<PAGE>
As Filed With the Securities and Exchange Commission on July 26, 1995
Registration No. 33-46279
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 7 [X]
FLAG INVESTORS VALUE BUILDER FUND, INC.
(Exact Name of Registrant as Specified in Charter)
135 East Baltimore Avenue
Baltimore, MD 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (410) 727-1700
Edward J. Veilleux
135 East Baltimore Street
Baltimore, MD 21202
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
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It is proposed that this filing will become effective (check appropriate box)
- ---- immediately upon filing pursuant to paragraph (b)
X
- ---- on August 1, 1995 pursuant to paragraph (b)
- ---- 60 days after filing pursuant to paragraph (a)
- ---- on [Date] pursuant to paragraph (a) of rule 485
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Registrant has elected to maintain registration of an indefinite number of
shares of its Common Stock, $.001 par value, pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed its Rule 24f-2 notice for its
fiscal year ended March 31, 1995, on May 26, 1995.
Page 1 of _____ Pages. Exhibit Index appears at Page ___.
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
July 26, 1995
Cross Reference Sheet
Items Required by Form N-1A
Part A Information Required in Prospectus Registration Statement Heading
- ------ ---------------------------------- ------------------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Investment Program;
Investment Restrictions;
General Information
Item 5. Management of the Fund Management of the Fund;
Investment Advisor and
Sub Advisor; Distributor;
Custodian, Transfer
Agent, Accounting Services
Item 5A. Management's Discussion of Fund *
Performance
Item 6. Capital Stock and Other Securities Cover Page;
Dividends and Taxes;
General Information
Item 7. Purchase of Securities Being Offered How to Invest in
the Fund
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Pending Legal Proceedings **
Part B Information Required in a Statement
of Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
and History
Item 13. Investment Objectives and Policies Investment Objective,
Policies and Risk
Considerations
Item 14. Management of the Fund Management of
the Fund
Item 15. Control Persons and Principal Control Persons and
Holders of Securities Principal Holders of
Securities
- ----------
* Information required by Item 5A is contained in Registrant's 1995 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Custodian, Transfer Agent
Item 17. Brokerage Allocation Brokerage
Item 18. Capital Stock and Other Securities Capital Shares and Accounting
Services
Item 19. Purchase, Redemption and Pricing of Valuation of Shares
Securities Being Offered and Redemption
Item 20. Tax Status Federal Tax Treatment of
Dividends and
Distributions
Item 21. Underwriters Distribution of Fund Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C Other Information
Part C contains the information
required by the items contained
therein under the items set forth
in the form.
- ----------
* Information required by Item 5A is contained in Registrant's 1995 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
LOGO
FLAG INVESTORS
VALUE BUILDER FUND, INC.
(CLASS A AND CLASS B SHARES)
This mutual fund (the "Fund") is designed to maximize total return through
a combination of a long-term growth of capital and current income.
This Prospectus sets forth basic information that investors should know
about the Fund prior to investing and should be retained for future
reference. A Statement of Additional Information dated August 1, 1995 has
been filed with the Securities and Exchange Commission (the "SEC") and is
hereby incorporated by reference. It is available upon request and without
charge by calling the Fund at (800) 767-FLAG.
Shares of the Fund are available through Alex. Brown & Sons Incorporated
("Alex. Brown") as well as Participating Dealers and Shareholder Servicing
Agents. This Prospectus relates to Class A and Class B Shares of the Fund.
The separate classes provide investors with alternatives as to sales load and
fund expenses. (See "How to Invest in the Fund.")
____________________________________________________________________________
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS
The date of this Prospectus is August 1, 1995
<PAGE>
FLAG INVESTORS
VALUE BUILDER FUND, INC.
(CLASS A AND CLASS B SHARES)
135 EAST BALTIMORE STREET
BALTIMORE, MARYLAND 21202
TABLE OF CONTENTS
-----------------
Page
------
1. Fee Table ........................................ 2
2. Financial Highlights ............................. 3
3. Investment Program ............................... 5
4. Investment Restrictions .......................... 9
5. How to Invest in the Fund ........................ 10
6. How to Redeem Shares ............................. 17
7. Telephone Transactions ........................... 18
8. Dividends and Taxes .............................. 19
9. Management of the Fund ........................... 20
10. Investment Advisor and Sub-Advisor ............... 21
11. Distributor ...................................... 23
12. Custodian, Transfer Agent, Accounting Services ... 24
13. Performance Information .......................... 25
14. General Information .............................. 26
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH ANY
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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1
<PAGE>
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1. FEE TABLE
............................................................................
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
Initial Sales Deferred
Charge Sales Charge
Alternative Alternative
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ......................... 4.50%* None
Maximum Sales Charge Imposed on Reinvested Dividends ......... None None
Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ........... None * 4.00%**
- -----------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (NET OF FEE WAIVERS):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Management Fees (net of fee waivers) ........................ .88%*** .88%***
12b-1 Fees .................................................. .25% .75%
Other Expenses (including a .25% shareholder servicing
fee for Class B Shares) .................................... .22% .47%****
---------- ----------
Total Fund Operating Expenses (net of fee waivers) .......... 1.35%*** 2.10%***
========== ==========
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</TABLE>
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* Purchases of $1 million or more of Class A Shares are not subject to an
initial sales charge. However, a contingent deferred sales charge of
.50% will be imposed on such purchases in the event of redemption within
24 months following such purchase. (See "How to Invest in the Fund--
Offering Price.")
** A declining contingent deferred sales charge will be imposed on
redemptions of Class B Shares made within six years of purchase. Class B
Shares will automatically convert to Class A Shares six years after
purchase. (See "How to Invest in the Fund -- Class B Shares.")
*** The Fund's investment advisor intends, but is not obligated, to waive its
fee to the extent required so that Total Fund Operating Expenses do not
exceed 1.35% of the Class A Shares' average daily net assets and 2.10% of
the Class B Shares' average daily net assets. Absent fee waivers,
Management Fees would be .93% of the Fund's average daily net assets and
Total Fund Operating Expenses would be 1.40% of the Class A Shares' average
daily net assets and 2.15% of the Class B Shares' average daily net assets.
**** A portion of the shareholder servicing fee is allocated to member firms
of the National Association of Securities Dealers, Inc. and qualified
banks for continued personal service by such members to investors in
Class B Shares, such as responding to shareholder inquiries, quoting net
asset values, providing current marketing materials and attending to
other shareholder matters.
EXAMPLE:
<TABLE>
<CAPTION>
You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period:* 1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares .................. $58 $87 $118 $211
Class B Shares .................. $62 $98 $139 $191**
- -------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses
on the same investment, assuming
no redemption:* 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Class B Shares ..................... $22 $68 $119 $191**
- ---------------------------------------------------------------------------------------
</TABLE>
* The example is based on Total Fund Operating Expenses net of fee waivers.
Absent fee waivers, expenses would be higher.
**Expenses assume that Class B Shares are converted to Class A Shares at the
end of six years. Therefore, the expense figures assume six years of Class
B expenses and four years of Class A expenses.
The Expenses and Example should not be considered a representation of
future expenses. Actual expenses may be greater or less than those shown.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Fund will bear directly and indirectly. A
person who purchases shares of either class through a financial institution
may be charged separate fees by the financial institution. (For more complete
descriptions of the various costs and expenses, see "How to Invest in the
Fund--Offering Price", "Investment Advisor and Sub-Advisor" and
"Distributor.") The Expenses and Example for the Class A Shares appearing in
the table above are based on the Fund's expenses for the Class A Shares for
the fiscal year ended March 31, 1995 which, net of fee waivers, were 1.35% of
the Class A Shares' average daily net assets. The Expenses and Example for
the Class B Shares, which have been offered only since January 3, 1995, are
based on those for the Class A Shares plus the incremental 12b-1 and service
fee costs.
The rules of the SEC require that the maximum sales charge be reflected in
the above table. However, certain investors may qualify for reduced sales
charges or no sales charge at all. (See "How to Invest in the Fund -- Class A
Shares.") Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders of the Fund may pay more than the equivalent of the maximum
front-end sales charges permitted by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD Rules").
- ------------------------------------------------------------------------------
2. FINANCIAL HIGHLIGHTS
The financial highlights included in this table are a part of the Fund's
financial statements for the periods indicated and have been audited by
Coopers & Lybrand L.L.P., independent accountants. The financial statements
and financial highlights for the fiscal year ended March 31, 1995 and the
report thereon of Coopers & Lybrand L.L.P. are included in the Statement of
Additional Information. Additional performance information is contained in
the Fund's Annual Report for the fiscal year ended March 31, 1995 which can
be obtained at no charge by calling the Fund at (800) 767-FLAG.
3
<PAGE>
(For a share outstanding throughout each period)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------------------------- ----------------
For the Period For the Period
June 15, 1992* January 3, 1995*
For the Year Ended March 31, through through
1995 1994 March 31, 1993 March 31, 1995
--------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of
period $ 11.23 $ 11.25 $ 10.00 $ 11.14
--------------- -------------- -------------- ----------------
Income from Investment
Operations:
Net investment income 0.35 0.40 0.18 0.08
Net realized and
unrealized
gain/(loss)
on investments 0.80 (0.04) 1.18 0.79
--------------- -------------- -------------- ----------------
Total from Investment
Operations 1.15 0.36 1.36 0.87
Less Distributions:
Dividends from net
investment income
and short-term
gains (0.35) (0.38) (0.11) --
Distributions from
net realized
long-term gains (0.01) -- --
--------------- -------------- -------------- ----------------
Total Distributions (0.36) (0.38) (0.11)
--------------- -------------- -------------- ----------------
Net asset value at
end of period $ 12.02 $ 11.23 $ 11.25 $ 12.01
=============== ============== ============== ================
Total Return** 10.57% 3.14% 13.73% 7.81%
Ratios to Average
Net Assets:
Expenses 1.35%(2) 1.35%(2) 1.35%(1)(2) 2.10%(1)(4)
Net investment income 3.07%(3) 3.14%(3) 2.88%(1)(3) 2.94%(1)(5)
Supplemental Data:
Net assets
at end of period
(000) $146,986 $131,097 $83,535 $ 341
Portfolio turnover
rate 18% 8% 8% 18%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges.
(1) Annualized.
(2) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 1.40%, 1.38% and 1.70% (annualized) for Class A
Shares for the periods ended March 31, 1995, March 31, 1994, and March
31, 1993, respectively.
(3) Without the waiver of advisory fees, the ratio of net investment income
to average net assets would have been 3.02%, 3.11% and 2.53%,
(annualized) for Class A Shares for the periods ended March 31, 1995,
March 31, 1994 and March 31, 1993, respectively.
(4) Without the waiver of advisory fees the ratio of expenses to average net
assets would have been 2.17% (annualized) for Class B Shares for the
period ended March 31, 1995.
(5) Without the waiver of advisory fees, the ratio of net investment income
to average net assets would have been 2.87% (annualized) for Class B
Shares for the period ended March 31, 1995.
4
<PAGE>
3. INVESTMENT PROGRAM
.............................................................................
INVESTMENT OBJECTIVE, POLICIES AND RISK
CONSIDERATIONS
The investment objective of the Fund is to maximize total return through a
combination of long-term growth of capital and current income. The Fund seeks
to achieve this objective through a policy of diversified investments in
equity and debt securities, including common stocks, convertible securities
and government and corporate fixed-income obligations. The Fund's investment
objective is a fundamental policy of the Fund and may not be changed without
shareholder approval. There can be no assurance, however, that the Fund will
achieve its investment objective.
Investment Company Capital Corp. ("ICC"), the Fund's investment advisor,
and the Fund's sub-advisor, Alex. Brown Investment Management ("ABIM")
(collectively, the "Advisors"), are responsible for managing the Fund's
investments. (See "Investment Advisor and Sub-Advisor.") The Advisors
consider both the opportunity for gain and the risk of loss in making
investments, and may alter the relative percentages of assets invested in
equity and fixed income securities from time to time, depending on the
judgment of the Advisors as to general market and economic conditions, trends
and yields and interest rates and changes in fiscal and monetary policies.
Under normal market conditions, between 40%-75% of the Fund's total assets
will be invested in common stock and other equity investments (including
preferred stocks, convertible debt, warrants and other securities convertible
into or exchangeable for common stocks). In selecting securities for the
Fund's portfolio, the Advisors expect to apply a "flexible value" approach to
the selection of equity investments. Under this approach, the Advisors will
attempt to identify securities that are undervalued in the marketplace but
will also consider such factors as current and expected earnings, dividends,
cash flows and asset values in their evaluation of a security's investment
potential.
In addition, at least 25% of the Fund's total assets will be invested in
fixed-income securities, defined for this purpose to include non-convertible
corporate debt securities and non-convertible preferred stock, and government
obligations. The average maturity of these investments will vary from time to
time depending on the Advisors' assessment of the relative yields available
on securities of different maturities. It is currently anticipated that
5
<PAGE>
the average maturity of the fixed income securities in the Fund's portfolio
will be between two and ten years under normal market conditions. In general,
non-convertible corporate debt obligations held in the Fund's portfolio will
be rated, at the time of purchase, BBB or higher by Standard & 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 Advisors under
criteria approved by the 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. In the event any security owned by the Fund is downgraded
below these rating categories, the Advisors will review and take appropriate
action with regard to the security.
............................................................................
INVESTMENTS IN NON-INVESTMENT GRADE SECURITIES
Where deemed appropriate by the Advisors, the Fund may invest up to 10% of
its total assets (measured at the time of the investment) in lower quality
debt securities (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. If such a downgrade
causes the 10% limit to be exceeded, the Fund will be precluded from
investing further in below investment grade debt securities but will not be
automatically required to sell any such securities. The Advisors will review
the situation and take appropriate action. Lower rated debt securities, also
known as "junk bonds," are considered to be speculative and involve greater
risk of default or price changes due to changes in the issuer's
creditworthiness. Securities in the lowest rating category that the Fund may
purchase (securities rated D by S&P or C by Moody's) may present a particular
risk of default, or may be in default and in arrears in payment of principal
and interest. Yields and market values of these bonds will fluctuate over
time, reflecting changing interest rates and the 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,
regardless of prevailing interest rates. Accordingly, adverse economic
developments, including a recession or a substantial period of rising
interest rates, may disrupt the high yield bond market, affecting both the
value and liquidity of such bonds. The market prices of these securities may
fluctuate more than those of higher rated securities and may decline
significantly in periods of general economic difficulty, which may follow
periods of rising interest rates. An economic downturn could adversely affect
6
<PAGE>
the ability of issuers of such bonds to make payments of principal and interest
to a greater extent than issuers of higher rated bonds might be affected. The
ratings categories of S&P and Moody's are described more fully in the Appendix
to the Statement of Additional Information.
The table below provides a summary of ratings assigned by S&P to debt
obligations in the Fund's portfolio. These figures are dollar-weighted
averages of month-end portfolio holdings during the fiscal year ended March
31, 1995, presented as a percentage of total investments. These percentages
are historical and are not necessarily indicative of the quality of current
or future portfolio holdings, which may vary.
S&P
Rating Average
----------- -----------
AAA ....... 0.8%
AA ........ 0.6%
A ......... 5.8%
BBB ....... 8.8%
BB ........ 5.3%
B ......... 4.4%
Unrated ... 0.0%
The Fund may also purchase obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities (except that the Fund does
not currently anticipate that it will purchase mortgage-related debt
securities), and may invest in high quality short-term debt securities such
as commercial paper rated A-1 by S&P or P-1 by Moody's.
.............................................................................
INVESTMENTS IN REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with domestic banks or
broker-dealers deemed creditworthy under guidelines approved by the
Directors. A repurchase agreement is a short-term investment in which the
purchaser (i.e., 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 purchaser's holding period. The value of the
underlying securities will be at least equal at all times to the total amount
of the repurchase agreement obligation, including the interest factor. If the
seller were to default on its obligation to repurchase the underlying
instrument, the Fund could experience loss due to delay in liquidating the
collateral and to adverse market action.
7
<PAGE>
INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS
In addition, from time to time, the Advisors may invest up to 10% of the
Fund's total assets in American Depository Receipts, which are U.S. exchange
listed interests in securities of foreign companies, and in debt and equity
securities issued by foreign corporate and government issuers when the
Advisors believe that such investments provide good opportunities for
achieving income and capital gains without undue risk. Foreign investments
involve different risks from investments in the United States. Accordingly,
the Advisors intend to invest in securities of companies in, and governments
of, developed, stable nations, but there exists the possibility of adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation which could adversely affect the investments of the
Fund in such foreign country.
.............................................................................
OTHER INVESTMENTS
For temporary, defensive purposes the Fund may invest up to 100% of its
assets in high quality short-term money market instruments, and in bills,
notes or bonds issued by the U.S. Treasury Department or by other agencies of
the U.S. Government.
The Fund may write covered call options on common stock which it owns
or has the immediate right to acquire through conversion or exchange of other
securities, provided that any such option is traded on a national securities
exchange. The Fund may also enter into closing transactions with respect to
such options.
In addition, the Fund may invest up to 10% of its net assets in illiquid
securities including (i) repurchase agreements with remaining maturities in
excess of seven days and (ii) no more than 5% of its total assets in
restricted securities. Not included within this limitation are securities
that are not registered under the Securities Act of 1933, as amended (the
"1933 Act"), but that can be offered and sold to qualified institutional
buyers under Rule 144A under the 1933 Act, if the securities are determined
to be liquid. The Board of Directors has adopted guidelines and delegated to
the Advisors, subject to the supervision of the Board of Directors, the daily
8
<PAGE>
function of determining and monitoring the liquidity of Rule 144A securities.
Rule 144A securities may become illiquid if qualified institutional buyers
are not interested in acquiring the securities.
- ------------------------------------------------------------------------------
4. INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of restrictions which
reflect both self-imposed standards and federal and state regulatory
limitations. The investment restrictions recited below are matters of
fundamental policy and may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. Accordingly, the Fund will
not:
1) Concentrate 25% or more of its total assets in securities of issuers in
any one industry (for these purposes the U.S. Government and its agencies
and instrumentalities are not considered an 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) With respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any single issuer (for these purposes the U.S.
Government and its agencies and instrumentalities are not considered an
issuer); or
4) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only from banks and in an amount not exceeding 10% of
the value of the total assets of the Fund at the time of such borrowing,
provided that, while borrowings by the Fund equalling 5% or more of the
Fund's total assets are outstanding, the Fund will not purchase
securities.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
9
<PAGE>
- ----------------------------------------------------------------------------
5. HOW TO INVEST IN THE FUND
Class A and Class B Shares may be purchased from Alex. Brown, 135 East
Baltimore Street, Baltimore, Maryland 21202, through any securities dealer
which has entered into a dealer agreement with Alex. Brown ("Participating
Dealers") or through any financial institution which has entered into a
Shareholder Servicing Agreement with the Fund ("Shareholder Servicing
Agents"). Shares of either class may also be purchased directly from the Fund
by completing the Application Form attached to this Prospectus and returning
it, together with payment of the purchase price plus any applicable front-end
sales charge, to the Fund at the address shown on the Application Form.
Participating Dealers or Shareholder Servicing Agents and their investment
representatives may receive different levels of compensation depending on
which class of shares they sell.
The Class A and Class B alternatives permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and
other circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the combination of sales
charge and distribution fee on Class A Shares is more favorable than the
combination of distribution/service fees and contingent deferred sales charge
on Class B Shares. In almost all cases, investors planning to purchase
$100,000 or more of Fund shares will pay lower aggregate charges and expenses
by purchasing Class A Shares. Accordingly, the Fund will not accept purchases
for Class B Shares in excess of $100,000 per account. (See "Fee Table.").
The minimum initial investment in shares of either class is $2,000, except
that the minimum initial investment for shareholders of any other Flag
Investors fund or class is $500 and the minimum initial investment for
participants in the Fund's Automatic Investing Plan is $250. Each subsequent
investment must be at least $100 per class, except that the minimum
subsequent investment under the Fund's Automatic Investing Plan is $250 for
quarterly investments and $100 for monthly investments. (See "Purchases
Through Automatic Investing Plan" below.) There is no minimum investment
requirement for qualified retirement plans (i.e., 401(k) plans or pension and
profit sharing plans). IRA accounts are, however, subject to the $2,000
minimum initial investment requirement. There is no minimum investment
requirement for spousal IRA accounts. Orders for purchases of shares are
accepted on any day on which the New York Stock Exchange is open for business
("Business Day"). The Fund reserves the right to suspend the sale of shares
at any time at the discretion of Alex. Brown and the Advisors. Purchase orders
10
<PAGE>
for shares will be executed at a per share purchase price equal to the net asset
value next determined after receipt of the purchase order plus any applicable
front-end sales charge (the "Offering Price") on the date such net asset value
is determined (the "Purchase Date"). Purchases made directly from the Fund must
be accompanied by payment of the Offering Price. Purchases made through Alex.
Brown or a Participating Dealer or Shareholder Servicing Agent must be in
accordance with such entity's payment procedures. Alex. Brown may, in its sole
discretion, refuse to accept any purchase order.
The net asset value per share is determined once daily as of the close of
the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on
each Business Day. Net asset value per share of a class is calculated by
valuing all assets held by the Fund, deducting liabilities attributable to
all shares and any liabilities attributable to the specific class, and
dividing the resulting amount by the number of then outstanding shares of the
class. For this purpose, portfolio securities are given their market value
where feasible. If a portfolio security is traded on a national exchange or
on an automated dealer quotation system, such as NASDAQ, on the valuation
date, the last quoted sale price is generally used. Options are valued at the
last reported sale price, or if no sales are reported, at the average of the
last reported bid and asked prices. Securities or other assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith under procedures established from time to time and
monitored by the Fund's Board of Directors. Debt obligations with maturities
of 60 days or less are valued at amortized cost, which constitutes fair value
as determined by the Fund's Board of Directors. Because of differences
between the classes of shares in distribution fees, the net asset value per
share of the classes is different at times.
.............................................................................
OFFERING PRICE
Shares may be purchased from Alex. Brown, Participating Dealers or
Shareholder Servicing Agents at the Offering Price which for Class A Shares
includes a sales charge which is calculated as a percentage of the Offering
Price and for Class B Shares is net asset value.
.............................................................................
CLASS A SHARES
The sales charge on Class A Shares, which decreases as the amount of
purchase increases, is shown below:
11
<PAGE>
<TABLE>
<CAPTION>
Sales Charge
as % of Dealer
------------------------------ Retention
Offering Net Amount as % of
Amount of Purchase Price Invesed Offering Price
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 ..... 4.50% 4.71% 4.00%
$50,000 - $99,999 ..... 3.50% 3.63% 3.00%
$100,000 - $249,999 .... 2.50% 2.56% 2.00%
$250,000 - $499,999 .... 2.00% 2.04% 1.50%
$500,000 - $999,999 .... 1.50% 1.52% 1.25%
$1,000,000 and over .... None* None* None*
</TABLE>
- ------
* Purchases of $1 million or more may be subject to a contingent deferred
sales charge. (See below.) Alex. Brown may make payments to dealers in the
amount of .50% of the Offering Price.
A shareholder who purchases additional Class A Shares may obtain reduced
sales charges, as set forth in the table above, through a right of
accumulation. In addition, an investor may obtain reduced sales charges as
set forth above through a right of accumulation of purchases of Class A
Shares and purchases of shares of other Flag Investors funds with the same
sales charge and purchases of shares of Flag Investors Intermediate-Term
Income Fund, Inc. and Flag Investors Maryland Intermediate Tax Free Income
Fund, Inc., (the "Intermediate Funds"). The applicable sales charge will be
determined based on the total of (a) the shareholder's current purchase plus
(b) an amount equal to the then current net asset value or cost, whichever is
higher, of all Class A Shares and of all Flag Investors shares described
above and any Flag Investors Class D shares held by the shareholder. To
obtain the reduced sales charge through a right of accumulation, the
shareholder must provide Alex. Brown, either directly or through a
Participating Dealer or Shareholder Servicing Agent, as applicable, with
sufficient information to verify that the shareholder has such a right. The
Fund may amend or terminate this right of accumulation at any time as to
subsequent purchases.
The term "purchase" refers to an individual purchase by a single
purchaser, or to concurrent purchases, which will be aggregated, by a
purchaser, the purchaser's spouse and their children under the age of 21
years purchasing shares for their own account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of Intent which states the investor's intention to
invest not less than $50,000 within a 13-month period in Class A Shares. Each
purchase of shares under a Letter of Intent will be made at the Offering
Price applicable at the time of such purchase to the full amount indicated on
the Letter of Intent. A Letter of Intent is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial
12
<PAGE>
investment under a Letter of Intent is 5% of the full amount. Shares purchased
with the first 5% of the full amount will be held in escrow (while remaining
registered in the name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full amount indicated
is not invested. Such escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. When the full amount indicated has been
purchased, the escrowed shares will be released. An investor who wishes to enter
into a Letter of Intent in conjunction with an investment in Class A Shares may
do so by completing the appropriate section of the Application Form attached to
this Prospectus.
No sales charge will be payable at the time of purchase on investments of
$1 million or more of Class A Shares. However, a contingent deferred sales
charge will be imposed on such investments in the event of a redemption
within 24 months following the purchase, at the rate of .50% on the lesser of
the value of the shares redeemed or the total cost of such shares. No
contingent deferred sales charge will be imposed on purchases of $3 million
or more of Class A Shares redeemed within 24 months of purchase if the
Participating Dealer and Alex. Brown have entered into an agreement under
which the Participating Dealer agrees to return any payments received on the
sale of such shares. In determining whether a contingent deferred sales
charge is payable, and, if so, the amount of the charge, it is assumed that
shares not subject to such charge are the first redeemed followed by other
shares held for the longest period of time.
Class A Shares may also be purchased through a Systematic Purchase Plan.
An investor who wishes to take advantage of such a plan should contact Alex.
Brown or a Participating Dealer or Shareholder Servicing Agent.
The Fund may sell Class A Shares at net asset value (without sales charge)
to the following: (i) banks, bank trust departments, registered investment
advisory companies, financial planners and broker-dealers purchasing shares
on behalf of their fiduciary and advisory clients, provided such clients have
paid an account management fee for these services (investors may be charged a
fee if they effect transactions in Fund shares through a broker or agent);
(ii) qualified retirement plans; (iii) participants in a Flag Investors fund
payroll savings plan program; (iv) investors who have redeemed Class A
Shares, or shares of any other mutual fund in the Flag Investors family of
funds with the same sales charges, or who have redeemed shares of the
Intermediate Funds which they had held for at least 24 months prior to
redemption, in an amount that is not more than the total redemption proceeds,
provided that the purchase is within 90 days after the redemption; and (v)
current or retired Directors of the Fund and directors and employees (and
their immediate families) of Alex. Brown, Participating Dealers and their
respective affiliates.
13
<PAGE>
............................................................................
CLASS B SHARES
No sales charge will be payable at the time of purchase of Class B Shares.
However, a contingent deferred sales charge will be imposed on certain Class
B Shares redeemed within six years of purchase. The charge is assessed on an
amount equal to the lesser of the then-current market value of the Class B
Shares redeemed or the total cost of such shares. Accordingly, the contingent
deferred sales charge will not be applied to dollar amounts representing an
increase in the net asset values above the initial purchase price of the
shares being redeemed. In addition, no charge is assessed on redemptions of
Class B Shares derived from reinvestment of dividends or capital gains
distributions.
In determining whether the contingent deferred sales charge is applicable
to a redemption, the calculation is made in the manner that results in the
lowest possible rate. Therefore, it is assumed that the redemption is first
of any Class B Shares in the shareholder's account that represent reinvested
dividends and distributions and second of Class B Shares held the longest
during the six year period. The amount of the contingent deferred sales
charge, if any, will vary depending on the number of years from the time of
payment for the purchase of Class B Shares until the redemption of such
shares (the "holding period"). For purposes of determining this holding
period, all payments during a month are aggregated and deemed to have been
made on the first day of the month. The following table sets forth the rates
of the contingent deferred sales charge.
<TABLE>
<CAPTION>
Year Since Purchase Contingent Deferred Sales Charge
Payment was Made (as a percentage of the dollar amount
subject to charge)
- ------------------------------------------------------------------------
<S> <C>
First ................. 4.0%
Second ................ 4.0%
Third ................. 3.0%
Fourth ................ 3.0%
Fifth ................. 2.0%
Sixth ................. 1.0%
Thereafter ............ None*
- ------------------------------------------------------------------------
</TABLE>
* As described more fully below, Class B Shares automatically convert to
Class A Shares six years after the beginning of the calendar month in which
the purchase order is accepted.
Waiver of Contingent Deferred Sales Charge. The contingent deferred sales
charge will be waived on the redemption of Class B Shares (i) following the
death or initial determination of disability (as defined in the Internal
Revenue Code of 1986, as amended) of a shareholder; or (ii) to the extent
that the redemption represents a minimum required distribution from an
14
<PAGE>
individual retirement account or other retirement plan to a shareholder who has
attained the age of 70 1/2 . The waiver with respect to (i) above is only
applicable in cases where the shareholder account is registered (a) in the name
of an individual person, (b) as a joint tenancy with rights of survivorship, (c)
as community property or (d) in the name of a minor child under the Uniform
Gifts or Uniform Transfers to Minors Act. A shareholder, or his or her
representative, must notify the Fund's transfer agent (the "Transfer Agent")
prior to the time of redemption if such circumstances exist and the shareholder
is eligible for this waiver. For information on the imposition and waiver of the
contingent deferred sales charge, contact the Transfer Agent at (800) 553-8080.
Automatic Conversion to Class A Shares. Six years after the beginning of
the calendar month in which the purchase order for Class B Shares is
accepted, such Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution and service fees.
Such conversion will be on the basis of the relative net asset values of the
two classes, without the imposition of any sales load, fee or other charge.
The conversion is not a taxable event to the shareholder.
For purposes of conversion to Class A Shares, shares received as dividends
and other distributions paid on Class B Shares in the shareholder's account
will be considered to be held in a separate sub-account. Each time any Class
B Shares in the shareholder's account (other than those in the sub-account)
convert to Class A Shares, an equal pro rata portion of the Class B Shares in
the sub-account will also convert to Class A Shares.
