below are in
addition to those described in the Fund's Prospectus, and are matters of
fundamental policy and may not be changed without the affirmative vote of a
majority of outstanding shares. The percentage limitations contained in these
restrictions apply at the time of purchase of securities. The Fund will not:
1) Invest less than 65% of its total assets in the communications field,
except as described in the Prospectus, (otherwise the Fund will not
concentrate more than 25% of its total assets in securities of issuers in
any industry);
2) Invest in the securities of any single issuer if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of such
issuer;
3) Borrow money, except as a temporary measure for extraordinary or emergency
purposes in an amount not exceeding 10% of the value of the total assets of
the Fund at the time of such borrowing;
4) Invest in real estate or mortgages on real estate;
5) Purchase or sell commodities or commodities contracts, provided that the
Fund may invest in financial futures and options on such futures;
6) Act as an underwriter of securities within the meaning of the U.S. federal
securities laws except insofar as it might be deemed to be an underwriter
upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities;
7) Issue senior securities; or
8) Make loans, except that the Fund may purchase or hold debt instruments in
accordance with its investment objectives and policies, and may loan
portfolio securities and enter into repurchase agreements as described in
this Registration Statement.
The following investment restrictions may be changed by a vote of the
majority of the Board of Directors. The Fund will not:
1) Invest in shares of any other investment company registered under the 1940
Act, except as permitted by federal law; and
2) Invest more than 10% of the value of its net assets in illiquid securities
(as defined under federal and state securities laws).
-6-
<PAGE>
VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined daily as of the close of
the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time) each
day on which the New York Stock Exchange is open for business (a "Business
Day"). The New York Stock Exchange is open for business on all weekdays except
for the following holidays (or the days on which they are observed): New Year's
Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund may enter into agreements that allow a third party, as agent
for the Fund, to accept orders from its customers up until the Fund's close of
business which is ordinarily 4:00 p.m. (Eastern Time). So long as a third party
receives an order prior to the Fund's close of business, the order is deemed to
have been received by the Fund and, accordingly, may receive the net asset value
computed at the close of business that day. These "late day" agreements are
intended to permit shareholders placing orders with third parties to place
orders up to the same time as other shareholders.
Redemption
The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC so that valuation of the net assets of the Fund is not
reasonably practicable.
Under normal circumstances, the Fund will redeem Shares by check or by
wire transfer of funds, as described in the Prospectuses. However, if the Board
of Directors determines that it would be in the best interests of the remaining
shareholders, the Fund will make payment of the redemption price in whole or in
part by a distribution of readily marketable securities from the portfolio of
the Fund in lieu of cash, in conformity with applicable rules of the SEC. If
Shares are redeemed in kind, the redeeming shareholder will incur brokerage
costs in later converting the assets into cash. The method of valuing portfolio
securities is described under "Valuation of Shares," and such valuation will be
made as of the same time the redemption price is determined. The Fund, however,
has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which it
is obligated to redeem Shares solely in cash up to the lesser of $250,000 or 1%
of its net asset value during any 90-day period for any one shareholder.
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional federal income
tax considerations generally affecting the Fund and its shareholders that are
not described in the Fund's Prospectuses. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or its shareholders, and
the discussion here and in the Fund's Prospectuses is not intended as a
substitute for careful tax planning. For example, under certain specified
circumstances, state income tax laws may exempt from taxation distributions of a
regulated investment company to the extent that such distributions are derived
from interest on federal obligations. Investors are urged to consult with their
tax advisor regarding whether such exemption is available.
-7-
<PAGE>
The following general discussion of certain federal income tax
consequences is based on the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
Qualification as a Regulated Investment Company
The Fund intends to qualify and elect to be treated for each taxable
year as a regulated investment company ("RIC") under Subchapter M of the Code.
Accordingly, the Fund must, among other things, (a) derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, and certain other related income, including,
generally, certain gains from options, futures and forward contracts; and (b)
diversify its holdings so that, at the end of each fiscal quarter of the Fund's
taxable year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash and cash items, United States Government securities,
securities of other RICs, and other securities, with such other securities
limited, in respect to any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets or 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities (other than United States Government securities or
securities of other RICs) of any one issuer or two or more issuers that the Fund
controls and which are engaged in the same, similar, or related trades or
business. For purposes of the 90% gross income requirement described above,
foreign currency gains that are not directly related to the Fund's principal
business of investing in stock or securities (or options or futures with respect
to stock or securities) may be excluded from income that qualifies under the 90%
requirement.
In addition to the requirements described previously, in order to
qualify as a RIC, the Fund must distribute at least 90% of its investment
company taxable income (that generally includes dividends, taxable interest, and
the excess of net short-term capital gains over net long-term capital losses
less operating expenses, but determined without regard to the deduction for
dividends paid) and at least 90% of its net tax-exempt interest income, for each
tax year, if any, to its shareholders. If the Fund meets all of the RIC
requirements, it will not be subject to federal income tax on any of its net
investment income or capital gains that it distributes to shareholders.
Although the Fund intends to distribute substantially all of its net
investment income and may distribute its capital gains for any taxable year, the
Fund will be subject to federal income taxation to the extent any such income or
gains are not distributed.
If the Fund fails to qualify for any taxable year as a RIC, all of its
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders, and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
the Fund's current and accumulated earnings and profits. In this event, such
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
Fund Distributions
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year.
-8-
<PAGE>
The Fund may either retain or distribute to shareholders its excess of
net long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders that are individuals at a maximum rate of 20%,
regardless of the length of time the shareholder has held Shares. If any such
gains are retained, the Fund will pay federal income tax thereon, and, if the
Fund makes an election, the shareholders will include such undistributed gains
in their income, will increase their basis in Fund shares by the difference
between the amount of such includable gains and the tax deemed paid by such
shareholder and will be able to claim their share of the tax paid by the Fund as
a refundable credit.
In the case of corporate shareholders, Fund distributions (other than
capital gains distributions) generally qualify for the dividends-received
deduction to the extent of the gross amount of qualifying dividends received by
the Fund for the year. Generally, and subject to certain limitations, a dividend
will be treated as a qualifying dividend if it has been received from a domestic
corporation. Accordingly, distributions from the Fund will qualify for the
corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the
year of payment. However, dividends declared payable to shareholders of record
in December of one year, but paid in January of the following year, will be
deemed for tax purposes to have been received by the shareholder and paid by the
Fund in the year in which the dividends were declared.
Investors should be careful to consider the tax implications of
purchasing Shares just prior to the ex-dividend date of any ordinary income
dividend or capital gains distribution. Those investors will be taxable on the
entire amount of the dividend or distribution received, even though some or all
of the amount distributed may have been realized by the Fund prior to the
investor's purchase.
The Fund will provide an annual statement to shareholders describing
the federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year, including the amount of dividends eligible for the corporate
dividends-received deduction.
Sale or Exchange of Fund Shares
The sale or exchange of a share is a taxable event for the shareholder.
Generally, gain or loss on the sale or exchange of a Share will be capital gain
or loss that will be long-term if the Share has been held for more than twelve
months and otherwise will be short-term. For individuals, long-term capital
gains are currently taxed at a rate of 20% and short-term capital gains are
currently taxed at ordinary income tax rates. However, if a shareholder realizes
a loss on the sale, exchange or redemption of a Share held for six months or
less and has previously received a capital gains distribution with respect to
the Share (or any undistributed net capital gains of the Fund with respect to
such Share are included in determining the shareholder's long-term capital
gains), the shareholder must treat the loss as a long-term capital loss to the
extent of the amount of the prior capital gains distribution (or any
undistributed net capital gains of the Fund that have been included in
determining such shareholder's long-term capital gains). In addition, any loss
realized on a sale or other disposition of Shares will be disallowed to the
extent an investor repurchases (or enters into a contract or option to
repurchase) Shares within a period of 61 days (beginning 30 days before and
ending 30 days after the disposition of the Shares). This loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.
In certain cases, the Fund will be required to withhold and remit to
the United States Treasury 31% of distributions payable to any shareholder who
(1) has failed to provide a correct tax identification number, (2) is subject to
backup withholding by the Internal Revenue Service for failure to properly
report receipt of interest or dividends, or (3) has failed to certify to the
Fund that such shareholder is not subject to backup withholding.
-9-
<PAGE>
Federal Excise Tax; Miscellaneous Considerations; Effect of Future Legislation
If the Fund fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term capital gains over short and long term capital losses)
for the one-year period ending on October 31 of that year (and any retained
amount from the prior calendar year), the Fund will be subject to a
nondeductible 4% Federal excise tax on the undistributed amounts. The Fund
intends to make sufficient distributions to avoid imposition of this tax, or to
retain, at most, its net capital gains and pay tax thereon.
State and Local Tax Considerations
Rules of state and local taxation of dividend and capital gains
distributions from regulated investment companies often differ from the rules
for federal income taxation described above. Shareholders are urged to consult
their tax advisors as to the consequences of these and other state and local tax
rules affecting an investment in the Fund.
MANAGEMENT OF THE FUND
Directors and Officers
The Fund's Board of Directors manages the Fund's overall business and
affairs. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its Advisors, Distributor, custodian and transfer agent.
The Directors and executive officers of the Fund, their respective
dates of birth and their principal occupations during the last five years are
set forth below. Unless otherwise indicated, the address of each Director and
executive officer is One South Street, Baltimore, Maryland 21202.
*TRUMAN T. SEMANS, Chairman and Director (10/27/26)
Brown Investment Advisory & Trust Company, 19 South Street, Baltimore,
Maryland 21202. Vice Chairman, Brown Investment Advisory & Trust
Company (formerly, Alex. Brown Capital Advisory & Trust Company);
Director, Investment Company Capital Corp. (registered investment
advisor) and Director and President of Virginia Hot Springs Inc.
(property management). Formerly, Managing Director and Vice Chairman,
Alex. Brown & Sons Incorporated (now DB Alex. Brown LLC) and Director,
ISI Family of Funds (registered investment companies).
RICHARD R. BURT, Director (2/3/47)
IEP Advisors, LLP, 1275 Pennsylvania Avenue, NW, 10th Floor,
Washington, DC 20004. Chairman, IEP Advisors, Inc.; Chairman of the
Board, Weirton Steel Corporation; Member of the Board, Archer Daniels
Midland Company (agribusiness operations), Hollinger International,
Inc. (publishing), Homestake Mining (mining and exploration), HCL
Technologies (information technology) and Anchor Technologies (gaming
software and equipment); Director, Mitchell Hutchins family of funds
(registered investment companies); and Member, Textron Corporation
International Advisory Council. Formerly, partner, McKinsey & Company
(consulting), 1991-1994; U.S. Chief Negotiator in Strategic Arms
Reduction Talks (START) with former Soviet Union and U.S. Ambassador to
the Federal Republic of Germany, 1985-1991.
*RICHARD T. HALE, Director (7/17/45)
Managing Director, DB Alex. Brown LLC (formerly BT Alex. Brown
Incorporated); Director and President, Investment Company Capital Corp.
(registered investment advisor). Director or President, Deutsche Asset
Management Mutual Funds (registered investment companies). Chartered
Financial Analyst. Formerly, Director, ISI Family of Funds (registered
investment companies).
-10-
<PAGE>
JOSEPH R. HARDIMAN, Director (5/27/37)
8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor
and Capital Markets Consultant; Director, Wit Capital Group (registered
broker-dealer), The Nevis Fund (registered investment company), and ISI
Family of Funds (registered investment companies). Formerly, Director,
Circon Corp. (medical instruments), November 1998-January 1999;
President and Chief Executive Officer, The National Association of
Securities Dealers, Inc. and The NASDAQ Stock Market, Inc., 1987-1997;
Chief Operating Officer of Alex. Brown & Sons Incorporated (now DB
Alex. Brown LLC), 1985-1987; General Partner, Alex. Brown & Sons
Incorporated (now DB Alex. Brown LLC), 1976-1985.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director,
Kimberly-Clark Corporation (personal consumer products), Household
International (banking and finance) and ISI Family of Funds (registered
investment companies). Formerly, Chairman of the Quality Control
Inquiry Committee, American Institute of Certified Public Accountants,
1992-1998, Trustee, Merrill Lynch Funds for Institutions, 1991-1993;
Adjunct Professor, Columbia University-Graduate School of Business,
1991-1992; and Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705. President, Duke Management
Company (investments); Executive Vice President, Duke University
(education, research and health care); Executive Vice Chairman and
Director, Central Carolina Bank & Trust (banking) and Director, Victory
Funds (registered investment companies). Formerly, Director AMBAC
Treasurers Trust (registered investment company), DP Mann Holdings
(insurance) and ISI Family of Funds (registered investment companies).
REBECCA W. RIMEL, Director (4/10/51)
The Pew Charitable Trusts, One Commerce Square, 2005 Market Street,
Suite 1700, Philadelphia, Pennsylvania 19103-7017. President and Chief
Executive Officer, The Pew Charitable Trusts (charitable foundation);
Director and Executive Vice President, The Glenmede Trust Company
(investment trust and wealth management). Formerly, Executive Director,
The Pew Charitable Trusts and Director, ISI Family of Funds (registered
investment companies).
ROBERT H. WADSWORTH, Director (1/29/40)
4455 E. Camelback Road, Suite 261 E., Phoenix, Arizona 85018.
President, Director, Investment Company Administration LLC, and
President, Director, First Fund Distributors, Inc. (registered
broker-dealer); Director, The Germany Fund, Inc., The New Germany Fund
Inc., The Central European Equity Fund, Inc., and Vice President,
Professionally Managed Portfolios and Advisors Series Trust (registered
investment companies). Formerly, President, Guinness Flight Investment
Funds, Inc. (registered investment companies); and President, The
Wadsworth Group (registered investment advisor).
-11-
<PAGE>
CARL W. VOGT, Esq., President (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington,
D.C. 20004-2604. Senior Partner, Fulbright & Jaworski L.L.P. (law);
Interim President of Williams College; Director, Yellow Corporation
(trucking), American Science & Engineering (x-ray detection equipment),
and ISI Family of Funds (registered investment companies). Formerly,
Chairman and Member, National Transportation Safety Board; Director,
National Railroad Passenger Corporation (Amtrak); and Member, Aviation
System Capacity Advisory Committee (Federal Aviation Administration);
and Director, Flag Investors Family of Funds (registered investment
companies).
CHARLES A. RIZZO, Treasurer (8/5/57)
Director, Deutsche Asset Management; and Vice President and Department
Head, BT Alex. Brown Incorporated (now DB Alex. Brown LLC), 1998-1999.
Formerly, Senior Manager, Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP), 1993-1998.
AMY M. OLMERT, Secretary (5/14/63)
Director, Deutsche Asset Management; and Vice President, BT Alex. Brown
Incorporated (now DB Alex. Brown LLC), 1997-1999. Formerly, Senior
Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP),
1988-1997.
DANIEL O. HIRSCH, Assistant Secretary (3/27/54)
Director, Deutsche Asset Management Americas, since 1999. Principal, BT
Alex. Brown Incorporated (now DB Alex. Brown LLC), 1998-1999. Formerly,
Assistant General Counsel, United States Securities and Exchange
Commission, 1993-1998.
- -------------------
* Messrs. Semans and Hale are directors who are "interested persons," as
defined in the 1940 Act.
Directors and officers of the Fund are also directors and officers of
some or all of the other investment companies managed, administered or advised
by Investment Company Capital Corporation ("ICCC") or its affiliates. There are
currently 24 funds in the Flag Investors Funds and Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as
Chairman of five funds and as a Director of 19 other funds in the Fund Complex.
Mr. Hale serves as Chairman of three funds and as Director of 21 funds in the
Fund Complex. Ms. Rimel and Messrs. Burt, Hardiman, Levy, McDonald and Wadsworth
serve as Directors of each of the funds in the Fund Complex. Mr. Vogt serves as
President of seven of the funds in the Fund Complex. Mr. Rizzo serves as
Treasurer, Ms. Olmert serves as Secretary, and Mr. Hirsch serves as Assistant
Secretary, for each of the funds in the Fund Complex.
Some of the Directors of the Fund are customers of, and have had normal
brokerage transactions with, DB Alex. Brown or its affiliates in the ordinary
course of business. All such transactions were made on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
persons. Additional transactions may be expected to take place in the future.
With the exception of the Fund's President, officers of the Fund
receive no direct remuneration in such capacity from the Fund. Officers and
Directors of the Fund who are officers or directors of ICCC or its affiliates
may be considered to have received remuneration indirectly. As compensation for
his or her services as director, each Director who is not an "interested person"
of the Fund (as defined in the 1940 Act) (an "Independent Director") and Mr.
Vogt, the Fund's President, receives an aggregate annual fee (plus reimbursement
for reasonable out-of-pocket expenses incurred in connection with his or her
attendance at board and committee meetings) from each fund in the Fund Complex
for which he or she serves. In addition, the Chairmen of the Fund Complex's
Audit Committee and Executive Committee receive an annual fee from the Fund
Complex. Payment of such fees and expenses is allocated among all such funds
described above in direct proportion to their relative net assets. For the
fiscal year ended December 31, 1999, Independent Directors' fees attributable to
the assets of the Fund totaled $60,493.
-12-
<PAGE>
The following table shows aggregate compensation payable to each of the
Fund's Directors by the Fund and the Fund Complex, respectively, and pension or
retirement benefits accrued as part of Fund expenses in the fiscal year ended
December 31, 1999.
-13-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Total Compensation
From the Fund
Aggregate Compensation and Fund Complex
From the Fund Payable to Pension or Retirement Payable to Directors
Directors for the Fiscal Year Benefits Accrued As for the Fiscal Year
Name of Person, Position Ended December 31, 1999 Part of Fund Expenses Ended December 31, 1999(8)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Truman T. Semans, Chairman(1) $0 $0 $0
Richard T. Hale, Director(1) $0 $0 $0
Richard R. Burt, Director(2) $1,995.00(4) (5) $9,750.00
James J. Cunnane, Director(3) $5,375.00(4) (5) $29,250 for service on 12
Boards in the Fund Complex
Joseph R. Hardiman, Director $7,441.00 (5) $39,000 for service on 12(6)
Boards in the Fund Complex
Louis E. Levy, Director $9,259.00 (5) $49,000 for service on 12
Boards in the Fund Complex
Eugene J. McDonald, Director $9,259.00(4) (5) $49,000 for service on 12
Boards in the Fund Complex
Rebecca W. Rimel, Director $7,397.00(4) (5) $39,000 for service on 11(6)
Boards in the Fund Complex
Carl W. Vogt, Esq., Director(7) $7,397.00(4) (5) $39,000 for service on 12,(6)
Boards in the Fund Complex
Robert H. Wadsworth, Director(2) $1,995.00(4) (5) $9,750.00
</TABLE>
- -----------------------------
(1) A Director who is an "interested person" as defined in the 1940 Act.
(2) Elected to the Fund's board effective October 7, 1999.
(3) Retired effective October 7, 1999.
(4) Of amounts payable to Messrs. Burt, Cunnane, McDonald, Vogt, and
Wadsworth, and to Ms. Rimel, $1,995, $5,375, $9,259, $7,397, and $1,995
and $7,397 respectively, was deferred pursuant to a deferred compensation
plan.
(5) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund
for the year ended December 31, 1999 was approximately $29,022.
(6) Ms. Rimel receives and Messrs. Hardiman and Vogt, prior to their
appointment or election as Director to all 12 Funds in the Fund Complex,
received proportionately higher compensation from each fund for which
they served as Director in the fiscal year ended December 31, 1999.
(7) Retired as Fund Director effective October 7, 1999. Currently President
of the Fund.
(8) For the fiscal year ended December 31, 1999, the Fund Complex consisted
of 12 funds and included the four funds in the ISI Family of Funds.
-14-
<PAGE>
The Fund Complex has adopted a Retirement Plan for Directors who are
not employees of the Fund, the Fund's Administrator or its respective affiliates
(the "Directors' Retirement Plan") and a Retirement Plan for a former Director
serving as the Fund's President (collectively, the "Retirement Plans"). After
completion of six years of service, each participant in the Retirement Plans
will be entitled to receive an annual retirement benefit equal to a percentage
of the fee earned by the participant in his or her last year of service. Upon
retirement, each participant will receive annually 10% of such fee for each year
that he or she served after completion of the first five years, up to a maximum
annual benefit of 50% of the fee earned by the participant in his or her last
year of service. The fee will be paid quarterly, for life, by each fund for
which he or she serves. The Retirement Plans are unfunded and unvested. The Fund
currently has two participants in the Directors' Retirement Plan, a Director who
retired effective December 31, 1994 and another Director who retired effective
December 31, 1996, each of whom qualified for the Retirement Plan by serving
thirteen years and fourteen years, respectively, as Directors in the Fund
Complex and who will be paid a quarterly fee of $4,875 by the Fund Complex for
the rest of his life. Such fees are allocated to each fund in the Fund Complex
based upon the relative net assets of such fund to the Fund Complex. Mr.
