<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.
5
<PAGE>
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.
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
6
<PAGE>
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.
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:
(i) accounts maintained directly with an investment
company in which shares of open-end investment
companies only can be purchased; and
(ii) Discretionary Accounts.
7
<PAGE>
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.
8
<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.
9
<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
10
<PAGE>
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
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.
11
<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
12