Class B Shares may also be purchased through a Systematic Purchase Plan.
An investor who wishes to take advantage of such a plan should contact Alex.
Brown or a Participating Dealer or Shareholder Servicing Agent.
- -----------------------------------------------------------------------------
PURCHASES BY EXCHANGE
As permitted pursuant to any rule, regulation or order promulgated by the
SEC, shareholders of other Flag Investors funds may exchange their shares of
those funds for an equal dollar amount of Fund shares of the same class.
Except as provided below, shares issued pursuant to this offer will not be
subject to the sales charges described above or any other charge.
Shareholders of the Intermediate Funds, may exchange into Class A Shares upon
payment of the difference in sales charges, as applicable, except that the
exchange will be made at net asset value if the shares of such funds have
been held for more than 24 months. Shareholders of Flag Investors Cash
Reserve Prime Class A Shares may exchange into Class A Shares upon payment of
the difference in sales charges, as applicable, or into Class B Shares at net
asset value, subject to any applicable contingent deferred sales charge.
15
<PAGE>
When a shareholder acquires Fund shares through an exchange from another
fund in the Flag Investors family of funds, the Fund will combine the period
for which the original shares were held prior to the exchange with the
holding period of the shares acquired in the exchange for purposes of
determining what, if any, contingent deferred sales charge is applicable upon
a redemption of any such shares.
The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day,
provided that the exchange request is received prior to 4:00 p.m. (Eastern
Time). Exchange requests received after 4:00 p.m. (Eastern Time) will be
effected on the next Business Day.
Shareholders of any mutual fund not affiliated with the Fund, who have
paid a sales charge may exchange shares of such fund for an equal dollar
amount of Class A Shares by submitting to Alex. Brown or a Participating
Dealer the proceeds of the redemption of such shares, together with evidence
of the payment of a sales charge and the source of such proceeds. Shares
issued pursuant to this offer will not be subject to the sales charges
described above or any other charge.
The exchange privilege with respect to other Flag Investors funds may also
be exercised by telephone. (See "Telephone Transactions" below.)
The exchange privilege may be exercised only in those states where the
class of shares of such other funds may legally be sold. Investors should
receive and read the applicable prospectus prior to tendering shares for
exchange. The Fund may modify or terminate this offer of exchange at any time
on 60 days' prior written notice to shareholders.
- -----------------------------------------------------------------------------
PURCHASES THROUGH AUTOMATIC INVESTING PLAN
Shareholders may purchase either Class A Shares or Class B Shares
regularly by means of an Automatic Investing Plan with a pre-authorized check
drawn on their checking accounts. Under this plan, the shareholder may elect
to have a specified amount invested monthly or quarterly in either Class A
Shares or Class B Shares. The amount specified by the shareholder will be
withdrawn from the shareholder's checking account using the pre-authorized
check. This amount will be invested in the class of shares selected by the
shareholder at the applicable Offering Price determined on the date the
amount is available for investment. Participation in the Automatic Investing
Plan may be discontinued either by the Fund or the shareholder upon 30 days'
prior written notice to the other party. A shareholder who wishes to enroll
in the Automatic Investing Plan or who wishes to obtain additional purchase
information may do so by completing the appropriate section of the
Application Form attached to this Prospectus.
16
<PAGE>
- ----------------------------------------------------------------------------
6. HOW TO REDEEM SHARES
Shareholders may redeem all or part of their investments on any Business
Day by transmitting a redemption order through Alex. Brown, a Participating
Dealer, a Shareholder Servicing Agent or by regular or express mail to the
Transfer Agent. Shareholders may also redeem shares of either class by
telephone (in amounts up to $50,000). (See "Telephone Transactions" below.) A
redemption order is effected at the net asset value per share (reduced by any
applicable contingent deferred sales charge) next determined after receipt of
the order (or, if stock certificates have been issued for the shares to be
redeemed, after the tender of the stock certificates for redemption).
Redemption orders received after 4:00 p.m. (Eastern Time) will be effected at
the net asset value next determined on the following Business Day. Payment
for redeemed shares will be made by check and will be mailed within seven
days after receipt of a duly authorized telephone redemption request or of a
redemption order fully completed and, as applicable, accompanied by the
documents described below:
1) A letter of instructions, specifying the shareholder's account number with
a Participating Dealer, if applicable, and the number of shares or dollar
amount to be redeemed, signed by all owners of the shares in the exact
names in which their account is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of each
registered owner by a member of the Federal Deposit Insurance Corporation,
a trust company, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
association;
3) If shares are held in certificate form, stock certificates either properly
endorsed or accompanied by a duly executed stock power for shares to be
redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of shares will be paid on
the next dividend payable date. If all of the shares in a shareholder's
account have been redeemed on a dividend payable date, the dividend will be
remitted by check to the shareholder.
The Fund has the power, under its Articles of Incorporation, to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' notice.
17
<PAGE>
............................................................................
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who hold Class A Shares or Class B Shares having a value of
$10,000 or more may arrange to have a portion of their shares redeemed
monthly or quarterly under the Fund's Systematic Withdrawal Plan. Such
payments are drawn from income dividends, and to the extent necessary, from
share redemptions (which would be a return of principal and, if reflecting a
gain, would be taxable). If redemptions continue, a shareholder's account may
eventually be exhausted. Because share purchases include a sales charge that
will not be recovered at the time of redemption, a shareholder should not
have a withdrawal plan in effect at the same time he is making recurring
purchases of shares. In addition, Class B Shares may be subject to a
contingent deferred sales charge upon redemption. (See "How to Invest in the
Fund -- Class B Shares.") A shareholder who wishes to participate in the
Fund's Systematic Withdrawal Plan may do so by completing the appropriate
section of the Application Form attached to this Prospectus.
- -----------------------------------------------------------------------------
7. TELEPHONE TRANSACTIONS
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem shares of either class in amounts up to
$50,000, by notifying the Transfer Agent by telephone at (800) 553-8080 on
any Business Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time)
or by regular or express mail at its address listed under "Custodian,
Transfer Agent, Accounting Services." Telephone transaction privileges are
automatic. Shareholders may specifically request that no telephone
redemptions or exchanges be accepted for their accounts. This election may be
made on the Application Form or at any time thereafter by completing and
returning appropriate documentation supplied by the Transfer Agent.
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or
the close of the New York Stock Exchange, whichever is earlier, is effective
that day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be
effected at the net asset value (less any applicable contingent deferred
sales charge on redemptions) as next determined on the following Business
Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, all telephone
18
<PAGE>
transaction requests will be recorded and investors may be required to
provide additional telecopied instructions of such transaction requests. The
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent telephone instructions if either of them does not employ these
procedures. Neither the Fund nor the Transfer Agent will be responsible for
any loss, liability, cost or expense for following instructions received by
telephone that either of them reasonably believes to be genuine. During
periods of extreme economic or market changes, shareholders may experience
difficulty in effecting telephone transactions. In such event, requests
should be made by regular or express mail. Shares held in certificate form
may not be exchanged or redeemed by telephone. (See "How to Invest in the
Fund -- Purchases by Exchange" and "How to Redeem Shares.")
- -----------------------------------------------------------------------------
8. DIVIDENDS AND TAXES
.............................................................................
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of quarterly dividends. The
Fund may distribute to shareholders any taxable net capital gains on an
annual basis or, alternatively, may elect to retain net capital gains and pay
tax thereon.
Unless the shareholder elects otherwise, all income and capital gains
distributions will be reinvested in additional Fund shares at net asset
value. Shareholders may elect to terminate automatic reinvestment by giving
written notice to the Transfer Agent (see "Custodian, Transfer Agent,
Accounting Services"), either directly or through their Participating Dealer
or Shareholder Servicing Agent, at least five days before the next date on
which dividends or distributions will be paid.
.............................................................................
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a general summary of certain federal income tax
considerations affecting the Fund and the shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the Fund or the
shareholders, and the discussion here is not intended as a substitute for
careful tax planning.
The following summary is based on current tax laws and regulations, which
may be changed by legislative, judicial, or administrative action. The
Statement of Additional Information sets forth further information concerning
taxes.
19
<PAGE>
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As long as the Fund qualifies for this tax
treatment, the Fund will be relieved of federal income tax on amounts
distributed to shareholders. Shareholders, unless otherwise exempt, generally
will be subject to income tax on the amounts so distributed regardless of
whether such distributions are paid in cash or reinvested in additional
shares.
Distributions from the Fund out of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, will be
taxed to shareholders as long-term capital gains regardless of the length of
time the shareholder has held the shares. All other income distributions will
be taxed to shareholders as ordinary income. Corporate shareholders may be
entitled to the dividends received deduction on a portion of dividends
received from the Fund. Shareholders will be advised annually as to the tax
status of all distributions.
Ordinarily, shareholders will include all dividends declared by the Fund
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
shareholders and paid by the Fund in the year in which the dividends were
declared.
The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
A sale, exchange, or redemption of shares is a taxable event for the
shareholder.
Shareholders are encouraged to consult with their tax advisors concerning
the application of the rules described above to their particular
circumstances and the application of state and local taxes to an investment
in the Fund.
- -----------------------------------------------------------------------------
9. MANAGEMENT OF THE FUND
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, sub-advisor, distributor, custodian
and transfer agent. The day-to-day operations of the Fund are delegated to
the Fund's officers, to the Fund's investment advisor, ICC, to its sub-advisor,
20
<PAGE>
ABIM, and to the Fund's distributor, Alex. Brown. Three Directors and all of the
officers of the Fund are officers or employees of ICC, ABIM or Alex. Brown. The
other Directors of the Fund have no affiliation with ICC, ABIM or Alex. Brown.
The Fund's Directors and officers are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
*Truman T. Semans Chairman J. Dorsey Brown, III President
*W. James Price Director Hobart C. Buppert, II Executive Vice President
*Richard T. Hale Director Lee S. Owen Executive Vice President
James J. Cunnane Director Bruce E. Behrens Vice President
N. Bruce Hannay Director Edward J. Veilleux Vice President
John F. Kroeger Director Gary V. Fearnow Vice President
Louis E. Levy Director Brian C. Nelson Vice President and Secretary
Eugene J. McDonald Director Diana M. Ellis Treasurer
Harry Woolf Director Laurie D. DePrine Assistant Secretary
</TABLE>
- ------
* Messrs. Semans, Price and Hale are Directors who are "interested persons"
of the Fund within the meaning of Section 2(a)(19) under the Investment
Company Act.
- -----------------------------------------------------------------------------
10. INVESTMENT ADVISOR AND SUB-ADVISOR
ICC is the Fund's investment advisor and ABIM is the Fund's sub-advisor.
ICC is also the investment advisor to, and Alex. Brown acts as distributor
for other mutual funds in the Flag Investors family of funds and Alex. Brown
Cash Reserve Fund, Inc., which funds had approximately $3.6 billion of net
assets as of June 30, 1995. ABIM is a registered investment advisor with
approximately $3.5 billion under management as of June 30, 1995.
Pursuant to the terms of the Investment Advisory Agreement, ICC supervises
and manages all of the Fund's operations. Under the Investment Advisory and
Sub-Advisory Agreements, ICC delegates to ABIM certain of its duties,
provided that ICC continues to supervise the performance of ABIM and report
thereon to the Fund's Board of Directors. Pursuant to the terms of the
Sub-Advisory Agreement, ABIM is responsible for decisions to buy and sell
securities for the Fund, for broker-dealer selection, and for negotiation of
commission rates under standards established and periodically reviewed by the
Board of Directors. The Board has established procedures under which ABIM may
allocate transactions to Alex. Brown, provided that compensation to Alex.
Brown on each transaction is reasonable and fair compared to the commission,
fee or other remuneration received or to be received by other broker-dealers
in connection with comparable transactions involving similar securities
during a comparable period of time. In addition, consistent with NASD Rules,
and subject to seeking the most favorable price and execution available and
21
<PAGE>
such other policies as the Board may determine, ABIM may consider services in
connection with the sale of shares as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
As compensation for its services for the fiscal year ended March 31, 1995,
ICC received from the Fund a fee (net of fee waivers) equal to .88% of the
Fund's average daily net assets and, for the same period, ICC paid ABIM a fee
(net of fee waivers) equal to .65% of the Fund's average daily net assets.
The fee paid to ICC is higher than that paid by most mutual funds, but ICC
has voluntarily agreed to waive a portion of the fee so that the total
operating expenses of the Fund do not exceed 1.35% of the Class A Shares'
average daily net assets and 2.10% of the Class B Shares' average daily net
assets. (See "Fee Table.") ABIM has also agreed to waive, on a voluntary
basis, that portion of its fee payable from ICC in excess of the amount equal
to .65% of the Fund's average daily net assets.
ICC is a wholly-owned subsidiary of Alex. Brown, the Fund's distributor.
ABIM is a limited partnership affiliated with Alex. Brown. 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. Alex. Brown owns a 1% general partnership interest in ABIM and Alex.
Brown Incorporated owns the remaining 49% limited partnership interest. The
address of both ICC and ABIM is 135 East Baltimore Street, Baltimore,
Maryland 21202.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent,
Accounting Services.")
.............................................................................
PORTFOLIO MANAGERS
Messrs. J. Dorsey Brown, III, the Fund's President, and Hobart C. Buppert,
II and Lee S. Owen, Executive Vice Presidents of the Fund, have shared
primary responsibility for managing the Fund's assets since inception.
J. Dorsey Brown, III -- 28 Years Investment Experience
Dorsey Brown is the Chief Executive Officer of ABIM, which he founded in
1974. From 1967 to 1974, he was a member of the Research and Investment
Advisory Department of the Baltimore-based investment firm, Robert Garrett &
Sons. Mr. Brown received his B.A. from Trinity College in Hartford,
Connecticut, in 1962 and studied at New York University Business School in
1966. He is a member of the Baltimore Security Analysts Society and the
Financial Analysts Federation.
22
<PAGE>
Hobart C. Buppert, II -- 23 Years Investment Experience
Mr. Buppert has been a Vice President of ABIM since 1980. Prior to joining
ABIM, Mr. Buppert worked as a Portfolio Manager for T. Rowe Price Associates
from 1976 to 1980 and as a Portfolio Manager and Research Analyst for the
Equitable Trust Company from 1972 to 1976. Mr. Buppert received his B.A and
M.B.A. degrees from Loyola College in 1970 and 1974. He is a member of the
Baltimore Security Analysts Society and the Financial Analysts Federation.
Lee S. Owen -- 23 Years Investment Experience
Lee Owen joined ABIM as a Vice President in 1983. From 1972 to 1983, Mr.
Owen was a Vice President and Portfolio Manager for T. Rowe Price Associates.
Mr. Owen is a 1970 graduate of Williams College and received his M.B.A. from
the University of Virginia in 1972. He is a member of the Baltimore Security
Analysts Society and the Financial Analysts Federation.
- -----------------------------------------------------------------------------
11. DISTRIBUTOR
Alex. Brown acts as distributor of the Class A Shares and the Class B
Shares. Alex. Brown is an investment banking firm which offers a broad range
of investment services to individual, institutional, corporate and municipal
clients. It is a wholly-owned subsidiary of Alex. Brown Incorporated which
has engaged directly and through subsidiaries and affiliates in the
investment business since 1800. Alex. Brown is a member of the New York Stock
Exchange and other leading securities exchanges. Headquartered in Baltimore,
Maryland, Alex. Brown has offices throughout the United States and, through
subsidiaries, maintains offices in London, England, Geneva, Switzerland and
Tokyo, Japan.
The Fund has adopted two separate Distribution Agreements and related
Plans of Distribution, one with respect to the Class A Shares and one with
respect to the Class B Shares (the "Plans"), pursuant to Rule 12b-1 under the
Investment Company Act. In addition, the Fund may enter into Shareholder
Servicing Agreements with certain financial institutions, such as banks, to
act as Shareholder Servicing Agents, pursuant to which Alex. Brown will
allocate a portion of its distribution fee as compensation for such financial
institutions' ongoing shareholder services. Such financial institutions may
impose separate fees in connection with these services and investors should
review this Prospectus in conjunction with any such institution's fee
schedule. In addition, financial institutions may be required to register as
dealers pursuant to state securities laws. Amounts allocated to any
23
<PAGE>
Participating Dealer or Shareholder Servicing Agent may not exceed amounts
payable to Alex. Brown under the Plans with respect to shares held by or on
behalf of customers of such entity.
As compensation for providing distribution services for the Class A Shares
for the fiscal year ended March 31, 1995, Alex. Brown received a fee equal to
.25% of the average daily net assets of the Class A Shares.
Under the Class B Plan, Alex. Brown will receive an annual distribution
fee, paid monthly, equal to .75% of the Class B Shares' average daily net
assets. In addition, Alex. Brown will receive an annual shareholder servicing
fee, paid monthly, equal to .25% of the Class B Shares' average daily net
assets. The distribution fee will be used to compensate Alex. Brown for its
services and expenses in distributing the Class B Shares. The shareholder
servicing fee will be used to compensate Alex. Brown, Participating Dealers
and Shareholder Servicing Agents for services provided and expenses incurred
in maintaining shareholder accounts, responding to shareholder inquiries and
providing information on their investments.
Payments under the Plans are made as described above regardless of Alex.
Brown's actual cost of providing distribution services and may be used to pay
Alex. Brown's overhead expenses. If the cost of providing distribution
services to the Fund in connection with the sale of the Class A Shares is
less than .25% of the average daily net assets invested in Class A Shares or
in connection with the sale of the Class B Shares is less than .75% of the
average daily net assets invested in Class B Shares for any period, the
unexpended portion of the distribution fees may be retained as profit by
Alex. Brown. Alex. Brown will from time to time and from its own resources
pay or allow additional discounts or promotional incentives in the form of
cash or other compensation (including merchandise or travel) to Participating
Dealers.
The address of Alex. Brown is 135 East Baltimore Street, Baltimore,
Maryland 21202.
- -----------------------------------------------------------------------------
12. CUSTODIAN, TRANSFER AGENT, ACCOUNTING SERVICES
PNC Bank, National Association ("PNC Bank"), a national banking
association with offices at Airport Business Park, 200 Stevens Drive, Lester,
Pennsylvania 19113, acts as custodian of the Fund's assets. Investment
Company Capital Corp., 135 East Baltimore Street, Baltimore, Maryland 21202
(telephone: (800) 553-8080), is the Fund's transfer and dividend disbursing
agent and provides accounting services to the Fund. As compensation for
24
<PAGE>
providing accounting services, ICC receives from the Fund an annual fee equal to
$13,000, plus a percentage of the Fund's average daily net assets in excess of
$10 million at a maximum rate of .10% of net assets, and declining at various
asset levels to a minimum rate of .001% on assets of $1 billion or more. (See
the Statement of Additional Information.) ICC also serves as the Fund's
investment advisor.
- -----------------------------------------------------------------------------
13. PERFORMANCE INFORMATION
From time to time, the Fund may advertise its performance, including
comparisons with other mutual funds with similar investment objectives and to
stock or other relevant indices. All such advertisements will show the
average annual total return, net of the Fund's maximum sales charge imposed
on Class A Shares or including the contingent deferred sales charge imposed
on Class B Shares redeemed at the end of the specified period covered by the
total return figure, over one, five and ten year periods or, if such periods
have not yet elapsed, shorter periods corresponding to the life of the Fund.
Such total return quotations will be computed by finding average annual
compounded rates of return over such periods that would equate an assumed
initial investment of $1,000 to the ending redeemable value, net of the
maximum sales charge and other fees, according to the required standardized
calculation. The standardized calculation is required by the SEC to provide
consistency and comparability in investment company advertising and is not
equivalent to a yield calculation. If the Fund compares its performance to
other funds or to relevant indices, the Fund's performance will be stated in
the same terms in which such comparative data and indices are stated, which
is normally total return rather than yield. For these purposes, the
performance of the Fund, as well as the performance of such investment
companies or indices, may not reflect sales charges, which, if reflected,
would reduce performance results.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc. and CDA Investment Technologies, Inc., independent
services which monitor the performance of mutual funds. The performance of
the Fund may also be compared to the Lehman Government Corporate Bond Index,
the Consumer Price Index, the return on 90 day U.S. Treasury bills, long-term
U.S. Treasury bonds, bank certificates of deposit, the Standard & Poor's 500
Stock Index and the Dow Jones Industrial Average. The Fund may also use total
return performance data as reported in the following national financial and
industry publications that monitor the performance of mutual funds: Money
Magazine, Forbes, Business Week, Barron's, Investor's Daily, IBC/Donoghue's
Money Fund Report and The Wall Street Journal.
25
<PAGE>
Performance will fluctuate, and any statement of performance should not be
considered as representative of the future performance of the Fund.
Shareholders should remember that performance is generally a function of the
type and quality of instruments held by the Fund, operating expenses and
market conditions. Any fees charged by banks with respect to customer
accounts through which shares may be purchased, although not included in
calculations of performance, will reduce performance results.
Although expenses for Class B Shares may be higher than those for Class A
Shares, the performance of Class B Shares may be higher than the performance
of Class A Shares after giving effect to the impact of the sales charges and
distribution/service fees applicable to each class of shares.
- ----------------------------------------------------------------------------
14. GENERAL INFORMATION
............................................................................
CAPITAL SHARES
The Fund is a Maryland corporation, authorized to issue thirty million
shares of capital stock, with a par value of $.001 per share. Shares of the
Fund have equal rights with respect to voting. Voting rights are not
cumulative, so 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. In the event of liquidation or dissolution of the
Fund, each share would be entitled to its portion of the Fund's assets after
all debts and expenses have been paid.
The Board of Directors of the Fund is authorized to establish additional
"series" of shares of capital stock, each of which would evidence interests
in a separate portfolio of securities, and separate classes of each series of
the Fund. The Shares offered by this Prospectus have been designated: Flag
Investors Value Builder Fund Class A Shares and Flag Investors Value Builder
Fund Class B Shares. The Board has no present intention of establishing any
additional series of the Fund but the Fund does have another class of shares
in addition to the Shares offered hereby, Flag Investors Value Builder Fund
Class D Shares, which are not currently being offered. Different classes of
the Fund may be offered to certain investors and holders of such shares may
be entitled to certain exchange privileges not offered to Class A or Class B
Shares. All classes of the Fund share a common investment objective,
portfolio of investments and advisory fee, but the classes may have different
distribution/service fees or sales load structures.
.............................................................................
ANNUAL MEETINGS
The Fund does not expect to hold annual meetings of shareholders, but
special meetings of shareholders may be held under certain circumstances.
26
<PAGE>
Shareholders of the Fund retain the right, under certain circumstances, to
request that a meeting of shareholders be held for the purpose of considering
the removal of a Director from office, and if such a request is made, the Fund
will assist with shareholder communications in connection with the meeting.
.............................................................................
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,
Coopers & Lybrand L.L.P.
.............................................................................
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their shares should contact Alex.
Brown at (800) 767-FLAG, the Transfer Agent at (800) 553-8080, or a
Participating Dealer or Shareholder Servicing Agent, as appropriate.
.............................................................................
FUND COUNSEL
Morgan, Lewis & Bockius serves as counsel to the Fund.
27
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
NEW ACCOUNT APPLICATION
- -----------------------------------------------------------------------------
Make check payable to "Flag Investors Value Builder
Fund, Inc." and mail with this application to:
Flag Investors Funds
P.O. Box 419426
Kansas City, MO 64141-6426
Attn: Flag Investors Value Builder Fund, Inc.
For assistance in completing this application please call: 1-800-553-8080
8:30 a.m. to 5:30 p.m., Eastern Time, Monday-Friday
To open an IRA account, call 1-800-767-3524 to request an IRA application
I wish to purchase the following class of shares of the Fund, in the amount
indicated below: Please check the applicable box and indicate amount of
purchase.
/ / Class A Shares (4.5% maximum initial sales charge) in the amount of $_____
/ / Class A Shares (4.0% maximum contingent deferred sales charge) in the
amount of $______
The minimum initial purchase for each class of shares is $2,000, except that
the minimum initial purchase for shareholders of any other Flag Investors
Fund or class is $500 and the minimum initial purchase for participants in
the Fund's Automatic Investing Plan is $250 per class. Each subsequent
purchase requires a $100 minimum per class, except that the minimum
subsequent purchase under the Fund's Automatic Investing Plan is $250 for
quarterly purchases and $100 for monthly purchases. The maximum investment in
Class B Shares is $100,000 per account. The Fund reserves the right not to
accept checks for more than $50,000 that are not certified or bank checks.
YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
Existing Account No., if any: _____________
INDIVIDUAL OR JOINT TENANT
_____________________________________________________________________________
First Name Initial Last Name
_____________________________________________________________________________
Social Security Number
_____________________________________________________________________________
Joint Tenant Initial Last Name
GIFTS TO MINORS
_____________________________________________________________________________
Custodian's Name (only one allowed by law)
_____________________________________________________________________________
Minor's Name (only one)
_____________________________________________________________________________
Social Security Number of Minor
under the _______________________ Uniform Gifts to Minors Act
State of Residence
CORPORATIONS, TRUSTS, PARTNERSHIPS, ETC.
_____________________________________________________________________________
Name of Corporation, Trust or Partnership
_____________________________________________________________________________
Tax ID Number Date of Trust
_____________________________________________________________________________
Name of Trustees (If to be included in the Registration)
_____________________________________________________________________________
For the Benefit of
_____________________________________________________________________________
MAILING ADDRESS
_____________________________________________________________________________
Street
_____________________________________________________________________________
City State Zip
( )
_____________________________________________________________________________
Daytime Phone
_____________________________________________________________________________
28
<PAGE>
LETTER OF INTENT (CLASS A SHARES ONLY) (OPTIONAL)
[ ] I agree to the Letter of Intent and Escrow Agreement set forth in the
accompanying prospectus. Although I am not obligated to do so, I intend to
invest over a 13-month period in Class A Shares as shown below, in an
aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000 / / $1,000,000
_____________________________________________________________________________
RIGHT OF ACCUMULATION (OPTIONAL)
[ ] I already own shares of the Flag Investors Fund(s) set forth below
(except Class B shares) to be applied for a reduced sales charge. List the
Account numbers of other Flag Investors Funds that you or your immediate
family (spouse and children under 21) already own that qualify for reduced
sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
29
<PAGE>
DISTRIBUTION OPTIONS
Please check appropriate boxes. If none of the options are elected, all
distributions will be reinvested in additional shares of the Fund at no sales
charge.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in Cash [ ] Paid in Cash
______________________________________________________________________________
AUTOMATIC INVESTING PLAN (OPTIONAL)
[ ] I authorize you as Agent for the Automatic Investing Plan to
automatically invest $________ in Class A Shares or $_______ in Class B Shares
for me, on a monthly or quarterly basis, on or about the 20th of each month
or if quarterly, the 20th of January, April, July and October, and to draw a
bank draft in payment of the investment against my checking account. (Bank
drafts may be drawn on commercial banks only.)
Minimum Initial Investment: $250
Subsequent Investments (check one):
[ ] Monthly ($100 minimum) Please attach a voided check.
[ ] Quarterly ($250 minimum)
______________________________________________________________________________
Bank Name
______________________________________________________________________________
Existing Flag Investors Fund Account No., if any
______________________________________________________________________________
Depositor's Signature Date
______________________________________________________________________________
Depositor's Signature Date
(if joint acct., both must sign)
______________________________________________________________________________
SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
[ ] Beginning the month of ________ , 19_________ please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of (complete as
applicable) $_______, from Class A Shares and/or $_______ from Class B Shares
that I own, payable to the account registration address as shown above.
(Participation requires minimum account value of $10,000 per class.)
Frequency (check one):
[ ] Monthly
[ ] Quarterly (January, April, July and October)
______________________________________________________________________________
TELEPHONE TRANSACTIONS
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect
to other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/We do not want
[ ] Telephone exchange privileges
[ ] Telephone redemption privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a predesignated bank account, please
provide the following information:
Bank:_______________________________ Bank Account No:_____________________
Address: ___________________________ Bank Account Name:___________________
30
<PAGE>
SIGNATURE AND TAXPAYER CERTIFICATION
I have received a copy of the Fund's prospectus dated August 1, 1995. Unless
the box below is checked, I certify under penalties of perjury, (1) that the
number shown on this form is my correct taxpayer identification number and
(2) that I am not subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. [ ] Check here
if you are subject to backup withholding.
If a non-resident alien, please indicate country of residence:
_____________________________________________________________________________
I acknowledge that the telephone redemption and exchange privileges are
automatic and will be effected as described in the Fund's current prospectus
(see "Telephone Transactions"). I also acknowledge that I may bear the risk
of loss in the event of fraudulent use of such privileges. If I do not want
telephone redemption or exchange privileges, I have so indicated on this
Application.
_____________________________________________________________________________
Signature Date
_____________________________________________________________________________
Signature (if joint acct., both must sign) Date
For Dealer Use Only
Dealer's Name: ______________________________________ Dealer Code:__________
Dealer's Address:______________________________________ Branch Code:__________
______________________________________
Representative: ______________________________________ Rep. No. __________
31
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Flag Investors Value Builder Fund, Inc.
P.O. Box 515
Baltimore, MD 21203
__________________
| |
| BULK RATE |
| U.S. POSTAGE |
| PAID |
| PERMIT NO. 2139 |
| BALTO., MD |
|__________________|
34
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
--------------------
FLAG INVESTORS VALUE BUILDER FUND, INC.
(Class A and Class B Shares)
135 E. Baltimore Street
Baltimore, Maryland 21202
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH A
PROSPECTUS WHICH MAY BE OBTAINED FROM YOUR
PARTICIPATING DEALER OR SHAREHOLDER SERVICING AGENT OR
BY WRITING OR CALLING ALEX. BROWN & SONS INCORPORATED,
135 EAST BALTIMORE STREET, BALTIMORE, MARYLAND 21202,
(800) 767-FLAG.