McDonald has qualified for, but has not received, benefits.
-15-
<PAGE>
Set forth in the table below are the estimated annual benefits payable
to a Participant upon retirement assuming various years of service and payment
of a percentage of the fee earned by such Participant in his or her last year of
service, as described above. The approximate credited years of service at
December 31, 1999 are as follows: for Mr. Levy, 5 years; for Mr. McDonald, 7
years; for Ms. Rimel and Mr. Vogt, 4 years; for Mr. Hardiman, 1 year; and for
Mr. Burt and Mr. Wadsworth, 0 years.
<TABLE>
<CAPTION>
Estimated Annual Benefits Payable By Fund Complex Upon Retirement
Years of Service Chairmen of Audit and Executive Committees Other Participants
---------------- ------------------------------------------ ------------------
<S> <C> <C>
6 years $ 4,900 $ 3,900
7 years $ 9,800 $ 7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>
Any Director and the President of the Fund who receive fees from the
Fund is permitted to defer 50% to 100% of his or her annual compensation
pursuant to a Deferred Compensation Plan. Messrs. Levy, McDonald, Vogt, Burt,
Wadsworth, and Ms. Rimel have each executed a Deferred Compensation Agreement.
Currently, the deferring Directors may select from among various Flag Investors
funds and Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. in which all or part
of their deferral account shall be deemed to be invested. Distributions from the
deferring Directors' deferral accounts will be paid in cash, in generally equal
quarterly installments over a period of ten years.
Code of Ethics
The Board of Directors of the Fund, the Fund's advisor, Investment
Company Capital Corporation ("ICCC" or the "Advisor"), and sub-advisor, Alex.
Brown Investment Management ("ABIM" or the "Sub-Advisor"), have adopted Codes of
Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics permit
access persons to invest in securities that may be purchased or held by the Fund
for their own accounts, but require compliance with the Codes' preclearance
requirements. In addition, the Codes provide for trading "blackout periods" that
prohibit trading by personnel within periods of trading by the Fund in the same
security, subject to certain exceptions. The Codes also prohibit short term
trading profits and personal investment in initial public offerings. The Codes
require prior approval with respect to purchases of securities in private
placements.
These codes of ethics are on public file with, and are available from,
the SEC.
The Company's principal underwriter, ICC Distributors, Inc., is not
required to adopt a Code of Ethics as it meets the exception provided by Rule
17j-1(c)(3) under the 1940 Act.
-16-
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
ICCC, the investment advisor, is an indirect subsidiary of Deutsche
Bank A.G. ABIM is a limited partnership affiliated with the Advisor. Buppert,
Behrens & Owens, Inc. a company organized and owned by three employees of ABIM,
owns a 49% limited partnership interest and a 1% general partnership interest in
ABIM. DB Alex. Brown owns a 1% general partnership interest in ABIM and DB Alex.
Brown Holdings, Inc. owns the remaining limited partnership interest. ICCC also
serves as investment advisor and ABIM serves as sub-advisor to other funds in
the Flag Investors family of funds.
Under the Investment Advisory Agreement, ICCC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. ICCC has delegated this responsibility to ABIM
provided that ICCC continues to supervise the performance of ABIM and report
thereon to the Fund's Board of Directors. Any investment program undertaken by
ICCC or ABIM will at all times be subject to policies and control of the Fund's
Board of Directors. ICCC will provide the Fund with office space for managing
its affairs, with the services of required executive personnel and with certain
clerical and bookkeeping services and facilities. These services are provided by
ICCC without reimbursement by the Fund for any costs. Neither ICCC nor ABIM
shall be liable to the Fund or its shareholders for any act or omission by ICCC
or ABIM or any losses sustained by the Fund or its shareholders except in the
case of willful misfeasance, bad faith, gross negligence, or reckless disregard
of duty. The services of ICCC and ABIM to the Fund are not exclusive and ICCC
and ABIM are free to render similar services to others.
As compensation for its services, ICCC is entitled to receive a fee
from the Fund, calculated daily and paid monthly, at the following annual rates
based upon the Fund's average daily net assets: 0.85% of the first $100 million,
0.75% of the next $100 million, 0.70% of the next $100 million, 0.65% of the
next $200 million, 0.58% of the next $500 million, 0.53% of the next $500
million and 0.50% of that portion exceeding $1.5 billion. As compensation for
its services, ABIM is entitled to receive a fee from ICCC, payable from its
advisory fee, calculated daily and paid monthly, at the following annual rates
based upon the Fund's average daily net assets: 0.60% of the first $100 million,
0.55% of the next $100 million, 0.50% of the next $100 million, 0.45% of the
next $200 million, 0.40% of the next $500 million, 0.37% of the next $500
million and 0.35% of that portion in excess of $1.5 billion.
-17-
<PAGE>
Each of the Investment Advisory Agreement and the Sub-Advisory
Agreement has an initial term of two years and will continue in effect from year
to year thereafter if such continuance is specifically approved at least
annually by the Fund's Board of Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
agreements, by votes cast in person at a meeting called for such purpose, and by
a vote of a majority of the outstanding Shares (as defined under "Capital
Stock"). The Fund or ICCC may terminate the Investment Advisory Agreement on
sixty days' written notice without penalty. The Investment Advisory Agreement
will terminate automatically in the event of assignment (as defined in the 1940
Act). The Sub-Advisory Agreement has similar termination provisions.
Advisory fees paid by the Fund to ICCC and sub-advisory fees paid by
ICCC to ABIM for the last three fiscal years were as follows:
Year Ended December 31,
- --------------------------------------------------------------------------------
Fees Paid to: 1999 1998 1997
------------- ---- ---- ----
ICCC $11,892,502 $5,927,518 4,172,769
ABIM $ 8,337,647 $4,132,229 $2,944,897
- --------------------------------------------------------------------------------
ICCC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Fund. An affiliate of ICCC serves as the
Fund's custodian. See "Custodian, Transfer Agent and Accounting Services."
DISTRIBUTION OF FUND SHARES
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves
as the distributor of each class of the Fund's Shares pursuant to a Distribution
Agreement (the "Distribution Agreement").
The Distribution Agreement provides that ICC Distributors shall; (i)
use reasonable efforts to sell Shares upon the terms and conditions contained in
the Distribution Agreement and the Fund's then current Prospectus; (ii) use its
best efforts to conform with the requirements of all federal and state laws
relating to the sale of the Shares; (iii) adopt and follow procedures as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. and any other applicable self-regulatory organization;
(iv) perform its duties under the supervision of and in accordance with the
directives of the Fund's Board of Directors and the Fund's Articles of
Incorporation and By-Laws; and (v) provide the Fund's Board of Directors with a
written report of the amounts expended in connection with the Distribution
Agreement. ICC Distributors shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of ICC Distributors are not exclusive and ICC Distributors
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment, or for any action
or inaction of ICC Distributors in the absence of bad faith, willful misfeasance
or gross negligence in the performance of its duties or obligations under the
Distribution Agreement or by reason of its reckless disregard of its duties and
obligations under the Distribution Agreement. The Distribution Agreement further
provides that the Fund and ICC Distributors will mutually indemnify each other
for losses relating to disclosures in the Fund's registration statement.
-18-
<PAGE>
The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock") or
upon 60 days' written notice by the Distributor and shall automatically
terminate in the event of an assignment. The Distribution Agreement has an
initial term of one year from the date of effectiveness. It shall continue in
effect thereafter with respect to each class of the Fund provided that it is
approved at least annually by (i) a vote of a majority of the outstanding voting
securities of the related class of the Fund or (ii) a vote of a majority of the
Fund's Board of Directors including a majority of the Independent Directors and,
with respect to each class of the Fund for which there is a plan of
distribution, so long as such plan of distribution is approved at least annually
by the Independent Directors in person at a meeting called for the purpose of
voting on such approval.
ICC Distributors and certain broker-dealers ("Participating Dealers")
have entered into Sub-Distribution Agreements under which such broker-dealers
have agreed to process investor purchase and redemption orders and respond to
inquiries from Fund shareholders concerning the status of their accounts and the
operations of the Fund. Any Sub-Distribution Agreement may be terminated in the
same manner as the Distribution Agreement and shall automatically terminate in
the event of an assignment.
With respect to Class A Shares, Class B Shares and Class C Shares, the
Fund may enter into Shareholder Servicing Agreements with certain financial
institutions to act as Shareholder Servicing Agents, pursuant to which ICC
Distributors will allocate a portion of its distribution fee as compensation for
such financial institutions' ongoing shareholder services. The Fund may also
enter into Shareholder Servicing Agreements pursuant to which the Advisor, the
Distributor or their respective affiliates will provide compensation out of
their own resources for ongoing shareholder services. Although banking laws and
regulations prohibit banks from distributing shares of open-end investment
companies such as the Fund, according to interpretations by various bank
regulatory authorities, financial institutions are not prohibited from acting in
other capacities for investment companies, such as the shareholder servicing
capacities described above. Should future legislative, judicial or
administrative action prohibit or restrict the activities of the Shareholder
Servicing Agents in connection with the Shareholder Servicing Agreements, the
Fund may be required to alter materially or discontinue its arrangements with
the Shareholder Servicing Agents. Such financial institutions may impose
separate fees in connection with these services.
As compensation for providing distribution services as described above,
the Fund will pay ICC Distributors, an annual fee, paid monthly equal to 0.25%
of the average daily net assets of the Class A Shares, 0.75% of the average
daily net assets of the Class B Shares and 0.75% of the average daily net assets
of the Class C Shares. With respect to the Class A Shares, ICC Distributors
expects to allocate up to all of its fee to Participating Dealers and
Shareholder Servicing Agents. With respect to the Class B Shares and the Class C
Shares, ICC Distributors expects to retain the entire distribution fee as
reimbursement for front-end payments to Participating Dealers. In addition, with
respect to the Class B Shares and the Class C Shares, the Fund will pay ICC
Distributors a shareholder servicing fee at an annual rate of 0.25% of the
average daily net assets of the respective class. (See the Prospectus.) ICC
Distributors expects to allocate most of its shareholder servicing fee to
Participating Dealers and Shareholder Servicing Agents. ICC Distributors does
not receive compensation for distributing Institutional Shares.
-19-
<PAGE>
As compensation for providing distribution and shareholder services to
the Fund for the last three fiscal years, the Fund's distributor received
aggregate fees in the following amounts:
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------------------------
Fiscal Year Ended December 31,
- --------------------------------------------- ------------------------------------------------------------
Fees 1999 1998 1997
- --------------------------------------------- ------------------ ----------------------- -----------------
<S> <C> <C> <C> <C>
12b-1 Fees $7,096,506(1) $2,717,467(1) $1,545,188(2)
- --------------------------------------------- ------------------ ----------------------- -----------------
Shareholder Servicing Fee
(Class B and Class C Shares) $ 996,008(1) $ 180,687(1) $ 59,629(3,4)
- --------------------------------------------- ------------------ ----------------------- -----------------
</TABLE>
-------------------------------------------------------
(1) Fees received by ICC Distributors.
(2) Of this amount, Alex. Brown & Sons, the Fund's distributor prior to
August 31, 1997, received $974,875 and ICC Distributors, the Fund's
distributor effective August 31, 1997, received $570,313.
(3) Of this amount, Alex. Brown & Sons, the Fund's distributor prior to
August 31, 1997, received $35,479 and ICC Distributors, the Fund's
distributor effective August 31, 1997, received $24,150.
(4) For Class B Shares only.
Pursuant to Rule 12b-1 under the 1940 Act, which provides that
investment companies may pay distribution expenses, directly or indirectly, only
pursuant to a plan adopted by the investment company's board of directors and
approved by its shareholders, the Fund has adopted a Plan of Distribution for
each class of Shares (except Institutional Shares) (the "Plans"). Under the
Plans, the Fund pays a fee to ICC Distributors for distribution and other
shareholder servicing assistance as set forth in the Distribution Agreement, and
ICC Distributors is authorized to make payments out of its fees to Participating
Dealers and Shareholder Servicing Agents. The Plans remain in effect from year
to year thereafter as specifically approved (a) at least annually by the Fund's
Board of Directors and (b) by the affirmative vote of a majority of the
Independent Directors, by votes cast in person at a meeting called for such
purpose.
In approving the Plans, the Directors concluded, in the exercise of
reasonable business judgment, that there was a reasonable likelihood that the
Plans would benefit the Fund and its shareholders. The Plans will be renewed
only if the Directors make a similar determination in each subsequent year. The
Plans may not be amended to increase materially the fee to be paid pursuant to
the Distribution Agreement without the approval of the shareholders of the Fund.
The Plans may be terminated at any time upon sixty days' notice, in either case
without penalty, by the vote of a majority of the Independent Directors or by a
vote of a majority of the outstanding Shares of the related class (as defined
under "Capital Stock").
During the continuance of the Plans, the Fund's Board of Directors will
be provided for their review, at least quarterly, a written report concerning
the payments made under the Plans to ICC Distributors pursuant to the
Distribution Agreement and to broker-dealers pursuant to any Sub-Distribution
Agreements. Such reports shall be made by the persons authorized to make such
payments. In addition, during the continuance of the Plans, the selection and
nomination of the Fund's Independent Directors shall be committed to the
discretion of the Independent Directors then in office.
-20-
<PAGE>
If a Plan is terminated in accordance with its terms, the obligation of
the Fund to make payments to ICC Distributors pursuant to the Plan will cease
and the Fund will not be required to make any payments past the date the
Distribution Agreement terminates with respect to that class. In return for
payments received pursuant to the Plans for the Class A Shares and the Class B
Shares for the last three fiscal years, the Fund's distributor paid the
distribution related expenses of the related classes including one or more of
the following: printing and mailing of prospectuses to other than current
shareholders; compensation to dealers and sales personnel; and interest,
carrying, or other financing charges.
The Fund's distributor received commissions on the sale of Class A
Shares and contingent deferred sales charges on the Class B and Class C Shares
and from such commissions and sales charges retained the following amounts:
<TABLE>
<CAPTION>
- -------------------------- ----------------------------------------------------------------------------------------
Fiscal Year Ended December 31,
- -------------------------- ----------------------------------------------------------------------------------------
1999 1998 1997
- -------------------------- ------------------------------ ---------------------------- ----------------------------
Class Received Retained Received Retained Received Retained
- -------------------------- ---------------- ------------- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Class A Commissions $3,858,037(1) $0 $2,696,511(1) $0(1) $469,945(2) $61,823(4)
- -------------------------- ---------------- ------------- --------------- ------------ ------------- --------------
Class B Contingent
Deferred Sales Charge $5,740,396 $0 $3,281,541(1) $0(1) $350,133(3) $34,414(4)
- -------------------------- ---------------- ------------- --------------- ------------ ------------- --------------
Class C Contingent
Deferred Sales Charge $391,351 $0 $24,6361 $0(1) N/A N/A
- -------------------------- ---------------- ------------- --------------- ------------ ------------- --------------
</TABLE>
- -------------
(1) By ICC Distributors.
(2) Of this amount, Alex. Brown & Sons, the Fund's distributor prior to
August 31, 1997, received $307,092 and ICC Distributors, the Fund's
distributor effective August 31, 1997 received $66,419.
(3) Of this amount, Alex. Brown & Sons, the Fund's distributor prior to
August 31, 1997, received $202,841 and ICC Distributors, the Fund's
distributor effective August 31, 1997 received $147,292.
(4) By Alex. Brown & Sons, the Fund's distributor prior to August 31, 1997.
-21-
<PAGE>
The Fund will pay all costs associated with its organization and
registration under the Securities Act of 1933 and the 1940 Act. Except as
described elsewhere, the Fund pays or causes to be paid all continuing expenses
of the Fund, including, without limitation: investment advisory and distribution
fees; the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of cash, portfolio securities and
other property, and any transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions chargeable to the Fund in connection
with portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing Shares; all costs and
expenses in connection with the registration and maintenance of the Fund and its
Shares with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Directors and Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; fees and
expenses of legal counsel, including counsel to the Independent Directors, and
of independent certified public accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including Officers and Directors) of the Fund that inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
assumed by ICCC, ABIM, or ICC Distributors.
The address of ICC Distributors is Two Portland Square, Portland, Maine
04101.
BROKERAGE
ABIM is responsible for decisions to buy and sell securities for the
Fund, for the broker-dealer selection and for negotiation of commission rates,
subject to the supervision of ICCC. Purchases and sales of securities on a
securities exchange are effected through broker-dealers who charge a commission
for their services. Brokerage commissions are subject to negotiation between
ABIM and the broker-dealers. ABIM may direct purchase and sale orders to any
broker-dealer, including, to the extent and in the manner permitted by
applicable law, its affiliates and ICC Distributors.
In over-the-counter transactions, orders are placed directly with a
principal market maker and such purchases normally include a mark up over the
bid to the broker-dealer based on the spread between the bid and asked price for
the security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. The Fund will not deal with
affiliates of the Advisors in any transaction in which affiliates of the
Advisors act as a principal.
<PAGE>
If affiliates of the Advisors are participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with rules of the SEC. The Fund believes that the limitation will
not affect its ability to carry out its present investment objective.
ABIM's primary consideration in effecting securities transactions is to
obtain best price and execution of orders on an overall basis. As described
below, however, ABIM may, in its discretion, effect transactions with dealers
that furnish statistical, research or other information or services that are
deemed by ABIM to be beneficial to the Fund's investment program. Certain
research services furnished by broker-dealers may be useful to ABIM with clients
other than the Fund. Similarly, any research services received by ABIM through
placement of portfolio transactions of other clients may be of value to ABIM in
fulfilling its obligations to the Fund. No specific value can be determined for
research and statistical services furnished without cost to ABIM by a
broker-dealer. ABIM is of the opinion that because the material must be analyzed
and reviewed by its staff, its receipt does not tend to reduce expenses, but may
be beneficial in supplementing ABIM's research and analysis. Therefore, it may
tend to benefit the Fund by improving ABIM's investment advice. In
over-the-counter transactions, ABIM will not pay any commission or other
remuneration for research services. ABIM's policy is to pay a broker-dealer
higher commissions for particular transactions than might be charged if a
different broker-dealer had been chosen when, in ABIM's opinion, this policy
furthers the overall objective of obtaining best price and execution. Subject to
periodic review by the Fund's Board of Directors, ABIM is also authorized to pay
broker-dealers (other than affiliates of the Advisors) higher commissions than
another broker might have charged on brokerage transactions for the Fund for
brokerage or research services. The allocation of orders among broker-dealers
and the commission rates paid by the Fund will be reviewed periodically by the
Board.
-22-
<PAGE>
Subject to the above considerations, the Board of Directors has
authorized the Fund to effect portfolio transactions, through affiliates of the
Advisors. At the time of such authorization the Board adopted certain policies
and procedures incorporating the standards of Rule 17e-1 under the 1940 Act
which requires that the commissions paid the affiliates of the Advisors must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
Rule 17e-1 also contains requirements for the review of such transactions by the
Board of Directors and requires ICCC and ABIM to furnish reports and to maintain
records in connection with such reviews.
ABIM manages other investment accounts. It is possible that, at times,
identical securities will be acceptable for the Fund and one or more of such
other accounts; however, the position of each account in the securities of the
same issuer may vary and the length of time that each account may choose to hold
its investment in such securities may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of the
Fund or one or more of these accounts is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by ABIM. ABIM may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Such simultaneous transactions, however, could adversely
affect the ability of the Fund to obtain or dispose of the full amount of a
security that it seeks to purchase or sell.
ABIM directed transactions to broker-dealers and paid related
commissions because of research services in the following amounts:
<TABLE>
<CAPTION>
- ------------------------------ ----------------------------------------------------------------------
Fiscal Year Ended December 31,
- ------------------------------ --------------------------- --------------------- --------------------
1999 1998 1997
- ------------------------------ --------------------------- --------------------- --------------------
<S> <C> <C> <C>
Transactions Directed $931,691,059 $244,993,558 $312,672,931
- ------------------------------ --------------------------- --------------------- --------------------
Commissions Paid $1,135,899 $275,519 $406,249
- ------------------------------ --------------------------- --------------------- --------------------
</TABLE>
For the fiscal years ended December 31, 1999 and December 31, 1998, the
Fund paid $7,200 and $4,500, respectively in brokerage commissions to DB Alex.
Brown or its affiliates. For the fiscal year ended December 31, 1997, the Fund
paid no brokerage commissions to DB Alex. Brown or its affiliates. The Fund is
required to identify any securities of its "regular brokers or dealers" (as such
term is defined in the 1940 Act) that the Fund has acquired during its most
recent fiscal year. As of December 31, 1999, the Fund held a 2.00% repurchase
agreement issued by Goldman Sachs & Co. valued at $126,131,000, a 3.25%
repurchase agreement issued by J.P. Morgan securities, Inc. valued at
$126,131,000 and a 2.50% repurchase agreement issued by Morgan Stanley & Co.
valued at $57,303,000. Goldman Sachs & Co., J.P. Morgan Securities, Inc. and
Morgan Stanley & Co. are "regular brokers or dealers" of the Fund.