Statement of Additional Information Dated: August 1, 1995
Relating to the Prospectus Dated: August 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
1. General Information and History .................................. 1
2. Investment Objective, Policies and Risk Considerations ........... 1
3. Valuation of Shares and Redemption ............................... 8
4. Federal Tax Treatment of Dividends and
Distributions .................................................. 9
5. Management of the Fund ........................................... 12
6. Investment Advisory and Other Services ........................... 16
7. Distribution of Fund Shares ...................................... 18
8. Brokerage ........................................................ 21
9. Capital Stock .................................................... 22
10. Semi-Annual Reports .............................................. 23
11. Custodian, Transfer Agent and Accounting Services ................ 23
12. Independent Accountants .......................................... 24
13. Performance Information .......................................... 24
14. Control Persons and Principal Holders of
Securities ..................................................... 26
15. Financial Statements ............................................. 26
APPENDIX - Moody's Investors Service and Standard & Poor's Ratings
Definitions.
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Flag Investors Value Builder Fund, Inc. (the "Fund") is an open-end
management investment company. Under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), all mutual funds are required
to furnish prospective investors with certain information concerning the
activities of the company being considered for investment. The Fund
currently offers two classes of shares: Flag Investors Value Builder Fund
Class A Shares and Flag Investors Value Builder Fund Class B Shares.
Important information concerning the Fund is included in the Fund's
Prospectus which may be obtained without charge from Alex. Brown & Sons
Incorporated ("Alex. Brown"), 135 East Baltimore Street, Baltimore, Maryland
21202 (telephone: (800) 767-FLAG) or from Participating Dealers that offer
shares of the respective classes of the Fund ("Shares") to prospective
investors. Prospectuses may also be obtained from Shareholder Servicing
Agents. As used herein, the "Fund" refers to Flag Investors Value Builder
Fund, Inc. and specific references to either class of the Fund's Shares will
be made using the name of such class. Some of the information required to be
in this Statement of Additional Information is also included in the Fund's
current Prospectus. To avoid unnecessary repetition, references are made to
related sections of the Prospectus. In addition, the Prospectus and this
Statement of Additional Information omit certain information about the Fund
and its business that is contained in the Registration Statement respecting
the Fund and its Shares filed with the SEC. Copies of the Registration
Statement as filed, including such omitted items, may be obtained from the
SEC by paying the charges prescribed under its rules and regulations.
The Fund was incorporated under the laws of the State of Maryland on
March 5, 1992. The Fund filed a registration statement with the SEC
registering itself as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") and its Shares under the Securities Act of 1933, and commenced
operations on June 15, 1992. The Fund commenced offering the Flag Investors
Value Builder Fund Class B Shares on January 3, 1995.
For the period from November 9, 1992 through November 18, 1994, the
Fund offered another class of shares: Flag Investors Value Builder Fund
Class D Shares, which were known at the time as Flag Investors Value Builder
Fund Class B Shares and reclassified as Flag Investors Value Builder Fund
Class D Shares on November 18, 1994. Shares of that class are not currently
being offered although shares remain outstanding.
Under a license agreement dated June 15, 1992 between the Fund and
Alex. Brown Incorporated, Alex. Brown Incorporated licenses to the Fund the
"Flag Investors" name and logo but retains the rights to the name and logo,
including the right to permit other investment companies to use them.
2. INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The Fund has the investment objective of maximizing total return
through a combination of long-term capital appreciation and current income.
The Fund seeks to achieve this objective through a policy of diversified
investments in equity and debt securities (including common stocks,
convertible securities and government and corporate fixed-income
obligations). Under normal market conditions, between 40%-75% of the Fund's
total assets will be invested in equity securities and at least 25% of the
Fund's total assets will be invested in fixed-income securities, all as more
fully described in the Prospectus. In addition, the Fund may invest in other
1
<PAGE>
types of securities, which are also described in the Prospectus. There can
be no assurance that the Fund's investment objective will be achieved.
In addition to the Fund's investments in corporate and government
fixed-income obligations rated, at the time of purchase, BBB or higher by
Standard & Poor's Ratings Group ("S&P") or Baa or higher by Moody's Investors
Service, Inc. ("Moody's"), the Fund may purchase a limited amount, up to 10%
of its total assets, of non-convertible corporate debt obligations that are
rated below investment grade by Moody's or S&P or are unrated and of similar
quality. A description of the rating categories of S&P and Moody's is set
forth in the Appendix to this Statement of Additional Information. The Fund
may also invest up to 5% of its net assets in covered call options, an
additional 10% of its total assets in the aggregate in American Depositary
Receipts and in equity and debt securities issued by foreign governments or
corporations.
Additional information about certain of the Fund's investment
policies and practices are described below.
Covered Call Options
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 which it owns or has the immediate right to acquire
provided that the aggregate value of such options does not exceed 5% of the
value of the Fund's net assets as of the time such options are entered into
by the Fund. If, however, the securities on which the calls have been
written appreciate, more than 5% of the Fund's assets may be subject to the
call. The Fund may also purchase call options for the purpose of terminating
its outstanding obligations with respect to securities upon which call option
contracts have been written.
When the Fund writes a call option on securities which it owns, it
gives the purchaser of the option the right, but not the obligation, 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 call options written by
the Fund, the Exercise Price, plus the option premium paid by the purchaser,
will almost always be greater than the market price of the underlying
security at the time a call 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 Fund's investment advisor, Investment
Company Capital Corp. ("ICC"), or the Fund's sub-advisor, Alex. Brown
Investment Management ("ABIM") (ICC and ABIM are sometimes collectively
referred to as the "Advisors"), as appropriate, believes the security should
be held for the long-term but expects 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 which are traded on a national securities exchange
will be written. Currently, call options may be traded on the Chicago Board
Options Exchange and the American, Pacific, Philadelphia and New York Stock
Exchanges. Call options are issued by The Options Clearing Corporation,
which also serves as the clearing house for transactions with respect to
options. The price of a call option is paid to the writer without refund on
expiration or exercise, and no portion of the price is retained by The
2
<PAGE>
Options Clearing Corporation or the exchanges listed above. Writers and
purchasers of options pay the transaction costs, which may include
commissions charged or incurred in connection with such option transactions.
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 call option which had been written previously. 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 Directors believe
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. ICC may also permit the call
option to be exercised. A profit or loss from a closing purchase transaction
or exercise of a call option will be realized depending on whether the amount
paid to purchase a call to close a position, or the price at which the option
is exercised, is less or more than the amount received from writing the call.
In the event that the Advisors are incorrect in their forecasts regarding
market values, interest rates and other applicable factors, the Fund would be
in a worse position than if the call option had not been written.
Positions in options on stocks may be closed before expiration only
by a closing transaction, which may be made only on an exchange which
provides a liquid secondary market for such options. Although the Fund will
write options only when ICC believes a liquid secondary market will exist on
an exchange for options of the same series, there can be no assurance that a
liquid secondary market will exist for any particular stock option. Possible
reasons for the absence of a liquid secondary market on an exchange for an
option include the following: (a) insufficient trading interest in certain
options; (b) restrictions on transactions imposed by an exchange; (c) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities; (d) inadequacy of the
facilities of an exchange or The Options Clearing Corporation to handle
trading volume; or (e) a decision by one or more exchanges to discontinue the
trading of options or to impose restrictions on types of orders. Although
The Options Clearing Corporation has stated that it believes (based on
forecasts provided by the exchanges on which options are traded) that its
facilities are adequate to handle the volume of reasonably anticipated
options transactions, and although each exchange has advised The Options
Clearing Corporation that it believes that its facilities will also be
adequate to handle reasonably anticipated volume, there can be no assurance
that higher than anticipated trading activity or order flow or other
unforeseen events might not at times render certain of these facilities
inadequate and thereby result in the institution of special trading
procedures or restrictions.
Certain provisions of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), will restrict the use of covered call options.
(See "Federal Tax Treatment of Dividends and Distributions" below.)
Convertible Securities
As described in the Prospectus, the Fund may invest in convertible
securities. In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a fixed-income
security) or its "conversion value" (i.e., the value of the underlying
shares of common stock if the security is converted). A convertible
security tends to increase in market value when interest rates decline
and tends to decrease in value when interest rates rise. However,
3
<PAGE>
the price of a convertible security also is influenced by the market value of
the security's underlying common stock. Thus, the price of a convertible
security tends to increase as the market value of the underlying common stock
increases, whereas it tends to decrease as the market value of the underlying
stock declines. Investments in convertible securities generally entail less
risk than investment in common stock of the same issuer.
Below Investment Grade Corporate Bonds
The Fund may purchase corporate bonds 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 not only of income dividends but, to a lesser
extent, capital gain distributions. 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, in the case of S&P, and from Aaa to C, in the case of
Moody's. Generally, securities which are rated lower than BBB by S&P or Baa by
Moody's are described as below investment grade. Securities rated lower than
investment grade may be of a predominately speculative character and their
future cannot be considered well-assured. The issuer's ability to make timely
payments of principal and interest may be subject to material contingencies.
Securities in the lowest rating categories may be unable to make timely interest
or principal payments and may be in default and in arrears in interest and
principal payments.
The following summarizes the Moody's and S&P definitions for
speculative grade debt obligations. Bonds which are rated Ba by Moody's are
judged to have speculative elements; their future cannot be considered 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.
Bonds rated B lack generally characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small. Caa rated bonds
are of poor standing. Such issues may be in default or may have elements of
danger with respect to principal or interest. In the case of S&P, BB rated
bonds have less near-term vulnerability to default than B or CCC rated
securities but face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which may lead to inadequate
capacity to meet timely interest and principal payments. The BB rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied BBB- rating. B rated bonds have a greater vulnerability
to default but currently have the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic conditions
will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB- rating. CCC
rated bonds have a currently identifiable vulnerability to default and,
without favorable business, financial, and economic conditions, will be
unable to repay interest and principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity to
pay interest and repay principal. The CCC rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied B or
B- rating.
4
<PAGE>
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, ratings are not absolute standards of quality and may not
reflect changes in an issuer's creditworthiness. Accordingly, the Advisors
do not rely exclusively on ratings issued by S&P or Moody's in selecting
portfolio securities but supplement such ratings with independent and ongoing
review of credit quality. In addition, the total return the Fund may earn
from investments in high yield securities will be significantly affected not
only by credit quality but by fluctuations in the markets in which such
securities are traded. Accordingly, selection and supervision by the
Advisors of investments in lower rated securities involves continuous
analysis of individual issuers, general business conditions, activities in
the high yield bond market and other factors. The analysis of issuers may
include, among other things, historic and current financial conditions,
strength of management, responsiveness to business conditions, credit
standing and current and anticipated results of operations. Analysis of
general business conditions and other factors may include anticipated changes
in economic activity in interest rates, the availability of new investment
opportunities and the economic outlook for specific industries.
Investing in higher yield, lower rated bonds entails substantially
greater risk than investing in investment grade bonds, including not only
credit risk, but potentially greater market volatility and lower liquidity.
Yields and market values of high yield bonds will fluctuate over time,
reflecting not only changing interest rates but also the bond market's
perception of credit quality and the outlook for economic growth. When
economic conditions appear to be deteriorating, lower rated bonds may decline
in value due to heightened concern over credit quality, regardless of
prevailing interest rates. In addition, in adverse economic conditions, the
liquidity of the secondary market for junk bonds may be significantly
reduced. 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 lower rated 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 lower
rated 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.
Finally, prices for high yield bonds may be affected by legislative
and regulatory developments. For example, from time to time, Congress has
considered legislation to restrict or eliminate the corporate tax deduction
for interest payments or to regulate corporate restructurings such as
takeovers, mergers or leveraged buyouts. Such legislation may significantly
depress the prices of outstanding high yield bonds.
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic banks or
broker-dealers deemed to be creditworthy by ICC, and the Fund's sub-advisor,
ABIM under guidelines approved by the Board of Directors. A repurchase
agreement is a short-term investment in which the purchaser (i.e., 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
5
<PAGE>
from the date of purchase, thereby determining the yield during the
purchaser'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.
Foreign Investment Risk Considerations
From time to time, the Advisors may invest up to 10% of the Fund's
assets in American Depository Receipts, which are U.S. exchange listed
interests in securities of foreign companies, and in debt and equity
securities issued by foreign corporate and government issuers when the
Advisors believe that such investments provide good opportunities for
achieving income and capital gains without undue risk. Foreign investments
involve substantial and different risks which should be carefully considered
by any potential investor. In general, less information is publicly
available about foreign companies than is available about companies in the
United States. Most foreign companies are not subject to uniform audit and
financial reporting standards, practices and requirements comparable to those
in the United States. In most foreign markets volume and liquidity are less
than in the United States and, at times, volatility of price can be greater
than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on United States exchanges.
There is generally less government supervision and regulation of foreign
stock exchanges, brokers, and companies in the United States. The settlement
period for foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity. Portfolio
securities held by the Fund which are listed on foreign exchanges may be
traded on days that the Fund does not value its securities, such as Saturdays
and the customary United States business holidays on which the New York Stock
Exchange is closed. As a result, the net asset value of Shares may be
significantly affected on days when shareholders do not have access to the
Fund.
Although the Fund intends to invest in securities of companies and
governments of developed, stable nations, there is also the possibility of
adverse changes in investment or exchange control regulations, expropriation
or confiscatory taxation, limitations on the removal of funds or other
assets, political or social instability, or diplomatic developments which
could adversely affect investments, assets or securities transactions of the
Fund in some foreign countries. The dividends and interest payable on
certain of the Fund's foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount available for distribution to
the Fund's shareholders. The expense ratio of the Fund can be expected to be
higher than those of investment companies investing in domestic securities
due to the additional cost of custody of foreign securities.
Investment Restrictions
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and
state regulatory limitations. The investment restrictions recited below are
6
<PAGE>
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 the outstanding Shares. Accordingly, the Fund will not:
1. Invest in real estate or mortgages on real estate;
2. Purchase or sell commodities or commodities contracts, including
financial futures contracts;
3. 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;
4. Issue senior securities;
5. Make loans, except that the Fund may purchase or hold debt
instruments and enter into repurchase agreements in accordance with its
investment objectives and policies;
6. Effect short sales of securities;
7. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
8. Purchase participations or other direct interests in oil, gas or
other mineral leases or exploration or development programs; or
9. Invest more than 10% of the value of its net assets in illiquid
securities (as defined under federal or state securities laws), including
repurchase agreements with remaining maturities in excess of seven days,
provided, however, that the Fund shall not invest more than 5% of its total
assets in securities that the Fund is restricted from selling to the public
without registration under the Securities Act of 1933, as amended (excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended, that have been determined to be liquid by
the Fund's Board of Directors based upon the trading markets for such
securities).
The following are investment restrictions that may be changed by a
vote of the majority of the Board of Directors. The Fund will not:
1. Purchase any securities of unseasoned issuers which have been in
operation directly or through predecessors for less than three years;
2. Invest in shares of any other investment company registered
under the Investment Company Act, other than in connection with a merger,
consolidation, reorganization or acquisition of assets;
3. Purchase or retain the securities of any issuer if to the
knowledge of the Fund any officer or Director of the Fund or its investment
advisor owns beneficially more than .5% of the outstanding securities of such
issuer and together they own beneficially more than 5% of the securities of
such issuer;
7
<PAGE>
4. Invest in companies for the purpose of exercising management or
control;
5. Invest in puts, calls, straddles, spreads or any combination
thereof, except that the Fund may write covered call options and may enter
into related closing transactions in accordance with its investment
objectives and policies;
6. Purchase warrants, if by reason of such purchase more than 5% of
the Fund's net assets (taken at market value) will be invested in warrants,
valued at the lower of cost or market. Included within this amount, but not
to exceed 2% of the value of the Fund's net assets, may be warrants that are
not listed on the New York or American Stock Exchange. For the purpose of the
foregoing calculations, warrants acquired by the Fund in units or attached to
securities will be deemed to be without value and therefore not included
within the preceding limitations; or
7. Invest in real estate limited partnerships.
The percentage limitations contained in these restrictions apply at
the time of purchase of securities.
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 securities
and securities with maturities of one year or less) may vary from year to
year, as well as within a year, depending on market conditions. For the
fiscal years ended March 31, 1995 and March 31, 1994, the Fund's portfolio
turnover rate was 18% and 8%, respectively.
3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined once daily as of 4:00
p.m. (Eastern Time) each day on which the New York Stock Exchange is open for
business ("Business Day"). The New York Stock Exchange is open for business
on all weekdays except for the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net asset value per share of a class is calculated by valuing all
assets held by the Fund, deducting liabilities attributable to all shares and
any liabilities attributable to the specific class, and dividing the
resulting amount by the number of then outstanding shares of the class. For
this purpose, portfolio securities will be given their market value where
feasible. If a portfolio security is traded on a national exchange or on an
automated dealer quotation system, such as NASDAQ, on the valuation date, the
last quoted sale price will generally be used. Options are valued at the
last reported sale price, or if no sales are reported, at the average of the
last reported bid and asked prices. Securities or other assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith under procedures established from time to time and
monitored by the Fund's Board of Directors. Debt obligations with maturities
of 60 days or less are valued at amortized cost which constitutes fair value
as determined by the Fund's Board of Directors.
8
<PAGE>
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 as
described in the Prospectus. However, if the Board of Directors determines
that it would be in the best interests of the remaining shareholders to make
payment of the redemption price in whole or in part by a distribution in kind
of readily marketable securities from the portfolio of the Fund in lieu of
cash, in conformity with applicable rules of the SEC, the Fund will make such
distributions in kind. 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 has elected to be governed by Rule
18f-1 under the Investment Company Act pursuant to which the Fund is
obligated to redeem Shares solely in cash up to the lesser of $250,000 or 1%
of the net asset value of the Fund during any 90-day period for any one
shareholder.
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. 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 Prospectus is not intended as a substitute
for careful tax planning.
The summary of 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. Subsequent 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 expects to be taxed as a regulated investment company under
Subchapter M of the Code. However, in order to qualify as a regulated
investment company for any taxable year, the Fund generally must (1) derive
at least 90% of its gross income from dividends, interest, certain payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currencies, and other income (including, but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies (the
"Income Requirement"), and (2) derive less than 30% of its gross income
(exclusive of certain gains from designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from gains
on the sale or other disposition of any of the following investments if such
investments are held for less than three months (the "Short-Short Gain
Test"): (a) stock or securities (as defined in Section 2(a)(36) of the
Investment Company Act); (b) options, futures or forward contracts (other
than options, futures, or forward contracts on foreign currencies), and (c)
foreign currencies (or options, futures, or forward contracts on foreign
9
<PAGE>
currencies) but only if such currencies (or options, futures, or forward
contracts) are not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with respect to
stocks or securities).
In addition, at the close of each quarter of the Fund's taxable year,
at least 50% of the value of its assets must consist of cash and cash items,
U.S. government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has not
invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the
value of its total assets may be invested in the securities of any one issuer
(other than U.S. government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses or related
trades or businesses (the "Asset Diversification Test"). Generally, the Fund
will not lose its status as a regulated investment company if it fails to
meet the Asset Diversification Test solely as a result of a fluctuation in
value of portfolio assets not attributable to a purchase.
Under Subchapter M, the Fund is exempt from federal income tax on its
net investment income and capital gains which it distributes to shareholders,
provided that it distributes at least 90% of its investment company taxable
income (net investment income and the excess of net short term capital gains
over net long term capital losses) for the year (the "Distribution
Requirement") and complies with the other requirements of the Code described
above. Distributions of investment company taxable income made during the
taxable year or, under certain specified circumstances, within twelve months
after the close of the taxable year will satisfy the Distribution
Requirement. The Distribution Requirement for any year may be waived if a
regulated investment company establishes to the satisfaction of the Internal
Revenue Service that it is unable to satisfy the Distribution Requirement by
reason of distributions previously made for the purpose of avoiding liability
for Federal excise tax.
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 for any taxable year, the Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at
regular corporate income tax rates without any deduction for distributions to
shareholders, and all such distributions generally will be taxable to
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be
eligible for the 70% 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 invested in additional Shares. The Fund anticipates that
it will distribute substantially all of its investment company taxable income
for each taxable year.
The Fund may either retain or distribute to shareholders its excess
of net long-term capital gains over net short-term capital losses ("net
capital gains"). If such gains are distributed as a capital gains
distribution, they are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has held Shares.
Conversely, if the Fund elects to retain its net capital gains, it will be
taxed thereon (except to the extent of any available capital loss carryovers)
at the applicable corporate capital gains tax rate. In this event, it is
10
<PAGE>
expected that the Fund also will elect to have shareholders treated as having
received a distribution of such gains, with the result that shareholders will
be required to report such gains on their returns as long-term capital gains,
will receive a tax credit for their allocable share of capital gains tax paid
by the Fund on the gains, and will increase the tax basis for their Shares by
an amount equal to 65 percent of such gains.
In the case of corporate shareholders, Fund distributions (other than
capital gains distributions) generally qualify for the 70% 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. For purposes of the alternative minimum tax and
the environmental tax, corporate shareholders generally will be required to
take the full amount of any dividend received from the Fund into account in
determining their adjusted current earnings for purposes of computing
"alternative minimum taxable income."
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 purchasing just prior to an
ordinary income dividend or capital gains distribution will be taxable on the
entire amount of the dividend received, even though the net asset value per
Share on the date of such purchase reflected the amount of such distribution.
Generally, gain or loss on the sale or exchange of a Share will be
capital gain or loss which will be long-term if the Share has been held for
more than one year and otherwise will be short-term. 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 which
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). Investors should particularly note that this loss disallowance rule
will apply to Shares received through the reinvestment of dividends during
the 61-day period.
The Fund will provide a statement annually to shareholders as to 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.
The Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of distributions payable to any shareholder
who (1) has provided either an incorrect taxpayer identification number or no
number at all, (2) who is subject to backup withholding by the Internal
Revenue Service for failure to properly report receipt of interest or
dividends, or (3) who has failed to certify to the Fund that the shareholder
is not subject to backup withholding.
Federal Excise Tax; Miscellaneous Considerations
The Code imposes a nondeductible 4% excise tax on regulated
investment companies that do not distribute in each calendar year an amount
equal to 98% of their ordinary income for the calendar year plus 98% of their
capital gain net income for the one-year period ending on October 31 of such
calendar year. The excise tax is imposed on the undistributed part of this
required distribution. In addition, the balance of such income must be
distributed during the next calendar year to avoid liability for the excise
11
<PAGE>
tax in that year. For the foregoing purposes, an investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year. Because the Fund intends
to distribute all of its income currently (or to retain, at most its net
capital gains and pay tax thereon), the Fund does not anticipate incurring
any liability for this excise tax. However, investors should note that the
Fund may in certain circumstances be required to liquidate portfolio
investments in order to make sufficient distributions to avoid excise tax
liability and, in addition, that the liquidation of such investments in such
circumstances may affect the ability of the Fund to satisfy the Short-Short
Gain Test.
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 advisers as to the consequences of these and other state
and local tax rules affecting an investment in the Fund.
5. MANAGEMENT OF THE FUND
Directors and Officers
The Directors and executive officers of the Fund 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 135 East
Baltimore Street, Baltimore, Maryland 21202.
*TRUMAN T. SEMANS, Chairman
Managing Director, Alex. Brown & Sons Incorporated; Formerly, Vice
Chairman, Alex. Brown Incorporated.
*W. JAMES PRICE, Director
6885 North Ocean Boulevard, Apartment #306, Ocean Ridge, Florida 33435-
3343. Director, Boca Research, Inc. (computer peripherals); Managing
Director Emeritus, Alex. Brown & Sons Incorporated; Director, CSX
Corporation (transportation and natural resources company) and PHH
Corporation (business services).
*RICHARD T. HALE, Director
Managing Director, Alex. Brown & Sons Incorporated.
JAMES J. CUNNANE, Director
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141. Managing
Director, CBC Capital (a merchant banking firm), 1993-Present; Formerly,
Senior Vice-President and Chief Financial Officer, General Dynamics
Corporation (defense)(1989-1993) and Director, The Arch Fund (mutual
fund).
N. BRUCE HANNAY, Director
201 Condon Lane, Port Ludlow, Washington 98365. Formerly, Vice
President, Research and Patents, AT&T Bell Laboratories; Formerly,
Director, Rohm & Haas Company (diversified chemicals), General Signal
Corp. (control equipment & systems) and Director, Plenum Publishing Corp.
12
<PAGE>
JOHN F. KROEGER, Director
P.O. Box 464, 24875 Swan Road-Martingham, St. Michaels, Maryland 21663.
Director/Trustee, AIM Funds (registered investment companies); Formerly,
Consultant, Wendell & Stockel Associates, Inc. (consulting firm); General
Manager, Shell Oil Company.
LOUIS E. LEVY, Director
26 Farmstead Road, Short Hills, New Jersey 07078. Director, Kimberly-
Clark Corporation (personal consumer products) and Household
International (banking and finance); Chairman of the Quality Control
Inquiry Committee, American Institute of Certified Public Accountants;
Formerly, Trustee, Merrill Lynch Funds for Institutions, 1991-1993;
Adjunct Professor, Columbia University-Graduate School of Business,
1991-1992; Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. McDONALD, Director
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).
HARRY WOOLF, Director
Institute for Advanced Study, South Olden Lane, Princeton, New Jersey
08540. Professor-at Large Emeritus, Institute for Advanced Study;
Director, Merrill Lynch Cluster C Funds (registered investment
companies); ATL and Spacelabs Medical Corp. (medical equipment); Family
Health International (nonprofit research and education).
J. DORSEY BROWN, III, President
Managing Director, Alex. Brown & Sons Incorporated; Chief Executive
Officer and Formerly, General Partner, Alex. Brown Investment Management.
HOBART C. BUPPERT, Executive Vice President
Vice President and Portfolio Manager, Alex. Brown Investment Management
(registered investment advisor), 1984-Present; President, Buppert,
Behrens & Owen, Inc. 1987-Present.
LEE S. OWEN, Executive Vice President
Portfolio Manager, Alex. Brown Investment Management (registered
investment advisor); Vice President and Secretary, Buppert, Behrens &
Owen, Inc.
BRUCE E. BEHRENS, Vice President
Vice President and Portfolio Manager, Alex. Brown Investment Management
(registered investment advisor); Vice President and Treasurer, Buppert,
Behrens & Owen, Inc.
EDWARD J. VEILLEUX, Vice President
Principal, Alex. Brown & Sons Incorporated; President, Investment Company
Capital Corp. (registered investment advisor); Vice President, Armata
Financial Corp. (registered broker-dealer).
GARY V. FEARNOW, Vice President
Managing Director, Alex. Brown & Sons Incorporated; Manager, Special
Products Department, Alex. Brown & Sons Incorporated.
BRIAN C. NELSON, Vice President and Secretary
Vice President, Alex. Brown & Sons Incorporated, Investment Company
Capital Corp. (registered investment advisor) and Armata Financial Corp.
(registered broker-dealer).
13
<PAGE>
DIANA M. ELLIS, Treasurer
Manager, Portfolio Accounting Department, Investment Company Capital
Corp. (registered investment advisor); Mutual Fund Accounting Department,
Alex. Brown & Sons Incorporated, 1991 - Present; Formerly, Accounting
Manager, Downtown Press Inc. (printer), 1987-1991.
LAURIE D. DePRINE, Assistant Secretary
Asset Management Department, Alex. Brown & Sons Incorporated, 1991 -
Present; Formerly, student 1989-1991.
_____________________
* A Director who is an "interested person", as defined in the Investment
Company Act.
Directors and officers of the Fund are also directors and officers of
some or all of the other investment companies managed, administered, advised
or distributed by Alex. Brown or its affiliates. There are currently 12
funds in the Flag Investors/ISI Funds and Alex. Brown Cash Reserve Fund, Inc.
fund complex (the "Fund Complex"). Mr. Price and Mr. Semans each serve as a
Director of seven funds in the Fund Complex. Messrs. Cunnane, Hannay,
Kroeger, Levy, McDonald and Woolf serve as Directors of each fund in the Fund
Complex. Mr. Hale serves as President and Director of one fund, Vice
President of one fund and as a Director of 10 other funds in the Fund
Complex. Mr. Behrens serves as President of one fund and Vice President of
two funds in the Fund Complex. Mr. Brown serves as President of one fund and
Vice President of two funds in the Fund Complex. Mr. Buppert serves as Vice
President of three funds in the Fund Complex and Mr. Owen serves as President
of one fund and Vice President of two funds in the Fund Complex. Mr. Fearnow
serves as Vice President of 10 funds in the Fund Complex. Mr. Veilleux
serves as Executive Vice President of one fund and as Vice President of 11
funds in the Fund Complex. Mr. Nelson, Ms. Ellis, and Ms. DePrine serve as
Vice President and Secretary, Treasurer and Assistant Secretary,
respectively, of each of the funds in the Fund Complex.
Some of the Directors of the Fund are customers of, and have had
normal brokerage transactions with, Alex. Brown 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.
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 Alex. Brown may be considered to have received remuneration
indirectly. As compensation from the Fund, each Director who is not an
"interested person" of the Fund (as defined in the Investment Company Act) (a
"Non-Interested Director") receives an aggregate annual fee (plus
reimbursement for reasonable out-of-pocket expenses incurred in connection
with his attendance at board and committee meetings) from all Flag
Investors/ISI Funds and Alex. Brown Cash Reserve Fund, Inc. for which he
serves. Payment of such fees and expenses are allocated among all such funds
described above in proportion to their relative net assets. For the fiscal
year ended March 31, 1995, Non-Interested Directors' fees attributable to the
assets of the Fund totalled approximately $9,132. The following table shows
aggregate compensation paid to each of the Fund's Directors by the Fund and
the Fund Complex, respectively, in the fiscal year ended March 31, 1995.
14
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Compensation From the Fund Total Compensation From the Fund
for the Fiscal Year Ended March 31, and Fund Complex Paid to Directors
1995 for the Fiscal Year Ended March 31, 1995
- ------------------------ ------------------------------------ ----------------------------------------
<S> <C> <C>
*Truman T. Semans, Chairman $0 $0
*W. James Price, Director $0 $0
*Richard T. Hale, Director $0 $0
James J. Cunnane, Director $384** $9,750 for service on 13 Boards**(3)
N. Bruce Hannay, Director $1,526(1) $39,000 for service on 13 Boards(3)
John F. Kroeger, Director $1,679 $42,000 for service on 13 Boards(3)
Louis E. Levy, Director $1,157*** $29,250 for service on 13 Boards***(3)
Eugene J. McDonald, Director $1,526(2) $39,000 for service on 13 Boards(3)
Harry Woolf, Director $1,526(2) $39,000 for service on 13 Boards(3)
</TABLE>
- ------------
* A Director who is an "interested person" as defined in the Investment
Company Act.
** Elected to the Board on December 14, 1994.
*** Elected to the Board on June 17, 1994.
(1) $377 of this amount has been deferred pursuant to a deferred compensation
plan.
(2) $762 of this amount has been deferred pursuant to a deferred compensation
plan.
(3) One of the funds ceased operations on May 17, 1995.
The Fund Complex has adopted a Retirement Plan (the "Retirement
Plan") for Directors who are not employees of the Fund, the Fund's Advisor or
their respective affiliates (the "Participants"). After completion of five
years of service, each Participant will be entitled to receive an annual
retirement benefit equal to a percentage of the fee earned by him in his last
year of service. Upon retirement, each Participant will receive annually 10%
of such fee for each year that he served after completion of the first five
years, up to a maximum annual benefit of 50% of the fee earned by him in his
last year of service. The fee will be paid quarterly, for life, by each Fund
for which he serves. The Retirement Plan is unfunded and unvested. Messrs.
Hannay, Kroeger and Woolf have qualified but have not received benefits, and
no such benefits are being accrued for them since they have not yet retired.
The Fund has one Participant, a Director who retired effective December 31,
1994, who has qualified for the Retirement Plan and who will be paid a
quarterly fee of $4,875 by the Fund Complex for the rest of his life. Such
fee is allocated to each fund in the Fund Complex based upon the relative net
assets of such fund to the Fund Complex.
Beginning in December, 1994, any Director who receives fees from the
Fund is permitted to defer a minimum of 50%, or up to all, of his annual
compensation pursuant to a Deferred Compensation Plan.
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<PAGE>
Code of Ethics
The Board of Directors of the Fund has adopted a Code of Ethics
pursuant to Rule 17j-1 under the Investment Company Act. The Code of Ethics
significantly restricts the personal investing activities of all employees of
ICC and the directors and officers of Alex. Brown. As described below, the
Code of Ethics imposes additional, more onerous, restrictions on the Fund's
investment personnel, including the portfolio managers and employees who
execute or help execute a portfolio manager's decisions or who obtain
contemporaneous information regarding the purchase or sale of a security by
the Fund.
The Code of Ethics requires that all employees of ICC, any director
or officer of Alex. Brown, and all Non-Interested Directors, preclear any
personal securities investments (with limited exceptions, such as non-
volitional purchases or purchases which are part of an automatic dividend
reinvestment plan). The preclearance requirement and associated procedures
are designed to identify any substantive prohibition or limitation applicable
to the proposed investment. The substantive restrictions applicable to
investment personnel include a ban on acquiring any securities in an initial
public offering, a prohibition from profiting on short-term trading in
securities and preclearance of the acquisition of securities in private
placements. Furthermore, the Code of Ethics provides for trading "blackout
periods" that prohibit trading by investment personnel and certain other
employees within periods of trading by the Fund in the same security.
6. INVESTMENT ADVISORY AND OTHER SERVICES
On March 13, 1992, the Board of Directors of the Fund, including a
majority of the Non-Interested Directors, approved an Investment Advisory
Agreement between the Fund and ICC and a Sub-Advisory Agreement among the
Fund, ICC and ABIM, both of which contracts are described in greater detail
below. The Investment Advisory Agreement and the Sub-Advisory Agreement were
approved by the sole shareholder of the Fund on June 5, 1992. ICC, the
investment advisor, is a wholly-owned subsidiary of Alex. Brown, the Fund's
distributor. ICC is also the investment advisor to Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Flag
Investors Intermediate-Term Income Fund, Inc., Flag Investors Quality Growth
Fund, Inc., Flag Investors Maryland Intermediate Tax Free Income Fund, Inc.,
Flag Investors Real Estate Securities Fund, Inc. and Flag Investors Equity
Partners Fund, Inc., which, are also distributed by Alex. Brown.
ABIM is a limited partnership affiliated with Alex. Brown. 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. Alex. Brown owns a 1% general partnership interest in ABIM
and Alex. Brown Incorporated owns the remaining 49% limited partnership
interest. ABIM, also the sub-advisor to Flag Investors Telephone Income
Fund, Inc. and Flag Investors Equity Partners Fund, Inc. is a registered
investment advisor with approximately $3.5 billion under management as of
June 30, 1995.
Under the Investment Advisory Agreement, ICC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. ICC has delegated this responsibility to
ABIM, provided that ICC continues to supervise the performance of ABIM and
report thereon to the Fund's Board of Directors. Any investment program
undertaken by ICC or ABIM will at all times be subject to policies and
16
<PAGE>
control of the Fund's Board of Directors. ICC will provide the Fund with
office space for managing its affairs, with the services of required
executive personnel and with certain clerical and bookkeeping services and
facilities. These services are provided by ICC without reimbursement by the
Fund for any costs. Neither ICC nor ABIM shall be liable to the Fund or its
shareholders for any act or omission by ICC or ABIM or any losses sustained
by the Fund or its shareholders except in the case of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duty. The services of
ICC and ABIM to the Fund are not exclusive and ICC and ABIM are free to
render similar services to others.
As compensation for its services, ICC is entitled to receive an
annual fee from the Fund, calculated daily and payable monthly, at the annual
rate of 1.00% of the first $50 million of the Fund's average daily net
assets, .85% of the Fund's average daily net assets in excess of $50 million
but not exceeding $100 million, .80% of the Fund's average daily net assets
in excess of $100 million but not exceeding $200 million, and .70% of the
Fund's average daily net assets in excess of $200 million. As compensation
for its services, ABIM receives a fee from ICC, calculated daily and payable
monthly, at the annual rate of .75% of the first $50 million of the Fund's
average daily net assets, .60% of the Fund's average daily net assets in
excess of $50 million but not exceeding $200 million, and .50% of the Fund's
average daily net assets in excess of $200 million.
This fee is higher than that paid by most mutual funds, but ICC has
voluntarily agreed to waive a portion of its fee from time to time so that
the Fund's total operating expenses do not exceed 1.35% of the Class A
Shares' average daily net assets and 2.10% of the Class B Shares' average
daily net assets. ABIM has also agreed to waive, on a voluntary basis, that
portion of its fee payable from ICC for sub-advisory services in excess of
the amount equal to .65% of the Fund's average daily net assets.
In addition, ICC has agreed to reduce its aggregate fees on a monthly
basis for any fiscal year to the extent required so that the amount of the
ordinary expenses of the Fund (excluding brokerage commissions, interest,
taxes and extraordinary expenses such as legal claims, liabilities,
litigation costs and indemnification related thereto) paid or incurred by the
Fund for such fiscal year does not exceed the expense limitations applicable
to the Fund imposed by the securities laws or regulations of the states in
which the Shares are registered or qualified for sale, as such limitations
may be raised or lowered from time to time. Currently, the most restrictive
of such expense limitations requires ICC to reduce its fees to the extent
required so that ordinary expenses of the Fund (excluding brokerage
commissions, interest, taxes, and extraordinary expenses such as legal
claims, liabilities, litigation costs and indemnification related thereto) do
not exceed 2.5% of the first $30 million of the Fund's average daily net
assets, 2.0% of the next $70 million of the Fund's average daily net assets
and 1.5% of the Fund's average daily net assets in excess of $100 million.
In addition, if required to do so by any applicable state securities laws or
regulations, ICC will reimburse the Fund to the extent required to prevent
the expense limitations of any state law or regulation from being exceeded.
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 Non-
Interested Directors who have no direct or indirect financial interest in
such agreements, by votes cast in person at a meeting called for such
purpose, or by a vote of a majority of the outstanding Shares (as defined
under "Capital Stock"). The Investment Advisory Agreement and the Sub-
Advisory Agreement were most recently approved by the Board of Directors on
September 22, 1994. The Fund or ICC may terminate the Investment Advisory
Agreement on sixty days' written notice without penalty. The Investment
Advisory Agreement will terminate automatically in the event of assignment
17
<PAGE>
(as defined in the Investment Company Act). The Sub-Advisory Agreement has
similar termination provisions. For the fiscal years ended March 31, 1995
and March 31, 1994 and for the fiscal period ended March 31, 1993, the Fund
paid ICC fees (net of fee waivers of $67,326, $38,495 and $138,716) of
$1,248,666, $1,009,858, and $240,367 and ICC paid ABIM from the fees it
received, fees (net of fee waivers of $1,247, $6,495 and $____) in the amount
of $967,323, $760,523 and $243,381, respectively.
ICC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Fund. (See "Custodian, Transfer
Agent, Accounting Services.")
7. DISTRIBUTION OF FUND SHARES
The Distribution Agreements provide that Alex. Brown has the
exclusive right to distribute the related class of Flag Investors Value
Builder Fund Shares either directly or through other broker-dealers and
further provide that Alex. Brown will: (a) solicit and receive orders for the
purchase of Shares; (b) accept or reject such orders on behalf of the Fund in
accordance with the Fund's currently effective prospectus and transmit such
orders as are accepted to the Fund's transfer agent as promptly as possible;
(c) receive requests for redemptions and transmit such redemption requests to
the Fund's transfer agent as promptly as possible; and (d) respond to
inquiries from shareholders concerning the status of their accounts and the
operations of the Fund. Alex. Brown has not undertaken to sell any specific
number of Shares. The Distribution Agreements further provide that, in
connection with the distribution of Shares, Alex. Brown will be responsible
for all of the promotional expenses. The services provided by Alex. Brown to
the Fund are not exclusive, and Alex. Brown is free to provide similar
services to others. Alex. Brown shall not be liable to the Fund or its
shareholders for any act or omission by Alex. Brown 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.
Alex. Brown 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 shareholders concerning the status of their accounts and the
operations of the Fund.
As compensation for providing distribution services as described
above for the Class A Shares, Alex. Brown receives an annual fee, paid
monthly equal to .25% of the average daily net assets of the Class A Shares.
As compensation for providing distribution services as described above for
the Flag Investors Class B Shares, Alex. Brown receives an annual fee, paid
monthly, equal to .75% of the average daily net assets of the Class B Shares.
As compensation for providing distribution services for the Class A Shares
for the fiscal years ended March 31, 1995 and March 31, 1994, and for the
period from June 15, 1992 (commencement of operations) through March 31,
1993, Alex. Brown received from the Fund aggregate commissions and fees in
the amount of $342,916, $265,840 and $94,139, respectively, and from such
fees paid $333,580, $115,614 and $73,303 to its investment representatives
and $9,351, $5,942 and $0 to Participating Dealers as compensation. Alex.
Brown expects to allocate most of its annual distribution fee to its
investment representatives and up to all of its fee to broker-dealers who
enter into Sub-Distribution Agreements with Alex. Brown.
In addition, with respect to the Class B Shares, the Fund will pay
Alex. Brown a shareholder servicing fee at an annual rate of .25% of the
average daily net assets of the Class B Shares. (See the Prospectus.)
18
<PAGE>
For the period from January 3, 1995 through March 31, 1995, Alex. Brown received
distribution and shareholder servicing fees of $406 for the Class B Shares.
For the period from November 9, 1992 through November 18, 1994 the
Fund offered the Flag Investors Value Builder Fund Class D Shares (which were
known at that time as the Flag Investors Value Builder Fund Class B Shares).
As compensation for providing distribution services for the Class D Shares
for the fiscal years ended March 31, 1995 and March 31, 1994, and for the
period from November 9, 1992 (commencement of operations of the Class D
Shares) through March 31, 1993, Alex. Brown received from the Fund aggregate
commissions and fees in the amount of $69,979, $55,128 and $7,575,
respectively, and from such fees paid $36,600, $0, and $0, respectively, to
its investment representatives and $2,106, $0, and $0, respectively, to
Participating Dealers.
Pursuant to Rule 12b-1 under the Investment Company 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 of its classes of shares (the "Plans"). Under the
Plans, the Fund pays a fee to Alex. Brown for distribution and other
shareholder servicing assistance as set forth in the Distribution Agreements,
and Alex. Brown is authorized to make payments out of its fee to its
investment representatives and to participating broker-dealers. Each
Distribution Agreement has an initial term of two years. The Distribution
Agreements and the Plans encompassed therein will remain in effect from year
to year as specifically approved at least annually by the Fund's Board of
Directors and by the affirmative vote of a majority of the Non-Interested
Directors by votes cast in person at a meeting called for such purpose. The
Distribution Agreements including the Plans and forms of Sub-Distribution
Agreements, were most recently approved by the Fund's Board of Directors,
including a majority of the Non-Interested Directors on September 22, 1994.
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 Agreements without the approval of the
shareholders of the Fund. The Plans may be terminated at any time and the
Distribution Agreements may be terminated at any time upon sixty days'
notice, in either case without penalty, by the vote of a majority of the
Fund's Non-Interested Directors or by a vote of a majority of the Fund's
outstanding Shares (as defined under "Capital Stock"). Any Sub-Distribution
Agreement may be terminated in the same manner at any time. The Distribution
Agreement and any Sub-Distribution Agreement shall automatically terminate in
the event of assignment.
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 Plan to Alex. Brown pursuant to the
Distribution Agreements, to broker-dealers pursuant to any Sub-Distribution
Agreements and to Shareholder Servicing Agents pursuant to Shareholder
Servicing 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 Non-Interested Directors shall be
committed to the discretion of the Non-Interested Directors then in office.
In addition, the Fund may enter into Shareholder Servicing Agreements
with certain financial institutions, such as banks, to act as Shareholder
Servicing Agents, pursuant to which Alex. Brown will allocate a portion of
19
<PAGE>
its distribution fee as compensation for such financial institutions' 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 and investors should review the Prospectus and this
Statement of Additional Information in conjunction with any such
institution's fee schedule. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein, and
banks and financial institutions may be required to register as dealers
pursuant to state law.
Under the Plans, amounts allocated to Participating Dealers and
Shareholder Servicing Agents may not exceed amounts payable to Alex. Brown
under such Plans. Payments under the Plans are made as described above
regardless of Alex. Brown's actual cost of providing distribution services
and may be used to pay Alex. Brown's overhead expenses. If the cost of
providing distribution services to the Class A Shares is less than .25% of
the average daily net assets invested in that Class or Class B Shares is less
than .75% of the average daily net assets invested in that Class for any
period, the unexpended portion of the distribution fees may be retained by
Alex. Brown. The Plans do not provide for any charges to the Fund for excess
amounts expended by Alex. Brown and, if either of the Plans is terminated in
accordance with its terms, the obligation of the Fund to make payments to
Alex. Brown pursuant to such Plan will cease and the Fund will not be
required to make any payments past the date the Distribution Agreement
terminates with respect to such Plan.
The Fund will pay all costs associated with its organization and
registration under the Securities Act of 1933 and the Investment Company 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 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 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 Non-Interested Directors,
and of independent auditors, in connection with any matter relating to the
Fund; a portion of 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 assumed by Alex. Brown, ICC or ABIM.
20
<PAGE>
The address of Alex. Brown is 135 East Baltimore Street, Baltimore,
Maryland 21202.
8. BROKERAGE
ABIM is responsible for decisions to buy and sell securities for the
Fund, for the broker-dealer selection and for negotiation of commission
rates, subject to the supervision of ICC. Purchases and sales of securities
on a securities exchange are effected through broker-dealers who charge a
commission for their services. Brokerage commissions are subject to
negotiation between ABIM and the broker-dealers. ABIM may direct purchase
and sale orders to any broker-dealer, including, to the extent and in the
manner permitted by applicable law, Alex. Brown.
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 Alex. Brown in any transaction in which Alex. Brown acts as a principal;
that is, an order will not be placed with Alex. Brown if execution of the
trade involves Alex. Brown serving as a principal with respect to any part of
the Fund's order, nor will the Fund buy or sell over-the-counter securities
with Alex. Brown acting as market maker.
If Alex. Brown is 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 broker-dealers that furnish statistical, research or other information
or services which 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 effected on an agency (but not on a principal) basis 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 Alex. Brown higher commissions on brokerage transactions
for the Fund in order to secure research and investment services described
above. The allocation of orders among broker-dealers and the commission
rates paid by the Fund will be reviewed periodically by the Board.
Subject to the above considerations, the Board of Directors has
authorized the Fund to effect portfolio transactions, on an agency basis,
through Alex. Brown. At the time of such authorization, the Board adopted
certain policies and procedures incorporating the standards of Rule 17e-1
under the Investment Company Act which requires that the commissions paid
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<PAGE>
Alex. Brown must be "reasonable and fair compared to the commission, fee or
other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities during a comparable
period of time." Rule 17e-1 also contains requirements for the review of such
transactions by the Board of Directors and requires ICC and ABIM to furnish
reports and to maintain records in connection with such reviews. The
Distribution Agreement between Alex. Brown and the Fund does not provide for
any reduction in the distribution fee to be received by Alex. Brown from the
Fund as a result of profits from brokerage commissions on transactions of the
Fund effected through Alex. Brown.
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 which it seeks to purchase or sell.
During the fiscal year ended March 31, 1995, Alex. Brown directed
$38,044,707 of transactions to broker-dealers and paid $89,162, to broker-
dealers in related commissions because of research services provided. Alex.
Brown received no brokerage commissions from the Fund for the year ended
March 31, 1995. The Fund is required to identify any securities of its
"regular brokers or dealers" (as such term is defined in the Investment
Company Act) which the Fund has acquired during its most recent fiscal year.
As of March 31, 1995, the Fund held, a $1,000,000 note issued by The
Travelers Corp. (the parent of Smith Barney Shearson), valued at $930,000 and
a 6.10% repurchase agreement issued by Goldman Sachs & Co. valued at
$3,012,000. Smith Barney Shearson and Goldman Sachs & Co. are "regular
brokers or dealers" of the Fund.
9. CAPITAL STOCK
The Fund is authorized to issue thirty million Shares of common
stock, par value $.001 per share. The Board of Directors may increase or
decrease the number of authorized Shares without shareholder approval.
The Fund's Articles of Incorporation provide for the establishment of
separate series and separate classes of Shares by the Directors at any time
without shareholder approval. The Fund currently has one Series and the
Board has designated three classes of Shares: Flag Investors Value Builder
Fund Class A Shares, Flag Investors Value Builder Fund Class B Shares and
Flag Investors Value Builder Fund Class D Shares. The Flag Investors Value
Builder Fund Class D Shares are not currently being offered. In the event
separate series or classes 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. 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, each 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
22
<PAGE>
fees) would be prorated between all classes of a series based upon the
relative net assets of each class. Any matters affecting any class
exclusively would 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. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.
There are no preemptive, conversion or exchange rights applicable to any
of the Shares. The issued and outstanding Shares are fully paid and non-
assessable. In the event of liquidation or dissolution of the Fund, each Share
is entitled to its portion of the Fund's assets (or the assets allocated to a
separate series of Shares if there is more than one series) after all debts and
expenses have been paid.
As used in this Statement of Additional Information the term
"majority of the outstanding Shares" means the vote of the lesser of (i) 67%
or more of the Shares present at a meeting, if the holders of more than 50%
of the outstanding Shares are present or represented by proxy, or (ii) more
than 50% of the outstanding Shares.
10. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with Semi-Annual reports containing
information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The
annual financial statements are audited by the Fund's independent
accountants.
11. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
PNC Bank, National Association ("PNC Bank"), Airport Business Park,
200 Stevens Drive, Lester, Pennsylvania 19113, has been retained to act as
custodian of the Fund's investments. PNC Bank receives such compensation
from the Fund for its services as Custodian as may be agreed to from time to
time by PNC Bank and the Fund. Investment Company Capital Corp. 135 East
Baltimore Street, Baltimore, Maryland 21202, has been retained to act as
transfer and dividend disbursing agent, effective February 28, 1994. As
compensation for providing these services, the Fund pays ICC up to $15.00 per
account, plus reimbursement for out-of-pocket expenses incurred in connection
therewith. For such services for the fiscal year ended March 31, 1995, ICC
received fees of $81,416.
ICC also provides certain accounting services to the Fund. As
compensation for these services, ICC receives an annual fee, calculated daily
and paid monthly as shown below. These fees are the same as those paid to
Alex. Brown under the prior accounting services agreement.
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<PAGE>
Average Net Assets Incremental Fee
- ------------------ ---------------
0 - $10,000,000 $13,000 (fixed fee)
$10,000,000 - $20,000,000 .100%
$20,000,000 - $30,000,000 .080%
$30,000,000 - $40,000,000 .060%
$40,000,000 - $50,000,000 .050%
$50,000,000 - $60,000,000 .040%
$60,000,000 - $70,000,000 .030%
$70,000,000 - $100,000,000 .020%
$100,000,000 - $500,000,000 .015%
$500,000,000 - $1,000,000,000 .005%
over $1,000,000,000 .001%
In addition, the Fund will reimburse ICC for the following out of
pocket expenses incurred in connection with ICC's performance of its services
under the Master Services Agreement: express delivery service, independent
pricing and storage.
For the fiscal year ended March 31, 1995, ICC received accounting
fees of $62,331.
ICC also serves as the Fund's investment advisor.
12. INDEPENDENT ACCOUNTANTS
The annual financial statements of the Fund are audited by Coopers &
Lybrand L.L.P., whose report thereon appears elsewhere herein, and have been
included herein in reliance upon the report of such firm of accountants given
on their authority as experts in accounting and auditing. Coopers & Lybrand
L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103.
13. 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:
24
<PAGE>
n
P(1 + 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 one, five, and ten year periods or a shorter period dating
from the effectiveness of the Fund's registration statement. During its
first year of operation the Fund may, in lieu of annualizing its total
return, use an aggregate total return calculated in the same manner. In
calculating the ending redeemable value, the maximum sales load (for the Flag
Investors Value Builder Class A Shares 4.5% and for the Flag Investors Value
Builder Class B Shares, 4.0% for the one year period, 2.0% for the five year
period and no sales charge thereafter) is deducted from the initial $1,000
payment and all dividends and distributions by the Fund are assumed to have
been reinvested at net asset value as described in the prospectus on the
reinvestment dates during the period. "T" in the formula above is calculated
by finding the average annual compounded rate of return over the period that
would equate an assumed initial payment of $1,000 to the ending redeemable
value. Any sales loads that might in the future be made applicable at the
time to reinvestments would be included as would any recurring account
charges that might be imposed by the Fund.
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 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 Analytical Services, Inc. or CDA Investment
Technologies Inc., or with the performance of the Lehman 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 Jones 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 (as distinguished from the computation required by the SEC
where the $1,000 payment is reduced by sales charges before being invested in
Shares). 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.
Calculated according to the SEC rules, for the one-year period ended
March 31, 1995, the ending redeemable value of a hypothetical $1,000 payment
25
<PAGE>
for the Flag Investors Class A Shares was $1,056 resulting in a total return
for such shares equal to 5.59%. For the period from the effectiveness of the
Fund's registration statement on June 15, 1992 through its fiscal year ended
March 31, 1995, the ending redeemable value of a hypothetical $1,000 payment
for the Flag Investors Class A Shares was $1,232 resulting in an average
annual total return for such shares equal to 7.96%. For the period from
January 3, 1995 (commencement of offering of Class B Shares) through March
31, 1995, the ending redeemable value of a hypothetical $1,000 payment for
Flag Investors Class B Shares was $1,035 resulting in an aggregate total
return for such shares equal to 3.5%. For the one-year period ended March
31, 1995, the ending redeemable value of a hypothetical $1,000 payment for
the Flag Investors Class D Shares was $1,074 resulting in a total return for
such shares equal to 7.42%. For the period from November 9, 1992
(commencement of operations of the Class D Shares) through the Fund's fiscal
year ended March 31, 1995, the ending redeemable value of a hypothetical
$1,000 payment for the Flag Investors Class D Shares was $1,198 resulting in
an average annual total return for such shares equal to 7.83%.
Calculated according to the alternative computation, which assumes no
sales charges and reinvestment of all distributions, for the one-year period
ended March 31, 1995, the ending redeemable value of a hypothetical $10,000
investment in Class A Shares was $11,060 resulting in a total return equal to
10.6% For the period from the effectiveness of the Fund's registration
statement on June 15, 1992 through its fiscal year ended March 31, 1995, the
ending redeemable value of a hypothetical $10,000 investment in Class A
Shares was $12,969, resulting in an average annual total return equal to
9.7%.
Calculated according to the alternative computation, which assumes no
sales charge and reinvestment of all distributions, for the period from
January 3, 1995 (commencement of offering of Class B Shares) through March
31, 1995, the ending redeemable value of a hypothetical $10,000 investment in
Class B Shares was $10,780 resulting in an aggregate total return equal to
7.8%.
Calculated according to the alternative computation, which assumes no
sales charges and reinvestment of all distributions for the one-year period
ended March 31, 1995, the ending redeemable value of a hypothetical $10,000
investment in Class D Shares was $11,020 resulting in a total return equal to
10.2%. For the period from November 9, 1992 (commencement of operations of
the Class D Shares) through the Fund's fiscal year ended March 31, 1995 the
ending redeemable value of a hypothetical $10,000 investment in Class D
Shares was $12,837 resulting in an average annual total return equal to 9.0%.
The Flag Investors Class B Shares were not offered prior to the date
of this Statement of Additional Information.
14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 29, 1995 to Fund management's knowledge, the following
persons held beneficially or of record 5% or more of the Fund's outstanding
shares of any class:
T. Rowe Price, Trustee for Alex. Brown & Sons, Inc., Plan 100460,
Attn: Asset Recon, P.O. Box 17215, Baltimore, MD 21203, owned of record
10.72% of the Fund's outstanding Class A Shares and Alex. Brown & Sons
Incorporated, 135 E. Baltimore Street, Baltimore, MD 21202, owned of record
75.56% of the Fund's outstanding Class A Shares*.
26
<PAGE>
Alex. Brown & Sons Incorporated, FBO 201-34186-17, P.O. Box 1346,
Baltimore, MD 21203-1346, owned of record 5.69% of the Fund's outstanding
Class B Shares*.
Alex. Brown & Sons Incorporated, FBO 201-55957-19, P.O. Box 1346,
Baltimore, MD 21203-1346, owned of record 5.68% of the Fund's outstanding
Class B Shares*.
Alex. Brown & Sons Incorporated, FBO 252-09175-15, P.O. Box 1346,
Baltimore, MD 21203-1346, owned of record 5.61% of the Fund's outstanding
Class B Shares*.
Alex. Brown & Sons Incorporated, FBO 259-07066-16, P.O. Box 1346,
Baltimore, MD 21203-1346, owned of record 6.42% of the Fund's outstanding
Class B Shares*.
Alex. Brown & Sons Incorporated, 135 E. Baltimore Street, Baltimore,
MD 21202, owned of record an additional 74.56% of the Fund's outstanding
Class B Shares*.
Alex. Brown & Sons Incorporated, 135 E. Baltimore Street, Baltimore,
MD 21020, owned of record 87.93% of the Fund's outstanding Class D Shares.
As of such date, Directors and officers as a group owned less than 1%
of the Fund's total outstanding Class A Shares.
15. FINANCIAL STATEMENTS
See next page.
____________________
* Alex. Brown owned beneficially less than 1% of such shares.