-23-
<PAGE>
CAPITAL STOCK
Under the Fund's Articles of Incorporation, the Fund has 127 million
authorized Shares of common stock, with a par value of $.001 per share. The
Board of Directors may increase or decrease the number of authorized Shares
without shareholder approval. On October 11, 1989, the Fund declared a two for
one stock dividend payable to shareholders of record on October 27, 1989.
The Fund's Articles of Incorporation provide for the establishment of
separate series and separate classes of Shares by the Directors at any time. The
Fund currently has one Series and the Board has designated four classes of
Shares: Flag Investors Communications Fund Class A Shares, Flag Investors
Communications Fund Class B Shares, Flag Investors Communications Fund Class C
Shares; and Flag Investors Communications Fund Institutional Shares. In the
event separate series are established, all Shares of the Fund, regardless of
series or class, would have equal rights with respect to voting, except that
with respect to any matter affecting the rights of the holders of a particular
series or class, the holders of each series or class would vote separately. In
general, each such series would be managed separately and shareholders of each
series would have an undivided interest in the net assets of that series. For
tax purposes, the series would be treated as separate entities. Generally, each
class of Shares issued by a particular series would be identical to every other
class and expenses of the Fund (other than 12b-1 fees and any applicable
services fees) are prorated between all classes of a series based upon the
relative net assets of each class. Any matters affecting any class exclusively
will be voted on by the holders of such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding Shares voting together
for election of Directors may elect all the members of the Board of Directors of
the Fund. There are no preemptive, conversion or exchange rights applicable to
any of the Shares. The issued and outstanding Shares are fully paid and
non-assessable. In the event of liquidation or dissolution of the Fund, each
Share is entitled to its portion of the Fund's assets (or the assets allocated
to a separate series of shares if there is more than one series) after all debts
and expenses have been paid.
As used in this Statement of Additional Information, the term "majority
of the outstanding Shares" means the vote of the lesser of (i) 67% or more of
the Shares present at a meeting, if the holders of more than 50% of the
outstanding Shares are present or represented by proxy, or (ii) more than 50% of
the outstanding Shares.
SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of investments
held in the Fund's portfolio and financial statements. The annual financial
statements are audited by the Fund's independent accountants.
-24-
<PAGE>
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Bankers Trust Company ("Bankers Trust") 130 Liberty Street, New York,
New York 10006, has been retained to act as custodian of the Fund's investments.
Bankers Trust receives such compensation from the Fund for its services as
custodian as may be agreed to from time to time by Bankers Trust and the Fund.
For the fiscal year ended December 31, 1999, Bankers Trust was paid $146,539 as
compensation for providing custody services to the Fund. Investment Company
Capital Corp. has been retained to act as transfer and dividend disbursing
agent. As compensation for providing these services, the Fund pays ICCC up to
$16.07 per account per year, plus reimbursement for out-of-pocket expenses. For
the fiscal year ended December 31, 1999, ICCC received transfer agency fees of
$1,639,648.
ICCC also provides certain accounting services to the Fund under a
Master Services Agreement between the Fund and ICCC. As compensation for these
services, ICCC receives an annual fee, calculated daily and paid monthly as
shown below.
<PAGE>
Average Daily Net Assets Incremental Annual Accounting Fee
------------------------ ---------------------------------
$ 0 - $ 10,000,000 $13,000(fixed fee)
$ 10,000,000 - $ 20,000,000 0.100%
$ 20,000,000 - $ 30,000,000 0.080%
$ 30,000,000 - $ 40,000,000 0.060%
$ 40,000,000 - $ 50,000,000 0.050%
$ 50,000,000 - $ 60,000,000 0.040%
$ 60,000,000 - $ 70,000,000 0.030%
$ 70,000,000 - $ 100,000,000 0.020%
$100,000,000 - $ 500,000,000 0.015%
$500,000,000 - $1,000,000,000 0.005%
over $1,000,000,000 0.001%
In addition, the Fund reimburses ICCC for certain out-of-pocket
expenses.
As compensation for providing accounting services to the Fund for the
fiscal year ended December 31, 1999, ICCC received fees of $153,996.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland
21201, are independent accountants to the Fund.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the Fund to
that of other open-end diversified management investment companies and to stock
or other relevant indices in advertisements or in certain reports to
shareholders, performance will be stated in terms of total return rather than in
terms of yield. The total return quotations, under the rules of the SEC, must be
calculated according to the following formula:
-25-
<PAGE>
n
P(l + T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1, 5
or 10 year periods (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of the
1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover 1, 5 and 10 year periods or a shorter period dating from the effectiveness
of the Fund's registration statement (or the later commencement of operations of
the series or class).
Calculated according to SEC rules, the ending redeemable value and
average annual total return of a hypothetical $1,000 payment for the periods
ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
One-Year Period Ended Five-Year Period Ended Ten-Year Period Ended Inception Through
December 31, 1999 December 31, 1999 December 31, 1999 December 31, 1999
--------------------- ---------------------- --------------------- -----------------
Average Average Average
Ending Ending Annual Ending Annual Ending Annual
Redeemable Total Redeemable Total Redeemable Total Redeemable Total
Class Value Return Value Return Value Return Value Return
- --------------------- -------------- --------- -------------- ---------- ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $1,375 37.47% $5,297 39.58% $7,511 22.34% $25,195 22.27%
January 18, 1984*
Class B $1,372 37.20% N/A N/A N/A N/A $5,292 39.63%
January 3, 1995*
Class C $1,429 42.89% N/A N/A N/A N/A $2,049 84.14%
November 1, 1998*
Institutional $1,459 45.88% N/A N/A N/A N/A $2,246 67.19%
May 1, 1998*
</TABLE>
* Inception Date.
The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth above
in order to compare more accurately the Fund's performance with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper, Inc., CDA Investment Technologies, Inc. or Morningstar
Inc., or with the performance of the Lehman Brothers Government Corporate Bond
Index, the Consumer Price Index, the return on 90-day U.S. Treasury bills, the
Standard and Poor's 500 Stock Index or the Dow Industrial Average, the Fund
calculates its aggregate and average annual total return for the specified
periods of time by assuming the investment of $10,000 in Shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. For this alternative computation, the Fund assumes that the
$10,000 invested in Shares is net of all sales charges. The Fund will, however,
disclose the maximum sales charges and will also disclose that the performance
data do not reflect sales charges and that inclusion of sales charges would
reduce the performance quoted. Such alternative total return information will be
given no greater prominence in such advertising than the information prescribed
under SEC rules, and all advertisements containing performance data will include
a legend disclosing that such performance data represent past performance and
that the investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
-26-
<PAGE>
The Fund's annual portfolio turnover rate (the lesser of the value of
the purchases or sales for the year divided by the average monthly market value
of the portfolio during the year, excluding U.S. Government and short-term
securities) may vary from year to year, as well as within a year, depending on
market conditions. The Fund's portfolio turnover rate in fiscal year 1999 was
17% and for fiscal year 1998 was 14%.
Morningstar Mutual Fund Advisory Service ("Morningstar") assigned the
Fund their "5" Best in Category, rating among the ten funds in the
communications funds category for the three-year period ended December 31, 1999.
As of December 31, 1999, Morningstar assigned the Fund a weighted overall
risk-adjusted rating of five stars based on the three-, five- and ten-year
ratings (see explanation below). As of December 31, 1998, the Fund's ratings for
separate periods within its investment category of domestic equity funds, were
five stars among 3,469 funds for three years, five stars among 2,180 funds for
five years and five stars among 770 funds for ten years.
The Morningstar risk-adjusted rating is expressed on a scale of 1 to 5
stars. The star rating is neither a predictive measure nor a "buy/sell"
recommendation. It is a purely descriptive representation of how well a fund has
balanced risk and return in the past. If the fund scores in the top 10% of its
investment category, it receives 5 stars (Highest); if it falls in the next
22.5%, it receives 4 stars (Above Average); if it falls in the middle 35%, it
receives 3 stars (Neutral or Average); if it falls in the next 22.5%, it
receives two stars (Below Average); and if it falls in the bottom 10%, it
receives 1 star (Lowest). The star ratings are recalculated monthly. The Fund's
overall risk-adjusted star rating is a weighted average of the Fund's three-,
five-, and 10-year histories, relative to other funds in its broad investment
category (i.e, equity). The three time periods are combined as a weighted
average. The 10-year rating accounts for 50% of the overall rating, the
five-year figure for 30%, and the three-year period 20%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, the following persons owned of record
or beneficially 5% or more of the outstanding shares of a class of the Fund, as
of April 4, 2000:
<TABLE>
<CAPTION>
Owned of Beneficially
Name and Address Record Owned Percentage Owned
---------------- ------ ----- ----------------
<S> <C>
Dain Rauscher Inc. FBO Rath Foundation X 7.58% of Institutional Shares
3134 Box Canyon Rd
Santa Ynez, CA 93460-9753
DB Alex. Brown LLC X 81.82% of Institutional Shares
FBO 250-10788-16
P.O. Box 1346
Baltimore, MD 21203-1346
</TABLE>
-27-
<PAGE>
As of April 4, 2000, the Directors and officers as a group owned less
than 1% of the Fund's total outstanding shares. To Fund management's knowledge,
DB Alex. Brown beneficially owned less than 1% of the Fund's total outstanding
Shares.
FINANCIAL STATEMENTS
The financial statements for the Fund for the fiscal year ended
December 31, 1999 are incorporated herein by reference to the Fund's Annual
Report dated December 31, 1999. A copy of the Fund's Annual Report must
accompany the delivery of this Statement of Additional Information.
-28-
<PAGE>
APPENDIX A
CORPORATE BOND RATINGS
Standard & Poor's Bond Ratings
AAA - The highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.
AA - Very strong capacity to pay interest and repay principal and, in
the majority of instances, differs from the higher rated issues only in small
degree.
A - Strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB - Regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
BB, B, CCC, CC and C - Regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
C - This rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but payments on this obligation
are being continued.
D - In payment default. The D rating category is used when interest
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The D rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
-29-
<PAGE>
Moody's Bond Ratings
Aaa - Judged to be of the best quality. Carries the smallest degree of
investment risk and generally referred to as "gilt edge." Interest payments are
protected by a large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa - Judged to be of high quality by all standards. Together with the
Aaa group, comprise what are generally known as high grade bonds. Rated lower
than the Aaa bonds because margins of protection may not be as large as in Aaa
securities or the fluctuation of protective elements may be of greater amplitude
or there may be other elements present that make the long-term risks appear
somewhat larger than in Aaa securities.
A - Possess many favorable investment attributes and are to be
considered as upper- medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the future.
Baa - Considered as medium-grade obligations, that is, neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and principal
payments may be very moderate; and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.
Caa - Of poor standing. May be in default or there may be present
elements of danger with respect to principal or interest.
Ca - Represent obligations that are speculative in a high degree. Often
in default or have other marked shortcomings.
C - The lowest rated class of bonds. Can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
-30-
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) (1) Articles of Incorporation incorporated by reference
to Exhibit (1)(a) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
(2) Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on September 13, 1990
incorporated by reference to Exhibit (1)(b) to
Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(3) Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on December 27, 1993
incorporated by reference to Exhibit (1)(c) to
Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(4) Articles Supplementary, as filed with the Maryland
Department of Assessments andTaxation on November 18, 1994
incorporated by reference to Exhibit (1)(d) toPost-Effective
Amendment No. 19 to Registrant's Registration Statement on
Form N-1A (Registration No. 2-87336), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
(5) Articles Supplementary, as filed with the Maryland
Department of Assessments andTaxation on January 20, 1998
(adding the Flag Investors Institutional Shares)
incorporated by reference to Exhibit (1)(e) to
Post-Effective Amendment No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-98-000501) on February 27, 1998.
(6) Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on September 29, 1998
(adding the Flag Investors Class C Shares), incorporated by
reference to Post-Effective Amendment 22 to Registrant's
Registration Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-99-000307) on February 26,
1999.
(7) Articles Supplementary, as filed with the Maryland
Department of Assessments and Taxation on November 19, 1998,
incorporated by reference to Post-Effective Amendment 22 to
Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-99-000307) on February 26, 1999.
(8) Articles of Amendment, as filed with the Maryland
Department of Assessments and Taxation on November 20, 1998,
incorporated by reference to Post-Effective Amendment 22 to
Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-99-000307) on February 26, 1999.
(9) Articles Supplementary filed with the Maryland
Department of Assessments and Taxation on October 5, 1999,
filed herewith.
(b) By-Laws, as amended through July 28, 1999, filed
herewith.
(c) Instruments Defining Rights of Security Holders
incorporated by reference to Exhibit 1 (Articles of
Incorporation), as amended to date to Post-Effective
Amendments Nos. 19 and 21 to Registrant's Registration
Statement (Registration No. 2-87336), filed with the
Securities and Exchange Commission via EDGAR (Accession Nos.
950116-96-000068 and 950116-98-000501, respectively) on
February 8, 1996 and February 27, 1998 and Exhibit 2
(By-Laws) as amended to date, to Post-Effective Amendment
No. 20 to such Registration Statement, filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-97-000792) on April 28, 1997.
<PAGE>
(d) (1) Investment Advisory Agreement dated as of June 4,
1999 between Registrant and Investment Company Capital
Corp., filed herewith.
(2) Sub-Advisory Agreement dated as of June 4, 1999 among
Registrant, Investment Company Capital Corp. and Alex. Brown
Investment Management, filed herewith.
(e) (1) Distribution Agreement dated as of August 31, 1997
between Registrant and ICC Distributors, Inc. incorporated
by reference to Exhibit (6)(a) to Post-Effective Amendment
No. 21 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998.
(2) Form of Sub-Distribution Agreement between ICC
Distributors, Inc. and Participating Broker-Dealers
incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-98-000501) on February 27, 1998.
(3) Form of Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents incorporated by
reference to Exhibit (6)(c) to Post-Effective Amendment No.
21 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-98-000501) on February 27, 1998.
(f) None.
(g) (1) Custodian Agreement between Registrant and Bankers
Trust Company dated June 5, 1998, incorporated by reference
to Exhibit (g)(1) to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336) filed with the Securities and
Exchange Commission via EDGAR (Accession No.
95016-99-000307) on February 26, 1999.
(2) Master Services Agreement between Registrant and
Investment Company Capital Corp. with Appendices for the
provision of Accounting and Transfer Agency Services
incorporated by reference to Exhibit (8)(b) to
Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000068) on February 8, 1996.
(h) (1) Group Purchase Plan Application incorporated by
reference to Exhibit (9) to Post-Effective Amendment No. 19
to Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
(2) Securities Lending Agreement, filed herewith.
(3) Subscription Agreement, filed herewith.
(i) Opinion of counsel, filed herewith
(j) (1) Consent of PricewaterhouseCoopers LLP, filed
herewith.
(2) Consents to being named as Director incorporated by
reference to Exhibit (11)(b) to Post-Effective Amendment No.
19 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
(k) None.
(l) Subscription Agreement re: initial $100,000 capital
incorporated by reference to Exhibit (13) to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on
Form N-1A (Registration No. 2-87336), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
<PAGE>
(m) (1) Distribution Plan incorporated by reference to
Exhibit (15)(a) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
(2) Distribution Plan with respect to the Flag
Investors Telephone Income Fund Class B Shares incorporated
by reference to Exhibit (15)(c) to Post-Effective Amendment
No. 19 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-87336), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-96-000068) on February 8, 1996.
(3) Amended Distribution Plan (Flag Investors Class A
Shares) incorporated by reference to Exhibit (15)(d) to
Post-Effective Amendment No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-98-000501) on February 27, 1998.
(4) Amended Distribution Plan (Flag Investors Class B
Shares) incorporated by reference to Exhibit (15)(e) to
Post-Effective Amendment No. 21 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-98-000501) on February 27, 1998.
(5) Distribution Plan (Flag Investors Class C Shares)
filed as Exhibit (m)(5) to Post-Effective Amendment No. 22
on Form N-1A (Registration No. 2-87336) filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-99-000307) on February 26, 1999.
(n) Not applicable.
(o) (1) Rule 18f-3 Plan incorporated by reference to Exhibit
(18)(a) to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (Registration No.
2-87336), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-96-000068) on February 8,
1996.
(2) Amended Rule 18f-3 Plan, as amended through March
26,1997 incorporated by reference to Exhibit (18)(b) to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-97-000792) on April 28, 1997.
(3) Amended Rule 18f-3 Plan, incorporated by reference to
Post-Effective Amendment 22 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-87336), filed
with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-99-000307) on February 26, 1999.
(p) Codes of Ethics, filed herewith.
(q) Powers of Attorney, filed herewith.
Item 24. Persons Controlled by or under Common Control with
Registrant.
None.
Item 25. Indemnification.
Sections 1, 2, 3 and 4 of Article VIII of Registrant's
Articles of Incorporation, included as Exhibit (a) to this
Registration Statement and incorporated herein by reference,
provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer
of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This
limitation on liability applies to events occurring at the
time a person serves as a director or officer of the
Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability
is asserted.
<PAGE>
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors
to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision
for indemnification of directors, officers, employees and
agents in the By-Laws of the Corporation or by resolution
or agreement to the fullest extent permitted by the
Maryland General Corporation law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation
Law in this Article VIII are to such law as from time to
time amended. No further amendment to the Charter of the
Corporation shall decrease, but may expand, any right of
any person under this Article VIII based on any event,
omission or proceeding prior to such amendment.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event of a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by
a director, officer or controlling person in connection
with the securities being registered) the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. Business and Other Connections of Investment Advisor.
During the past two fiscal years, no director or officer of
Investment Company Capital Corp., the Registrant's
investment advisor, and no partner of Alex. Brown Investment
Management, the Registrant's sub-advisor, has engaged in any
other business, profession, vocation or employment of a
substantial nature other than that of the business of
investment management and, through affiliates, investment
banking.
<PAGE>
Item 27. Principal Underwriters.
(a) State the name of each investment company (other than
the Registrant) for which each principal underwriter
currently distributing securities of the Registrant also
acts as a principal underwriter, depositor or investment
advisor.
ICC Distributors, Inc., the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies: BT Advisor Funds, BT
Institutional Funds, BT Pyramid Mutual Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, NY
Tax Free Money Portfolio, Treasury Money Portfolio,
International Equity Portfolio, Equity 500 Index Portfolio,
Capital Appreciation Portfolio, Asset Management Portfolio,
BT Investment Portfolios, Deutsche Banc Alex. Brown Cash
Reserve Fund, Inc., Flag Investors Communications Fund,
Inc., Flag Investors Emerging Growth Fund, Inc., the Flag
Investors Total Return U.S. Treasury Fund Shares of Total
Return U.S. Treasury Fund, Inc., the Flag Investors Managed
Municipal Fund Shares of Managed Municipal Fund, Inc., Flag
Investors Short-Intermediate Income Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag Investors Real
Estate Securities Fund, Inc., Flag Investors Equity Partners
Fund, Inc., Flag Investors Series Funds, Inc.(formerly known
as Flag Investors International Fund, Inc.), Flag Investors
Funds, Inc. (formerly known as Deutsche Funds, Inc.), Flag
Investors Portfolios Trust (formerly known as Deutsche
Portfolios), Morgan Grenfell Investment Trust, Glenmede
Fund, Inc. and Glenmede Portfolios.
(b) Provide the information with respect to each director,
officer or partner of each principal underwriter named in
answer to Item 21.
<PAGE>
<TABLE>
<CAPTION>
Names and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
-------------------------- ---------------
<S> <C> <C>
John Y. Keffer President None
Ronald H. Hirsch Treasurer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Frederick Skillin Assistant Treasurer None
Marc D. Keffer Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
------------------------ ----
</TABLE>
* Two Portland Square
Portland, Maine 04101
(c) Not Applicable.
Item 28. Location of Accounts and Records.
State the name and address of each person maintaining
principal possession of each account, book or other
document required to be maintained by Section 31(a)
of the 1940 Act [15 U.S.C. 80a-30(a)] and the Rules
[17 CFR 270.31a-1 to 31a-3] thereunder.
Investment Company Capital Corp., Registrant's investment
advisor, transfer agent, dividend disbursing agent and
accounting services provider, One South Street, Baltimore,
Maryland 21202, maintains physical possession of each such
account, book or other document of the Fund, except for
those maintained by Alex. Brown Investment Management,
Registrant's sub-advisor, One South Street, Baltimore,
Maryland 21202, by Registrant's distributor, ICC
Distributors, Inc., Two Portland Square, Portland, Maine
04101, or by the Registrant's custodian, Bankers Trust
Company, 130 Liberty Street, New York, New York 10006.
Item 29. Management Services.
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part
A or Part B of this Form (because the contract was not
believed to be of interest to a purchaser of securities of
the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the
total dollars paid and by whom, for the last three fiscal
years.