27
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Statement of Net Assets March 31, 1995
Percent
No. of Value of Net
Shares Security (Note A) Assets
COMMON STOCK--64.7%
Banking--1.6%
90,000 KeyCorp $ 2,542,500 1.6%
Basic Industry--1.3%
35,500 FMC Corp.* 2,147,750 1.3
Capital Goods--1.2%
36,000 Eaton Corp. 1,953,000 1.2
Chemical--2.3%
30,000 Hercules, Inc. 1,398,750 0.9
28,000 Monsanto Co. 2,247,000 1.4
3,645,750 2.3
Consumer Durables/
Non-Durables--10.1%
109,100 Collins & Aikman Co.* 872,800 0.6
81,400 Consolidated Stores Corp.* 1,638,175 1.0
33,500 Eastman Kodak Co. 1,779,688 1.1
80,000 Eckerd Corp.* 2,350,000 1.5
12,000 J.C. Penney Company, Inc. 538,500 0.3
50,000 Liz Claiborne Inc. 887,500 0.6
37,200 Philip Morris Cos., Inc. 2,427,300 1.5
18,200 Ralston Purina Co. 869,050 0.5
113,000 RJR Nabisco Holdings Corp. 663,875 0.4
45,000 Tandy Corp. 2,148,750 1.4
70,000 Unifi, Inc. 1,890,000 1.2
16,065,638 10.1
Defense/Aerospace--4.1%
25,500 E-Systems Inc. 1,157,063 0.7
38,000 Lockheed Martin Corp. 2,009,250 1.3
60,000 McDonnell Douglas Corp. 3,345,000 2.1
6,511,313 4.1
Electric Utilities--1.5%
100,000 Unicom Corp. 2,375,000 1.5
Energy--2.0%
27,500 Burlington Resources Inc. 1,120,625 0.7
35,800 MAPCO Inc. 1,995,850 1.3
3,116,475 2.0
Entertainment--1.8%
20,000 Capital Cities/ABC Inc. 1,765,000 1.1
150,000 LodgeNet Entertainment
Corp.* 1,125,000 0.7
2,890,000 1.8
28
<PAGE>
Percent
No. of Value of Net
Shares Security (Note A) Assets
Financial Services--6.8%
83,500 American Express Co. $ 2,912,062 1.8%
87,500 Countrywide Credit
Industries 1,520,313 1.0
43,000 Federal Home Loan
Mortgage Corp. 2,601,500 1.6
52,500 MBNA Corp. 1,522,500 1.0
57,000 Travelers Corp. 2,201,625 1.4
10,758,000 6.8
Health Care--7.2%
20,000 Amgen, Inc.* 1,347,500 0.8
19,000 Bristol-Myers Squibb 1,197,000 0.8
41,000 Eli Lilly & Co. 2,998,125 1.9
57,000 Johnson & Johnson 3,391,500 2.1
60,000 Mallinckrodt Group 2,025,000 1.3
55,000 Novacare Inc.* 433,125 0.3
11,392,250 7.2
Housing--2.9%
60,000 Fleetwood Enterprises 1,417,500 0.9
55,000 Ryland Group Inc. 797,500 0.5
105,000 USG Corp.* 2,415,000 1.5
4,630,000 2.9
Insurance--7.1%
125,000 Alexander & Alexander
Services Inc. 2,953,125 1.8
130,500 Bankers Life Holding Co. 2,691,562 1.7
72,200 Conseco Inc. 2,878,975 1.8
40,000 EXEL Limited 1,765,000 1.1
40,000 Mid Ocean Ltd. 1,090,000 0.7
11,378,662 7.1
Multi-Industry--5.2%
22,500 ITT Corp. 2,309,063 1.5
16,700 Loews Corp. 1,649,125 1.0
43,900 Tenneco Inc. 2,068,787 1.3
32,000 United Technologies 2,212,000 1.4
8,238,975 5.2
29
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Statement of Net Assets (continued) March 31, 1995
No. of
Shares/ Percent
Par Value of Net
(000) Security (Note A) Assets
COMMON STOCK -- (concluded)
Real Estate -- 3.5%
45,200 Carr Realty Inc. $ 785,350 0.5%
60,200 General Growth Properties 1,234,100 0.8
184,136 Host Marriott Corp.* 2,186,615 1.4
25,000 Liberty Property Trust 484,375 0.3
35,000 National Health
Investors Inc. 883,750 0.5
5,574,190 3.5
Service Companies -- 1.3%
55,500 CUC International Inc.* 2,157,562 1.3
Technology -- 2.0%
38,000 International Business
Machines Corp. 3,111,250 2.0
Telecommunications -- 1.6%
69,000 MCI Communications 1,423,125 0.9
42,000 Telefonos de Mexico SA ADS 1,197,000 0.7
2,620,125 1.6
Transportation -- 1.2%
33,200 Conrail Inc. 1,863,350 1.2
Total Common Stocks
(Cost $87,005,875) 102,971,790 64.7
Convertible Preferred
Stock -- 4.5%
50,000 American Express Co.,
$2.30 DECS 2,243,750 1.4
61,000 Conseco Inc.,
$3.25 Cvt Pfd 2,440,000 1.5
23,000 Delta Air Lines Inc.,
$3.50 Cvt Pfd 1,224,750 0.8
24,200 Rouse Co., Series A
$3.25 Cvt Pfd 1,234,200 0.8
Total Convertible
Preferred Stock
(Cost $7,246,262) 7,142,700 4.5
Convertible Bonds -- 2.1%
$2,000 Richardson Electronics,
Cvt Deb, 7.25%,
12/15/06 1,500,000 1.0
30
<PAGE>
Percent
Par Value of Net
(000) Security (Note A) Assets
Convertible Bonds -- (continued)
$2,000 Sizeler Property Investors,
Cvt Deb, 8.00%,
7/15/03 $1,757,500 1.1%
Total Convertible Bonds
(Cost $3,595,714) 3,257,500 2.1
Corporate Bonds -- 25.1%
1,000 American Life Holding Co.
Sr Sub Nt, 11.25%,
9/15/04 1,011,250 0.6
2,000 Arcadian Partners LP, Nt
10.75%, 5/1/05 1,975,000 1.2
2,000 Bankers Life Holding
Corp., Nt, 13.00%,
11/1/02 2,280,000 1.4
1,000 Caesar's World
8.875%, 8/15/02 1,016,250 0.6
1,000 Chattem Inc., Sr Sub Deb,
w/warrants, 12.75%,
6/15/04 968,000 0.6
3,000 Conseco Inc., Nt,
8.125%, 2/15/03 2,550,000 1.6
700 CSX Corp., Nt,
7.00%, 9/15/02 677,250 0.4
575 Dillard Dept. Stores, Nt,
7.15%, 9/1/02 554,875 0.4
1,000 Eckerd Corp., Nt,
9.25%, 2/15/04 1,012,500 0.6
300 Exxon Capital Corp., Nt,
6.50%, 7/15/99 291,000 0.2
2,000 FMC Corp., Nt,
8.75%, 4/1/99 2,045,000 1.3
1,000 Fund American Enterprise,
Nt, 7.75%, 2/1/03 971,250 0.6
Host Marriott Corp.:
233 Nt, 10.50%, 5/1/06 234,748 0.2
2,058 Nt, 10.375%, 6/15/11 2,060,572 1.3
2,000 John Q. Hammons Hotels LP,
Nt, 8.875%, 2/15/04 1,872,500 1.2
2,000 Jordan Industries, Nt,
10.375%, 8/1/03 1,860,000 1.2
1,285 Markel Corp., Nt,
7.25%, 11/1/03 1,156,500 0.7
31
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Statement of Net Assets (concluded) March 31, 1995
Percent
Par Value of Net
(000) Security (Note A) Assets
Corporate Bonds -- (continued)
$1,100 Masco Corp. Nt,
6.625%, 9/15/99 $1,062,875 0.7%
MCI Communications:
2,000 Nt, 6.25%, 3/23/99 1,917,500 1.2
500 Nt, 7.50%, 8/20/04 491,250 0.3
500 New England Telephone &
Telegraph, Nt, 6.15%,
9/1/99 477,500 0.3
1,000 Noble Drilling Company,
Nt, 9.25%, 10/1/03 980,000 0.6
500 PepsiCo Inc., Nt,
6.25%, 9/1/99 479,375 0.3
700 Pet Incorporated, Nt,
5.75%, 7/1/98 665,000 0.4
500 Petroleum Heat & Power, Nt,
12.25%, 2/1/05 517,500 0.3
700 Riverwood International
Nt, 10.75%, 6/15/00 728,000 0.5
2,000 RJR Nabisco Holdings Corp.,
Nt, 7.625%, 9/15/03 1,852,500 1.2
1,500 Salomon Inc., Nt,
7.125%, 8/1/99 1,423,125 0.9
1,000 Tektronix Inc., Nt,
7.50%, 8/1/03 903,750 0.6
1,729 Teledyne Inc., Series C,
Deb, 10.00%, 6/1/04 1,746,290 1.1
1,000 Tenneco Inc., Nt,
7.875%, 10/1/02 997,500 0.6
1,000 Travelers Corp., Nt,
6.125%, 6/15/00 930,000 0.6
1,000 Union Pacific, Nt,
6.25%, 3/15/99 952,500 0.6
300 Virginia Electric & Power,
1st Mtg., 7.375%, 7/1/02 295,875 0.2
500 Wal-Mart Stores, Nt,
5.50%, 9/15/97 483,125 0.3
500 Xerox Corp., Nt,
7.15%, 8/1/04 475,625 0.3
Total Corporate Bonds
(Cost $40,902,095) 39,915,985 25.1
32
<PAGE>
Percent
Par Value of Net
(000) Security (Note A) Assets
U.S. GOVERNMENT SECURITIES -- 0.6%
U.S. Treasury Notes
$1,000 4.25%, 5/15/96
(Cost $1,000,701) $ 975,750 0.6%
Repurchase agreement -- 1.9%
3,012 Goldman Sachs & Co., 6.10%,
Dated 3/31/95, to be
repurchased on 4/3/95,
collateralized by U.S.
Treasury Bonds with a
market value of
$3,072,602
(Cost $3,012,000) 3,012,000 1.9
Total Investment In
Securities
(Cost $142,762,647)** 157,275,725 98.9
Other Assets in Excess
of Liabilities, Net 1,768,794 1.1
Net Assets $159,044,519 100.0%
Net Asset Value:
Class A Share
($146,986,087 (divided
by) 12,229,210
shares outstanding) $12.02(1)
Class B Share
($341,153 (divided
by) 28,411
shares outstanding) $12.01(2)
Class D Share
($11,717,279 (divided
by) 975,482
shares outstanding) $12.01(3)
Maximum Offering
Price Per:
Class A Share
($12.02 (divided
by) .955) $12.59
Class B Share $12.01
* Non-income producing security.
** Also aggregate cost for federal tax purposes.
(1) Redemption value is $12.02.
(2) Redemption value is $11.53 following 4.00% contingent deferred
sales charge.
(3) Redemption value is $11.89 following 1.00% contingent deferred
sales charge.
See accompanying Notes to Financial Statements.
33
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Statement of Operations For the Year Ended March 31, 1995
Investment Income (Note a):
Interest $4,175,130
Dividends 2,405,975
Less: Foreign taxes withheld (2,158)
Total income 6,578,947
Expenses:
Investment advisory fee (Note B) 1,315,992
Distribution fees (Note B) 413,301
Transfer agent fees (Note B) 81,416
Accounting fee (Note B) 62,331
Legal 57,216
Printing and postage 46,857
Custodian fees 41,018
Registration fees 38,435
Audit 24,899
Miscellaneous 11,149
Organizational expense (Note A) 10,231
Directors' fees 9,001
Insurance 6,449
Total expenses 2,118,295
Less: Fees waived (Note B) (67,326)
Net expenses 2,050,969
Net investment income 4,527,978
Realized and Unrealized Gain On Investments:
Net realized gain from security transactions 295,501
Change in unrealized appreciation/(depreciation) of
investments 10,180,720
Net gain on investments 10,476,221
Net increase in net assets resulting from operations $15,004,199
See accompanying Notes to Financial Statements.
34
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Statement of Changes in Net Assets
For the Year For the Year
Ended Ended
March 31, 1995 March 31, 1994
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $4,527,978 $3,601,566
Net realized gain from security transactions 295,501 805,267
Change in unrealized appreciation/(depreciation)
of investments 10,180,720 (1,974,360)
Net increase in net assets resulting from
operations 15,004,199 2,432,473
Distributions to Shareholders From:
Net investment income:
Class A shares (4,153,376) (2,808,222)
Class B shares -- --
Class D shares (313,209) (209,680)
Net realized short-term gains:
Class A shares -- (478,263)
Class B shares -- --
Class D shares -- (44,852)
Net realized long-term gains:
Class A shares (183,928) --
Class B shares -- --
Class D shares (15,454) --
Total distributions (4,665,967) (3,541,017)
Capital Share Transactions (NOTE C):
Proceeds from sale of shares 24,574,387 60,869,513
Value of shares issued in reinvestment
of dividends 4,064,365 3,131,587
Cost of shares repurchased (22,079,629) (10,565,786)
Increase in net assets derived from capital
share transactions 6,559,123 53,435,314
Total increase in net assets 16,897,355 52,326,770
NET ASSETS:
Beginning of year 142,147,164 89,820,394
End of year $159,044,519 $142,147,164
See accompanying Notes to Financial Statements.
35
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class D Shares
For the For the For the
period period period
June 15, Jan. 3, Nov. 9,
1992* 1995* 1992*
For the year through through For the year through
ended March 31, March 31, March 31, ended March 31, March 31,
1995 1994 1993 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period $11.23 $11.25 $10.00 $11.14 $11.22 $11.24 $10.45
Income from Investment Operations:
Net investment income 0.35 0.40 0.18 0.08 0.31 0.36 0.14
Net realized and unrealized gain
on investments 0.80 (0.04) 1.18 0.79 0.80 (0.04) 0.74
Total from Investment Operations 1.15 0.36 1.36 0.87 1.11 0.32 0.88
Less Distributions:
Dividends from net investment income
and short-term gains (0.35) (0.38) (0.11) -- (0.31) (0.34) (0.09)
Distributions from net realized
long-term gains (0.01) -- -- -- (0.01) -- --
Total distributions (0.36) (0.38) (0.11) -- (0.32) (0.34) (0.09)
Net asset value at end of period $12.02 $11.23 $11.25 $12.01 $12.01 $11.22 $11.24
Total Return 10.57% 3.14% 13.73% 7.81% 10.18% 2.78% 9.00%
Ratios to Average Net Assets:
Expenses 1.35%(2) 1.35%(2) 1.35%(1,2) 2.10%(1,4) 1.70%(6) 1.70%(6) 1.70%(1,6)
Net investment income 3.07%(3) 3.14%(3) 2.88%(1,3) 2.94%(1,5) 2.72%(7) 2.79%(7) 2.83%(1,7)
Supplemental Data:
Net assets at end of period (000) $146,986 $131,097 $83,535 $341 $11,717 $11,051 $6,285
Portfolio turnover rate 18% 8% 8% 18% 18% 8% 8%
</TABLE>
*Commencement of Operations
(1) Annualized
(2) Without the waiver of advisory fees (Note B), the ratio of expenses to
average net assets would have been 1.40%, 1.38% and 1.70% (annualized)
for Class A Shares for the years ended March 31, 1995, 1994 and for the
period ended March 31, 1993, respectively.
(3) Without the waiver of advisory fees (Note B), the ratio of net
investment income to average net assets would have been 3.02%, 3.11% and
2.53% (annualized) for Class A Shares for the years ended March 31,
1995, 1994, and for the period ended March 31, 1993, respectively.
(4) Without the waiver of advisory fees (Note B), the ratio of expenses to
average net assets would have been 2.17% (annualized) for Class B Shares
for the period ended March 31, 1995.
(5) Without the waiver of advisory fees (Note B), the ratio of net
investment income to average net assets would have been 2.87%
(annualized) for Class B Shares for the period ended March 31, 1995.
(6) Without the waiver of advisory fees (Note B), the ratio of expenses to
average net assets would have been 1.74%, 1.73% and 1.93% (annualized)
for Class D Shares for the years ended March 31, 1995, 1994 and for the
period ended March 31, 1993, respectively.
(7) Without the waiver of advisory fees (Note B), the ratio of net
investment income to average net assets would have been 2.68%, 2.76% and
2.60% (annualized) for Class D Shares for the years ended March 31,
1995, 1994 and for the period ended March 31, 1993, respectively.
See accompanying Notes to Financial Statements.
36
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Notes to Financial Statements
A. Significant Accounting Policies - Flag Investors Value Builder Fund,
Inc. ("the Fund") was organized as a Maryland Corporation on March 5,
1992 and commenced operations June 15, 1992. The Fund is registered
under the Investment Company Act of 1940 as a diversified, open-end
Management Investment Company seeking long-term growth of capital and
current income through diversified investments in a professionally
managed balanced portfolio of equity and debt securities. On November 9,
1992, the Fund began offering Class D shares (formerly Class B shares).
The Class A and Class D Shares each have different sales loads and
distribution fees. On November 18, 1994, Class D Shares were no longer
available for sale, however, existing shareholders may reinvest their
dividends. On January 3, 1995, the Fund began offering Class B Shares.
Class B Shares have no initial sales charge but are subject to a
different distribution fee and a contingent deferred sales charge.
Significant accounting policies are as follows:
Security Valuation - Portfolio securities which are listed on a National
Securities Exchange are valued on the basis of their last price or in
the absence of recorded sales, at the average of readily available
closing bid and asked prices. Unlisted securities held by the Fund are
valued at the average of the quoted bid and asked prices in the
over-the-counter market. Short-term obligations with maturities of 60
days or less are valued at amortized cost.
Repurchase Agreements - The Fund may agree to purchase money market
instruments subject to the seller's agreement to repurchase them at an
agreed upon date and price. The seller, under a repurchase agreement,
will be required on a daily basis to maintain as collateral the value of
the securities subject to the agreement at not less than the repurchase
price. The agreement is conditioned upon the collateral being deposited
under the Federal Reserve book entry system.
Federal Income Taxes - No provision is made for federal income taxes as
it is the Fund's intention to continue to qualify as a regulated
investment company and to continue to make requisite distributions to
the shareholders which will be sufficient to relieve it from all or
substantially all federal income and excise taxes. The Fund's policy is
to distribute to shareholders substantially all of its taxable net
investment income and net realized capital gains.
Other - Security transactions are accounted for on the trade date and
the cost of investments sold or redeemed is determined by use of the
specific identification method for both financial reporting and income
tax purposes. Interest income is recorded on an accrual basis and
includes, when applicable, the pro rata amortization of premiums and
accretion of discounts. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Costs incurred by the
Fund in connection with its organization and the initial public offering
of shares have been deferred and are being amortized on the
straight-line method over a five-year period beginning on the date on
which the Fund commenced its investment activities.
B. Investment Advisory Fees, Transactions with Affiliates and Other
Fees - Investment Company Capital Corp. ("ICC"), a subsidiary of Alex.
Brown & Sons Incorporated ("Alex. Brown"), is the Fund's investment
advisor and Alex. Brown Investment Management ("ABIM") is the Fund's
subadvisor. As compensation for its advisory services, ICC receives from
the Fund an annual fee, calculated daily and paid monthly, at the annual
rate of 1.00% of the first $50 million of the Fund's average daily net
assets; .85% of the next $50 million of the Fund's average daily net
assets; .80% of the next $100 million of the Fund's average daily net
assets; and .70% of the Fund's average daily net assets in excess of
$200 million. As compensation for its subadvisory services, ABIM
37
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Notes to Financial Statements (continued)
receives a fee from ICC, payable from its advisory fee, calculated daily
and paid monthly, at an annual rate of .75% of the first $50 million of
the Fund's average daily net assets; .60% of the next $150 million of the
Fund's average daily net assets; and .50% of the Fund's average daily net
assets in excess of $200 million.
ICC has agreed to reduce its aggregate fees so that ordinary expenses of
the Fund for any fiscal year do not exceed 1.35% of the average daily
net assets of Class A Shares, 2.10% of the average daily net assets of
Class B Shares, and 1.70% of the average daily net assets of Class D
Shares. For the year ended March 31, 1995, ICC voluntarily waived
$67,326 in fees.
As compensation for its accounting services, ICC receives from the Fund
an annual fee, calculated daily and paid monthly, from the Fund's
average daily net assets. ICC received $62,331 for accounting services
for the year ended March 31, 1995.
As compensation for its transfer agent services, ICC receives from the
Fund a per account fee, calculated and paid monthly. ICC received
$81,416 for transfer agent services for the year ended March 31, 1995.
As compensation for providing distribution services, Alex. Brown
receives from the Fund an annual fee, calculated daily and paid monthly,
at an annual rate equal to .25% of the average daily net assets of Class
A shares, 1.00% (includes .25% shareholder servicing fee) of the average
daily net assets of Class B shares, and .60% of the average daily net
assets of Class D shares. For the year ended March 31, 1995,
distribution fees aggregated $413,301 of which $342,916, $406, and
$69,979 were attributable to Flag Investors Class A Shares, Flag
Investors Class B Shares and Flag Investors Class D Shares,
respectively. Alex. Brown received no commissions from the Fund for the
year ended March 31, 1995.
C. Capital Share Transactions - The Fund is authorized to issue up
to 30 million shares of $.001 per value capital stock. Transactions of
the Fund were as follows:
Class A Shares
For the year For the year
ended ended
March 31, March 31,
1995 1994
Shares sold 2,019,949 4,876,599
Shares issued to share-
holders on reinvest-
ment of dividends 340,078 244,101
Shares redeemed (1,802,800) (873,391)
Net increase in shares
outstanding 557,227 4,247,309
Proceeds from sale
of shares $23,014,817 $55,729,506
Reinvested dividends 3,755,243 2,793,058
Net asset value of
shares redeemed (20,417,857) (9,925,243)
Net increase from
capital share
transactions $ 6,352,203 $48,597,321
Class B Shares
For the
Period ended
January 3, 1995*
to
March 31, 1995
Shares sold 28,411
Shares issued to share-
holders on reinvest-
ment of dividends --
Shares redeemed --
Net increase in shares
outstanding 28,411
Proceeds from sale
of shares $327,879
Reinvested dividends --
Net asset value of
shares redeemed --
Net increase from
capital share
transactions $327,879
*Commencement of operations.
38
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
Notes to Financial Statements
(concluded)
Class D Shares
For the year For the year
ended ended
March 31, March 31,
1995 1994
Shares sold 110,073 451,081
Shares issued to share-
holders on reinvest-
ment of dividends 28,011 29,490
Shares redeemed (147,152) (55,252)
Net increase/
(decrease) in shares
outstanding (9,068) 425,319
Proceeds from sale
of shares $1,231,691 $5,140,007
Reinvested dividends 309,122 338,529
Net asset value of
shares redeemed (1,661,772) (640,543)
Net increase/
(decrease) from
capital share
transactions $ (120,959) $4,837,993
D. Investment Transactions - Purchases and sales of investment securities,
other than short-term and U.S. government obligations, aggregated $40,334,923
and $26,406,450, respectively, for the year ended March 31, 1995. Sales of
U.S. government obligations aggregated $5,146,875, and there were no purchases
of U.S. government obligations for the year.
At March 31, 1995, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost was $20,030,135 and
aggregate gross unrealized depreciation of all securities in which there is an
excess in tax cost over value was $5,517,057.
E. Net Assets - At March 31, 1995, net assets consisted of:
Paid-in-Capital:
Flag Investors Class A Shares $131,897,117
Flag Investors Class B Shares 327,861
Flag Investors Class D Shares 10,698,030
Undistributed net
investment income 1,236,573
Accumulated net realized gain
from security transactions 371,860
Unrealized appreciation of
investments 14,513,078
$159,044,519
Report of Independent Accountants
To the Shareholders and Directors of
Flag Investors Value Builder Fund, Inc.:
We have audited the accompanying statement of net assets of Flag Investors
Value Builder Fund, Inc. as of March 31, 1995, and the related statements of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights
for each of the respective periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of March 31, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Flag Investors Value Builder Fund, Inc. as of March 31, 1995, the results of
its operations for the year then ended, the changes in its net assets and the
financial highlights for each of the respective periods presented, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P
Baltimore, Maryland
May 1, 1995
39
<PAGE>
APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
Standard & Poor's Commercial Paper Ratings
S & P - Commercial paper rated A-1+ or A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed. The issuer has access to at least two channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management is unquestioned. Relative strength or
weakness of the above factors determines whether the issuer's commercial
paper is rated A-1, A-2 or A-3.
Moody's Commercial Paper Ratings
Moody's - The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationship which exists with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated P-1, P-2 or P-3.
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
differs from the highest 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.
A-1
<PAGE>
BB, B, CCC, and CC and C - Regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
D - In default. The D rating category is used when interest payments
or principal payments 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 if debt service payments are jeopardized.
Moody's Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." 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 - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or the
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than the Aaa securities.
A - Bonds which are rated 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 which suggest a susceptibility to impairment some
time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are 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 - Bonds which are rated Ba are 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 characterize bonds in this class.
A-2
<PAGE>
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-3
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement.
(a) Financial statements:
(1) Included in Parts A and B of the Registration Statement:
-- Financial Highlights for the periods ended March 31, 1993,
March 31, 1994 and March 31, 1995
-- Statement of Net Assets at March 31, 1995
-- Statement of Operations for the fiscal year ended March 31,
1995
-- Statement of Changes in Net Assets for the periods ended
March 31, 1994 and March 31, 1995
-- Notes to Financial Statements
-- Report of Independent Accountants
(2) All required financial statements are included in Parts A
and B hereof. All other financial statements and schedules
are inapplicable.
(b) Exhibits:
(1) (a) Articles of Incorporation and Certificate of
Correction;(1)
(b) Amended Articles of Incorporation;(1)
(c) Articles Supplementary dated December 27, 1993;(1)
(d) Articles Supplementary;(1)
(2) By-Laws, as amended through June 12, 1992;(1)
(3) None;
(4) (a) Specimen Security for Class A Shares;(2)
(b) Specimen Security for Class D Shares;(2)
(c) Specimen Security for Class B Shares;(2)
<PAGE>
(5) (a) Investment Advisory Agreement between Registrant and Flag
Investors Management Corp (now known as Investment Company
Capital Corp.);(1)
(b) Sub-Advisory Agreement among Registrant, Flag Investors
Management Corp. (now known as Investment Company Capital
Corp.) and Alex. Brown Investment Management;(1)
(6) (a) Distribution Agreement between Registrant and Alex. Brown
& Sons Incorporated;(1)
(b) Form of Sub-Distribution Agreement between Alex. Brown &
Sons Incorporated and Participating Broker-Dealers;(1)
(c) Form of Shareholder Servicing Agreement between Registrant
and Shareholder Servicing Agents;(1)
(d) Distribution Agreement between Registrant and Alex. Brown
& Sons Incorporated with respect to Class D Shares;(1)
(e) Distribution Agreement between Registrant and Alex. Brown
& Sons Incorporated with respect to Class B Shares;(1)
(7) None;
(8) Custodian Agreement between Registrant and Provident National
Bank (now known as PNC Bank);(1)
(9) Form of Master Services Agreement (including Accounting and
Transfer Agency Services Appendices) between Registrant and
Investment Company Capital Corp.;(1)
(10) Opinion of Counsel;(1)
(11) Consent of Coopers & Lybrand L.L.P.;(1)
(12) None;
(13) Subscription Agreement re: initial $100,000 capital;(1)
(14) None;
(15) (a) Distribution Plan;(1)
(b) Distribution Plan with respect to Flag Investors
Class D Shares(1);
(c) Distribution Plan with respect to Flag Investors
Class B Shares;(1)
-2-
<PAGE>
(16) Schedule of Computation of Performance Quotations;(1)
(24) Powers of Attorney;(1)
(27) Financial Data Schedule.(1)
- -------------
(1) Filed herewith.
(2) Incorporated by reference to Post-Effective Amendment No. 4 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-46279), filed with
the Securities and Exchange Commission on October 28, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders of
each class of securities of the Registrant.
The following information is given as of June 29, 1995
Title of Class Number of Record Holders
-------------- ------------------------
Shares of Capital Stock
Class A 8,843
Class B 63
Class D 1,325
Item 27. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, included as Exhibit 1 to this Registration Statement and
incorporated herein by reference, provide as follows:
-3-
<PAGE>
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.
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 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
-4-
<PAGE>
During the last 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.
Item 29. Principal Underwriters
(a) Alex. Brown & Sons Incorporated acts as distributor for Alex. Brown
Cash Reserve Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors International Fund, Inc., Flag Investors Emerging Growth Fund, Inc.,
Flag Investors Total Return U.S. Treasury Fund Shares, Flag Investors Managed
Municipal Fund Shares, Flag Investors Intermediate-Term Income Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag Investors Maryland Intermediate Tax
Free Income Fund, Inc., Flag Investors Real Estate Securities Fund, Inc. and
Flag Investors Equity Partners Fund, Inc., all registered open-end management
investment companies.
(b)
Position and
Offices Position and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
------------------ -------------- -------------
Alvin B. Krongard Chief Executive None
Officer, Chairman
and Director
Mayo A. Shattuck III President, Director None
Beverly L. Wright Chief Financial Officer None
and Treasurer
Robert F. Price Secretary and None
General Counsel
- ----------------
* 135 East Baltimore Street
Baltimore, MD 21202
(c) Not applicable.
Item 30. Location of Accounts and Records
With respect to 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] promulgated thereunder, furnish the names and
address of each person maintaining physical possession of each such account,
book or other document
Investment Company Capital Corp., Registrant's investment advisor,
transfer agent and dividend disbursing agent, 135 E. Baltimore Street,
Baltimore, Maryland 21202, maintains physical possession of each such account,
book or other document of the Fund, except for
-5-
<PAGE>
those maintained by the Registrant's sub-advisor ABIM, 135 E. Baltimore Street,
Baltimore, MD 21202, by the Registrant's custodian, PNC Bank, Airport Business
Park, 200 Stevens Drive, Lester, Pennsylvania 19113.
Item 31. 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 8.
Item 32. Undertakings
Furnish the following undertakings in substantially the following form
in all initial Registration Statements filed under the 1933 Act:
(a) Not Applicable.
(b) Not Applicable
(c) A copy of the Registrant's latest Annual Report to Shareholders will
be furnished upon request and without charge, by contacting the Registrant at
(800) 767-3524.
-6-
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 5 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to the Registration Statement to be signed on
its behalf by the undersigned thereto duly authorized in the City of Baltimore,
in the State of Maryland on the 26th day of July, 1995.
FLAG INVESTORS VALUE BUILDER FUND, INC.
By: /s/ J. Dorsey Brown, III
-------------------------
J. Dorsey Brown, III, 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 and on the date indicated.
*/s/ Truman T. Semans Director July 26, 1995
- -------------------------- -------------
Truman T. Semans Date
*/s/ W. James Price Director July 26, 1995
- -------------------------- -------------
W. James Price Date
*/s/ Richard T. Hale Director July 26, 1995
- -------------------------- -------------
Richard T. Hale Date
/s/ James J. Cunnane Director July 26, 1995
- -------------------------- -------------
James J. Cunnane Date
*/s/ N. Bruce Hannay Director July 26, 1995
- -------------------------- -------------
N. Bruce Hannay Date
*/s/ John F. Kroeger Director July 26, 1995
- -------------------------- -------------
John F. Kroeger Date
*/s/ Louis E. Levy Director July 26, 1995
- -------------------------- -------------
Louis E. Levy Date
*/s/ Eugene J. McDonald Director July 26, 1995
- -------------------------- -------------
Eugene J. McDonald Date
*/s/ Harry Woolf Director July 26, 1995
- -------------------------- -------------
Harry Woolf Date
/s/ J. Dorsey Brown, III President July 26, 1995
- -------------------------- -------------
J. Dorsey Brown, III Date
*/s/ Diana M. Ellis Chief Financial July 26, 1995
- -------------------------- and Accounting -------------
Diana M. Ellis Officer Date
*By: /s/ Brian C. Nelson
---------------------
Brian C. Nelson
Attorney-In-Fact
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EDGAR
Exhibit Page
Number Document Number
--------------------------------------------------------------------------
<S> <C> <C>
Ex-99.B(1) (a) Registrant's Articles of Incorporation and Certificate of Correction, filed
herewith.
Ex-99.B(1) (b) Registrant's Amended Articles of Incorporation, filed herewith.
Ex-99.B(1) (c) Registrant's Articles Supplementary dated December 27, 1993, filed herewith.
Ex-99.B(1) (d) Registrant's Articles Supplementary, filed herewith.
Ex-99.B(2) Registrant's By-Laws, as amended through June 12, 1992, filed herewith.
(4) (a) Registrant's Specimen Security for Class A Shares is incorporated herein by
reference to Post-Effective Amendment No. 4 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-46279), filed with the Securities
and Exchange Commission on October 28, 1994.
(b) Specimen Security for Class D Shares is incorporated herein by reference to
Post-Effective Amendment No. 4 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-46279), filed with the Securities and
Exchange Commission on October 28, 1994.
(c) Specimen Security for Class B Shares is incorporated herein by reference to
Post-Effective Amendment No. 4 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-46279), filed with the Securities and
Exchange Commission on October 28, 1994.
Ex-99.B(5) (a) Investment Advisory Agreement between Registrant and Flag Investors
Management Corp. (now known as Investment Company Capital Corp.), filed herewith.
Ex-99.B(5) (b) Sub-Advisory Agreement between Registrant, Flag Investors Management Corp.
(now known as Investment Company Capital Corp.) and Alex. Brown Investment
Management, filed herewith.
Ex-99.B(6) (a) Distribution Agreement between Registrant and Alex. Brown & Sons Incorporated,
filed herewith.
Ex-99.B(6) (b) Registrant's Form of Sub-Distribution Agreement between Alex. Brown & Sons
Incorporated and Participating Broker-Dealers, filed herewith.
Ex-99.B(6) (c) Registrant's Form of Shareholder Servicing Agreement between Registrant and
Shareholder Servicing Agents, filed herewith.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Ex-99.B(6) (d) Distribution Agreement between Registrant and Alex. Brown & Sons Incorporated
with respect to Class D Shares, filed herewith.
Ex-99.B(6) (e) Form of Distribution Agreement between Registrant and Alex. Brown & Sons
Incorporated with respect to Class B Shares, filed herewith.
Ex-99.B(8) Custodian Agreement between Registrant and PNC, filed herewith.
Ex-99.B(9) Form of Master Services Agreement (including Accounting and Transfer Agency Services
Appendices) between Registrant and Investment Company Capital Corp., filed herewith.
Ex-99.B(10) Opinion of Counsel, filed herewith.
Ex-99.B(11) Consent of Coopers & Lybrand L.L.P., filed herewith.
Ex-99.B(13) Subscription Agreement with respect to the initial capitalization of the Fund, filed
herewith.
Ex-99.B(15) (a) Registrant's Distribution Plan, filed herewith.
Ex-99.B(15) (b) Registrant's Distribution Plan with respect to Flag Investors Class D Shares,
filed herewith.
Ex-99.B(15) (c) Registrant's Form of Distribution Plan with respect to Flag Investors Class B
Shares, filed herewith.
Ex-99.B(16) Schedule of Computation of Performance Quotations, filed herewith.
Ex-99.B(24) Powers of Attorney, filed herewith.
Ex-(27) Financial Data Schedule, filed herewith.
</TABLE>
<PAGE>
EX-99.B(1)(a)
ARTICLES OF INCORPORATION
OF
FLAG INVESTORS BALANCED FUND, INC.
ARTICLE I
THE UNDERSIGNED, Edward J. Veilleux, whose post office address is
135 East Baltimore Street, Baltimore, Maryland 21202, being at least eighteen
years of age, does hereby act as an incorporator, under and by virtue of the
General Laws of the State of Maryland authorizing the formation of
corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is Flag Investors Balanced Fund, Inc.
ARTICLE III
The purpose for which the Corporation is formed is to act as an
open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act").
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and
other investments including assets in cash.
(2) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
shareholders of the Corporation) shares of its capital stock, in any manner
<PAGE>
and to the extent now or hereafter permitted by law and by the Charter of the
Corporation.
(4) To enter into a written contract or contracts with any person
or persons providing for a delegation of the management of all or part of
this Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors of the Corporation. Any such contract or
contracts may be made with any person even though such person may be an
officer, other employee, director or shareholder of this Corporation or a
corporation, partnership, trust or association in which any such officer,
other employee, director or shareholder may be interested.
(5) To enter into a written contract or contracts appointing one
or more underwriters, distributors or agents for the sale of the shares of
the Corporation on such terms and conditions as the Board of Directors of the
Corporation may deem reasonable and proper, and to allow such person or
persons a commission on the sale of such shares. Any such contract or
contracts may be made with any person even though such person may be an
officer, other employee, director or shareholder of this Corporation or a
corporation, partnership, trust or association in which any such officer,
other employee, director or shareholder may be interested.
(6) To enter into a written contract or contracts employing such
custodian or custodians for the safekeeping of the property of the
Corporation and of its shares, such dividend disbursing agent or agents, and
such transfer agent or agents and registrar or registrars for its shares, and
such agent or agents for accounting and other administrative services on such
terms and conditions as the Board of Directors of the Corporation may deem
reasonable and proper for the conduct of the affairs of the Corporation, and
to pay the fees and disbursements of such custodians, dividend disbursing
agents, transfer agents, registrars and accounting and administrative
services agents out of the income and/or any other property of the
Corporation. Notwithstanding any other provisions of the Charter or the By-
Laws of the Corporation, the Board of Directors of the Corporation may cause
any or all of the property of the Corporation to be transferred to, or to be
acquired and held in the name of, a custodian so appointed or any nominee or
nominees of this Corporation or nominee or nominees of such custodian
satisfactory to the Board of Directors of the Corporation.
(7) To employ the same person, partnership (general or limited),
association, trust or corporation in any multiple capacity under Sections
(4), (5) and (6) of this Article, who may receive compensation from the
Corporation in as many capacities in which such person, partnership (general
<PAGE>
or limited), association, trust or corporation shall serve the Corporation.
(8) To do any and all such further acts or things and to exercise
any and all such further powers or rights as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment,
carrying out or attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of
the powers, rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in force, and
the enumeration of the foregoing shall not be deemed to exclude any powers,
rights or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation
in the State of Maryland is c/o Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland 21202. The name of the resident agent
of the Corporation in this State is Edward J. Veilleux, a citizen of this
State, who resides there, and the post office address of the resident agent
is 135 East Baltimore Street, Baltimore, Maryland 21202.
ARTICLE VI
Section 1. The total number of shares of capital stock which the
Corporation shall have the authority to issue is thirty million shares, of
the par value of 1 mil ($.001) per share and of the aggregate par value of
thirty thousand dollars ($30,000), all of which shares are designated Common
Stock. Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end investment company under the 1940 Act, the Board of
Directors of the Corporation shall have the power and authority, without the
approval of the holders of any outstanding shares, to increase or decrease
the number of shares of capital stock, or the number of shares of capital
stock of any class or series, that the Corporation has authority to issue.
Section 2. Any fractional share shall carry proportionately all
the rights of a whole share, excepting any right to receive a certificate
evidencing such fractional share, but including, without limitation, the
right to vote and the right to receive dividends.
<PAGE>
Section 3. All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of the Charter and the By-
Laws of the Corporation. All shares issued pursuant to the Charter of the
Corporation for which the price or consideration fixed thereon shall have
been paid shall be deemed to be fully paid and non-assessable.
Section 4. The Board of Directors of the Corporation shall have
authority to classify and reclassify any authorized but unissued shares of
capital stock from time to time by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of the capital stock; provided that the Board of
Directors of the Corporation shall not classify or reclassify any of such
shares into any class or series of stock which is prior to any class or
series of capital stock then outstanding with respect to rights upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the general assets of, the Corporation, except that there may
be variations so fixed and determined among different series and classes as
to investment objectives, purchase price, right of redemption, special rights
as to dividends, and in liquidation, with respect to assets belonging to a
particular series or class, voting powers and conversion rights. Subject to
the provisions of Section 7 of this Article VI and applicable law, the power
of the Board of Directors of the Corporation to classify or reclassify any of
the shares of capital stock shall include, without limitation, authority to
classify or reclassify any such stock into a class or classes of capital
stock and to divide and classify shares of any class into one or more series
of such class, by determining, fixing or altering one or more of the
following:
(A) The distinctive designation of such class or series and
the number of shares to constitute such class or series; provided that,
unless otherwise prohibited by the terms of such class or series, the
number of shares of any class or series may be decreased by the Board of
Directors of the Corporation in connection with any classification or
reclassification of unissued shares and the number of shares of such
class or series may be increased by the Board of Directors of the
Corporation in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased or otherwise acquired by the Corporation shall
remain part of the authorized capital stock and be subject to
classification and reclassification as provided herein.
<PAGE>
(B) Whether or not and, if so, the rates, amounts and times
at which, and the conditions under which, dividends shall be payable on
shares of such class or series.
(C) Whether or not shares of such class or series shall have
voting rights in addition to any general voting rights provided by law
and the Charter of the Corporation and, if so, the terms of such
additional voting rights.
(D) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of the affairs,
or upon any distribution of the assets, of the Corporation.
(E) Any other rights, restrictions, including restrictions on
transferability, and qualifications of shares of such class or series,
not inconsistent with law and the Charter of the Corporation.
Section 5. The Board of Directors of the Corporation shall have
authority to issue from time to time shares of capital stock, whether now or
hereafter authorized, for such consideration as the Board of Directors of the
Corporation may deem advisable, subject to such limitations as may be set
forth in the Charter or the By-Laws of the Corporation or in the Maryland
General Corporation Law.
Section 6. No holder of stock of the Corporation shall, as such
holder, have any preemptive right to purchase or subscribe for any shares of
the capital stock of the Corporation or any other security of the Corporation
which it may issue or sell (whether out of the number of shares authorized by
the Charter of the Corporation, or out of any shares of the capital stock of
the Corporation acquired by it after the issue thereof, or otherwise) other
than such right, if any, as the Board of Directors of the Corporation, in its
discretion, may determine.
Section 7. Shares of Common Stock of the Corporation shall have
the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(A) Assets Belonging to a Class. All consideration received
by the Corporation for the issue or sale of stock of any class of Common
Stock, together with all assets in which such consideration is invested
and reinvested, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
<PAGE>
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to
the class of shares of Common Stock with respect to which such assets,
payments or funds were received by the Corporation for all purposes,
subject only to the rights of creditors, and shall be so handled upon
the books of account of the Corporation. Such consideration, assets,
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds in whatever form, are
herein referred to as "assets belonging to" such class. Any assets,
income, earnings, profits, and proceeds thereof, funds or payments which
are not readily attributable to any particular class shall be allocable
among any one or more of the classes in such manner and on such basis as
the Board of Directors of the Corporation, in its sole discretion, shall
deem fair and equitable.
(B) Liabilities Belonging to a Class. The assets belonging
to any class of Common Stock shall be charged with the liabilities in
respect of such class, and shall also be charged with such class's share
of the general liabilities of the Corporation determined as hereinafter
provided. The determination of the Board of Directors of the
Corporation shall be conclusive as to the amount of such liabilities,
including the amount of accrued expenses and reserves; as to any
allocation of the same to a given class; and as to whether the same are
allocable to one or more classes. The liabilities so allocated to a
class are herein referred to as "liabilities belonging to" such class.
Any liabilities which are not readily attributable to any particular
class shall be allocable among any one or more of the classes in such
manner and on such basis as the Board of Directors of the Corporation,
in its sole discretion, shall deem fair and equitable.
(C) Dividends and Distributions. Shares of each class of
Common Stock shall be entitled to such dividends and distributions, in
stock or in cash or both, as may be declared from time to time by the
Board of Directors of the Corporation, acting in its sole discretion,
with respect to such class, provided, however, that dividends and
distributions on shares of a class of Common Stock shall be paid only
out of the lawfully available "assets belonging to such class" as such
phrase is defined in Section 7(A) of this Article VI.
<PAGE>
(D) Liquidating Dividends and Distributions. In the event of
the liquidation or dissolution of the Corporation, shareholders of each
class of Common Stock shall be entitled to receive, as a class, out of
the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any
particular class of stock, the assets belonging to such class; and the
assets so distributable to the shareholders of any class of Common Stock
shall be distributed among such shareholders in proportion to the number
of shares of such class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not
belonging to any particular class of stock and available for
distribution, such distribution shall be made to the holders of stock of
all classes of Common Stock in proportion to the asset value of the
respective classes of Common Stock determined as hereinafter provided.
(E) Voting. Each shareholder of each class of Common Stock
shall be entitled to one vote for each share of Common Stock,
irrespective of the class, then standing in his name on the books of the
Corporation, and on any matter submitted to a vote of shareholders, all
shares of Common Stock then issued and outstanding and entitled to vote
shall be voted in the aggregate and not by class except that: (i) when
expressly required by law, shares of Common Stock shall be voted by
individual class and (ii) only shares of Common Stock of the respective
class or classes affected by a matter shall be entitled to vote on such
matter. At all meetings of the shareholders, the holders of one-third
of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for
the transaction of any business, except as otherwise provided by statute
or by the Charter of the Corporation. In the absence of a quorum, no
business may be transacted, except that the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, except as otherwise required by the By-Laws
of the Corporation, until the holders of the requisite amount of shares
of stock shall be so present. At any such adjourned meeting at which a
quorum may be present, any business may be transacted which might have
been transacted at the meeting as originally called. The absence from
any meeting, in person or by proxy, of holders of the number of shares
of stock of the Corporation in excess of a majority thereof which may be
required by the laws of the State of Maryland, the 1940 Act, or any
other applicable statute, the Charter or the By-Laws of the Corporation,
<PAGE>
for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before
the meeting, if there shall be present at the meeting, in person or by
proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters.
(F) Redemption. To the extent the Corporation has funds or
other property legally available therefor, each holder of shares of
Common Stock of the Corporation shall be entitled to require the
Corporation to redeem all or any part of the shares of Common Stock of
the Corporation standing in the name of such holder on the books of the
Corporation, and all shares of Common Stock issued by the Corporation
shall be subject to redemption by the Corporation, at the redemption
price of such shares as in effect from time to time as may be determined
by the Board of Directors of the Corporation in accordance with the
provisions hereof, subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption of shares of Common Stock
of the Corporation or postpone the date of payment of such redemption
price in accordance with provisions of applicable law. Without limiting
the generality of the foregoing, the Corporation shall, to the extent
permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of Common Stock of the Corporation (i) if
such redemption is, in the opinion of the Board of Directors of the
Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal
Revenue Code, as now or hereafter in force, (ii) if the value of such
shares in the account maintained by the Corporation or its transfer
agent for any class of Common Stock is less than Five Hundred Dollars
($500.00) provided, however, that each shareholder shall be notified
that the value of his account is less than Five Hundred Dollars
($500.00) and allowed sixty (60) days to make additional purchases of
shares before such redemption is processed by the Corporation or (iii)
if the net income with respect to any particular class of Common Stock
should be negative or it should otherwise be appropriate to carry out
the Corporation's responsibilities under the 1940 Act, in each case
subject to such further terms and conditions as the Board of Directors
of the Corporation may from time to time adopt. The redemption price of
shares of Common Stock of the Corporation shall, except as otherwise
provided in this Section 7(F), be the net asset value thereof as
<PAGE>
determined by the Board of Directors of the Corporation from time to
time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of
the Board of Directors of the Corporation. Payment of the redemption
price shall be made in cash by the Corporation at such time and in such
manner as may be determined from time to time by the Board of Directors
of the Corporation unless, in the opinion of the Board of Directors of
the Corporation, which shall be conclusive, conditions exist which make
payment wholly in cash unwise or undesirable; in such event the
Corporation may make payment wholly or partly by securities or other
property included in the assets belonging or allocable to the class of
the shares redemption of which is being sought, the value of which shall
be determined as provided herein.
(G) Conversion or Exchange. Each holder of any class of
Common Stock of the Corporation, who either surrenders his share
certificate in good delivery form to the Corporation or, if the shares
in question are not represented by certificates, delivers to the
Corporation a written request in good order signed by the shareholder,
shall, subject to such procedures as may be established by the Board of
Directors of the Corporation, be entitled to convert or exchange the
shares in question on the basis hereinafter set forth, into shares of
stock of any other class of the Corporation. The Corporation shall
determine the net asset value, as provided herein, of the shares to be
converted and may deduct therefrom a conversion or exchange cost, in an
amount determined within the discretion of the Board of Directors of the
Corporation. Within five (5) business days after such surrender and
payment of any conversion or exchange cost, the Corporation shall issue
to the shareholder such number of shares of stock of the class desired
as, taken at the net asset value thereof determined as provided herein
in the same manner and at the same time as that of the shares
surrendered, shall equal the net asset value of the shares surrendered,
less any conversion or exchange cost as aforesaid. Any amount
representing a fraction of a share may be paid in cash at the option of
the Corporation. Any conversion or exchange cost may be paid and/or
assigned by the Corporation to the underwriter and/or to any other
entity, as it may elect.
(H) Restrictions on Transferability. If, in the opinion of
the Board of Directors of the Corporation, concentration in the
ownership of shares of Common Stock might cause the Corporation to be
deemed a personal holding company within the meaning of the Internal
<PAGE>
Revenue Code, as now or hereafter in force, the Corporation may at any
time and from time to time refuse to give effect on the books of the
Corporation to any transfer or transfers of any share or shares of
Common Stock in an effort to prevent such personal holding company
status.
ARTICLE VII
The number of directors of the Corporation shall be six (6), which
number may be increased or decreased pursuant to the By-Laws of the
Corporation but shall never be less than three (3) except for any period
during which shares of the Corporation are held by less than three
shareholders. The name of the director who shall act until the directors are
elected by the Corporation's shareholders or until his successor is duly
elected and qualify is:
Edward J. Veilleux
ARTICLE VIII
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 shareholders 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.
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 to 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
<PAGE>
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.
ARTICLE IX
Any determination made in good faith, so far as accounting matters
are involved, in accordance with accepted accounting practices by or pursuant
to the direction of the Board of Directors of the Corporation, as to the
amount of assets, obligations or liabilities of the Corporation, as to the
amount of net income of the Corporation from dividends and interest for any
period or amounts at any time legally available for the payment of dividends,
as to the amount of any reserves or charges set up and the propriety thereof,
as to the time of or purpose for creating reserves or as to the use,
alteration or cancellation of any reserves or charges (whether or not any
obligation or liability for which such reserves or charges shall have been
created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the value of any security owned by
the Corporation or as to any other matters relating to the issuance, sale,
redemption or other acquisition or disposition of securities or shares of
capital stock of the Corporation, and any reasonable determination made in
good faith by the Board of Directors of the Corporation as to whether any
transaction constitutes a purchase of securities on "margin", a sale of
securities "short", or an underwriting of the sale of, or a participation in
any underwriting or selling group in connection with the public distribution
of, any securities, shall be final and conclusive, and shall be binding upon
the Corporation and all holders of its capital stock, past, present and
future, and shares of the capital stock of the Corporation are issued and
sold on the condition and understanding, evidenced by the purchase of shares
of capital stock or acceptance of share certificates, that any and all such
determinations shall be binding as aforesaid. No provision of the Charter of
the Corporation shall be effective (i) to require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act, or
of any valid rule, regulation or order of the Securities and Exchange
<PAGE>
Commission thereunder or (ii) 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.
ARTICLE X
The duration of this Corporation shall be perpetual.
ARTICLE XI
Section 1. The Corporation reserves the right from time to time to
make any amendments to its Charter which may now or hereafter be authorized
by law, including any amendments changing the terms or contract rights, as
expressly set forth in its Charter, of any of its outstanding stock by
classification, reclassification or otherwise, but no such amendment which
changes such terms or contract rights of any of its outstanding stock shall
be valid unless such amendment shall have been authorized by not less than a
majority of the aggregate number of the votes entitled to be cast thereon by
a vote at a meeting or by the unanimous written consent of the Directors of
the Corporation as provided in the Corporation's By-Laws.
Section 2. Notwithstanding any provision of the General Laws of
the State of Maryland requiring any action to be taken or authorized by the
affirmative vote of a greater proportion than the majority of the total
number of shares of any class of stock of the Corporation, such action shall
be effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding of that class
of stock entitled to vote thereon, except as otherwise provided in the
Charter of the Corporation.
Section 3. So long as permitted by Maryland law, the books of the
Corporation may be kept outside of the State of Maryland at such place or
-1-
<PAGE>
places as may be designated from time to time by the Board of Directors of the
Corporation or in the By-Laws of the Corporation.
Section 4. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Maryland, the Board of Directors of the
Corporation is expressly authorized:
(A) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the By-Laws of the Corporation to
the shareholders, and except as otherwise required by the 1940 Act.
(B) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations
the books and accounts of the Corporation, or any of them other than the
stock ledger, shall be open to the inspection of the shareholders, and
no shareholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by law or authorized by
resolution of the Board of Directors or of the shareholders of the
Corporation.
(C) Without the assent or vote of the shareholders, to
authorize the issuance from time to time of shares of the stock of any
class of the Corporation, whether now or hereafter authorized, for such
consideration as the Board of Directors of the Corporation may deem
advisable.
(D) Without the assent or vote of the shareholders, to
authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to authorize and
cause to be executed mortgages and liens upon the property of the
Corporation, real and personal.
(E) Notwithstanding anything in the Charter of the
Corporation to the contrary, to establish in its absolute discretion the
basis or method for determining the value of the assets belonging to any
class, and the net asset value of each share of any class of the
Corporation for purposes of sales, redemptions, repurchases of shares or
otherwise.
(F) To determine in accordance with generally accepted
accounting principles and practices what constitutes net profits,
earnings, surplus or net assets in excess of capital, and to determine
what accounting periods shall be used by the Corporation for any
purpose, whether annual or any other period, including daily; (i) to set
-2-
<PAGE>
apart out of any funds of the Corporation such reserves for such purposes
as it shall determine and to abolish the same; (ii) to declare and pay any
dividends and distributions in cash, securities or other property from
surplus or any funds legally available therefor, at such intervals (which
may be as frequently as daily) or on such other periodic basis, as it
shall determine; (iii) to declare such dividends or distributions by means
of a formula or other method of determination, at meetings held less
frequently than the frequency of the effectiveness of such declarations;
(iv) to establish payment dates for dividends or any other distributions
on any basis, including dates occurring less frequently than the
effectiveness of declarations thereof; and (v) to provide for the payment
of declared dividends on a date earlier or later than the specified payment
date in the case of shareholders of the Corporation redeeming their entire
ownership of shares of any class of the Corporation.
(G) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors of
the Corporation is authorized to exercise all such powers and do all
such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of Maryland law, the Charter
and the By-Laws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of Flag Investors
Balanced Fund, Inc. has signed these articles of incorporation on this 3rd
day of March, 1992.
/s/ Edward J. Veilleux
----------------------
Edward J. Veilleux
Incorporator
-3-
<PAGE>
THE UNDERSIGNED incorporator of Flag Investors Balanced Fund, Inc.
who executed the foregoing Articles of Incorporation of which this
Certificate is made a part, hereby acknowledges the same to be his Act and
further acknowledges that, to the best of his knowledge, the matters and
facts set forth therein are true in all material respects under the penalties
of perjury.
/s/ Edward J. Veilleux
----------------------
Edward J. Veilleux
Incorporator
-4-
<PAGE>
CERTIFICATE OF CORRECTION
TO CORRECT AN ERROR
IN
ARTICLES OF INCORPORATION
Pursuant to the provisions of Section 1-207 of Corporations and
Associations Articles, Annotated Code of Maryland, the undersigned executes
the following certificate of correction.
1. The name of the party to the document being corrected is Flag
Investors Balanced Fund, Inc.
2. That Articles of Incorporation were filed with the Department of
Assessments and Taxation of the State of Maryland on March 5, 1992 and that
said document requires correction as permitted under the provisions of
Section 1-207 of the Corporations and Associations Article of Annotated Code
of Maryland.
3. The error or defect in said documents to be corrected is as
follows:
ARTICLE VII
The number of directors of the Corporation shall be six
(6), which number may be increased or decreased pursuant to
the By-Laws of the Corporation but shall never be less than
three (3) except for any period during which shares of the
Corporation are held by less than three shareholders. The
name of the director who shall act until the directors are
elected by the Corporation's shareholders or until his
successor is duly elected and qualify is:
Edward J. Veilleux
4. The foregoing inaccuracy or defect in the document is corrected to
read as follows:
ARTICLE VII
The number of directors of the Corporation shall be
seven (7) which number may be increased or decreased
pursuant to the By-Laws of the Corporation but shall
never be less than three (3) except for any period during
which shares of the Corporation are held by less than
three shareholders. The name of the director who shall
act until the directors are elected by the Corporation's
shareholders or until his successor is duly elected and
qualify is:
Edward J. Veilleux
<PAGE>
IN WITNESS WHEREOF, the undersigned corporation has caused this
certificate of correction to be signed in its corporate name and on its
behalf by its Incorporator on this 17th day of March, 1992.
FLAG INVESTORS BALANCED FUND, INC.
By:/s/ Edward J. Veilleux
----------------------
Edward J. Veilleux
Incorporator
<PAGE>
EX-99.B(1)(b)
FLAG INVESTORS BALANCED FUND, INC.
ARTICLES OF AMENDMENT
Flag Investors Balanced Fund, Inc., a Maryland corporation having its
principal business office at 135 East Baltimore Street, Baltimore, Maryland
21202 (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-208 of the Maryland General Corporation
Law, the Corporation having no members entitled to vote, the Board of
Directors of the Corporation, by unanimous consent dated May 1, 1992, have
authorized that the charter of the Corporation be, and hereby is, amended as
follows:
Article II of the Articles of Incorporation is amended and restated to
read in full as follows:
The name of the Corporation is:
FLAG INVESTORS VALUE BUILDER FUND, INC.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Vice President and attested by its
Secretary on May 1, 1992.
[SEAL] FLAG INVESTORS BALANCED
FUND, INC.
Attest: /s/ Brian C. Nelson By: /s/ Edward J. Veilleux
------------------- ----------------------
Brian C. Nelson Edward J. Veilleux
Secretary Vice-President
The undersigned, Vice-President of Flag Investors Balanced Fund, Inc.,
who executed on behalf of said corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles of
Amendment to 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 herein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Edward J. Veilleux
-----------------------
Edward J. Veilleux
<PAGE>
EX-99.B(1)(c)
FLAG INVESTORS VALUE BUILDER FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS VALUE BUILDER 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 has adopted a
resolution classifying and designating the Corporation's previously
unclassified thirty million (30,000,000) shares of Common Stock, par
value $.001 per share, having an aggregate value of $30,000.00, as
follows: twenty million (20,000,000) shares are designated "Flag
Investors Value Builder Class A Shares" (the "Class A Shares"), five
million (5,000,000) shares are designated "Flag Investors Value Builder
Class B Shares" (the "Class B Shares"), and five million (5,000,000)
shares remain undesignated.
SECOND: Immediately before the designation and classification of
the Class A Shares and Class B Shares pursuant to these Articles
Supplementary, the Corporation was authorized to issue thirty million
(30,000,000) shares of Common Stock, par value $.001 per share, having
an aggregate par value of $30,000.00, of which thirty million
(30,000,000) shares were designated Common Stock in the Corporation's
Articles of Incorporation, but which, out of authorized but unissued
shares, had been designated (i) Flag Investors Value Builder Fund Shares
and renamed Flag Investors Value Builder Fund Class A Shares; and (ii)
Flag Investors Value Builder Fund Class B Shares, respectively, by the
Corporation's Board of Directors as authorized in the Corporation's
Articles of Incorporation.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, Flag Investors Value Builder Fund, Inc. has
caused these Articles Supplementary to be executed by one of its Vice-
Presidents and its corporate seal to be affixed and attested by its Secretary
on this 15th day of December 1993.
[CORPORATE SEAL]
FLAG INVESTORS VALUE BUILDER FUND, INC.
By: /s/ Edward J. Veilleux
----------------------
Vice-President
Attest: /s/ Brian C. Nelson
-------------------
Secretary
<PAGE>
The undersigned, Vice President of FLAG INVESTORS VALUE BUILDER
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/ Edward J. Veilleux
--------------------------
Edward J. Veilleux
<PAGE>
EX-99.B(1)(d)
FORM OF
FLAG INVESTORS VALUE BUILDER FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS VALUE BUILDER 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 has adopted a
resolution designating the Corporation's classified thirty million
(30,000,000) shares of Common Stock, par value $.001 per share, having an
aggregate value of $30,000.00, as follows: twenty million (20,000,000) shares
are designated "Flag Investors Value Builder Fund Class A Shares" (the "Class
A Shares"), five million (5,000,000) shares are designated "Flag Investors
Value Builder Fund Class B Shares" (the "Class B Shares"), three million
(3,000,000) shares are designated "Flag Investors Value Builder Fund Class D
Shares" (the "Class D Shares") and two million (2,000,000) shares remain
undesignated.
SECOND: Immediately before the designation of the Class D Shares
pursuant to these Articles Supplementary, the Corporation was authorized to
issue thirty million (30,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of $30,000.00, of which twenty million
(20,000,000) shares were designated "Flag Investors Value Builder Fund Class
A Shares", five million (5,000,000) shares were designated "Flag Investors
Value Builder Fund Class B Shares" and five million (5,000,000) shares
remained undesignated.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, Flag Investors Value Builder Fund, Inc. has
caused these Articles Supplementary to be executed by one of its Vice
Presidents and its corporate seal to be affixed and attested by its Secretary
on this 18th day of November 1994.
[CORPORATE SEAL]
FLAG INVESTORS VALUE BUILDER FUND, INC.
By: /s/ Edward J. Veilleux
----------------------------------
Vice President
Attest: /s/ Brian C. Nelson
------------------------------
Secretary
<PAGE>
The undersigned, Vice President of FLAG INVESTORS VALUE BUILDER
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/ Edward J. Veilleux
---------------------------
Edward J. Veilleux
<PAGE>
EX-99.B(2)
BY-LAWS
OF
FLAG INVESTORS VALUE BUILDER FUND, INC.