See Exhibit (g).
Item 30. Undertakings.
Furnish the following undertakings in substantially the
following form in all initial Registration Statements
filed under the 1933 Act:
Not Applicable.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 23 to the Registration Statement to be signed on its behalf by the
undersigned thereto duly authorized in the City of Baltimore, in the State of
Maryland, on the 28th day of April, 2000.
FLAG INVESTORS COMMUNICATIONS FUND, INC.
By: /s/ Carl Vogt, Esq.*
------------------------
Carl Vogt, Esq.
President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in the
capacities on the date(s) indiciated:
<TABLE>
<CAPTION>
*/s/ Truman T. Semans Chairman and Director April 28, 2000
- --------------------- --------------
Truman T. Semans Date
<S> <C> <C>
*/s/ Richard R. Burt Director April 28, 2000
- -------------------- --------------
Richard R. Burt Date
*/s/Richard T. Hale Director April 28, 2000
- ------------------- --------------
Richard T. Hale Date
*/s/Joseph R. Hardiman Director April 28, 2000
- ---------------------- --------------
Joseph R. Hardiman Date
*/s/Louis E. Levy Director April 28, 2000
- ----------------- --------------
Louis E. Levy Date
*/s/Eugene J. McDonald Director April 28, 2000
- ---------------------- --------------
Eugene J. McDonald Date
*/s/Rebecca W. Rimel Director April 28, 2000
- -------------------- --------------
Rebecca W. Rimel Date
*/s/ Robert H. Wadsworth Director April 28, 2000
- ------------------------ --------------
Robert H. Wadsworth Date
*/s/ Carl W. Vogt, Esq. President April 28, 2000
- ------------------------ --------------
Carl W. Vogt, Esq. Date
*/s/ Charles A. Rizzo Chief Financial and Accounting April 28, 2000
- ---------------------- Officer --------------
Charles A. Rizzo Date
*By: /s/ Daniel O. Hirsch April 28, 2000
- -------------------------- --------------
Daniel O. Hirsch Date
Attorney-In-Fact
</TABLE>
<PAGE>
RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and any
Post-Effective Amendments thereto, of Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
North American Government Bond Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Flag Investors Equity Partners Fund, Inc. and ISI Strategy Fund,
Inc. on behalf of each Fund's President pursuant to a properly executed power of
attorney.
RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and any
Post-Effective Amendments thereto, of Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
North American Government Bond Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Flag Investors Equity Partners Fund, Inc. and ISI Strategy Fund,
Inc. on behalf of each Fund's Chief Financial Officer pursuant to a properly
executed power of attorney.
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS COMMUNICATIONS FUND, INC. (the "Corporation") having its
principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with Section
2-105(c) of the Maryland General Corporation Law, at a meeting duly convened and
held on September 28, 1999, has adopted a resolution increasing the total number
of shares of capital stock which the Corporation has the authority to issue to
one hundred twenty-seven million (127,000,000) shares of Common Stock, par value
$.001 per share, having an aggregate par value of one hundred twenty-seven
thousand dollars ($127,000.00), all of which shares are designated as follows:
seventy-five million (75,000,000) shares are designated "Flag Investors
Communications Fund Class A Shares" (the "Class A Shares"), twenty million
(20,000,000) shares are designated "Flag Investors Communications Fund Class B
Shares" (the "Class B Shares"), fifteen million (15,000,000) shares are
designated "Flag Investors Communications Fund Class C Shares" (the "Class C
Shares"), fifteen million (15,000,000) shares are designated "Flag Investors
Communications Fund Institutional Shares" (the "Institutional Shares") and two
million (2,000,000) shares remain undesignated.
SECOND: Immediately before the increase in authorized shares pursuant
to these Articles Supplementary, the Corporation was authorized to issue one
hundred ten million (110,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of one hundred ten thousand dollars
($110,000.00), all of which shares were designated as follows: sixty-three
million (63,000,000) shares were designated "Flag Investors Communications Fund
Class A Shares" (the "Class A Shares"), fifteen million (15,000,000) shares were
designated "Flag Investors Communications Fund Class B Shares" (the "Class B
Shares"), fifteen million (15,000,000) shares were designated "Flag Investors
Communications Fund Class C Shares" (the "Class C Shares"), fifteen million
(15,000,000) shares were designated "Flag Investors Communications Fund
Institutional Shares" (the "Institutional Shares") and two million (2,000,000)
shares remained undesignated.
THIRD: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors Communications Fund, Inc. has caused
these Articles Supplementary to be executed by its President and its corporate
seal to be affixed and attested by its Secretary on this 28th day of September,
1999.
[CORPORATE SEAL]
FLAG INVESTORS COMMUNICATIONS FUND, INC.
By: /s/ Harry Woolf
---------------
Harry Woolf
President
Attest: /s/ Amy M. Olmert
-----------------
Amy M. Olmert
Secretary
The undersigned, President of FLAG INVESTORS COMMUNICATIONS FUND, INC.,
who executed on behalf of said corporation the foregoing Articles Supplementary
to the Articles of Incorporation of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ Harry Woolf
---------------
Harry Woolf
President
<PAGE>
As Amended Through
July 28, 1999
BY-LAWS
OF
FLAG INVESTORS COMMUNICATIONS FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be in the City of Baltimore, State of Maryland.
Section 3. Other Offices. The Corporation may have such other offices
in such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Stockholder Meetings. The Corporation may, but
shall not be required to, hold a regular meeting of stockholders in any year in
which the Corporation is not required, under the Investment Company Act of 1940,
as amended (the "1940 Act"), to submit for stockholder approval (i) the election
of directors), (ii) any contract with an investment adviser or principal
underwriter (as such terms are defined in the 1940 Act) that the Corporation
enters into or any renewal or amendment thereof, or (iii) the selection of the
Corporation's independent public accountants. If stockholder approval is
required for any of the purposes in (i) through (iii) above, the regular meeting
shall be held, at which stockholders shall vote on the proposal necessitating
such meeting and shall transact any other business as may properly be brought
before the meeting. Regular meetings of stockholders, if any, shall be held on
such day during the month of June and at such time as shall be designated by the
Board of Directors and stated in the notice of the meeting.
Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Charter or the Corporation may be
called for any purpose or purposes by a majority of the Board of Directors or
the President, and shall be called by the President or Secretary on the written
request of the stockholders as provided by the Maryland General Corporation Law.
Such request shall state the purpose or purposes of the proposed meeting and the
matters proposed to be acted on at it; provided, however, that unless requested
by stockholders entitled to cast a majority of all the votes entitled to be cast
at the meeting, a special meeting need not be called to consider any matter
which is substantially the same as a matter voted on at any special meeting of
the stockholders held during the preceding twelve (12) months.
Section 3. Place of Meetings. The regular meeting, if any, and any
special meeting of the stockholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice; Shareholder List. (a)
Notice of the place, date and time of the holding of each regular and special
meeting of the stockholders and the purpose or purposes of the meeting shall be
given personally or by mail, not less than ten nor more than ninety days before
the date of such meeting, to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. The notice of every meeting of
stockholders may be accompanied by a form of proxy approved by the Board of
Directors in favor of such actions or persons as the Board of Directors may
select.
<PAGE>
(b) Notice of any meeting of stockholders shall be deemed
waived by any stockholder who shall attend such meeting in person or by proxy,
or who shall, either before or after the meeting, submit a signed waiver of
notice which is filed with the records of the meeting. A meeting of stockholders
convened on the date for which it was called may be adjourned from time to time
without further notice to a date not more than 120 days after the original
record date.
(c) At least five (5) days prior to each meeting of
stockholders, the officer or agent having charge of the share transfer books of
the Corporation shall make a complete list of stockholders entitled to vote at
such meeting, in alphabetical order with the address of and the number of shares
held by each stockholder.
Section 5. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the stockholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
Section 6. Voting. (a) Except as otherwise provided by statute or the
Charter of the Corporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any meeting of
shareholders may authorize another person or persons to act as proxy for the
shareholder by (1) a written authorization signed by such shareholder or the
shareholder's authorized agent; or (2) by telephone, a telegram, cablegram,
datagram or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. No proxy shall be valid after the expiration of eleven
months from the date thereof, unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the shareholder executing it, except
in those cases where such proxy states that it is irrevocable and where an
irrevocable proxy is permitted by law. Except as otherwise provided by statute,
the Charter of the Corporation or these By-Laws, any corporate action to be
taken by vote of the shareholders shall be authorized by a majority of the total
votes cast at a meeting of shareholders at which a quorum is present by the
holders of shares present in person or represented by proxy and entitled to vote
on such action, except that a plurality of all the votes cast at a meeting at
which a quorum is present is sufficient to elect a director.
(c) If a vote shall be taken on any question other than the
election of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the stockholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
<PAGE>
Section 7. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders.
Section 8. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute any action required to be taken at any regular or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if the following are filed with the records of
stockholders' meetings: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote at it.
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<PAGE>
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Charter
of the Corporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Charter of the Corporation
or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (except for any period during which shares
of the corporation are held by fewer than three shareholders) nor more than
fifteen. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
by plurality vote of a quorum cast by written ballot at the regular meeting of
stockholders, if any, or at a special meeting held for that purpose. The term of
office of each director shall be from the time of his election and qualification
and until his successor shall have been elected and shall have qualified, or
until his death, or until he shall have resigned, or have been removed as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Charter of the Corporation.
Section 4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. The stockholders may elect a successor to fill a
vacancy on the Board of Directors which results from the removal of a Director.
A majority of the remaining Directors, whether or not sufficient to constitute a
quorum, may fill a vacancy on the Board of Directors which results from any
cause except an increase in the number of directors, and a majority of the
entire Board of Directors may fill a vacancy which results from an increase in
the number of Directors; provided however, that no vacancies shall be filled by
action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the stockholders of the Corporation. In the event that at any
time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the stockholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of stockholders and until his successor is elected and qualifies. A
Director elected by the stockholders of the Corporation to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 7. Regular Meetings. Regular meetings of the Board may be held
with notice at such times and places as may be determined by the Board of
Directors.
Section 8. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the President, or by a majority of the
directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
Section 9. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or by
commercial delivery services addressed to him at his residence or usual place of
business, at least three days before the day on which such meeting is to be
held.
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<PAGE>
Section 10. Waiver of Notice of Special Meetings. Notice of any special
meeting need not be given to any Director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of the
meeting or who shall attend such meeting. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice of any meeting need not
state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than three
members, of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter of the Corporation, these By-Laws, the 1940 Act or other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board; provided, however, that the
approval of any contract with an investment adviser or principal underwriter, as
such terms are defined in the 1940 Act, which the Corporation enters into or any
renewal or amendment thereof, the approval of the fidelity bond required by the
1940 Act, and the selection of the Corporation's independent public accountants
shall each require the affirmative vote of a majority of the Directors who are
not interested persons, as defined in the 1940 Act, of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the Directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the Directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other Directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time appoint
one of its members as Chairman of the Board, who shall serve at the pleasure of
the Board and who shall perform and execute such duties and powers as may be
conferred upon or assigned to him by the Board or these By-Laws, but who shall
not by reason of performing and executing these duties and powers be deemed an
officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if one has been selected and is present, shall
preside. In the absence or inability of the Chairman of the Board to preside at
a meeting, the President, or, in his absence or inability to act, another
director chosen by a majority of the directors present, shall act as chairman of
the meeting and preside at it. The Secretary (or, in his absence or inability to
act, any person appointed by the Chairman) shall act as secretary of the meeting
and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
Section 15. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time.
Section 16. Compensation. Any Director, whether or not he is a salaried
officer, employee or agent of the Corporation, may be compensated for his
services as director or as a member of a committee, or as Chairman of the Board
or chairman of a committee, and in addition may be reimbursed for transportation
and other expenses, all in such manner and amounts as the directors may from
time to time determine.
Section 17. Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the stockholders of
the Corporation in accordance with the provisions of the 1940 Act.
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<PAGE>
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by resolution
adopted by a majority of the entire Board, designate an Executive Committee,
Compensation Committee, Audit Committee and Nomination Committee, each of which
shall consist of two or more of the directors of the Corporation, which
committee shall have and may exercise all the powers and authority of the Board
with respect to all matters other than as set forth in Section 3 of this Article
IV.
Section 2. Other Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the Board
of Directors may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No committee of the Board
shall have power or authority to:
(a) recommend to stockholders any action requiring
authorization of stockholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an investment
adviser or principal underwriter, as such terms are defined in the 1940 Act, or
take any other action required to be taken by the Board of Directors by the 1940
Act;
(c) amend or repeal these By-Laws or adopt new By-Laws;
(d) declare dividends or other distributions or issue
capital stock of the Corporation; and
(e) approve any merger or share exchange which does not
require stockholder approval.
Section 4. General. One-third, but not less than two members, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence of disqualification of
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
All committees shall keep written minutes of their proceedings and
shall report such minutes to the Board. All such proceedings shall be subject to
revision or alteration by the Board; provided, however, that third parties shall
not be prejudiced by such revision or alteration.
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint such other officers, agents and
employees as it may deem necessary or proper. Any two or more offices may be
held by the same person, except the offices of President and Vice President, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board may from time to time elect or appoint, or delegate to the
President the power to appoint, such other officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
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<PAGE>
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
Section 6. Bonds or other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board (or if
there be none), he shall preside at all meetings of the stockholders and of the
Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He may
employ and discharge employees and agents of the Corporation, except such as
shall be appointed by the Board, and he may delegate these powers.
Section 8. The Vice Presidents. In the absence or disability of the
President, or when so directed by the President, any Vice President designated
by the Board of Directors may perform any or all of the duties of the President,
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President; provided, however, that no Vice President
shall act as a member of or as chairman of any committee of which the President
is a member or chairman by designation of ex-officio, except when designated by
the Board. Each Vice President shall perform such other duties as from time to
time may be conferred upon or assigned to him by the Board or the President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation, except those which the Corporation
has placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934) pursuant to a written agreement designating such bank or trust company or
member of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to
the credit of the Corporation;
(d) receive, and give receipts for, moneys due and payable
to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor; and
(f) in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability of the
Treasurer, or when so directed by the Treasurer, any Assistant Treasurer may
perform any or all of the duties of the Treasurer, and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided
for the purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
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<PAGE>
(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates
and other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all the duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Board or the President.
Section 12. Assistant Secretaries. In the absence or disability of the
Secretary, or when so directed by the Secretary, any Assistant Secretary may
perform any or all of the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
Each Assistant Secretary shall perform such other duties as from time to time
may be conferred upon or assigned to him by the Board of Directors, the
President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem sufficient,
the Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any Director.
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by the President, a Vice President,
or the Chairman of the Board, and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date of
issue.
Section 2. Rights of Inspection. There shall be kept at the principal
executive office, which shall be available for inspection during usual business
hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
stockholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been stockholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual business hours the Corporation's
books of account and stock ledger in accordance with the General Laws of the
State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of stockholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
Section 4. Transfer Agents and Registrars. The Corporation may have one
or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
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<PAGE>
Section 5. Record Date and Closing of Transfer Books. The Board of
Directors may set a record date for the purpose of making any proper
determination with respect to stockholders, including which stockholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise other rights. The record date may
not be more than ninety (90) days before the date on which the action requiring
the determination will be taken; and, in the case of a meeting of stockholders,
the record date shall be at least ten (10) days before the date of the meeting.
The Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or mutilation
of such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 8. Stock Ledgers. The Corporation shall not be required to keep
original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the office(s) of the
Transfer Agent(s) of the Corporation's capital stock.
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing the name
of the Corporation, which shall be in the charge of the secretary. The Board of
Directors may authorize one or more duplicate seals and provide for the custody
thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the last day of December in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safekeeping of the
securities and investments of the Corporation shall contain provisions complying
with the 1940 Act, and the general rules and regulations thereunder.
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<PAGE>
ARTICLE X
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Money market instruments,
bonds or other securities at any time owned by the Corporation may be held on
behalf of the Corporation or sold, transferred or otherwise disposed of subject
to any limits imposed by these By-Laws, and pursuant to authorization by the
Board and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Directors and
ratified by the Board of Directors or the stockholders in accordance with the
provisions of the 1940 Act.
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report to
the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
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<PAGE>
ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify its
directors to the fullest extent that indemnification of directors is permitted
by the Maryland General Corporation Law. The Corporation shall indemnify its
officers to the same extent as its Directors and to such further extent as is
consistent with law. The Corporation shall indemnify its Directors and officers
who while serving as Directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent with law.
This Article XIII shall not protect any such person against any liability to the
Corporation or any shareholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 2. Advances. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article XIII shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with proceedings to which he is a party
in the manner and to the full extent permissible under the Maryland General
Corporation Law, the Securities Act of 1933 (the "1933 Act") and the 1940 Act,
as such statutes are now or hereafter in force.
Section 3. Procedure. On the request of any current or former director
or officer requesting indemnification or an advance under this Article XIII, the
Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the 1933 Act and the 1940
Act, as such statutes are now or hereafter in force, whether the standards
required by this Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this Article
XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested directors or otherwise, both as to action by a Director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Maryland Law. References to the Maryland General Corporation
Law in this Article XIII are to such law as from time to time amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the stockholders or at any special meeting of the stockholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
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<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 4th day of June, 1999 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 and administrative 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 manage
the Fund's affairs and shall supervise all aspects of the Fund's operations
(except as otherwise set forth herein), 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");
(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
<PAGE>
(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
operations, except for distribution services;
(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;
(d) provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery, supplies and similar items
for the Fund's principal office;
(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;
(f) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(g) take all actions necessary to carry into effect
the Fund's purchase and sale programs;
(h) supervise the operations of the Fund's transfer
and dividend disbursing agent;
(i) provide the Fund with such administrative and
clerical services for the maintenance of certain shareholder records,
as are deemed advisable by the Fund's Board of Directors; and,
(j) 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.
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
<PAGE>
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.
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 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 BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT 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. BT 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 BT Alex. Brown in
any transaction in which the Advisor or BT Alex. Brown acts as a principal with
respect to any part of the Fund's order. If BT 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;
(d) the provisions of the By-Laws; and
(e) any other applicable provisions of state and
federal law.
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<PAGE>
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall, subject to compliance with
applicable banking regulations, 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 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.
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: 0.85% of the
first $100 million of the Fund's average daily net assets, 0.75% of the next
$100 million of the Fund's average daily net assets, 0.70% of the next $100
million of the Fund's average daily net assets, 0.65% of the next $200 million
of the Fund's average daily net assets, 0.58% of the next $500 million of the
Fund's average daily net assets, 0.53% of the next $500 million of the Fund's
average daily net assets, and 0.50% of that portion of the Fund's average daily
net assets in excess of $1.5 billion.
-24-
<PAGE>
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.
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.
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.
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<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 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: /s/ Kathy L. Churko By: /s/ Harry Woolf
----------------------- ------------------------------
Name: Kathy L. Churko Name: Harry Woolf
Title: President
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Kathy L. Churko By: /s/ Edward J. Veilleux
----------------------- ------------------------------
Name: Kathy L. Churko Name: Edward J. Veilleux
Title: Executive Vice President
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 4th day of June , 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;
(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
<PAGE>
(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
I 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 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.
<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 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 BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT 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 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. BT 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 BT Alex. Brown in any
transaction in which the Sub-Advisor or BT Alex. Brown acts as a principal with
respect to any part of the Fund's order. If BT 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 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
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<PAGE>
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.
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: 0.60% of the first $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 $100 million of the Fund's average
daily net assets, 0.45% of the next $200 million of the Fund's average daily net
assets, 0.40% of the next $500 million of the Fund's average daily net assets,
0.37% of the next $500 million of the Fund's average daily net assets, and 0.35%
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.
The fees payable to the Sub-Advisor under this Agreement shall be paid
into an interest bearing escrow account in the event that (i) the Securities and
Exchange Commission issues an order (the "Order") permitting the implementation
of this Agreement prior to approval by the holders of "a majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Fund and (ii)
the holders of "a majority of the outstanding voting securities" (as defined in
the 1940 Act) of the Fund have not voted to approve this Agreement by the
closing of the merger of Bankers Trust Corporation with Deutsche Bank AG (the
"Closing Date"). If shareholder approval of this Agreement has been obtained
within 150 days of the later of the Closing Date or the granting of the Order,
the fees paid by the Fund into the escrow account (and interest thereon) shall
be paid to the Sub-Advisor. If such approval has not been obtained within 150
days of the later of the Closing Date or the granting of the Order, this
Agreement shall terminate and the fees paid by the Fund into the escrow account
(and interest thereon) shall be paid to the Fund.
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.
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<PAGE>
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
(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 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.