(amended through June 12, 1992)
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 Shareholders
Section 1. Annual Meetings. An annual meeting of the shareholders
of the Corporation shall not be required to be held in any year in which
shareholders are not required to elect directors under the Investment Company
Act of 1940, as amended (the "1940 Act") even if the Corporation is holding a
meeting of the shareholders for a purpose other than the election of
directors. If the Corporation is required by the 1940 Act to hold a meeting
to elect directors, the meeting shall be designated as the Annual Meeting of
shareholders for that year and shall be held within 120 days after the
occurrence of an event requiring the election of directors. The Board of
Directors may, in its discretion, hold a meeting to be designated as the
Annual Meeting of shareholders on a date within the month of March, in any
year where an election of directors by shareholders is not required under the
1940 Act. The date of an Annual Meeting shall be set by appropriate
resolution of the Board of Directors, and shareholders shall vote on the
election of directors and transact any other business as may properly be
brought before the Annual Meeting.
<PAGE>
Section 2. Special Meetings. Special meetings of the
shareholders, 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 shareholders 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 shareholders 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 shareholders held
during the preceding twelve (12) months.
Section 3. Place of Meetings. The regular meeting, if any, and
any special meeting of the shareholders 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 shareholders and the purpose or purposes of the
meeting shall be given personally or by mail, not less then ten nor more than
ninety days before the date of such meeting, to each shareholder entitled to
vote at such meeting and to each other shareholder 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 shareholder at his address as it
appears on the records of the Corporation, with postage thereon prepaid. The
notice of every meeting of shareholders 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.
(b) Notice of any meeting of shareholders shall be deemed
waived by any shareholder 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 shareholders 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
shareholders, the officer or agent having charge of the share transfer books
of the Corporation shall make a complete list of shareholders entitled to
vote at such meeting, in alphabetical order with the address of and the
number of shares held by each shareholder.
-2-
<PAGE>
Section 5. Organization. At each meeting of the shareholders, 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 shareholders
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
shareholders to one vote for every share of such stock standing in his name
on the record of shareholders 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 for him by a
proxy signed by such shareholder or his attorney-in-fact. 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 or
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 shareholder voting, or by his proxy, if there
be such proxy, and shall state the number of shares voted.
-3-
<PAGE>
Section 7. Inspectors. The Board may, in advance of any meeting
of shareholders, 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 shareholder 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
shareholders. On request of the chairman of the meeting or any shareholder
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 shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except as
otherwise provided by statute any action required to be taken at any regular
or special meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of shareholders' meetings: (i) a unanimous written consent which sets
forth the action and is signed by each shareholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting but not entitled to vote at it.
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 shareholders by law or by the
Charter of the Corporation or these By-Laws.
-4-
<PAGE>
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 shareholders.
Section 3. Election and Term of Directors. Directors shall be
elected by majority vote of a quorum cast by written ballot at the regular
meeting of shareholders, 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 shareholders by a vote of a majority of the votes
entitled to be cast for the election of directors.
Section 6. Vacancies. The shareholders 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 shareholders 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 shareholders 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 shareholders and until
his successor is elected and qualifies. A Director elected by the
shareholders 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.
-5-
<PAGE>
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.
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.
-6-
<PAGE>
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; provided, however, that for so long as
the Corporation is registered as an investment company under the 1940 Act,
this Section shall be inapplicable to the approval of any investment advisory
agreement, sub-advisory agreement or any plan (or agreement containing a
plan) pursuant to Rule 12b-1 under the 1940 Act.
-7-
<PAGE>
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; provided, however, that for so
long as the Corporation is registered as an investment company under the 1940
Act, this Section shall be inapplicable to the approval of any investment
advisory agreement, sub-advisory agreement or any plan (or agreement
containing a plan) pursuant to Rule 12b-1 under the 1940 Act.
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
shareholders of the Corporation in accordance with the provisions of the 1940
Act.
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.
-8-
<PAGE>
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 shareholders any action requiring
authorization of shareholders 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 shareholder 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 or
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.
-9-
<PAGE>
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 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.
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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 shareholders 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;
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(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 shareholders;
(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.
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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 shareholders, (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 shareholders 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 shareholders 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.
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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.
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 shareholders, including which shareholders 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 shareholders, 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.
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Section 8. Stock Leaders. 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 March 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.
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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.
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 shareholders in
accordance with the provisions of the 1940 Act.
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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 shareholders based upon each such examination shall be mailed
to each shareholder 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.
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.
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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 shareholders or at any special meeting of the
shareholders 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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EX-99.B(5)(a)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 15th day of
June, 1992 by and between FLAG INVESTORS VALUE BUILDER FUND, INC., a Maryland
corporation (the "Fund"), and FLAG INVESTORS MANAGEMENT CORP., a Maryland
corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, 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 Advisors 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 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 service 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
Secretary of the State of Maryland on March 5, 1992 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
March 16, 1992;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-46279) and
under the 1940 Act as filed with the SEC on March 16, 1992 relating to the
shares of the Fund, and all amendments thereto; and
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(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 1 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 filing 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 securities transactions will be
to obtain the best price and execution on an overall basis. 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.
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In selecting a broker-dealer to execute each particular transaction, the
Advisor will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the broker-
dealer; the size of and difficulty in executing the order; and the value of
the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-
dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board
of Directors may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Fund to pay a broker-
dealer that provides brokerage and research services to the Advisor an amount
of commission for effecting a portfolio investment transaction in excess of
the amount of commission another broker-dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker-dealer, viewed in terms of
either that particular transaction or the Advisor's overall responsibilities
with respect to the Fund. The Advisor is further authorized to allocate the
orders placed by it on behalf of the Fund to such broker-dealers other than
Alex. Brown & Sons Incorporated ("Alex. Brown") 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 Rules of Fair Practice 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 Alex. Brown to execute
portfolio transactions for the Fund on an agency basis. The commissions paid
to 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 account 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.
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 Alex. Brown in any
transaction in which the Advisor or Alex. Brown acts as a principal with
respect to any part of the Fund's order. If 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 the 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:
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(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 Federal and State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without
cost to the Fund, the services of and 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 the expenses of
engraving or printing of certificates representing shares of the Fund; all
costs and expenses in connection with 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 or
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 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 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
including a majority of the Fund's Directors who are not "interested persons"
(as defined in the 1940 Act) of the Fund and shareholders of the Fund, the
Advisor may delegate to a sub-advisor its duties enumerated in Section 3,
hereof. 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, but shall not be responsible for the sub-advisor's performance
under the sub-advisory agreement.
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(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 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 expense 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 at an annual rate of 1.00% of the first $50 million of the
Fund's average daily net assets, .85% of the next $50 million of the Fund's
average daily net assets, .80% of the next $100 million of the Fund's average
daily net assets and .70% of the Fund's average daily net assets exceeding
$200 million.
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 the 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. Subject to the provisions of Section 10 hereof,
payment of the Advisor's compensation for the preceding month shall be made
as promptly as possible after completion of the computations contemplated by
Section 10 hereof.
10. Expense Limitation. In the event the operating expenses of
the Fund, including all investment advisory and administrative fees, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by the securities laws or
regulations thereunder of any state in which the Fund's shares are qualified
for sale, as such limitations may be raised or lowered from time to time, the
Advisor shall reduce its investment advisory fee to the extent of its share
of such excess expenses and, if required pursuant to any such laws or
regulations, will reimburse the Fund for its share of annual operating
expenses in excess of any expense limitation that may be applicable;
provided, however, there shall be excluded from such expenses the amounts of
any interest, taxes, brokerage commissions and extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the Fund.
Such reduction, if any, shall be computed and accrued daily, shall be settled
on a monthly basis and shall be based upon the expense limitation applicable
to the Fund.
11. 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.
12. Term and Renewal. This Agreement shall become effective as of
the date hereof and shall continue in force and effect, subject to Section 13
hereof, for two years from the date hereof. 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:
-5-
<PAGE>
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities (as defined in 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" (as defined in
the 1940 Act) 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 vote of the Fund's Board of
Directors or a vote of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act) or by the Advisor, upon sixty (60) days' written
notice to the other party. This Agreement shall automatically terminate in
the event of its assignment (as defined in 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 the 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 of the Advisor for this purpose shall be 135 East
Baltimore Street, Baltimore, Maryland 21202.
16. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the 1940 Act shall be resolved
by reference to such term or provision of the 1940 Act and to interpretations
thereof, if any, by the United States courts or in the absence of any
controlling decision of any such court, by rules, regulations or orders of
the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
Otherwise the provisions of this Agreement shall be interpreted in accordance
with the laws of Maryland.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate by their respective offices as of the day and
year first above written.
[SEAL] FLAG INVESTORS VALUE BUILDER FUND, INC.
Attest: /s/ Brian C. Nelson By: /s/ Edward J. Veilleux
---------------------- ------------------------------
[SEAL] FLAG INVESTORS MANAGEMENT CORP.
Attest: /s/ Brian C. Nelson By: /s/ Richard T. Hale
--------------------- --------------------------------
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<PAGE>
EX-99.B(5)(b)
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 15th day of June, 1992 by and
among FLAG INVESTORS VALUE BUILDER FUND, INC., a Maryland corporation (the
"Fund"), FLAG INVESTORS MANAGEMENT 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, 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
Secretary of State of the State of Maryland on March 5, 1992 and all
amendments thereto (such Articles of Incorporation, as presently in
effect 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 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 March 16, 1992;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-46279)
and under the 1940 Act as filed with the SEC on March 16, 1992 relating
to the shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments are 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.
<PAGE>
3. Duties of Sub-Advisor. In carrying out its obligations under
Section 1 hereof, the Sub-Advisor shall:
(a) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of
Directors;
(b) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(c) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Fund's Board of Directors;
(d) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect such purchase and sale programs
as aforesaid, including the placing of orders for the purchase and sale
of securities of the Fund; and
(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio.
4. Broker-Dealer Relationships. In circumstances when the Sub-
Advisor is responsible for decisions to buy and sell securities for the Fund,
broker-dealer 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.
-2-
<PAGE>
Consistent with the Rules of Fair Practice 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 Alex. Brown & Sons
Incorporated ("Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to 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. 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 Alex. Brown in any
transaction in which the Sub-Advisor or Alex. Brown acts as a principal with
respect to any part of the Fund's order. If 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 provisions of the By-Laws; and
(e) any other applicable provisions of Federal and State 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 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.
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<PAGE>
(c) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to
the Advisor under the Investment Advisory Agreement between the Fund and
the Advisor; payments to the Fund's distributor under the Fund's plan of
distribution; the charges and expenses of any registrar, any custodian
or depository appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commission
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: .75% of the
first $50 million of the Fund's average daily net assets, .60% of the Fund's
average daily net assets in excess of $50 million but not exceeding $200
million, and .50% of the Fund's average daily net assets in excess of $200
million. 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. Subject to the provisions of Section 10 hereof, payment of the
Sub-Advisor's compensation for the preceding month shall be made as promptly
as possible after completion of the computations contemplated in Section 10
hereof.
9. Additional 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.
-4-
<PAGE>
10. Expense Limitation. If, for any fiscal year of the Fund, the
amount of the fee which the Advisor would otherwise receive from the Fund
pursuant to the Investment Advisory Agreement between the Fund and the
Advisor is reduced pursuant to the expense limitation provisions of the
Investment Advisory Agreement, the fee which the Sub-Advisor would otherwise
receive from the Advisor pursuant to Section 8 of this Agreement shall also
be reduced proportionately, and, if such amount should exceed such monthly
fee, the Sub-Advisor agrees to repay the Advisor such amount of its fee
previously received with respect to such fiscal year as may be required to
make up the deficiency no later than the last day of the following month. In
no event will the Sub-Advisor be required to reimburse the Advisor for any
amount in excess of the fee its receives pursuant to this Agreement during
the fiscal year of the Fund in which the reimbursement is required.
11. 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 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 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).
14. 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-Advisory 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.
-5-
<PAGE>
15. 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.
16. 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 135 East Baltimore Street, Baltimore, Maryland 21202.
17. Questions and 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.
Attest: FLAG INVESTORS VALUE BUILDER FUND, INC.
/s/ Brian C. Nelson By: /s/ Edward J. Veilleux
- ------------------- -----------------------
Attest: FLAG INVESTORS MANAGEMENT CORP.
/s/ Brian C. Nelson By: /s/ Richard T. Hale
- ------------------- ---------------------
Attest: ALEX. BROWN INVESTMENT MANAGEMENT
By Alex. Brown & Sons Incorporated,
a General Partner
/s/ Brian C. Nelson By: /s/ J. Dorsey Brown
- ------------------- ---------------------
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<PAGE>
EX-99.B(6)(a)
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 15th day of June, 1992, by and between
FLAG INVESTORS VALUE BUILDER FUND, INC., a Maryland corporation (the "Fund"),
and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex. Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the exclusive
distributor of the shares of Common Stock of the Fund (the "Shares") and
Alex. Brown wishes to become the distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the payments
contemplated by paragraph 5 constitute the financing of activities intended
to result in the sale of Shares, and this Agreement is entered into pursuant
to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor for
the Shares for the period and on the terms set forth in this Agreement. The
Fund may from time to time issue separate series or classes of its shares of
common stock, or classify and reclassify shares of such series as classes,
and the appointment effected hereby shall constitute appointment for the
distribution of such additional series and classes unless the parties shall
otherwise agree in writing. Alex. Brown accepts such appointment and agrees
to render the services herein set forth, for the compensation herein
provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on March 5, 1992 and all amendments thereto
(the "Articles of Incorporation");
<PAGE>
(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 Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with
the Securities and Exchange Commission (the "SEC") on March 16, 1992;
(e) The Fund's Registration Statement on Form
N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No.
33-46279) and under the 1940 Act as filed with the SEC on March 16, 1992
relating to the Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus and
all amendments and supplements thereto are herein called "Prospectus").
The Fund will furnish Alex. Brown 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 as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its
services as Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed necessary
to carry into effect the distribution of the Shares;
(c) provide the Board of Directors of the Fund with quarterly
reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex.
Brown does not undertake to sell all or any specific portion of the Shares.
The Fund shall not sell any of the Shares except through Alex. Brown and
securities dealers who have valid Sub-Distribution Agreements with Alex.
Brown. Notwithstanding the provisions of the foregoing sentence, the Fund
may issue its Shares at their net asset value to any shareholder of the Fund
purchasing such Shares with dividends or other cash distributions received
from the Fund pursuant to an offer made to all shareholders.
-2-
<PAGE>
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any director of the Board of Directors of
the Fund. The Board of Directors may agree, on behalf of the Fund, to
amendments to this Agreement, provided that the Fund must obtain prior
approval of the shareholders of the Fund to any amendment which would result
in a material increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, Alex. Brown 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 and any amendments and supplements
thereto;
(c) the provisions of the Articles of Incorporation of the
Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such services
are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any promotional or
sales literature used by Alex. Brown or furnished by Alex. Brown to
purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing;
-3-
<PAGE>
(c) the Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock 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 corporate fees payable by the Fund to
Federal, State or other governmental agencies; the cost and expense of
engraving or printing of stock certificates representing Shares; all costs
and expenses in connection with maintenance of registration of the Fund and
the Shares with the SEC and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel) except as provided
in subparagraph (a) above, the expenses of printing, including typesetting,
and distributing prospectuses 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 who are not "interested
persons" of the Fund (as defined in the 1940 Act) or 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; charges
and expenses of legal counsel including counsel to the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act), and of
independent 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. Alex. Brown may, but shall be
under no 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 Alex. Brown's
charge in rendering such services may be billed monthly to the Fund, subject
to examination by the Fund's independent accountants. Payment or assumption
by Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund or obligate Alex. Brown to pay or assume any similar
Fund expense on any subsequent occasions.
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<PAGE>
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown,
compensation at the annual rate of .25% of the average daily net assets of
the Fund. Except as hereinafter set forth, continuing 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 calculations of the
fees as set forth above. Payment of Alex. Brown's compensation for the
preceding month shall be made as promptly as possible.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives
for opening accounts, processing investor letters of transmittals and
applications and withdrawal and redemption orders, responding to inquiries
from Fund shareholders concerning the status of their accounts and the
operations of the Fund, and communicating with the Fund and its transfer
agent on behalf of the Fund shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into Sub-
Distribution Agreements (the "Sub-Distribution Agreements') with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All Sub-
Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the
status of their accounts and the operations of the Fund and communicating
with the Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each
such Participating Dealer an amount not to exceed that portion of the
compensation paid to Alex. Brown hereunder that is attributable to accounts
of Fund shareholders who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Brown to the Fund are
not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed
that directors, officers or employees of Alex. Brown may serve as directors
or officers of the Fund, and that directors or officers of the Fund may serve
as directors, officers and employees of Alex. Brown to the extent permitted
by law, and that directors, officers and employees of Alex. Brown are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, directors or
officers of any other firm or corporation, including other investment
companies.
-5-
<PAGE>
13. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, 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 (as defined in the 1940
Act), and
(b) by the affirmative vote of a majority of the Directors
who are not "interested persons" of the Fund (as defined in the 1940 Act) and
do not have a financial interest in the operation of this Agreement, by votes
cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time, on
sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act) or (iv) by Alex.
Brown. The notice provided for herein may be waived by each party. This
Agreement shall automatically terminate in the event of its assignment (as
the term is defined in the 1940 Act).
15. Liability. In the performance of its duties hereunder, Alex.
Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of Alex. Brown or reckless disregard by Alex.
Brown of its duties under this Agreement.
16. 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 parties, it is agreed that the
address of both Alex. Brown and the Fund for this purpose shall be 135 East
Baltimore Street, Baltimore, Maryland 21202.
-6-
<PAGE>
17. 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 as of the day and
year first above written.
[SEAL] FLAG INVESTORS VALUE BUILDER FUND, INC.
Attest:/s/ Brian C. Nelson By /s/ Edward J. Veilleux
------------------------
Vice President
[SEAL] Alex. BROWN & SONS INCORPORATED
By /s/ Richard T. Hale
-------------------------
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<PAGE>
EX-99.B(6)(b)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland corporation,
serves as distributor (the "Distributor") of the Flag Investors Funds
(collectively, the "Funds", individually a "Fund"). The Funds are open-end
investment companies registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares
("Shares") to the public in accordance with the terms and conditions
contained in the Prospectus of each Fund. The term "Prospectus" used herein
refers to the prospectus on file with the Securities and Exchange Commission
which is part of the registration statement of each Fund under the Securities
Act of 1933 (the "Securities Act"). In connection with the foregoing you may
serve as a participating dealer (and, therefore, accept orders for the
purchase or redemption of Shares, respond to shareholder inquiries and
perform other related functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating
Dealer and as such are authorized (i) to accept orders for the purchase of
Shares and to transmit to the Funds such orders and the payment made
therefore, (ii) to accept orders for the redemption of Shares and to
transmit to the Funds such orders and all additional material, including any
certificates for Shares, as may be required to complete the redemption and
(iii) to assist shareholders with the foregoing and other matters relating to
their investments in each Fund, in each case subject to the terms and
conditions set forth in the Prospectus of each Fund. You are to review each
Share purchase or redemption order submitted through you or with your
assistance for completeness and accuracy. You further agree to undertake
from time to time certain shareholder servicing activities for customers of
yours who have purchased Shares and who use your facilities to communicate
with the Funds or to effect redemptions or additional purchases of Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in
the Prospectus of each Fund and in such printed information as the
Distributor may subsequently prepare. No person is authorized to distribute
any sales material relating to any Fund without the prior written approval of
the Distributor.
3. Compensation. As compensation for such services, you will look
solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor
will pay you no less often than annually a shareholder processing and service
fee (as we may determine from time to time in writing) computed as a
percentage of the average daily net assets maintained with each Fund during
the preceding period by shareholders who purchase their shares through you or
with your assistance, provided that said assets are at least $250,000 for
each Fund for which you are to be compensated, and provided that in all cases
your name is transmitted with each shareholder's purchase order.
<PAGE>
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of
the Funds. We agree to furnish to you as many copies of each Prospectus,
annual and interim reports and proxy solicitation materials as you may
reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the
"NASD"). Your expulsion or suspension from the NASD will automatically
terminate this Agreement on the effective date of such expulsion or
suspension. You agree that you will not offer Shares to persons in any
jurisdiction in which you may not lawfully make such offer due to the fact
that you have not registered under, or are not exempt from, the applicable
registration or licensing requirements of such jurisdiction. You agree that
in performing the services under this Agreement, you at all times will comply
with the Rules of Fair Practice of the NASD, including, without limitation,
the provisions of Section 26 of such Rules. You agree that you will not
combine customer orders to reach breakpoints in commissions for any purposes
whatsoever unless authorized by the then current Prospectus in respect of
Shares of a particular class or by us in writing. You also agree that you
will place orders immediately upon their receipt and will not withhold any
order so as to profit therefrom. In determining the amount payable to you
hereunder, we reserve the right to exclude any sales which we reasonably
determine are not made in accordance with the terms of the Prospectus and
provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares
under the Securities Act. The Funds intend to register or qualify in certain
states where registration or qualification is required. We will inform you
as to the states or other jurisdictions in which we believe the Shares have
been qualified for sale under, or are exempt from the requirements of, the
respective securities laws of such states. You agree that you will offer
Shares to your customers only in those states where such Shares have been
registered, qualified, or an exemption is available. We assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction. We will file with the Department of State in New York a State
Notice and a Further State Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full authority to
take such action as it deems advisable in respect of all matters pertaining
to the offering of its Shares, including the right not to accept any order
for the purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law
to be kept by you relating to transactions in Shares and, upon request by any
Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you
except for lack of good faith and for obligations expressly assumed by it
hereunder. In carrying out your obligations, you agree to act in good faith
and without negligence. Nothing contained in this Agreement is intended to
operate as a waiver by the Distributor or you of compliance with any
provision of the Investment Company Act, the Securities Act, the Securities
Exchange Act of 1934, as amended, or the rules and regulations promulgated by
the Securities and Exchange Commission thereunder.
-2-
<PAGE>
10. Termination. This Agreement may be terminated by either party,
without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time
for any particular Fund without penalty by the vote of a majority of the
members of the Board of Directors or Trustees of such Fund who are not
"interested persons" (as defined in the Investment Company Act) and who have
no direct or indirect financial interest in the operation of the Distribution
Agreement between such Fund and the Distributor or by the vote of a majority
of the outstanding voting securities of the Fund.
11. Communications. All communications to us should be sent to the
above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
__________________________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
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<PAGE>
EX-99.B(6)(c)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SHAREHOLDER SERVICING AGREEMENT
_________________, 19__
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement
with you concerning the provision of support services to your clients and
customers ("Customers") who may from time to time beneficially own shares of our
common stock ("Shares").
The terms and conditions of this Servicing Agreement are as
follows:
Section 1. (a) You agree to provide the following services to
Customers who may from time to time beneficially own Shares: (i) aggregating and
processing purchase and redemption requests for Shares from Customers and
placing net purchase and redemption orders with our distributor; (ii) processing
dividend payments from us on behalf of Customers; (iii) providing information
periodically to Customers showing their positions in Shares; (iv) arranging for
bank wires; (v) responding to Customer inquiries relating to the services
performed by you; (vi) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to Customers; and (viii) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. You will provide to Customers a schedule of any
fees that you may charge directly to them for such services. You hereby
represent that such fees are not unreasonable or excessive. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records required
by law relating to transactions in Shares and, upon our request, promptly make
such of these records available to us as we may reasonably request in connection
with our operations, and (ii) promptly notify us if you experience any
difficulty in maintaining the records described in the foregoing clauses in an
accurate and complete manner.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be a part of the space, equipment
and facilities currently used in your business, or any personnel employed by
you) as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Customers.
Section 3. Neither you nor any of your officers, employees,
agents or assignees are authorized to make any representations concerning us or
Shares except those contained in our then current prospectus for such Shares,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by us in writing.
<PAGE>
Section 4. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority to act as
agent for us in any matter or in any respect. You may, upon prior written notice
to us, delegate your responsibilities hereunder to another person or persons;
provided, however, that notwithstanding any such delegation, you will remain
responsible for the performance of all of your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees, agents or assignees
regarding your responsibilities hereunder or the purchase, redemption, transfer
or registration of Shares by or on behalf of Customers. You and your employees
will, upon request, be available during normal business hours to consult with us
or our designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will cause our distributor pay to you, and you
will accept as full payment therefor, a fee (as we may determine from time to
time in writing) computed as a percentage of the average daily net assets of the
Customers' Shares held of record by you from time to time, which fee will be
computed daily and payable no less often than annually. For purposes of
determining the fees payable under this Section 5, the average daily net assets
of the Customers' Shares will be computed in the manner specified in our
registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes of
purchases and redemptions. The fee rate stated above may be prospectively
increased or decreased by us or by our distributor, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of Shares, including the sale of such shares to you for the account of
any Customer or Customers.
Section 6. You will furnish us or our designees with such
information relating to your performance under this Agreement as we or they may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
shall otherwise cooperate with us and our designees (including, without
limitation, any auditors designated by us), in connection with the preparation
of reports to our Board of Directors concerning this Agreement and the monies
paid or payable by us pursuant hereto, as well as any other reports or filings
that may be required by law.
Section 7. We may enter into other similar services agreements
with any other person or persons without your consent.
Section 8. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our distributor, and
is terminable, without penalty, at any time by us or by you upon ten days'
notice to the other party hereto and shall automatically terminate in the event
of its assignment, as that term is defined in the Investment Company Act of
1940, as amended.
Section 9. This Agreement will be construed in accordance with
the laws of the State of Maryland.
Section 10. All notices and other communications to either you
or us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device, if to us at the address below, and if to you,
at the address specified by you after your signature below:
Flag Investors Family of Funds
135 East Baltimore Street
Baltimore, Maryland 21202
Attention: Edward J. Veilleux
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<PAGE>
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to us, at the address set forth in Section 10 above.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
Date: By:________________________________
Authorized Officer
Confirmed and Accepted:
Firm Name: _____________________________
By: _____________________________
Address: _____________________________
_____________________________
Date: _____________________________
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<PAGE>
EX-99.B(6)(d)
Now Known As Class D Shares
FLAG INVESTORS VALUE BUILDER FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 4th day of November 1992, by and between
FLAG INVESTORS VALUE BUILDER FUND, INC., a Maryland corporation (the "Fund"),
and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex. Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the exclusive
distributor of the class of shares of the Fund known as the Flag Investors
Class B Shares (the "Shares") and Alex. Brown wishes to become the
distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the payments
contemplated by paragraph 5 constitute the financing of activities intended
to result in the sale of Shares, and this Agreement is entered into pursuant
to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor for
the Shares for the period and on the terms set forth in this Agreement. The
Fund may from time to time issue separate series or classes of its shares of
common stock, or classify and reclassify shares of such series as classes,
and the appointment effected hereby shall constitute appointment for the
distribution of such additional series and classes unless the parties shall
otherwise agree in writing. Alex. Brown accepts such appointment and agrees
to render the services herein set forth, for the compensation herein
provided.
<PAGE>
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on March 5, 1992 and all amendments thereto
(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 Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with
the Securities and Exchange Commission (the "SEC") on March 16, 1992;
(e) The Fund's Registration Statement on Form
N-1A under the Securities Act of 1933, as amended (the "1933 Act") (File No.
33-46279) and under the 1940 Act as filed with the SEC on March 16, 1992
relating to the Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus and
all amendments and supplements thereto are herein called "Prospectus").
The Fund will furnish Alex. Brown 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 as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its
services as Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed necessary
to carry into effect the distribution of the Shares;
-2-
<PAGE>
(c) provide the Board of Directors of the Fund with quarterly
reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex.
Brown does not undertake to sell all or any specific portion of the Shares.
The Fund shall not sell any of the Shares except through Alex. Brown and
securities dealers who have valid Sub-Distribution Agreements with Alex.
Brown. Notwithstanding the provisions of the foregoing sentence, the Fund
may issue its Shares at their net asset value to any shareholder of the Fund
purchasing such Shares with dividends or other cash distributions received
from the Fund pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of
the Fund. The Board of Directors may agree, on behalf of the Fund, to
amendments to this Agreement, provided that the Fund must obtain prior
approval of the shareholders of the Fund to any amendment which would result
in a material increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, Alex. Brown 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 and any amendments and supplements
thereto;
(c) the provisions of the Articles of Incorporation of the
Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and State law.
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<PAGE>
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such services
are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any promotional or
sales literature used by Alex. Brown or furnished by Alex. Brown to
purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing;
(c) the Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock 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 corporate fees payable by the Fund to
Federal, State or other governmental agencies; the cost and expense of
engraving or printing of stock certificates representing Shares; all costs
and expenses in connection with maintenance of registration of the Fund and
the Shares with the SEC and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel) except as provided
in subparagraph (a) above, the expenses of printing, including typesetting,
and distributing prospectuses 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 who are not "interested
persons" of the Fund (as defined in the 1940 Act) or 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; charges
and expenses of legal counsel, including counsel to the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act), and of
independent 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.
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<PAGE>
8. Delegation of Responsibilities. Alex. Brown may, but shall be
under no 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 Alex. Brown's
charge in rendering such services may be billed monthly to the Fund, subject
to examination by the Fund's independent accountants. Payment or assumption
by Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund or obligate Alex. Brown to pay or assume any similar
Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex-Brown,
compensation at the annual rate of .60% of the average daily net assets of
the shares of the Fund. Except as hereinafter set forth, continuing
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
calculations of the fees as set forth above. Payment of Alex. Brown's
compensation for the preceding month shall be made as promptly as possible.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives
for opening accounts, processing investor letters of transmittals and
applications and withdrawal and redemption orders, responding to inquiries
from Fund shareholders concerning the status of their accounts and the
operations of the Fund, and communicating with the Fund and its transfer
agent on behalf of the Fund shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into Sub-
Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All Sub-
Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the
status of their accounts and the operations of the Fund and communicating
with the Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each
such Participating Dealer an amount not to exceed that portion of the
compensation paid to Alex. Brown hereunder that is attributable to accounts
of Fund shareholders who are customers of such Participating Dealer.