-31-
<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: /s/ Kathy L. Churko By: /s/ Harry Woolf
----------------------- ---------------------------
Name: Kathy L. Churko Name: Harry Woolf
Title: President
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Kathy L. Churko By: /s/ Edward J. Veilleux
----------------------- ---------------------------
Name: Kathy L. Churko Name: Edward J. Veilleux
Title: Executive Vice President
[SEAL] ALEX. BROWN INVESTMENT MANAGEMENT
Attest: /s/ Kathy L. Churko By: /s/ J. Dorsey Brown
----------------------- ---------------------------
Name: Kathy L. Churko Name: J. Dorsey Brown
Title: CEO
<PAGE>
March 30, 2000
Bankers Trust Company
130 Liberty Street
New York, NY 10006
USA
RE: Securities Lending Agreement
Ladies and Gentlemen:
This letter will confirm our agreement, as set forth below, pursuant to
which Bankers Trust Company ("BTC") will be authorized by each investment
company on whose behalf this Agreement is executed, including any series
thereof, (each, a "Company"), each Company being an investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act"), to
lend on behalf of each Company set forth on Schedule 1 attached hereto, certain
securities held by BTC as custodian:
1. Appointment of Agent
--------------------
(a) (i) Until this Agreement is terminated pursuant to Section 11, BTC
is authorized as our agent to lend on a disclosed basis our securities held in
custody by BTC to such borrowers as appear on BTC's approved list of borrowers,
a copy of which may be obtained at any time upon request, at the time of any
loan and on such terms as BTC shall in its sole discretion decide. Such
borrowers may include certain United Kingdom entities, if we provide BTC with
our authorization in the form attached hereto as Exhibit A. BTC shall further be
authorized as our agent to sign agreements with borrowers, ownership or other
certificates as may be required by the Internal Revenue Service or any other tax
authorities, and to take any other actions necessary to effect such loans.
(ii) No securities loans shall be made on behalf of a Company if,
as a result, the aggregate value of all securities loans of such Company will
exceed the percentage set forth on Schedule 1 attached hereto (or such other
level as may be communicated to BTC by the Company) of the value of such
Company's total assets, including the value of collateral received in respect of
securities loans.
(b) We acknowledge that BTC acts as agent for other securities lending
clients who may hold some of the same securities as we may hold and,
accordingly, that any given loan to a borrower may be allocated among several of
BTC's clients. We agree that BTC shall have full discretion to allocate such
loans among BTC's clients as it deems appropriate and shall have no obligation
to include us in any such allocation.
<PAGE>
(c) We represent, warrant and agree that: (i) each Company is a
corporation established pursuant to the laws of the State of Maryland and is
registered under the 1940 Act; (ii) we have and will have the right to lend the
securities subject to loans hereunder; (iii) a majority of the Board of
Directors of the Company (including a majority of the directors who are not
"interested persons," within the meaning of the 1940 Act, of the Company), will
initially and at least annually thereafter determine that the investment of
securities lending cash collateral in shares of the BT Institutional Funds -
Institutional Daily Assets Fund ("DAF") is in the best interest of the
shareholders of each Company; (iv) investment in shares of the DAF by a
particular Company will be consistent with such Company's investment objectives
and policies; (v) investment in shares of DAF by a particular Company will be in
accordance with guidelines regarding the investment of cash collateral specified
by the Company and DAF has been approved for investment by each Company or DAF
invests in the types of instruments that such Company has authorized for the
investment of its cash collateral; (vi) the securities lending program or each
Company will comply with all present and future applicable positions of the
Securities and Exchange Commission and its staff regarding such arrangements;
(vii) the execution, delivery and performance of this Agreement are within our
powers, have been and remain duly authorized by all necessary action and will
not violate or constitute a default under any applicable law or regulation or of
any decree, order, judgment, agreement or instrument binding on us; (viii) no
consent (including, but not limited to, exchange control consents) of any
applicable governmental authority or body is necessary, except for such consents
as have been obtained and are in full force and effect, and all conditions of
which have been duly complied with; and (ix) this Agreement constitutes a legal,
valid and binding obligation enforceable against us in accordance with its
terms.
(d) When used herein, "we", "us" and "our" shall include the Company
and/or each respective Company, as the context shall require.
2. Remuneration
------------
Unless otherwise agreed, BTC shall pay us a fee for each loan equal to
an agreed upon percentage of (a) in the case of loans not collateralized by
cash, the fee paid by the borrower to BTC with respect to each loan, and (b) in
the case of loans collateralized by cash, the difference between (i) the net
realized income derived from approved investments of the cash collateral, minus
(ii) the borrower's rebate. BTC shall receive any fee paid by the borrower and,
provided that BTC shall have actually received payment of such fees from the
borrower, credit our portion of such fees to our account monthly.
3. Statements of Loan Activity and Fees
------------------------------------
BTC shall promptly advise us by written or electronic means of any loan
entered into by BTC on our behalf. In addition, BTC shall send us a monthly
statement summarizing securities lending activity (including revenues therefrom)
for the previous month effected by BTC on our behalf.
2
<PAGE>
4. Distributions on Loaned Securities and Collateral
-------------------------------------------------
All borrowers shall be required to pay or otherwise deliver to BTC all
substitute payments in respect of interest payments, dividends, or other
distributions made on the loaned securities. Such payments shall be credited by
BTC to our account upon receipt by BTC of such payments from the borrower,
unless otherwise agreed upon by the parties. We authorize BTC to pay, provided
that the borrower is not in default under its agreement with BTC, to the
borrower all interest payments received by BTC on Government Securities (as
defined in Section 6(a)) held by BTC as collateral for our loans.
5. Recalls of Securities
---------------------
(a) Unless otherwise agreed by us, we may instruct BTC to terminate any
loan in whole or in part by giving BTC written notice thereof (a "Recall
Notice"). BTC shall thereupon promptly recall the securities from the borrower,
within the recall period specified by BTC's agreement with the borrower, which
shall not be later than the fifth business day (but, in the case of U.S. equity
securities, the third business day, and, in the case of Government Securities,
the first business day) following the business day on which BTC gives a notice
recalling the securities to the borrower (the "Recall Period"). If, on the day
BTC receives the Recall Notice, (i) the borrower is closed for business or (ii)
the principal market for the loaned securities is closed for trading, the Recall
Period will commence on the next business day on which both the borrower and the
principal trading market are open.
(b) If any loaned security is not returned by a borrower by the
expiration of the applicable Recall Period, BTC shall notify us of such fact.
BTC shall take all steps which BTC deems appropriate to secure the prompt return
of the securities pursuant to BTC's agreement with the borrower (which may
include the liquidation of collateral and the purchase of replacement
securities).
6. Collateral
----------
(a) Unless otherwise indicated to us by BTC, prior to or simultaneously
with the delivery of our securities to a borrower, BTC shall obtain and hold on
our behalf collateral having a value not less than the value (the "Margin
Requirement") specified in Exhibit B hereto. The collateral shall consist of (i)
cash, (ii) securities issued or guaranteed by the United States Government or
its agencies or instrumentalities ("Government Securities"), or (iii) letters of
credit issued by banks as may be acceptable to BTC.
3
<PAGE>
(b) BTC will mark to market loaned securities and collateral (if the
collateral is represented by Government Securities) on a daily basis, and if on
any day, the aggregate market value of the collateral held by BTC for loans made
to any one borrower is less than the Margin Requirement, BTC shall obtain from
such borrower pursuant to BTC's agreement with the borrower such additional
collateral so that the aggregate market value of the collateral is not less than
the Margin Requirement. We understand that BTC may be obligated to release
collateral in excess of the Margin Requirement to the borrower when so required
by BTC's agreement with the borrower.
(c) We authorize BTC to invest, on our behalf and for our account, any
cash collateral received from a borrower in any of the instruments described in
Exhibit B hereto, including any such instrument purchased through or entered
into with BTC or its affiliates. We acknowledge that such cash collateral is
invested at our risk, and if, upon termination of any loan, the cash collateral
held by BTC for our account is less than the amount required to be returned to
the borrower under BTC's agreement with the borrower, we will provide BTC with
cash in the amount of any such deficiency.
7. Indemnification
---------------
(a) In the event that any loan is terminated and the loaned securities
or any portion thereof shall not have been returned to BTC by or on behalf of
the borrower within the time specified by BTC's agreement with the borrower, BTC
shall at its expense (i) within one (1) business day after the expiration of the
Recall Period, replace the loaned securities (or any portion thereof not so
returned) with a like amount of the loaned securities of the same issuer, class
and denomination, and hold us harmless from any brokerage commission, fees, and
New York State or City transfer taxes incurred by BTC in the purchase of such
replacement securities or (ii) if BTC is unable to purchase such securities on
the open market, credit our account with an amount of cash in U.S. dollars equal
to the Market Value (as defined below) of such unreturned loaned securities
determined at the close of business as of the date on which the loaned
securities should have been returned plus, until such time as the events in (i)
or (ii) are consummated, all financial benefits derived from the beneficial
ownership of the loaned securities which have accrued on the loaned securities
whether or not received from the borrower. The Market Value of any securities
listed on a national securities exchange will be the last sales price on the
principal exchange on which trading occurred on the date the Market Value is
determined or, if there was no sale on any such exchange on such date, the last
bid price quoted. The Market Value of securities traded in the over-the-counter
market will be the last quoted bid price in the over-the-counter market as
reported by the National Quotation Bureau Incorporated or any successor
organization. The Market Value of Government Securities shall be the price as
quoted by a generally recognized pricing service for the business day preceding
the date of determination (or, if not so quoted on such day, the next preceding
day on which they were so quoted). The Market Value of securities the principal
4
<PAGE>
trading market for which is outside the United States will be the last sale
price on the principal exchange on which they are traded, or if there was no
sale on that date, the last sale price on the next preceding day on which there
was such a sale on such exchange, all as quoted in the DataSheet Service of the
Interactive Data Corporation, or, if not therein quoted, then as quoted by any
such exchange; the foreign exchange rate used to calculate the Market Value of
foreign securities not denominated in U.S. dollars shall be the foreign exchange
rate quoted by BTC at the close of business in New York on the preceding day.
The Market Value of securities for which market quotations are not readily
available over a reasonable period of time, will be the average of values quoted
by three major investment banking firms which are mutually agreeable to BTC and
us.
(b) In the event that BTC shall be required to make any payment to us
or shall incur any loss or expense pursuant to (a) above, it shall, to the
extent of such payment or loss or expense, be subrogated to, and succeed to, all
of our rights against the borrower and to the collateral involved; to the extent
the collateral consists of cash or Government Securities, we shall
contemporaneously with any such payment to us by BTC surrender same to BTC for
its sole disposition.
(c) Except as provided in this Section 7, BTC shall have no liability
to us for any failure of a borrower to return loaned securities.
8. BTC's Relationship with a Borrower.
-----------------------------------
We acknowledge that BTC and/or its affiliates may be a creditor of, for
its own account or in a fiduciary capacity, or generally engage in any kind of
commercial or investment banking business with, a borrower to whom BTC has lent
our securities. Without limiting the generality of the foregoing, BTC shall not
be required to disclose to us any financial information about a borrower
obtained in the course of its relationship with such borrower.
9. Notices
-------
a) All notices under this Agreement, except with respect to Recall
Notices which shall be sent in accordance with section 9(b) herein below, shall
be in writing and sent by mail or facsimile, addressed as follows:
5
<PAGE>
If to BTC:
Bankers Trust Company
130 Liberty Street, 35th Floor
New York, NY 10006
U.S.A.
Attention: Securities Lending Documentation Unit
Facsimile No.: (212) 250-2339
If to us, one copy to each:
Flag Investors Funds Flag Investors Funds
Mutual Fund Services Administration Mutual Fund Services Legal Dept.
One South Street, 18th Floor One South Street, 18th Floor
Baltimore, Maryland 21202 Baltimore, Maryland 21202
Attention: Mr. Richard Hale Attention: Mr. Daniel O. Hirsch
Facsimile No.: (410) 895-3720 Facsimile No.: (410) 895-4949
Phone No.: (410) 895-3663 Phone No.: (410) 895-3776
b) All Recall Notices under this Agreement shall be in writing and sent
by mail or facsimile, addressed as follows:
Recall Notices for US Securities:
Bankers Trust Company
130 Liberty Street, 35th Floor
New York, NY 10006
U.S.A
Attention: Securities Lending Operations Support
Facsimile No.: (212) 250-1488
Recall Notices for Non-US Securities:
Bankers Trust Company
Winchester House
1 Great Winchester Street
London, EC2N 2DB
England
Attention: Securities Lending Manager
Facsimile No.: (171) 545-2905
All notices delivered in accordance with this Agreement shall be
effective upon receipt. The address indicated above for either party may be
changed by prior written notice to the other party.
6
<PAGE>
10. Indemnification and Reimbursement of Agent, etc.
------------------------------------------------
(a) We agree to indemnify BTC and to hold BTC harmless from any
liabilities, losses, costs or expenses (including reasonable attorneys' fees)
which BTC may incur in connection with this Agreement or the transactions
contemplated hereby; provided that such indemnification shall not extend to
liabilities, losses, costs or expenses to the extent that such liabilities,
losses, costs or expenses (i) are found by a final judgment of a court of
competent jurisdiction to have resulted from BTC's own willful misconduct or
gross negligence or (ii) result from BTC's indemnity provided in Section 7.
(b) We agree that BTC's duties and responsibilities shall only be those
expressly set forth herein and that BTC may consult with counsel and be fully
protected with respect to any action taken or omitted to be taken in good faith
upon advice of such counsel.
(c) We agree that BTC may rely on any certificate, statement, request,
consent, agreement or other instrument which it believes to be genuine and to
have been signed or presented by a proper person or persons.
11. Termination
-----------
Either party may terminate this Agreement by giving not less than five
business days written notice to the other party. Such termination shall be
effective on the date specified therein, provided that such termination notice
shall not constitute a notice pursuant to Section 5 unless so specified by us,
and further provided that this Agreement shall continue to govern all
outstanding loans until the termination thereof.
12. Governing Law and Legal Proceedings
-----------------------------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to conflicts of
laws principles thereof).
(b) We hereby agree that any legal action or proceeding arising out of
or relating to this Agreement may be brought in the courts of the State of New
York, the courts of the United States of America located in the City of New York
or in any other court having jurisdiction with respect thereto. We hereby waive,
in relation to any such action or proceeding, any defense to any action or
proceeding based on venue or that the action has been brought in an inconvenient
forum.
7
<PAGE>
13. Force Majeure
-------------
Notwithstanding any other provision contained herein, BTC shall not be
liable for any action taken, or any failure to take any action required to be
taken hereunder or otherwise to fulfill BTC's obligations hereunder in the event
and to the extent that the taking of such action or such failure arises out of
or is caused by acts of governmental authorities (whether de jure or de facto),
including nationalization, expropriation, the imposition of currency
restrictions, war, insurrection, riot, revolution, terrorism or civil commotion;
acts of God, accident, fire, water damage, explosion, hurricane, cyclone,
earthquake, volcanic eruption, nuclear fusion, fission, or radioactivity;
mechanical breakdown, computer or system failure or computer virus, failure or
malfunctioning of any communications media for whatever reason; interruption
(whether partial or total) of power supplies or other utility or service; strike
or other stoppage (whether partial or total) of labor; any law, decree,
regulation or order of any government or governmental body (including any court
or tribunal); or any other cause (whether similar or dissimilar to any of the
foregoing) whatsoever beyond BTC's control.
14. Miscellaneous
-------------
This Agreement constitutes the entire agreement of the parties with
respect to BTC's acting as our agent in connection with the loan of our
securities which we have placed in custody with BTC, and supersedes all prior
understandings, written or oral, or any previous agreement with respect thereto.
Neither party shall be bound by any modifications of this Agreement unless it
has so agreed in writing.
8
<PAGE>
If the terms hereof accurately reflect our agreement, please so
indicate by signing below.
FLAG INVESTORS COMMUNICATIONS
FUND, INC. AND FLAG INVESTORS
EQUITY PARTNERS FUND, INC.
By: ________________________
Daniel O. Hirsch
Assistant Secretary
Agreed to and Accepted by
As of the Date Hereof:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
9
<PAGE>
Exhibit A
LOANS TO UK COUNTERPARTIES
Certain of the borrowers to which Bankers Trust Company ("BTC") may
loan our securities held in trust and/or custody are entities which are
organized and existing under the laws of the United Kingdom ("UK
Counterparties"). Loans to UK Counterparties will be made by BTC as our agent
pursuant to a form of securities lending agreement governed by the laws of the
United Kingdom (the "UK Agreement") which is available to us upon request.
By signing this authorization, we grant our consent to BTC making, on
our behalf, the following representations and warranties to such UK
Counterparties:
(1) We are duly authorized and empowered to perform our respective
duties and obligations under the UK Agreement;
(2) We are not restricted under the terms of our constitution or
in any other manner from lending securities in accordance with
the UK Agreement or from otherwise performing our obligations
thereunder; and
(3) We are absolutely entitled to pass full beneficial ownership
of all securities loaned under the UK Agreement to the
applicable UK Counterparty free from all liens, charges and
encumbrances.
We authorize BTC as our agent to (a) disclose our name to the UK Inland
Revenue for approval of us as an approved lender to a UK Counterparty and (b)
undertake to the Inland Revenue on our behalf to lend securities on certain
specified terms, with which BTC as our agent will comply. We agree to provide
BTC with all documents, certificates or other information necessary to enable
BTC to make the appropriate filings on our behalf with the Inland Revenue to
become an approved lender to UK Counterparties. We understand such approval is
necessary to enable the UK Counterparty to make manufactured payments in respect
of interest, dividends or other distributions on the loaned securities without
deduction of UK withholding tax.
In order to make loans to UK Counterparties, we understand that we will
be required to submit to the non-exclusive jurisdiction of the courts of England
in connection with any disputes which may arise out of or in connection with the
UK Agreement, and waive any objection to proceedings in such courts whether on
the grounds of sovereignty, venue or that the proceedings have been brought in
an inconvenient forum. By signing this authorization, we also consent to BTC's
entering into such agreements on our behalf.
Except as specifically described above, all provisions of the
Securities Lending Agreement between us and BTC shall be applicable to loans to
UK Counterparties.
<PAGE>
THE LENDING OF SECURITIES TO UK COUNTERPARTIES IS AUTHORIZED UNDER THE
PROCEDURES DESCRIBED ABOVE SUBJECT TO ANY LIMITATIONS SET FORTH BELOW.
Date: 30th day of March, 2000
FLAG INVESTORS COMMUNICATIONS FUND,
INC. AND FLAG INVESTORS EQUITY
PARTNERS FUND, INC.
By: ________________________
Daniel O. Hirsch
Assistant Secretary
2
<PAGE>
Exhibit B
I. Margin Requirements Referred to in Section 6(a)
-----------------------------------------------
For loans of securities the collateral for which is all denominated in
the same currency as the loaned securities, 102%, and for loans of securities
the collateral for which is not all denominated in the same currency as the
loaned securities, 105%, of the aggregate market value of the loaned securities,
plus any accrued but unpaid distributions thereon.
II. Investment Vehicle Referred to in Section 6 (c)
-----------------------------------------------
Institutional Daily Assets Fund ("IDAF"), an open-end money market
investment company registered under the Investment Company Act of 1940.
<PAGE>
Schedule 1
Name of Company Percentage Lending Limit
- --------------- ------------------------
Flag Investors Communications Fund, Inc. 33 1/3%
Flag Investors Equity Partners Fund, Inc. 33 1/3%
<PAGE>
March 30, 2000
Bankers Trust Company
130 Liberty Street
New York, NY 10006 U.S.A.
Re: Securities Lending Agreement
Ladies and Gentlemen:
In accordance with the Securities Lending Agreement between
you and us dated March 30, 2000 ("Agreement"), we hereby confirm our agreement
that we shall be entitled to 70% ("Our Percentage"), and Bankers Trust Company
("BTC") shall be entitled to a securities lending fee of 30%, of the fee paid by
the borrower to BTC, net of commissions, if any, with respect to each loan which
is not collateralized by cash. In the case of each loan collateralized by cash,
BTC shall receive on our behalf the income derived from approved investments of
the cash collateral ("Income"). From the Income BTC shall pay the borrower's
rebate and commissions, if any, (collectively "Rebate"), shall credit to our
account Our Percentage of the difference between (i) the sum of the Income plus
an amount computed at an annual rate of 0.12% on the cash collateral invested
during the term of such investment and (ii) the Rebate, and shall retain the
remainder of the Income as its securities lending fee. The monthly securities
lending earnings statement you provide to us pursuant to the Agreement will
reflect the computation in clause (i) above.
Very truly yours,
FLAG INVESTORS COMMUNICATIONS FUND, INC. AND
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
By: ________________________
Daniel O. Hirsch
Assistant Secretary
Agreed to and Accepted:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
<PAGE>
INSTITUTIONAL DAILY ASSETS FUND
SUBSCRIPTION AGREEMENT
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
1. Pursuant to the undersigneds' (collectively, the "Subscriber")
securities lending agreement ("Lending Agreement") with Bankers Trust Company
("Bankers Trust"), Subscriber has granted authority to Bankers Trust to invest
on Subscriber's behalf, in accordance with Subscriber's instructions, cash
collateral received in connection with securities lending transactions.
Subscriber hereby appoints Bankers Trust as agent and attorney-in-fact with
specific authority to buy and sell shares of the Institutional Daily Assets Fund
(the "Fund"), an open-end investment company managed and administered by Bankers
Trust and privately placed by the Fund's placement agent ("Placement Agent").
2. Subscriber hereby gives Bankers Trust standing instructions (the
"Standing Instructions") to (i) invest its securities lending cash collateral in
shares of the Fund and (ii) redeem shares of the Fund as necessary in connection
with the Bankers Trust securities lending program.
3. Subscriber acknowledges that this subscription is conditioned upon
acceptance by Bankers Trust and the Fund's Placement Agent.
4. Subscriber covenants and agrees with Bankers Trust as follows:
(a) Subscriber authorizes Bankers Trust to record and hold shares of
the Fund in the name of Bankers Trust or its nominee as Subscriber's agent.
(b) Bankers Trust will distribute to Subscriber a monthly summary of
purchase and redemption transactions. Subscriber hereby waives its right to
receive a confirmation after each purchase or redemption transaction. This
waiver may be revoked at any time by written notice to Bankers Trust.
(c) Bankers Trust may receive certain fees for managing or providing
other services to the Fund, as set forth in the Fund's Confidential Private
Offering Memorandum as may be amended from time to time (the "Memorandum").
(d) These directions are continuing and shall remain in full force
and effect until revoked by Subscriber by a written notice addressed and mailed
to Bankers Trust Company, 130 Liberty Street, New York, New York 10006, 20th
Floor, Attn: Securities Lending Documentation Unit, and to the Placement Agent
at the address indicated on the last page of this Subscription Agreement but
such revocation shall not affect any liability of Subscriber in any way
resulting from any transaction initiated prior to receipt of such notice of
revocation and Bankers Trust's and the Placement Agent's noting such change in
instructions in the account.
5. Subscriber represents and warrants as follows:
(a) The Shares to be acquired under this Subscription Agreement are
being acquired by Subscriber for investment and not as a nominee or agent for
the benefit of any other person, and Subscriber has no current intention of
distributing, reselling or assigning the Shares.
<PAGE>
(b) Subscriber has been furnished with, and has carefully read, the
Memorandum. Subscriber understands and agrees to the terms and conditions set
forth in the Memorandum, and acknowledges such terms are subject to change from
time to time. Subscriber's Standing Instructions, given to Bankers Trust
pursuant to this Subscription Agreement, will not become final until Subscriber
has been furnished with a definitive Memorandum.
(c) Subscriber understands that the Shares have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or under the laws
of any jurisdiction, and that the Fund does not contemplate and is not under any
obligation to so register the Shares. Subscriber understands and agrees further
that its investment can only be liquidated through a request for redemption made
by the Subscriber, or by Bankers Trust on Subscriber's behalf.
(d) Subscriber, either alone or through Subscriber's shareholders or
advisors, is sophisticated, knowledgeable and experienced in financial, business
and investment matters, and, as a result, Subscriber is in a position to
evaluate the merits and risks of an investment in the Fund. To the extent deemed
appropriate by Subscriber, Subscriber has consulted its own advisers as to the
financial, tax, legal and related matters concerning investment in the Fund and
Subscriber has evaluated the risks of investing in the Fund and has determined
that such an investment is suitable for Subscriber.
(e) (i) Subscriber is not a foreign corporation, foreign
partnership, foreign trust or foreign estate for U.S. income tax purposes (as
those terms are defined in the U.S. Internal Revenue Code of 1986 and
regulations adopted pursuant thereto). Subscriber will promptly inform Bankers
Trust and the Placement Agent if its U.S. tax status changes.
(ii) If Subscriber is an "investment Company" (as such term is
defined pursuant to Section 3 of the Investment Company Act of 1940 ("the 1940
Act")) that has not registered with the Securities and Exchange Commission
("SEC") pursuant to Section 8 of the 1940 Act, then Subscriber is aware of the
provisions of Section 12(d)(1)(E)(iii)(bb) of the 1940 Act.
(f) To the full satisfaction of Subscriber, Subscriber has been
furnished with any and all materials Subscriber has reasonably requested
relating to the Fund or the offering of Shares, and Subscriber has been afforded
the opportunity to ask questions of the officers and employees of Bankers Trust
and the Placement Agent concerning the terms and conditions of the offering and
to obtain any additional information necessary to verify the accuracy of any
representations or information appearing in the Memorandum and, if requested,
the Fund's Confidential Statement of Additional Information (the "Statement").
(g) Subscriber has relied only on the Memorandum and, if requested,
the Statement and, if consulted, such persons mentioned in 5(d) above in
determining to invest in the Fund.
(h) The information provided by Subscriber herein is complete and
accurate as of the date hereof and may be relied upon by the Placement Agent and
Bankers Trust. Subscriber will notify the Placement Agent and Bankers Trust if
any representation, warranty or information becomes untrue and Subscriber will
promptly send to the Placement Agent and Bankers Trust written confirmation
thereof.
(i) Subscriber acknowledges that this Subscription Agreement
represents an arm's length arrangement among Bankers Trust, the Placement Agent
and Subscriber.
(j) Subscriber has full authority to invest all cash collateral
Subscriber receives in connection with its participation in Bankers Trust's
securities lending program, including authority to issue the Standing
Instructions to buy and sell Shares of the Fund. Subscriber has proper
authorization to direct investments of cash collateral.
(k) The representative of Subscriber who has signed this
Subscription Agreement is duly authorized to execute and deliver this
Subscription Agreement on behalf of Subscriber. This Subscription Agreement has
been duly executed by Subscriber and constitutes a valid and legally binding
agreement of Subscriber.
-2-
<PAGE>
6. Accredited Investor Status
--------------------------
Note: The Fund offers and sells Shares only to purchasers who are
deemed to be "accredited investors" (as defined in Regulation
D under the 1933 Act) and who satisfy certain other
suitability standards.
PLEASE INITIAL ALL APPROPRIATE SPACES BELOW AND ON THE
FOLLOWING PAGES INDICATING THE BASIS UPON WHICH YOU MAY
QUALIFY TO PURCHASE SHARES. FAILING TO INITIAL ANY SPACE
APPLICABLE TO THE SUBSCRIBER MAY RESULT IN INSUFFICIENT
INFORMATION TO DETERMINE WHETHER THE SUBSCRIBER QUALIFIES TO
PURCHASE SHARES.
a. Subscriber certifies that it is an accredited investor
_______ because it is (i) a bank as defined in Section 3(a)(2)
Initial of the 1933 Act whether acting for its own account or
for the account of an accredited investor who is not a
natural person; (ii) a savings and loan association or
other institution specified in Section 3(a)(5)(A) of the
1933 Act whether acting for its own account or for the
account of an accredited investor who is not a natural
person; or (iii) an insurance company as defined in
Section 2(13) of the 1933 Act.
b. Subscriber certifies that it is an accredited investor
_______ because it is an investment company registered under the
Initial Investment Company Act of 1940, as amended (the "1940
Act") not formed for the specific purpose of investing
in the Fund.
c. Subscriber certifies that it is an accredited investor
_______ because it has total assets in excess of $5,000,000 AND
Initial (please initial 1, 2 or 3 below as applicable):
1. Subscriber certifies that it is: an organization
_______ described in section 501(c)(3) of the U.S. Internal
Initial Revenue Code of 1986, a corporation, a
Massachusetts or similar business trust, or a
partnership, not formed for the specific purpose of
investing in the Fund.
2. Subscriber certifies that it is a trust or bank
_______ collective trust and (i) the investment in the Fund
Initial is being directed by a sophisticated person and
(ii) was not formed for the purpose of investing in
the Fund.1
3. Subscriber certifies that it is (i) a plan
_______ established and maintained by a state, its
Initial political subdivisions or any agency or
instrumentality of a state or its political
subdivisions, for the benefit of its employees.
d. Subscriber certifies that it is an accredited investor
because it is an employee benefit plan within the
_______ meaning of the Employee Retirement Income Security Act
Initial of 1974, as amended, and (i) its investment decision is
made by a plan fiduciary2 as defined in Section 3(21) of
such Act or (ii) it has total assets in excess of
$5,000,000 or (iii) it is a self-directed plan, with
investment decisions made solely by persons that are
accredited investors.
- ---------------
1 For purposes of this representation, a "sophisticated person" is a person who
has such knowledge and experience in financial and business matters that he or
she is capable of evaluating the merits and risks of the prospective investment
in the Fund.
2 For purposes of this representation, the term "plan fiduciary" means a bank,
savings and loan association, insurance company or registered investment
adviser.
-3-
<PAGE>
Please provide the following supplemental data:
a. Legal form of entity (corporation, trust, etc.):
CORPORATION
-----------
b. Jurisdiction of organization:
STATE OF MARYLAND
-----------------
7. Subscriber agrees that the representations, warranties and
agreements included in this Subscription Agreement will be deemed restated and
reaffirmed whenever shares of the Fund are purchased pursuant to the Standing
Instructions.
8. Subscriber understands that the information provided herein will be
relied upon by the Fund, Bankers Trust and the Placement Agent for the purpose
of determining the eligibility of Subscriber to invest in the Fund. Subscriber
agrees to indemnify and hold harmless Bankers Trust and the Placement Agent and
each other person, if any, who controls or is controlled by any of them, within
the meaning of Section 15 of the 1933 Act (collectively "Indemnitees"), against
any and all loss, liability, claim, damage and expense whatsoever (i) arising
out of or based upon any false representation or warranty contained herein or
any breach of any agreement contained herein including, but not limited to, the
representations, warranties and agreements Subscriber will be deemed to have
made under this Subscription Agreement, whenever Subscriber purchases additional
shares of the Fund or in any other document furnished by Subscriber to any of
the Indemnitees in connection with any transaction to which this Subscription
Agreement relates or (ii) in the event that claims are brought against Bankers
Trust and/or the Placement Agent that Subscriber was not authorized to invest in
the Fund.
9. Subscriber agrees that in no event will the Memorandum and, if
requested, the Statement be duplicated or transmitted to anyone other than the
prospective investor to whom they were directed by written communication of the
Fund.
10. This Subscription Agreement will be construed in accordance with,
and governed in all respects by, the laws of the State of New York.
11. Subscriber understands that shares of the Fund are not deposits or
obligations of, or guaranteed or endorsed by, Bankers Trust or any other banking
or depository institution, and the shares are not Federally guaranteed or
insured by the Federal Deposit Insurance Corporation, the U.S. Government, the
Federal Reserve Board or any other agency. The Fund intends to maintain a
constant $1.00 per share net asset value, although there can be no assurance
that it will be able to do so.
12. This Subscription Agreement shall be binding and shall inure to the
benefit of Bankers Trust, the Placement Agent or any of their successors,
assigns or any future placement agent or investment manager to the Fund which is
appointed by the Fund's Board of Trustees.
-4-
<PAGE>
13. Subscriber has executed this Subscription Agreement on the date set
forth below.
Date: March 30, 2000 By: ____________________________________________
Daniel O. Hirsch
Assistant Secretary
FLAG INVESTORS COMMUNICATIONS FUND, INC. AND FLAG
-------------------------------------------------
INVESTORS EQUITY PARTNERS FUND, INC.
------------------------------------
Print or Type Name of Subscriber
Address of Subscriber:
Flag Investors Funds
Mutual Fund Services, Administration
One South Street
Baltimore, Maryland 21202
Attention: Mr. Richard Hale
Facsimile No.: (410) 895-3720
Telephone Number: (410) 895-3663
Tax Identification Number(s):
Flag Investors Communications Fund, Inc. 52-1319644
Flag Investors Equity Partners Fund, Inc. 52-1912412
Approved and Agreed:
ICC DISTRIBUTORS INC., Placement Agent
By:________________________________________
Name:
Title:
Address: 2 Portland Square
Portland, Maine 04101
Telephone Number: (207) 879-1900
Approved and Agreed:
BANKERS TRUST COMPANY
By:_________________________________________
Name:
Title:
-5-
<PAGE>
1701 Market Street MORGAN, LEWIS
Philadelphia, PA 19103 & BOCKIUS L L P
(215) 963-5000 C O U N S E L O R S A T L A W
Fax: (215) 963-5299
April 24, 2000
Flag Investors Communications Fund, Inc.
One South Street
Baltimore, Maryland 21202
Re: Opinion of Counsel regarding Post-Effective Amendment No. 23 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
(File No. 2-87336)
----------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Flag Investors Communications Fund, Inc.
(the "Fund") a Maryland corporation, in connection with the above-referenced
Registration Statement which relates to the Funds shares of common stock, par
value $.001 per share (the "Shares"). This opinion is being delivered to you in
connection with the Fund's filing of Post-Effective Amendment No. 23 to the
Registration Statement (the "Amendment") to be filed with the Securities and
Exchange Commission pursuant to Rule 485(b) under the Securities Act of 1933.
With your permission, all assumptions and statements of reliance herein have
been made without any independent investigation or verification on our part,
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the State of Maryland to the existence and good
standing of the Fund dated April 12, 2000;
(b) the Articles of Incorporation of the Fund and all amendments and
supplements thereto (the "Articles of Incorporation");
(c) a certificate executed by Amy M. Olmert, the Secretary of the Fund,
certifying as to the Fund's Articles of Incorporation and By-Laws
and certain resolutions adopted by the Board of Directors of the
Fund authorizing the issuance of the shares; and
(d) a printer's proof of the Amendment.
<PAGE>
In our capacity as counsel to the Fund, we have examined the originals,
or certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer?s proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of
the opinion that the Shares, when issued and sold in accordance with the
Articles of Incorporation and By-Laws, and for the consideration described in
the Registration Statement, will be legally issued, fully paid and nonassessable
under the laws of the State of Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in such Registration
Statement. In giving this consent, we do not concede that we are in the category
of persons whose consent is required under Section 7 of the 1933 Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
- -------------------------------
Morgan, Lewis & Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 23 to the Registration Statement on Form N-1A of our report dated
February 11, 2000, relating to the financial statements and financial highlights
which appears in the December 31, 1999 Annual Report to Shareholders of Flag
Investors Communications Fund, Inc., which is also incorporated by reference
into the Registration Statement. We also consent to the reference to us under
the headings "Financial Highlights" and "Independent Accountants" in such
Registration Statement.
PricewaterhouseCoopers LLP
Baltimore, Maryland
April 27, 2000
<PAGE>
Adopted December 14, 1994 and Amended March 18, 1996,
September, 1997 and December 17, 1997
Flag Investors Funds
Consolidated Code of Ethics
I. General
Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act") makes it
unlawful for certain persons to engage in "fraudulent" practices in connection
with purchases or sales by those persons of securities when those securities are
held or to be acquired by an investment company. The rule also requires every
investment company and the investment company's investment advisor and, in
certain cases, principal underwriter to adopt a Code of Ethics containing
provisions "reasonably necessary to prevent" such fraudulent practices by so
called "Access Persons."
Flag Investors Communications Fund, Inc. ("Communications"), Flag Investors
International Fund, Inc. ("International"), Flag Investors Emerging Growth Fund,
Inc. ("Emerging Growth"), Flag Investors Short-Intermediate Income Fund, Inc.
("Short-Intermediate"), Flag Investors Value Builder Fund, Inc. ("Value
Builder") Flag Investors Real Estate Securities Fund, Inc. ("Real Estate") and
Flag Investors Equity Partners Fund, Inc. ("Equity Partners") are investment
companies covered by the rule. Communications, International, Emerging Growth,
Short-Intermediate, Value Builder, Real Estate and Equity Partners are also
referred to herein individually as a "Fund," and collectively as "Funds."
Investment Company Capital Corp. ("ICC") is the investment advisor to
Communications, International, Emerging Growth, Short-Intermediate, Value
Builder, Real Estate and Equity Partners. Alex. Brown Investment Management
("ABIM") is the sub-advisor to Communications, Value Builder and Equity
Partners; The Glenmede Trust Company ("Glenmede") is the sub-advisor to
International; Brown Investment Advisory & Trust Company ("Brown Trust") is the
sub-advisor to Emerging Growth and Short-Intermediate; LaSalle Investment
Management (Securities) L.P. ("LaSalle") is the sub-advisor to Real Estate.
ABIM, Glenmede, Brown Trust and LaSalle are referred to herein as the
Sub-Advisors. ICC Distributors, Inc. ("ICC Distributors") is the principal
underwriter for each of the Funds. This document constitutes the Code of Ethics
required by Rule l7j-1.
II. Definitions
For purposes of this Code, the following terms have the meanings, set forth as
follows:
A. "Access Person" means:
1. Every director and officer of a Fund;
2. Every "advisory person" of the Funds and of ICC and the
Sub-Advisors. An advisory person is an employee who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase
or sale of a security by a Fund, or whose functions relate to
the making of any recommendations with respect to such
purchases or sales; and any natural person in a control
relationship with a Fund or the Fund's investment advisor or
sub-advisor who obtains information concerning recommendations
made to the Fund with regard to the purchase or sale of a
security;
3. Any director or officer of ICC or the Sub-Advisors who,
with respect to a Fund for which such entity acts as
investment advisor or sub-advisor, makes any recommendation,
participates in the determination of which recommendation
shall be made, or whose principal function or duties relate to
the determination of which recommendation shall be made; or
who, in connection with his or her duties, obtains any
information concerning securities recommendations being made
by such investment advisor or sub-advisor to the Fund; and
4. Any director or officer of ICC Distributors who in the
ordinary course of his or her business makes, participates in
or obtains information regarding the purchase or sale of
securities for the Funds or whose functions or duties as part
of the ordinary course of his or her business relate to the
making of any recommendation to the Funds regarding any
purchase or sale of securities.
<PAGE>
B. "Beneficial Ownership" of a security is to be determined in the same
manner as it is for purposes of Section 16 of the Securities Exchange
Act of 1934. This means that a person should generally consider himself
or herself the beneficial owner of any securities in which he or she
has a direct or indirect pecuniary interest. In addition, a person
should consider himself or herself the beneficial owner of securities
held by his or her spouse, his or her minor children, a relative who
shares his or her home, or other persons by reason of any contract,
arrangement, understanding or relationship that provides him or her
with sole or shared voting or investment power.
C. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act. Section 2(a)(9) defines "control" as the power
to exercise a controlling influence over the management or policies of
a company, unless such power is solely the result of an official
position with such company. Ownership of 25% or more of a company's
outstanding voting securities is presumed to give the holder thereof
control over the company. Such presumption may be countered by the
facts and circumstances of a given situation.
D. "Covered Persons" means any officer, director or employee of the
Funds, ICC, the Sub-Advisors and ICC Distributors.
E. "Disinterested Director" means a Director of a Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19)
of the 1940 Act.
F. "Held or to be acquired" means (i) is or has been held by the Fund,
or (ii) is being or has been considered by such Fund or its investment
advisor or Sub-Advisor for purchase, within the most recent 15 days.
G. "Investment Personnel" means all Access Persons who occupy the
position of portfolio manager with respect to a Fund, all Access
Persons who provide or supply information and/or advice to any
portfolio manager, or who execute or help execute any portfolio
manager's decisions, and all Access Persons who, in connection with
their regular functions, obtain contemporaneous information regarding
the purchase or sale of a security by a Fund.
H. "Purchase or sale of a security" means obtaining or disposing of
"beneficial ownership" (see B above) of that security and includes,
among other things, the writing of an option to purchase or sell a
security. A person who has any questions about beneficial ownership
should consult the Secretary of the Fund.
I. "Security" shall have the same meaning as that set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include securities
issued by the Government of the United States or an agency thereof,
bankers' acceptances, bank certificates of deposit, commercial paper
and registered, unaffiliated open-end investment companies.
J. A security is "being purchased or sold" by a Fund from the time when
a purchase or sale program has been communicated to the person who
places the buy and sell orders for the Fund until the time when such
program has been fully completed or terminated.
III. General Principles
A. Covered Persons
All Covered Persons are subject to the prohibitions of Rule 17j-1
against fraudulent practices and to the general fiduciary principles as
set forth in B and C below. Certain provisions of this Code of Ethics,
for example, the reporting requirements and certain other requirements
and restrictions contained herein apply to narrower classes of persons,
e.g., Access Persons or Investment Personnel.
However, everyone in the ICC, Sub-Advisor and ICC Distributors
organizations should appreciate the need to behave in an ethical manner
with respect to the Funds. In particular, all employees who are
involved in any way with the activities of a Fund should be wary of any
potential conflicts between their duty of loyalty to a Fund and their
own financial interests, particularly with respect to their own
securities trading activities. Employees should take care to preserve
the confidentiality of the Funds' business affairs. Employees who are
not "Access Persons" but who become aware of proposed Fund securities
transactions should not engage in transactions in those same securities
without the permission of the Secretary of the Fund. Otherwise,
employees who are not Access Persons are not limited in their personal
securities transactions by this Code, but such employees are encouraged
to consult with the Secretary of the Fund or with other officers of the
Funds if they have any doubts about the applicability of the Code to
any proposed transaction.
B. Statement of General Fiduciary Principles
<PAGE>
The following principles are the policy of the Funds, ICC, he
Sub-Advisors and ICC Distributors and must be followed by all Covered
Persons:
1. It is the duty of all Covered Persons at all times to place
the interests of shareholders first;
2. All personal securities transactions must be conducted
consistent with this Code of Ethics and in such manner as to
avoid any actual or potential conflict of interest or any
abuse of an individual's position of trust and responsibility;
and
3. Covered Persons must not take inappropriate advantage to
the detriment of shareholders of the Funds of their positions,
or the information they acquire, with or on behalf of the
Funds, ICC, the Sub-Advisors and ICC Distributors.
C. Fraudulent Practices
Rule 17j-1 makes it unlawful for any Covered Person, in connection with
a Fund with which such Covered Person has a relationship, to:
1. Employ any device, scheme or artifice to defraud the Fund;
2. Make to the Fund any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in order
to make the statements made, in light of the circumstances
under which they are made, not misleading;
3. Engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the Fund;
or
4. Engage in any manipulative practice with respect to the
Fund.
IV. Restrictions on Personal Transactions
A. Preclearance
As set forth below, Access Persons, Investment Personnel and, in
certain instances, Covered Persons are required to "preclear" personal
securities transactions. These preclearance requirements and procedures
should be reasonably designed to identify any prohibition or limitation
applicable to the proposed transaction.
1. A Disinterested Director of a Fund shall not purchase or
sell a security that the Director knows is to be sold or
acquired by the Fund, without first obtaining written
authorization of the Fund's Secretary;
2. Covered Persons who, in connection with their regular
functions or duties do not make or participate in decisions
regarding the purchase or sale of securities for a Fund,
obtain information (other than publicly available information)
regarding such purchases or sales, or make or participate in
the making of recommendations in connection with such
purchases or sales, shall not purchase or sell a security that
the Covered Person knows is to be sold or acquired by the
Fund, without first obtaining written authorization of the
Fund's Secretary; and
3. Access Persons shall not purchase or sell a security (other
than on behalf of the Fund) without first obtaining written
authorization of the Fund's Secretary.
B. Exemptions
The requirements of paragraph A above shall not apply to the following
transactions:
1. Purchases or sales over which the person had no direct or
indirect influence or control;
2. Purchases or sales which are non-volitional on the part of
either the person or the Fund;
3. Purchases which are part of an automatic dividend
reinvestment plan;
<PAGE>
4. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all --- ---- holders of a class of its
securities, to the extent such rights were acquired from such
issuer; or
5. Transactions in shares of any investment company.
Where a person has fiduciary responsibility which makes it
inappropriate, in the view of such person, to obtain prior
authorization with respect to a transaction, such person may complete
the transaction but must promptly notify the Secretary of the Fund or
another appropriate person.
C. Blackout Periods
No Access Person may execute securities transactions on a day during
which any Fund in the Access Person's complex has a pending "buy" or
"sell" order in the same security until that order is executed or
withdrawn. No Investment Personnel may buy or sell a security within
seven calendar days before and three calendar days after the Fund,
which the Investment Personnel manages, trades in that security. Access
Persons and Investment Personnel of ICC, ABIM and Brown Trust
(collectively Asset Management) would be exempt from the blackout
provisions of this Section IV.C. provided that: 1) the market
capitalization of a particular security exceeds $2 billion; and 2)
orders of the respective business unit of Asset Management do not
exceed ten (10) percent of the daily average trading volume for the
prior fifteen (15) days.
D. Prohibition Against Participation in IPOs
No Investment Personnel may acquire securities as a part of an initial
public offering by the issuer.
E. Private Placements
Investment Personnel may acquire securities in a private placement only
after prior approval by the Secretary of the Fund. The Secretary of the
Fund will consider the following factors, among others, in determining
whether to grant approval of the acquisition in a private placement by
Investment Personnel:
1. Whether the opportunity is being offered to the Investment
Personnel by virtue of his or her position with the Fund;
2. Whether the transaction appears upon reasonable inquiry and
investigation to present no reasonable likelihood of harm to
the Funds and which is otherwise in accordance with Rule
l7j-l; and
3. Whether the security offered in the private placement is a
security that is eligible for purchase, and should be made
available for purchase, by any of the Funds.
F. Ban on Short-Term Trading Profits
No Investment Personnel may profit in the purchase and sale, or sale
and purchase, of the same (or equivalent) securities within 60 calendar
days. Any profits realized on such short-term trades will be disgorged
to the benefit of the appropriate Fund, if practical.
V. Compliance Procedures
A. Reporting Requirements
1. Every Access Person shall report(1) to the Secretary of the
Fund the following information with respect to transactions in
any security in which such Access Person(2) has, or by reason
- ------------------------
(1) Any such report may contain a statement that the report shall not be
construed as an admission by the person making the report that he has any
direct or indirect beneficial ownership in the security to which the report
relates.
(2) No report is required if such person is a Disinterested Director, and such
person would be required to make such report solely by reason of being a
director, except where such director knew or, in the ordinary course of
fulfilling his official duties as a director of the Fund, should have known
that during the 15-day period immediately preceding or after the date of
the transaction in a security by the director, such security is or was
purchased or sold, or considered for purchase or sale by the Fund.
<PAGE>
of such transaction acquires, any direct or indirect
beneficial ownership in a security, whether or not the
security is held or to be acquired by the Fund:
a. The date of the transaction, title and number of
shares, and the principal amount of each security
involved;
b. The nature of the transaction (i.e., purchase,
sale or any other type of acquisition or
disposition);
c. The price at which the transaction was effected;
d. The name of the broker, dealer or bank with or
through whom the transaction was effected; and
e. The date the report was signed.
<PAGE>
2. Every report shall be made not later than ten days after
the end of the calendar quarter in which the transaction to
which the report relates was effected, and shall be in the
form of Appendix A hereto. In the event no reportable
transaction occurred during the quarter, the report should be
so noted and returned signed and dated.
3. Notwithstanding the provisions of Section 1 hereof, no
person shall be required to make a report with respect to
transactions effected for any account over which such person
does not have any direct or indirect influence or control.
B. Disclosure of Personal Holdings
Each Access Person must disclose to the Secretary of the Fund, all
personal securities holdings - irrespective of trading activity - upon
commencement of employment or within two weeks of receipt of this Code
of Ethics. Each Access Person must revise the list of such holdings
thereafter on an annual basis.
C. Records of Securities Transactions
Access Persons must direct each brokerage firm or bank at which such
person maintains a securities account to supply to the Secretary of the
Fund, on a timely basis, duplicate copies of confirmations of all
personal securities transactions and copies of periodic statements for
all securities accounts.
D. Certification of Compliance with Code of Ethics
Access Persons must certify annually that they have read and understand
this Code of Ethics and recognize that they are subject to the Code and
that they have complied with the Code and its reporting requirements.
E. Post-Trade Monitoring
Each Fund must implement procedures to monitor personal investment
activity by Access Persons after preclearance has been granted in order
to identify patterns of personal securities trading occurring before
Fund trades.
VI. Additional Restrictions
A. Prohibition Against Receiving Gifts
No Access Person may accept any gift or other thing of more than de
minimis value from any person or entity that does business with or on
behalf of the Funds, ICC, the Sub-Advisors and ICC Distributors.
B. Prohibition Against Serving as Director
No Investment Personnel may serve on the board of directors of a
publicly traded company, absent prior authorization from the Secretary
<PAGE>
of the Fund based upon a determination that the board service would be
consistent with the interests of the Fund and its shareholders. If such
authorization is granted, the Investment Personnel that is serving as a
director must be isolated from those making investment decisions
through a "Chinese Wall" or other procedures.
VII. Review and Enforcement
A. General
Access Persons who have supervisory responsibility should take
reasonable steps to protect against violations of Rule 17j-1 by
employees for whom they are responsible. Supervisors are not expected
to guarantee the conduct of their employees, but should be alert to
possible problems. In addition, Access Persons who become aware of
violations of Rule 17j-1 or actions inconsistent with this Code are
expected to take steps to correct such problems. Depending on the
gravity of the situation, it may be appropriate for an Access Person to
bring a problem to the attention of the Chairman of a Fund. The
Chairman may agree to handle such matters in confidence, subject to the
right of the Board of Directors to obtain information about any
activities of the Chairman.
B. Review
The Secretary of each Fund shall notify all Access Persons of their
obligations under Rule 17j-1 and the Code. The Secretary of the Fund
shall review all reports and shall promptly consider all requests made
by Access Persons of ICC, the Sub-Advisors and ICC Distributors
pursuant to the provisions of the Code. If problems arise, the
Secretary of each Fund may attempt to resolve those problems
informally, but he or she has the authority to recommend sanctions to
the Chairman of the Fund or to the Board of Directors where
appropriate. The Secretary of the Fund will make a quarterly report to
the Board of Directors concerning all reports received. Subject to the
authority of the Board of Directors, the Secretary of each Fund shall
have broad discretion to administer the Code so as to achieve its
purposes and prevent the problems that Rule 17j-1 was designed to
resolve.
C. Enforcement
1. The Secretary of the Fund shall compare all reported
personal securities transactions with completed portfolio
transactions of the Funds and a list of securities being
considered for purchase or sale by the Funds to determine
whether a violation of this Code may have occurred. Before
making any determination that a violation has been committed
by any person, the Secretary of the Fund shall give such
person an opportunity to supply additional explanatory
material.
2. If the Secretary of the Fund determines that a violation of
this Code may have occurred, he or she shall submit his or her
written determination, together with the confidential monthly
report and any additional explanatory material provided by the
individual, to the Chairman of the Fund and outside counsel,
who shall make an independent determination as to whether a
violation has occurred.
3. If the Chairman and outside counsel find that a violation
has occurred, the Chairman shall impose upon the individual
such sanctions as he or she deems appropriate and shall report
the violation and the sanction imposed to the Board of
Directors of the Fund.
4. No person shall participate in a determination of whether
he or she has committed a violation of the Code or of the
imposition of any sanction against himself or herself. If a
securities transaction of the Chairman is under consideration,
the President shall act in all respects in the manner
prescribed herein for the Chairman.
In the event the Secretary of a Fund is absent or unable to serve, the
Treasurer or Vice Presidents of the Funds, respectively, shall assume
the responsibilities and perform the obligations of the Secretary of
each Fund under this Code.
VIII. Records
The Funds shall maintain records in the manner and to the extent set forth
below, which records may be maintained on microfilm under the conditions
described in Rule 31a-2 under the 1940 Act and shall be available for
examination by representatives of the Securities and Exchange Commission.
<PAGE>
A. A copy of this Code and any other code which is, or at any time
within the past five years has been, in effect shall be preserved in an
easily accessible place;
B. A record of any violation of this Code and of any action taken as a
result of such violation shall be preserved in an easily accessible
place for a period of not less than five years following the end of the
fiscal year in which the violation occurs;
C. A copy of each report made by a director pursuant to this Code shall
be preserved for a period of not less than five years from the end of
the fiscal year in which it is made, the first two years in an easily
accessible place; and
D. A list of all persons who are, or within the past five years have
been, required to make reports pursuant to this Code shall be
maintained in an easily accessible place.
IX. Investment Advisor's, Sub-Advisor's and Principal Underwriter's Code
of Ethics
A. The procedures for clearance and reporting of personal securities
transactions set forth in sections IV and V hereof shall not apply to
any Access Person who is subject to substantially similar requirements
under procedures established by ICC, the Sub-Advisors and ICC
Distributors.
B. Each of ICC, the Sub-Advisors and ICC Distributors shall:
1. Submit to the Board of Directors of the Fund a copy of its
code of ethics adopted pursuant to Rule 17j-1;
2. Promptly report to the Fund in writing any material
amendments to such Code;
3. Promptly furnish to the Fund upon request copies of any
reports made pursuant to such Code by any person who is an
Access Person as to the Fund; and
4. Immediately furnish to the Fund, without request, all
material information regarding any violation of such Code by
any person who is an Access Person as to the Fund.
X. Miscellaneous
A. Confidentiality. All reports of securities transactions and any
other information filed with the Funds pursuant to this Code shall be
treated as confidential.
B. Interpretation of Provisions. The Board of Directors may from time
to time adopt such interpretations of this Code as it deems
appropriate.
C. Periodic Review and Reporting. The Chairman of each Fund shall
report to the Board of Directors at least annually as to the operation,
and any violations, of this Code and shall address in any such report
the need (if any) for further changes or modifications to this Code.
Adopted this 14th day
of December, 1994.
<PAGE>
APPENDIX A
FLAG INVESTORS FUNDS
Transaction Report
To: The Secretary, FLAG INVESTORS FUNDS
From: _______________________________________________________________
This Transaction Report (the "Report") is submitted pursuant to the
Code of Ethics of the Flag Investors Funds (the "Funds"), and supplies, on the
table on the reverse side, information with respect to a transaction in any
security in which I may be deemed to have, or by reason of such transaction
acquire, any direct or indirect beneficial ownership interest, whether or not
such security is a security held or to be acquired by any one or more of the
Funds for the calendar quarter ended ______________ 20 .* I understand that I
may have beneficial ownership of securities of which certain other persons are
the record owners as well as securities of which I am the record owner, and I
have included transactions in such securities in this Report where applicable. I
also understand that:
(i) If I am a "Disinterested" Director of the Funds, I am required to
report a transaction in a security only in such cases as I knew or, in the
ordinary course of fulfilling my official duties as a Director of the Fund,
should have known that, during the 15-day period immediately preceding or after
the date of my purchase or sale, the security was purchased or sold, or was
considered for purchase or sale by a Fund or its investment advisor for such
Fund; and
(ii) I am not required to include in this Report transactions effected
for any account over which I do not have any direct or indirect influence or
control.
I hereby certify that:
1. I am fully familiar with the Code of Ethics of the Fund;
2. To the best of my knowledge, the information furnished in this
Report is complete, true and correct; and
3. If, during the month indicated, I have obtained, through the
acquisition of securities or otherwise, ownership of 1/2% or more of
the outstanding voting securities of any issuer, I have reported such
fact to the Fund.
_____________________
Date Signature
* If you had no reportable transactions during the quarter, please enter
"none" in the table on the next page.
<PAGE>
<TABLE>
<CAPTION>
Date of Shares or Nature of Broker
Trans- Title of Principal Trans- Price Dealer
action Issuer Securities Amount action* Per Unit Or Bank**
- ------- ---------- ---------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
* Purchase, sale or other type of disposition or acquisition.
** Indicate in this column if you wish to disclaim beneficial ownership of any
security listed in this report.
<PAGE>
February, 2000
PERSONAL SECURITIES TRADING
POLICIES AND PROCEDURES
For: Alex. Brown Investment Management ("ABIM")
Investment Company Capital Corp. ("ICC")
- --------------------------------------------------------------------------------
I. INTRODUCTION
ABIM and ICC ("Asset Management") recognize the desirability of
permitting Employees and members of their immediate families the opportunity to
engage in normal investment practices for their personal accounts and accounts
in which they have a beneficial interest. The legitimate investment objectives
of Employees, however, must be balanced against the interests of clients as well
as Asset Management's regulatory responsibilities.
Asset Management's policies and procedures regarding personal
securities trading have been developed in response to various securities laws
and rules and regulations of self-regulatory agencies. These procedures include
many of the recommendations made by a special advisory group formed by the
Investment Company Institute to review practices and standards governing
personal investing. These procedures have been submitted to the Board of
Directors of the Flag Investors Family of mutual funds (the "Funds"), and shall
serve as the Code of Ethics required in connection with Asset Management's
services as investment advisor to the Funds.
Each Employee is expected to adhere to these policies and procedures
so as to avoid any actual or potential conflicts of interest, or situations in
which an individual may be accused of having abused a position of trust and
responsibility. Any questions regarding the application of these policies and
procedures should be directed to your appropriate senior officer or the
designated Asset Management compliance officer.
II. DEFINITIONS
Employee - For purposes of these policies and procedures, the term
Employee will refer to all Employees of Asset Management and members of
their immediate families.
Immediate Family - Immediate Family shall include spouse, minor
children, dependents and other relatives who share the same house and
depend on the Employee for support.
Employee Related Accounts - The term " Employee Related Account" shall
mean any account held in the name of an Employee or in which the
Employee has a Beneficial Interest. In addition, such accounts include
accounts held in the name(s) of any member(s) of the Employee's
Immediate Family as well as any account in which those persons have a
Beneficial Interest.
Beneficial Interest - An Employee or immediate family member shall be
considered to have a beneficial interest in an account if he or she
obtains benefits from the account substantially equivalent to whole or
partial ownership. Employee and immediate family members are also
deemed to have a beneficial interest in accounts in which they have the
power, directly or indirectly, to make investment decisions. Examples
include, but are not limited to, accounts for trusts, partnerships and
corporations in which an Employee or immediate family member maintains
an interest or derives a benefit.
4
<PAGE>
Discretionary Accounts - An Employee Related Account where full
investment discretion has been granted to an investment manager,
trustee or outside bank where neither the Employee nor a close relative
participates in the investment decisions or is informed in advance of
transactions in the account.
III. POLICIES/PROCEDURES
A. Substantive Restrictions on Personal Investing
1. Initial Public Offerings
Asset Management Employees are prohibited from
acquiring shares of an issuer in an initial public
offering.
2. Private Securities Transactions
Asset Management Employees may engage in such
transactions after having obtained the prior written
approval of the appropriate senior officer of their
respective business unit and Mutual Funds Compliance.
Attached as Exhibit A is a copy of the general policy
and the appropriate form for making such request.
Among the factors in considering the request by a
senior officer are: 1) whether the opportunity is
being made available to the Employee due to the
Employee's position within Asset Management; 2)
whether the transaction would appear to conflict with
clients' interests; and, 3) whether the security
being offered is an appropriate investment to be made
on behalf of clients.
Employees who received approval to engage in a
private securities transaction must disclose that
investment in the event they become involved in any
subsequent consideration of the issuer as a potential
investment for the Funds or other clients. In such
circumstances, a final decision to invest on behalf
of clients should be made after independent review by
personnel with no personal interest in the issuer.
3. Blackout Periods
a. Pending Trades - Employees are prohibited
from executing a transaction in an Employee
Related Account when Asset Management
clients of their respective business unit
have pending "buy" or "sell" orders in the
same security. This prohibition will remain
in effect until such orders are executed or
withdrawn.
b. Fund Trades - Employees are prohibited from
trading in a security for a period of at
least seven calendar days before, and three
calendar days after, any transaction by a
Fund Account advised by that respective
business unit of Asset Management in the
same security. This blackout period would be
inapplicable where 1) the market
capitalization of the security exceeded $2
billion; and 2) trades of the respective
business unit of Asset Management do not
exceed 10% of the daily average trading
volume for the prior 15 days.
c. Discretionary Accounts - The Blackout
Periods described above do not apply to
Discretionary Accounts.
<PAGE>
4. Outside Securities Accounts
a. General
Except in extraordinary circumstances, Asset
Management prohibits the maintenance of
Employee Related Accounts with
broker/dealers outside of DBAB. The
appropriate senior officer for their
respective business units must approve any
requests by Employees for such accounts.
Attached as Exhibit B, is a copy of the
general policy and the appropriate form for
making such request. All such accounts are
subject to prior approval and record keeping
requirements as will be described below.
b. Exceptions
Asset Management has determined that the
following outside accounts are exempt from
the prior approval requirements:
5
<PAGE>
(i) accounts maintained directly with
an investment company in which
shares of open-end investment
companies only can be purchased;
and
(ii) Discretionary Accounts.
c. Transfer
Outside accounts which are not exempt under
Section 4.b. must be transferred to DBAB
within forty-five (45) days of the
Employee's hire date.
5. Ban on Short-Term Trading Profits
In addition to the blackout periods noted above, and
in the absence of appropriate extenuating
circumstances, Asset Management Employees are
prohibited from profiting in the purchase and sale,
or sale and purchase, of the same (or equivalent)
securities within 60 calendar days. Profits realized
from trades within the proscribed period will be
required to be forfeited to the appropriate Asset
Management business unit. Under limited and
appropriate circumstances, an Employee may request an
exception to this restriction. Such requests may only
be made to the appropriate senior officer of his or
her respective business unit.
6. Outside Business Affiliations, Employment or
Compensation
Asset Management Employees may not maintain outside
affiliations (e.g. officer or director, governor,
trustee, etc.) without the prior written approval of
the appropriate senior officer of their respective
business units. Attached as Exhibit C is a copy of
the general policy and the appropriate form for
making such request. Service on Boards of publicly
traded companies should be limited to a small number
of instances. However, such service may be undertaken
based upon a determination that these activities are
consistent with the interest of Asset Management and
its clients. Employees serving as directors will not
be permitted to participate in the process of making
investment decisions on behalf of clients which
involve the subject company.
7. Gifts
Asset Management restricts the making or receiving of
gifts and gratuities to ensure the highest standards
of employee integrity and conduct, and to ensure
compliance with rules of the various self-regulatory
organizations. Asset Management Employees are
expected to report and receive prior approval for any
such gifts or gratuities, except for gifts of de
minimis value. De minimis is defined as the annual
receipt of gifts from the same source valued at $100
or less.
6
<PAGE>
B. Procedures for Personal Investing
1. Transaction Approval
All Asset Management Employees must receive prior
approval of personal securities transactions in
Employee Related Accounts. All prior approval
requests must be made in writing to the appropriate
person designated for such approvals. Approvals of
transactions are good for the day they are given and
must be reinstated the next day if not executed or
withdrawn. Attached as Exhibit D is a copy of the
Personal Securities Transaction Approval Form to be
completed by Asset Management Employees. Only after
receiving approval may the Asset Management Employees
contact their registered representative to enter the
order.
Requests for approval of trades by ABIM Employees
(and the accompanying approval form) are to be
directed to the Chief Executive Officer, or his
designee, and a copy of the completed form will be
maintained centrally at ABIM.
Requests for approval of trades by ICC Employees (and
the accompanying approval form) are to be directed to
Mutual Funds Compliance. After approval, ICC
employees must receive approval from Corporate
Compliance and forward the Corporate pre-clearance
number to Mutual Funds Compliance. One copy of the
completed form will be maintained with Mutual Funds
Compliance.
Asset Management has determined that certain
securities transactions are exempt from the prior
approval requirements as follows:
o Trading activity in Discretionary Accounts;
o Shares of open-end investment companies
registered under the Investment Company Act
of 1940;
o Shares purchased under an issuer sponsored
dividend reinvestment program;
o Purchases and sales of securities issued or
guaranteed by the U.S. government or its
agencies and bank certificates of deposit;
o To the extent acquired from the issuer,
purchases effected upon the exercise of
rights issued pro rata to holders of a class
of securities; and
o Securities purchased under an employer
sponsored stock purchase plan or upon the
exercise of employee stock options. Any sale
of securities acquired pursuant to the
exercise of employee stock options remains
subject to the pre-clearance procedures.
7
<PAGE>
2. Records of Securities Transactions
a. General
Each Asset Management Employee is
responsible for confirming that all Employee
Related Accounts are set up in such a way
that designated supervisory personnel
receive records of securities transactions
as follows:
(i) In the case of accounts maintained
at DBAB, a report system (the Firm
Insider Trade Report System) has
been developed which will provide
designated supervisory personnel a
monthly summary report of
securities transactions in Employee
Related Accounts. At the time an
account is approved, Employees must
provide the account name and number
to the person in their respective
business unit responsible for
maintaining the report system.
(ii) In the case of outside securities
accounts, Asset Management must
receive duplicate copies of
confirmations and statements.
Before engaging in any
transactions, the Employee must
confirm that: i) the account has
been approved; and, ii) that firm
has been instructed to provide
duplicate confirmations and
statements.
b. Exemptions
(i) Accounts maintained directly with
an investment company in which
shares of open-end investment
companies only can be purchased are
exempt from the records
requirements, provided that the
requisite information regarding the
account is disclosed in the
Employee's Initial Holdings Report
and Annual Holdings Report, as
described in paragraph 4.a. below.
(ii) Discretionary Accounts are exempt
from the records requirements,
provided that the requisite
information regarding the account
is disclosed as described in
paragraph 4.b. below.
3. Post-Trade Monitoring
Asset Management supervisory personnel will conduct
periodic reviews of the trading activities of Asset
Management Employees to monitor compliance with these
procedures so as to ensure that the interests of
Asset Management and its clients are not compromised.
4. Certification/Disclosure of Accounts and Holdings
a. Employee Related Accounts
All Asset Management Employees will, at time
of hire and annually thereafter, be provided
with a copy of these policies and procedures
and will be requested to certify annually
that they have read and understand them.
(i) Initial Holdings Report
Within 10 days of the Employee's
hire date, each Employee shall make
an Initial Holdings Report in the
form of Exhibit E.
(ii) Annual Holdings Report
8
<PAGE>
On an annual basis, each Employee
shall make an Annual Holdings
Report in the form of Exhibit E.
The Annual Holdings Report shall
contain information which is
current as of a date which is no
more than 30 days before the report
is submitted.
b. Discretionary Accounts
Each Asset Management Employee with an
outside Discretionary Account will, at the
time of hire and annually thereafter,
provide Mutual Funds Compliance with a
certification from their investment manager,
trustee or outside bank, as applicable, as
to the discretionary status of the account.
The certification form is attached as
Exhibit F.
C. Sanctions
Persons violating the provisions of these
Personal Trading Policies and Procedures may
be subject to the following sanctions:
1. Upon the first violation within a
one-year period, the Employee will
be subject to a monetary penalty of
$100, or such other penalty as may
be determined in the discretion of
the committee referenced in
paragraph 3.
2. Upon the second violation within a
one-year period, the Employee will
be subject to a monetary penalty of
$500, or such other penalty as may
be determined in the discretion of
the committee referenced in
paragraph 3 (assuming that the
first violation was brought to the
Employee's attention).
3. Upon the third violation within a
one-year period, the matter shall
be reviewed by a committee
consisting of the Head of the
Business Unit, the Head of Legal
and the Head of Compliance. The
committee will determine
appropriate sanctions, which may
include (but are not limited to) a
letter of censure, further monetary
penalties, restrictions on the
violator's personal securities
transactions, unwinding of the
transaction and disgorgement of
profits and suspension or
termination of employment.
The proceeds of any monetary penalties
recovered in connection with the sanctions
described above shall be donated to the
United Way.
9
<PAGE>
EXHIBIT A
PRIVATE SECURITIES TRANSACTIONS
Private Securities Transactions are those which are not transacted
through a brokerage firm and/or not reflected on records of accounts maintained
at such brokerage firms. Asset Management Employees and members of their
immediate family may not purchase or sell any security (except those exempt
under these Personal Securities Policies and Procedures) in a private securities
transaction unless the Employee has received the prior written approval of the
senior officer of their respective business unit. Requests for approval must be
made on the Request for Approval of Private Securities Transaction Form (a copy
of which is provided with this Code).
The definition of a private securities transaction should be construed
broadly. Any questions regarding such transactions should be directed to the
senior officer of the respective business unit.
PLEASE SEE THE REQUEST FOR APPROVAL OF PRIVATE SECURITIES TRANSACTION FORM
BEGINNING ON THE FOLLOWING PAGE
REQUEST FOR APPROVAL OF
PRIVATE SECURITIES TRANSACTION
To:__________________________________________________(Branch/Department Manager)
The undersigned requests approval of the following securities transaction:
Issuer:
Is Issuer a publicly traded company? Yes __________ No
Buy: __________ Sell: __________ Anticipated Date of Transaction:
Description of Securities:
10
<PAGE>
Number of Shares/Units:___________________________________________ Cost/Proceeds
Name of person from whom I propose to purchase or to whom I propose to sell:
Is this person a client of the Firm? Yes __________ No
If yes, what is nature of the client relationship between that person and the
firm?
To your knowledge, is this investment being offered to others? Yes ____ No
Are you providing any service or advice to this Issuer? Yes ____ No
If yes, please describe the service or advice:
(Name of Person Requesting Approval)
_________________
(Date) (Signature)
................................................................................
IMPORTANT NOTICE
IT IS THE FIRM'S POLICY THAT EMPLOYEES MAY NOT SOLICIT OR RECOMMEND TO
ANY CLIENT OF THE FIRM THE PURCHASE OF ANY SECURITY UNLESS SUCH PURCHASE IS MADE
THROUGH THE FIRM. MOREOVER, THE RECEIPT BY ANY EMPLOYEE OF A "FINDER'S FEE" OR
OTHER COMPENSATION FROM A PERSON OR COMPANY UNRELATED TO THE FIRM FOR REFERRALS
OF PROSPECTIVE INVESTORS IS PROHIBITED.
To: Mutual Funds Compliance
I have reviewed and approved this request for permission to engage in
the private securities transaction described. In connection with this request, I
have the following comments:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________
(Name of Branch/Department Manager)
_____________________ ________________________________________
(Date) (Signature of Branch/Department Manager)
................................................................................
To: _______________________________________________ (Person Requesting Approval)
Your request for permission to engage in the private securities
transaction described on the front of this form has been approved. If any of the
details of that transaction change, please advise Mutual Funds Compliance before
the transaction is completed.
_____________________
(Date) (Mutual Funds Compliance)
11
<PAGE>
EXHIBIT B
OUTSIDE SECURITIES ACCOUNTS
It is the Firm's policy that all Employee Related Accounts be
maintained at DBAB. Such accounts may be maintained at outside firms only in
extraordinary circumstances. Any such requests for an outside securities account
must be made in writing on a Request for Approval of an Outside Brokerage
Account Form (a copy of which is provided with these procedures) and approved in
advance by the appropriate senior officer of the respective business unit.
Approval will be granted only if:
|X| The other firm offers products of services not available through DBAB; or,
|X| Other extenuating needs or circumstances exist and are demonstrated.
PLEASE SEE THE REQUEST FOR APPROVAL OF OUTSIDE BROKERAGE ACCOUNT FORM BEGINNING
ON THE FOLLOWING PAGE
12
<PAGE>
REQUEST FOR APPROVAL OF AN OUTSIDE BROKERAGE ACCOUNT
To: ___________________________________ From: ________________________________
Branch/Department Manager
The undersigned requests approval to maintain the outside brokerage account
described below.
Name & Address _________________________________________________________________
of Broker Dealer _______________________________________________________________
Investment Representative for A/C: _____________________________________________
A/C #: _________________________________ A/C Title: _________________________
Reason for Request: ____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
I understand that if my request is approved, I must:
1) Comply with the Firm's procedures requiring prior approval by
my supervisor of All transactions in this account; and
2) Make the necessary arrangements for my supervisor to receive
duplicate confirmations and monthly statements for this
account.
____________________________________ _________________________________________
(Name of Person Requesting Approval) (Signature of Person Requesting Approval)
................................................................................
To: Mutual Funds Compliance Date: _____________________
I have reviewed and approved this request for the above outside
brokerage account.
___________________________________ ________________________________________
(Name of Branch/Department Manager) (Signature of Branch/Department Manager)
13
<PAGE>
EXHIBIT C
OUTSIDE BUSINESS AFFILIATIONS,
EMPLOYMENT AND COMPENSATION
General Policy
No Asset Management Employee may maintain outside affiliations
(directorships, governorships or trusteeships) with business organizations,
outside employment or receive compensation from any source, without the prior
approval of the senior officer of their respective business unit. In addition,
some instances may require approval by the New York Stock Exchange as well.
Requests for approval must be made on the Outside Business Affiliation,
Employment or Compensation Form (a copy of which is provided with these
procedures). Termination of such affiliations must also be reported.
Service on Board of Eleemosynary Organizations
Asset Management Employees are encouraged not only to provide monetary
support to charitable and civic organizations in their communities, but also to
be generous with their time and effort. Asset Management is justifiably proud
that many Employees serve as officers, directors, trustees or fund-raisers for
numerous eleemosynary organizations.
From time to time, such organizations may need to procure, either
directly or indirectly, brokerage or investment management services that DBAB
provides, and the Employee associated with such an organization may expect
either to provide those services on behalf of DBAB, or be compensated by DBAB as
a result of the use of these services, or to be directed business by an
unrelated service provider recommended by the Employee to that organization.
For the benefit of the eleemosynary organization, DBAB and the Asset
Management Employee associated with the eleemosynary organization, the following
guidelines apply whenever DBAB is providing or is expected to provide services,
directly or indirectly, to the organization with which the employee is
associated:
1. The Employee must disclose his or her employment by DBAB; and,
2. If the Employee expects to be compensated by DBAB in
connection with or as a result of, the services provided by
DBAB or an unrelated service provider recommended by the
Employee, the Employee must disclose this fact; and,
3. If the Employee is a member of the body which decides whether
to employ DBAB, the Employee must abstain from participating
in the selection of the service provider; and,
4. All of the foregoing must be memorialized in writing to the
appropriate officer of the board of the eleemosynary
organization or in the minutes of the applicable meeting(s) of
the governing body at which the selection of the service
provider is made.
PLEASE SEE THE APPROVAL OF OUTSIDE BUSINESS AFFILIATION, EMPLOYMENT OR
COMPENSATION FORM ON THE FOLLOWING PAGE
14
<PAGE>
OUTSIDE BUSINESS AFFILIATION, EMPLOYMENT OR COMPENSATION
FIRM POLICY
No Employee may maintain any outside affiliations (e.g. officer or
director, governor, or trustee etc.) with any business organization, outside
employment, or receive compensation from any source without prior approval of
the individual's Branch/Department Manager and Mutual Funds Compliance.
Outside affiliation relationships with non-business organizations (e.g.
church, civic organization, etc.) do not require prior approval unless the
Employee wants to establish and handle an account for the organization.
Generally, Employee's may not serve as trustee for any such accounts while they
also serve as IR.
Please provide the information requested below, sign on the back, and
submit the form to you Branch/Department Manager for approval. You will be
informed if approval is granted.
1. Employee Name: ________________________________________________________
2. Organization with which you wish to become affiliated, or organization
or person by whom you wish to be employed or compensated:
a. Name: ________________________________________________________
b. Address: _____________________________________________________
c. Nature of Business: __________________________________________
d. Does the organization have publicly traded securities? _______
e. If so, where are they traded? ________________________________
f. Does the organization have a brokerage account at the Firm? __
g. If so, what is the account number and who is the IR? _________
3. State the nature of your proposed affiliation or employment, or the
nature of the services for which you will be compensated, and briefly
describe your duties: _________________________________________________
_______________________________________________________________________
_______________________________________________________________________
4. On what date will your proposed affiliation, employment or compensation
begin? ________________________________________
5. a. Will you be compensated? ___________________________________________
b. If so, how much? ___________________________________________________
6. State the nature and extent of your financial interest, if any, in the
organization: _________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
7. State the amount of time you will devote to the organization's business
and indicate whether you will devote any time to the organization's
business during normal working hours:
8. State the reasons why you have been asked to become affiliated with the
organization (social contact, knowledge of the industry,
etc.)__________________________________________
_______________________________________________________________________
_______________________________________________________________________
................................................................................
To: ________________________________________________ (Branch/Department Manager)
15
<PAGE>
The undersigned requests approval of the outside business affiliation,
employment or compensation described on the reverse side of this request.
_________________________________________
(Name of Person Requesting Approval)
____________________ _________________________________________
(Date) (Signature of Person Requesting Approval)
................................................................................
To: Mutual Funds Compliance
I have reviewed and approved this request for the outside business
affiliation, employment or compensation described on the reverse side of this
request. In connection with this request, I have the following comments:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________
(Name of Branch/Department Manager)
____________________ ________________________________________
(Date) (Signature of Branch/Department Manager)
................................................................................
To: ___________________________________ (Person Requesting Approval)
The outside business affiliation, employment or compensation described
on the reverse side of this request has been approved. Please advise your
Manager and the Legal/Compliance Department in writing if any of the information
on the reverse side of this request changes materially.
___________________ _______________________________________
(Date) (Mutual Funds Compliance)
16
<PAGE>
EXHIBIT D
ICC EMPLOYEE TRANSACTION APPROVAL FORM
- --------------------------------------------------------------------------------
EMPLOYEE NAME
- --------------------------------------------------------------------------------
NAME OF SECURITY
- --------------------------------------------------------------------------------
BUY or SELL/ # OF SHARES
- --------------------------------------------------------------------------------
TRADE DATE
- --------------------------------------------------------------------------------
ACCOUNT #
- --------------------------------------------------------------------------------
BROKER / BROKERAGE
- --------------------------------------------------------------------------------
Are you aware of any fund trades of the securities named above in the past 3
days or of the intention of any fund manager to trade the securities named above
within the next 7 days? o YES o NO
If the transaction described above is a purchase, does it involve the
acquisition of shares of an issuer in an initial public offering? o YES o NO
(Purchases of shares of an issuer in an initial public offering are prohibited.)
If the transaction described above is a transaction for profit, have you held
your position in the securities for more than 60 days? o YES o NO
(If transaction is for profit, position must be held a minimum of sixty (60)
days prior to sale.)
Approval _______________________________
Corporate Compliance 212-469-8787 Corporate Pre-Clearance #_______________
- --------------------------------------------------------------------------------
FOR COMPLIANCE DEPARTMENT USE ONLY
- -Market cap: ____ over $2 billion ____ under $2 billion
- -Fund trades do not exceed 10% of Issuer's average daily trading volume for last
15 days: ____ yes ____ no
- -Blackout period applies: ____ yes ____ no
_____ Initials
17
<PAGE>
EXHIBIT E
ALEX. BROWN INVESTMENT MANAGEMENT
INVESTMENT COMPANY CAPITAL CORP.
INITIAL/ANNUAL HOLDINGS REPORT
NAME: ________________________
DATE:
I hereby certify that I have read, understand and have complied with the
memorandum entitled: Personal Securities Trading Policies and Procedures.
Furthermore, I am providing/confirming below certain additional information.
IF MORE SPACE IS NEEDED, ATTACH AN ADDITIONAL FORM
1. Provided below is a description of all Employee Related Accounts
(including open-end investment company accounts), as described in these
procedures, which I maintain or in which I have a beneficial interest.
PLEASE ATTACH A COPY OF THE MOST RECENT STATEMENT FOR ALL ACCOUNTS LISTED
ACCOUNT NAME ACCOUNT NUMBER BROKER/DEALER OR BANK
------------ -------------- AT WHICH MAINTAINED
---------------------
____________ ______________ _____________________
____________ ______________ _____________________
____________ ______________ _____________________
____________ ______________ _____________________
____________ ______________ _____________________
18
<PAGE>
2. Provided below is a description of securities in which I have any
direct or indirect beneficial interest.
<TABLE>
<CAPTION>
NAME OF CLASS SHARE/ PRINCIPAL AMOUNT
ISSUER OF SECURITIES UNIT (IF DEBT SECURITY)
------ ------------- AMOUNT ------------------
------
<S> <C> <C> <C>
___________________ ______________________ ________________ ___________________
___________________ ______________________ ________________ ___________________
___________________ ______________________ ________________ ___________________
___________________ ______________________ ________________ ___________________
___________________ ______________________ ________________ ___________________
___________________ ______________________ ________________ ___________________
___________________ ______________________ ________________ ___________________
</TABLE>
3. I have engaged in the following private securities transactions during
the calendar year.
NAME OF ISSUER DATE OF TRANSACTION NATURE OF INVESTMENT
-------------- ------------------- --------------------
______________ ___________________ ___________________________
______________ ___________________ ___________________________
______________ ___________________ ___________________________
______________ ___________________ ___________________________
______________ ___________________ ___________________________
______________ ___________________ ___________________________
______________
(Date) (Signature)
- --------------------------------------------------------------------------------
FOR COMPLIANCE DEPARTMENT USE ONLY
Reviewed by:
Name: ________________________________
Signature: ___________________________
19
<PAGE>
EXHIBIT F
DISCRETIONARY ACCOUNT CERTIFICATION FORM
I, ____________________ hereby certify that I am a representative of
the investment manager, trustee or outside bank at which the account described
below is maintained:
ACCOUNT NAME: ___________________________________________
ACCOUNT NUMBER: ___________________________________________
FIRM AT WHICH
MAINTAINED: ___________________________________________
BENEFICIARY(IES): ___________________________________________
I further certify that neither the Beneficiary named above nor any
close relative of the Beneficiary exercises investment discretion over the
account, participates in investment decisions with respect to the account or is
informed in advance of transactions in the account.
__________________________________
(Signature)
__________________________________
(Name)
__________________________________
(Title)
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard R. Burt, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard R. Burt
-------------------
Richard R. Burt
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard T. Hale
-------------------
Richard T. Hale
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph R. Hardiman, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Joseph R. Hardiman
----------------------
Joseph R. Hardiman
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis E. Levy
-----------------
Louis E. Levy
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Eugene J. McDonald
----------------------
Eugene J. McDonald
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chairman and a director of
the Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Truman T. Semans
--------------------
Truman T. Semans
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux, Amy M.
Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as President of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
----------------
Carl W. Vogt
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, her true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in her
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/ Rebecca W. Rimel
--------------------
Rebecca W. Rimel
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Robert H. Wadsworth, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Robert H. Wadsworth
-----------------------
Robert H. Wadsworth
Date: October 25, 1999
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Charles A. Rizzo, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Communications
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Treasurer of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Charles A. Rizzo
--------------------
Charles A. Rizzo
Date: October 25, 1999