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<PAGE>
12. Non-Exclusivity . The services of Alex. Brown to the Fund are
not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed
that directors, officers or employees of Alex. Brown may serve as directors
or officers of the Fund, and that directors or officers of the Fund may serve
as directors, officers and employees of Alex. Brown to the extent permitted
by law; and that directors, officers and employees of Alex. Brown are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, directors or
officers of any other firm or corporation, including other investment
companies.
13. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, 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 (as defined in the 1940
Act), and
(b) by the affirmative vote of a majority of the Directors
who are not "interested persons" of the Fund (as defined in the 1940 Act) and
do not have a financial interest in the operation of this Agreement, by votes
cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time, on
sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act) or (iv) by Alex.
Brown. The notice provided for herein may be waived by each party. This
Agreement shall automatically terminate in the event of its assignment (as
the term is defined in the 1940 Act).
15. Liability. In the performance of its duties hereunder, Alex.
Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of Alex. Brown or reckless disregard by Alex.
Brown of its duties under this Agreement.
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<PAGE>
16. 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 parties, it is agreed that the
address of both Alex. Brown and the Fund for this purpose shall be 135 East
Baltimore Street, Baltimore, Maryland 21202.
17. 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 as of the day and
year first above written.
[SEAL] FLAG INVESTORS VALUE BUILDER FUND, INC.
Attest: /s/ Sue Powell By /s/ Edward J. Veilleux
-------------- --------------------------------
Title: Vice President
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest: /s/ Sue Powell By /s/ Richard T. Hale
-------------- ---------------------------------
Title: Managing Director
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<PAGE>
EX-99.B(6)(e)
New Class B Shares
FLAG INVESTORS VALUE BUILDER FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 30th day of December, 1994, by and
between FLAG INVESTORS VALUE BUILDER FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the exclusive
distributor of the class of shares of the Fund known as the Flag Investors
Class B Shares (the "Shares") and Alex. Brown wishes to become the
distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the
payments contemplated by paragraph 9 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the Act (the
"Plan") allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor
for the Shares for the period and on the terms set forth in this Agreement.
The Fund may from time to time issue separate series or classes of its shares
of common stock, or classify and reclassify shares of such series as classes,
and the appointment effected hereby shall constitute appointment for the
distribution of such additional series and classes unless the parties shall
otherwise agree in writing. Alex. Brown accepts such appointment and agrees
to render the services herein set forth, for the compensation herein
provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on March 5, 1992 and all amendments thereto
(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 Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
<PAGE>
(d) The Fund's Notification of Registration filed pursuant
to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with
the Securities and Exchange Commission (the "SEC") on March 16, 1992;
(e) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-46279)
and under the 1940 Act as filed with the SEC on March 16, 1992 relating to
the Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown 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 as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its
services as Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares; and
(c) provide the Board of Directors of the Fund with
quarterly reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex.
Brown does not undertake to sell all or any specific portion of the Shares.
The Fund shall not sell any of the Shares except through Alex. Brown and
securities dealers who have valid Sub-Distribution Agreements with Alex.
Brown. Notwithstanding the provisions of the foregoing sentence, the Fund
may issue its Shares at their net asset value to any shareholder of the Fund
purchasing such Shares with dividends or other cash distributions received
from the Fund pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of
the Fund. The Board of Directors may agree, on behalf of the Fund, to
amendments to this Agreement, provided that the Fund must obtain prior
approval of the shareholders of the Fund to any amendment which would result
in a material increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 and any amendments and supplements
thereto;
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<PAGE>
(c) the provisions of the Articles of Incorporation of the
Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association
of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and State
law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such services
are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any promotional
or sales literature used by Alex. Brown or furnished by Alex. Brown to
purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing; and
(c) the Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock 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 corporate fees payable by the Fund to
Federal, State or other governmental agencies; the cost and expense of
engraving or printing of stock certificates representing Shares; all costs
and expenses in connection with maintenance of registration of the Fund and
the Shares with the SEC and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel) except as provided
in subparagraph (a) above, the expenses of printing, including typesetting,
and distributing prospectuses 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 who are not "interested
persons" of the Fund (as defined in the 1940 Act) or 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; charges
and expenses of legal counsel, including counsel to the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act), and of
independent 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.
-3-
<PAGE>
8. Delegation of Responsibilities. Alex. Brown may, but shall
be under no 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 Alex. Brown's
charge in rendering such services may be billed monthly to the Fund, subject
to examination by the Fund's independent accountants. Payment or assumption
by Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund or obligate Alex. Brown to pay or assume any similar
Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown,
compensation at the annual rate of .75% of the average daily net assets of
the shares of the Fund. Except as hereinafter set forth, continuing
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
calculations of the fees as set forth above. Payment of Alex. Brown's
compensation for the preceding month shall be made as promptly as possible.
10. Service Fee. The Fund shall pay Alex. Brown a service fee
(as such term is defined in the NASD Rules of Fair Practice) equal to .25% of
the average daily net assets of the Shares of the Fund. Such fee shall be
calculated and accrued daily and the amounts of the daily accruals shall be
paid monthly in the manner described in paragraph 9 above.
11. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives
for opening accounts, processing investor letters of transmittals and
applications and withdrawal and redemption orders, responding to inquiries
from Fund shareholders concerning the status of their accounts and the
operations of the Fund, and communicating with the Fund and its transfer
agent on behalf of the Fund shareholders.
12. Sub-Distribution Agreements. Alex. Brown may enter into
Sub-Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All Sub-
Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the
status of their accounts and the operations of the Fund and communicating
with the Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each
such Participating Dealer an amount not to exceed that portion of the
compensation paid to Alex. Brown hereunder that is attributable to accounts
of Fund shareholders who are customers of such Participating Dealer.
13. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed
that directors, officers or employees of Alex. Brown may serve as directors
or officers of the Fund, and that directors or officers of the Fund may serve
as directors, officers and employees of Alex. Brown to the extent permitted
by law; and that directors, officers and employees of Alex. Brown are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, directors or
officers of any other firm or corporation, including other investment
companies.
14. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided
that such continuance is specifically approved at least annually:
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<PAGE>
(a) (i) by the Fund's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities (as defined in the
1940 Act), and
(b) by the affirmative vote of a majority of the Directors
who are not "interested persons" of the Fund (as defined in the 1940 Act) and
do not have a financial interest in the operation of this Agreement, by votes
cast in person at a meeting specifically called for such purpose.
15. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of
any penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act) or (iv) by Alex.
Brown. The notice provided for herein may be waived by each party. This
Agreement shall automatically terminate in the event of its assignment (as
the term is defined in the 1940 Act).
16. Liability. In the performance of its duties hereunder,
Alex. Brown shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits in performing
all services provided for under this Agreement, but shall not be liable for
any act or omission which does not constitute willful misfeasance, bad faith
or gross negligence on the part of Alex. Brown or reckless disregard by Alex.
Brown of its duties under this Agreement.
17. 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 parties, it is agreed that the
address of both Alex. Brown and the Fund for this purpose shall be 135 East
Baltimore Street, Baltimore, Maryland 21202.
18. 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 as of the day and
year first above written.
[SEAL] FLAG INVESTORS VALUE BUILDER FUND, INC.
Attest: /s/ Brian C. Nelson By /s/ Edward J. Veilleux
-------------------- --------------------------
Title:
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest: /s/ Brian C. Nelson By /s/ Richard T. Hale
------------------- ---------------------------
Title:
-5-
<PAGE>
EX-99.B(8)
CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS
This Agreement is made as of June 15, 1992 by and between Flag Investors
Value Builder Fund, Inc. (the "Fund"), a Maryland corporation, and Provident
National Bank ("Provident"), a national banking association.
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund wishes
to retain Provident to provide custodian services, and Provident wishes to
furnish custodian services, either directly or though an affiliate or
affiliates, as more fully described herein.
In consideration of the promises and mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall mean
any officer of the Fund and any other person, who is duly authorized by the
Fund's Governing Board, to give Oral and Written Instructions on behalf of
the Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix as such appendix may be amended in writing by the
Fund's Governing Board from time to time.
(b) "Book-Entry System". The term "Book-Entry System" means
Federal Reserve Treasury book-entry system for United States and federal
agency securities, its successor or successors, and its nominee or nominees
and any book-entry system maintained by an exchange registered with the SEC
under the 1934 Act.
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(d) "Governing Board". The term "Governing Board" shall mean the
Fund's Board of Directors if the Fund is a corporation or the Fund's Board of
Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall mean
oral instructions received by Provident from an Authorized Person or from a
person reasonably believed by Provident to be an Authorized Person.
(f) "Property". The term "Property" shall mean:
(i) any and all securities and other investment items which
the Fund may from time to time deposit, or cause to be
deposited, with Provident or which Provident may from
time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by Provident from time to
time, from or on behalf of the Fund.
(g) "Provident". The term "Provident" shall mean Provident
National Bank or a subsidiary or affiliate of Provident National Bank.
<PAGE>
(h) "SEC". The term "SEC" shall mean the Securities and Exchange
Commission.
(i) "Securities and Commodities Laws". The term shall mean the
"1933 Act", the Securities Act of 1933, as amended, the "1934 Act", the
Securities Exchange Act of 1934, as amended, and the "CEA", the Commodities
Exchange Act, as amended.
(j) "Shares". The term "Shares" shall mean the shares of stock of
any series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Fund is organized as a Trust.
(k) "Written Instructions". The term "Written Instructions" shall
mean written instructions signed by two Authorized Persons and received by
Provident. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints Provident to provide
custodian services, and Provident accepts such appointment and agrees to
furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide Provident with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of Provident
or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreements if Provident is
not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. Compliance with Government Rules and Regulations.
Provident undertakes to comply with all applicable requirements of
the 1933 Act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules
and regulations of governmental authorities having jurisdiction with respect
to all duties to be performed by Provident hereunder. Except as specifically
set forth herein, Provident assumes no responsibility for such compliance by
the Fund.
5. Instructions. Unless otherwise provided in this Agreement,
Provident shall act only upon Oral and Written Instructions. Provident shall
be entitled to rely upon any Oral and Written Instructions it receives from
an Authorized Person (or from a person reasonably believed by Provident to be
an Authorized Person) pursuant to this Agreement. Provident may assume that
any Oral or Written Instructions received hereunder are not in any way
inconsistent with the provisions of organizational documents of the Fund or
of any vote, resolution or proceeding of the Fund's Governing Board or of the
Fund's shareholders.
-2-
<PAGE>
The Fund agrees to forward to Provident Written Instructions confirming
Oral Instructions so that Provident receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by
Provident shall in no way invalidate the transactions or enforceability of
the transactions authorized by the Oral Instructions.
The Fund further agrees that Provident shall incur no liability to the
Fund in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If Provident is in doubt as to any action
it should or should not take, Provident may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If Provident shall be in doubt as to any
questions of law pertaining to any action it should or should not take,
Provident may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Fund, the Fund's advisor or Provident,
at the option of Provident).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions Provident receives from
the Fund, and the advice it receives from counsel, Provident shall be
entitled to rely upon and follow the advice of counsel.
(d) Protection of Provident. Provident shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral
or Written Instructions it receives from the Fund or from counsel and which
Provident believes, in good faith, to be consistent with those directions,
advice or Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon Provident (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of Provident's properly
taking or not taking such action.
7. Records. The books and records pertaining to the Fund, which are
in the possession of Provident, shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940
Act and other applicable securities laws, rules and regulations. The Fund,
or the Fund's authorized representatives, shall have access to such books and
records at all times during Provident's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by Provident to the Fund or to an authorized representative of the
Fund, at the Fund's expense.
8. Confidentiality. Provident agrees to keep confidential all records
of the Fund and information relative to the Fund and its shareholders (past,
present and potential), unless the release of such records or information is
otherwise consented to, in writing, by the Fund. The Fund further agrees
that, should Provident be required to provide such information or records to
duly constituted authorities (who may institute civil or criminal contempt
proceedings for failure to comply) , Provident shall not be required to seek
the Fund's consent prior to disclosing such information; provided that
Provident gives the Fund prior written notice of the provision of such
information and records.
-3-
<PAGE>
9. Cooperation with Accountants. Provident shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund.
10. Disaster Recovery. Provident shall enter into and shall maintain
in effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment
failures, Provident shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall have no
liability with respect thereto.
11. Compensation. As compensation for custody services rendered by
Provident during the term of this Agreement, the Fund will pay to Provident a
fee or fees as may be agreed to in writing from time to time by the Fund and
Provident.
12. Indemnification. The Fund agrees to indemnify and hold harmless
Provident and its nominees from all taxes, charges, expenses, assessment,
claims and liabilities (including, without limitation, liabilities arising
under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and
foreign securities and blue sky laws, and amendments thereto, and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action which Provident takes or does not take
(i) at the request or on the direction of or in reliance on the advice of the
Fund or (ii) upon Oral or Written Instructions. Neither Provident, nor any
of its nominees, shall be indemnified against any liability to the Fund or to
its shareholders (or any expenses incident to such liability) arising out of
Provident's or its nominees' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement or Provident's own grossly negligent failure to perform its duties
under this Agreement.
13. Responsibility of Provident. Provident shall be under no duty to
take any action on behalf of the Fund except as specifically set forth herein
or as may be specifically agreed to by Provident, in writing. Provident
shall be obligated to exercise care and diligence in the performance of its
duties hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this Agreement.
Provident shall be responsible for its own or its nominees' own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
and obligations under this Agreement or Provident's own negligent failure to
perform its duties under this Agreement.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, Provident, in connection with its duties under
this Agreement, shall not be under any duty or obligation to inquire into and
shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which
Provident reasonably believes to be genuine; or (b) delays or errors or loss
of data occurring by reason of circumstances beyond Provident's control,
including acts of civil or military authority, national emergencies, fire,
flood or catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, Provident
shall have no liability to the Fund for any consequential, special or
indirect losses or damages which the Fund may incur or suffer by or as a
consequence of Provident's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by
Provident.
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<PAGE>
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or arrange
for delivery to Provident, all the property it owns, including cash received
as a result of the distribution of its Shares, during the period that is set
forth in this Agreement. Provident will not be responsible for such property
until actual receipt.
(b) Receipt and Disbursement of Money. Provident, acting upon
Written Instructions, shall open and maintain separate account(s) in the
Fund's name using all cash received from or for the account of the Fund,
subject to the terms of this Agreement. In addition, upon Written
Instructions, Provident shall open separate custodial accounts for each
separate series, portfolio or class of the Fund and shall hold in such
account(s) all cash received from or for the accounts of the Fund
specifically designated to each separate series, portfolio or class.
Provident shall make cash payments from or for the account of the Fund
only for:
(i) purchases of securities in the name of the Fund or
Provident or Provident's nominee as provided in sub-
paragraph (j) and for which Provident has received a
copy of the broker's or dealer's confirmation or
payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered
to Provident;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution,
advisory, management fees or similar expenses which
are to be borne by the Fund;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent for
the shareholders, an amount equal to the amount of
dividends and distributions stated in the Written
Instructions to be distributed in cash by the
transfer agent to shareholders, or, in lieu of paying
the Fund's transfer agent, Provident may arrange for
the direct payment of cash dividends and distributions
to shareholders in accordance with procedures mutually
agreed upon from time to time by and among the Fund,
Provident and the Fund's transfer agent.
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Fund and
held by or delivered to Provident;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-paragraph (c) of this Paragraph 14;
and
(viii) payments, upon Written Instructions made for other
proper Fund purposes.
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<PAGE>
Provident is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received as custodian for the
account of the Fund.
(c) Receipt of Securities.
(i) Provident shall hold all securities received by it for
the account of the Fund in a separate account that
physically segregates such securities from those of
any other persons, firms or corporations. All such
securities shall be held or disposed of only upon
Written Instructions of the Fund pursuant to the terms
of this Agreement. Provident shall have no power or
authority to assign, hypothecate, pledge or otherwise
dispose of any such securities or investment, except
upon the express terms of this Agreement and upon
Written Instructions, accompanied by a certified
resolution of the Fund's Governing Board, authorizing
the transaction. In no case may any member of the
Fund's Board of Directors/Trustees, or any officer,
employee or agent of the Fund withdraw any securities.
At Provident's own expense and for its own
convenience, Provident may enter into subcustodian
agreements with other United States banks or trust
companies to perform duties described in this sub-
paragraph (c). Such bank or trust company shall have
an aggregate capital, surplus and undivided profits,
according to its last published report, of at least
one million dollars ($1,000,000), if it is a
subsidiary or affiliate of Provident, or at least
twenty million dollars ($20,000,000) if such bank or
trust company is not a subsidiary or affiliate of
Provident. In addition, such bank or trust company
must be qualified to act as custodian and agree to
comply with the relevant provisions of the 1940 Act
and other applicable rules and regulations. Any such
arrangement will not be entered into without prior
written notice to the Fund.
Provident shall remain responsible for the performance
of all of its duties as described in this Agreement
and shall hold the Fund harmless from its own acts or
omissions, under the standards of care provided for
herein, or the acts and omissions of any sub-custodian
chosen by Provident under the terms of this sub-
paragraph (c).
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<PAGE>
(d) Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, Provident, directly or through the
use of the Book-Entry System, shall:
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner
of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed,
retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to
be delivered to Provident;
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise
of any conversion privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or
other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, and receive and
hold under the terms of this Agreement such
certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Fund and take such other steps as shall be stated in
said Oral or Written Instructions to be for the
purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
(vii) release securities belonging to the Fund to any bank
or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released
only upon payment to Provident of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made subject to
proper prior authorization, further securities may be
released for that purpose; and repay such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note
or notes evidencing the loan;
-7-
<PAGE>
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into
on behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in connection
with such repurchase agreements, but only upon the
delivery of the securities;
(ix) release and deliver or exchange securities owned by
the Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
(x) release and deliver securities owned by the fund for
the purpose of redeeming in kind shares of the Fund
upon delivery thereof to Provident; and
(xi) release and deliver or exchange securities owned by
the Fund for other corporate purposes.
Provident must also receive a certified resolution
describing the nature of the corporate purpose and the
name and address of the person(s) to whom delivery
shall be made when such action is pursuant to sub-
paragraph (d).
(e) Use of Book-Entry System. The Fund shall deliver to Provident
certified resolutions of the Fund's Governing Board approving, authorizing
and instructing Provident on a continuous and on-going basis, to deposit in
the Book-Entry System all securities belonging to the Fund eligible for
deposit therein and to utilize the Book-Entry System to the extent possible
in connection with settlements of purchases and sales of securities by the
Fund, and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. Provident
shall continue to perform such duties until it receives Written or Oral
Instructions authorizing contrary actions(s).
To administer the Book-Entry System properly, the following provisions
shall apply:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry system, established
pursuant to this sub-paragraph (e) hereof, the records
of Provident shall identify by Book-Entry or otherwise
those securities belonging to the Fund. Provident
shall furnish the Fund a detailed statement of the
Property held for the Fund under this Agreement at
least monthly and from time to time and upon written
request.
(ii) Securities and any cash of the Fund deposited in the
Book-Entry System will at all times be segregated from
any assets and cash controlled by Provident in other
than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities.
Provident and its sub-custodian, if any, will pay out
money only upon receipt of securities and will deliver
securities only upon the receipt of money.
(iii) All books and records maintained by Provident which
relate to the Fund's participation in the Book-Entry
System will at all times during Provident's regular
business hours be open to the inspection of the Fund's
duly authorized employees or agents, and the Fund will
be furnished with all information in respect of the
services rendered to it as it may require.
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<PAGE>
(iv) Provident will provide the Fund with copies of any
report obtained by Provident on the system of internal
accounting control of the Book-Entry System promptly
after receipt of such a report by Provident.
Provident will also provide the Fund with such reports on its own system
of internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for the Fund
which are issued or issuable only in bearer form, except such securities held
in the Book-Entry system, shall be held by Provident in bearer form; all
other securities held for the Fund may be registered in the name of the Fund;
Provident; the Book-Entry System; a sub-custodian; or any duly appointed
nominee(s) of the Fund, Provident, Book-Entry system or sub-custodian. The
Fund reserves the right to instruct Provident as to the method of
registration and safekeeping of the securities of the Fund. The Fund agrees
to furnish to Provident appropriate instruments to enable Provident to hold
or deliver in proper form for transfer, or to register its registered nominee
or in the name of the Book-Entry System, any securities which it may hold for
the account of the Fund and which may from time to time be registered in the
name of the Fund. Provident shall hold all such securities which are not
held in the Book-Entry System in a separate account for the Fund in the name
of the Fund physically segregated at all tines from those of any other person
or persons.
-9-
<PAGE>
(g) Voting and Other Action. Neither Provident nor its nominee
shall vote any of the securities held pursuant to this Agreement by or for
the account of the Fund, except in accordance with Written Instructions.
Provident, directly or through the use of the Book-Entry System, shall
execute in blank and promptly deliver all notice, proxies, and proxy
soliciting materials to the registered holder of such securities. If the
registered holder is not the Fund then Written or Oral Instructions must
designate the person(s) who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, Provident is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund, all
income, dividends, distributions, coupons, option
premiums, other payments and similar items, included
or to be included in the Property, and, in addition,
promptly advise the Fund of such receipt and credit
such income, as collected, to the Fund's custodian
account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment
of money;
-10-
<PAGE>
(C) receive and hold for the account of the Fund all
securities received as a distribution on the Fund's
portfolio securities as a result of a stock dividend,
share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to
any portfolio securities belonging to the Fund held
by Provident hereunder;
(D) present for payment and collect the amount payable
upon all securities which may mature or be called,
redeemed, or retired, or otherwise become payable on
the date such securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(j) Miscellaneous Transactions.
(A) Provident is authorized to deliver or cause to be
delivered Property against payment or other
consideration or written receipt therefor in the
following cases:
(1) for examination by a broker or dealer selling
for the account of the Fund in accordance with
street delivery custom;
(2) for the exchange of interim receipts or
temporary securities for definitive securities;
and
(3) for transfer of securities into the name of the
Fund or Provident or nominee of either, or for
exchange of securities for a different number
of bonds, certificates, or other evidence,
representing the same aggregate face amount or
number of units bearing the same interest rate,
maturity date and call provisions, if any;
provided that, in any such case, the new
securities are to be delivered to Provident.
-11-
<PAGE>
(B) Unless and until Provident receives Oral or Written
Instructions to the contrary, Provident shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the
account of the Fund;
(2) collect interest and cash dividends received,
with notice to the Fund, to the account of the
Fund;
(3) hold for the account of the Fund all stock
dividends, rights and similar securities issued
with respect to any securities held by
Provident; and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by
the Internal Revenue Code or the Income Tax
Regulations of the United States Treasury
Department or under the laws of any State now
or hereafter in effect, inserting the Fund's
name on such certificate as the owner of the
securities covered thereby, to the extent it
may lawfully do so.
(k) Segregated Accounts.
(A) Provident shall upon receipt of Written or Oral
Instructions establish and maintain a segregated
accounts(s) on its records for and on behalf of the
Fund. Such account(s) may be used to transfer cash and
securities, including securities in the Book-Entry
System:
(1) for the purposes of compliance by the Fund with
the procedures required by a securities or
option exchange, providing such procedures
comply with the 1940 Act and any releases of
the SEC relating to the maintenance of
segregated accounts by registered investment
companies; and
-12-
<PAGE>
(2) upon receipt of Written Instructions, for other
proper corporate purposes.
(B) Provident shall arrange for the establishment of IRA custodian
accounts for such shareholders holding shares through IRA
accounts, in accordance with the Prospectus, the Internal
Revenue Code (including regulations), and with such other
procedures as are mutually agreed upon from time to time by
and among the Fund, Provident and the Fund's transfer agent.
(l) Purchases of Securities. Provident shall settle
purchased securities upon receipt of Oral or
Written Instructions from the fund or its
investment advisor(s) that specify:
(A) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
(B) the number of shares or the principal amount purchased
and accrued interest, if any;
(C) the date of purchase and settlement;
(D) the purchase price per unit;
(E) the total amount payable upon such purchase; and
(F) the name of the person from whom or the broker through
whom the purchase was made. Provident shall upon
receipt of securities purchased by or for the Fund pay
out of the moneys held for the account of the Fund the
total amount payable to the person from whom or the
broker through whom the purchase was made, provided
that the same conforms to the total amount payable as
set forth in such Oral or Written Instructions.
-13-
<PAGE>
(m) Sales of Securities. Provident shall sell securities upon
receipt of Oral Instructions from the Fund that specify:
(A) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(B) the number of shares or principal amount sold, and
accrued interest, if any;
(C) the date of trade, settlement and sale;
(D) the sale price per unit;
(E) the total amount payable to the Fund upon such sale;
(F) the name of the broker through whom or the person to
whom the sale was made; and
(G) the location to which the security must be delivered
and delivery deadline, if any.
Provident shall deliver the securities upon receipt of the total amount
payable to the Fund upon such sale, provided that the total amount payable is
the same as was set forth in the Oral or Written Instructions. Subject to
the foregoing, Provident may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
(a) Reports.
(i) Provident shall furnish the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of the Fund, listing the
portfolio securities belonging to the fund with the
adjusted average cost of each issue and the market
value at the end of such month, and stating the cash
account of the Fund including disbursement;
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<PAGE>
(C) the reports to be furnished to the Fund pursuant to
Rule 17f-4; and
(D) such other information as may be agreed upon from time
to time between the Fund and Provident.
(b) Provident shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion or
similar communication received by it as custodian of the
Property. Provident shall be under no other obligation to
inform the Fund as to such actions or events.
(n) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the
safekeeping thereof upon receipt by Provident) shall be at the sole risk of
the Fund. If payment is not received by Provident within a reasonable time
after proper demands have been made, Provident shall notify the Fund in
writing, including copies of all demand letters, any written responses,
memoranda of all oral responses and to telephonic demands thereto, and await
instructions from the Fund. Provident shall not be obliged to take legal
action for collection unless and until reasonably indemnified to its
satisfaction. Provident shall also notify the Fund as soon as reasonably
practicable whenever income due on securities is not collected in due course.
-15-
<PAGE>
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by Provident on sixty (60) days prior written
notice to the other party. In the event this Agreement is terminated
(pending appointment of a successor to Provident or vote of the shareholders
of the Fund to dissolve or to function without a custodian of its cash,
securities or other property), Provident shall not deliver cash, securities
or other property of the Fund to the Fund. It may deliver them to a bank or
trust company of Provident's, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000), as a custodian for the Fund to be held
under terms similar to those of this Agreement. Provident shall not be
required to make any such delivery or payment until full payment shall have
been made to Provident of all of its fees, compensation, costs and expenses.
Provident shall have a security interest in and shall have a right of setoff
against Property in the Fund's possession as security for the payment of such
fees, compensation, costs and expenses.
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to Provident at
Provident's address, Airport Business Center, International Court 2, 200
Stevens Drive, Lester, Pennsylvania 19113, marked for the attention of the
Custodian Services Department (or its successor) (b) if to the Fund, at the
address of the Fund; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
five days after it has been mailed. If notice is sent by messenger, it shall
be deemed to have been given on the day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. Delegation. Provident may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of
Provident National Bank or PNC Financial Corp, provided that (i) Provident
gives the Fund thirty (30) days prior written notice; (ii) the delegate
agrees with Provident to comply with all relevant provisions of the 1940 Act;
and (iii) Provident and such delegate promptly provide such information as
the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation, including (without limitation) the capabilities
of the delegate.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof.
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<PAGE>
21. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if any,
with respect to delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement
shall be binding and shall inure to the benefit of the parties hereto and
their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PROVIDENT NATIONAL BANK
[SEAL] By: /s/ A. Plambeck
---------------------------
FLAG INVESTORS VALUE BUILDER FUND, INC.
[SEAL] By: /s/ Edward J. Veilleux
----------------------------
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<PAGE>
EX-99.B(9)
FORM OF
MASTER SERVICES AGREEMENT
THIS AGREEMENT is made as of the day of , 19___ by
and between FLAG INVESTORS VALUE BUILDER FUND, INC., a Maryland corporation
(the "Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation
("ICC").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain ICC to provide certain services
on behalf of the Fund, as set forth in the Appendices to this Agreement, and
ICC is willing so to serve.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Appointment. The Fund hereby appoints ICC to perform such
services and to serve such functions on behalf of the Fund as set forth in
the Appendices to this Agreement, on the terms set forth in this Agreement
and the Appendices hereto. ICC accepts such appointment and agrees to
furnish such services and serve such functions. The Fund may have currently
outstanding one or more series or classes of its shares of common stock, par
value $.001 per share ("Shares") and may from time to time hereafter issue
separate series or classes of its Shares or classify and reclassify Shares of
any series or class, and the appointment effected hereby shall constitute
appointment for the provision of services with respect to all existing series
and classes and any additional series and classes unless the parties shall
otherwise agree in writing.
2. Delivery of Documents. The Fund has furnished ICC with copies
properly certified or authenticated of the following documents and will
furnish ICC from time to time with copies, properly certified or
authenticated, of all amendments of or supplements thereto, if any:
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of ICC to act in such capacities on behalf of the Fund as set
forth in the Appendices to this Agreement, and the entering into of this
Agreement by the Fund;
(b) The Fund's Articles of Incorporation and all amendments
thereto (the "Charter") and the Fund's By-Laws and all amendments thereto
(the "By-Laws");
(c) The Fund's most recent Registration Statement on Form N-
1A under the Securities Act of 1933, as amended (the "1933 Act") and under
the 1940 Act as filed with the Securities and Exchange Commission (the "SEC")
relating to the Shares; and
(d) Copies of the Fund's most recent prospectus or
prospectuses, including amendments and supplements thereto (collectively, the
"Prospectus").
3. Services to be Provided; Fees. During the term of this
Agreement, ICC shall perform the services and act in such capacities on
behalf of the Fund as set forth herein and in the Appendices to this
Agreement. For the services performed by ICC for the Fund, the Fund will
compensate ICC in such amounts as may be agreed to from time to time by the
parties in writing.
<PAGE>
4. Records. The books and records pertaining to the Fund which
are in the possession of ICC shall be the property of the Fund. Such books
and records shall be prepared and maintained as required by the 1940 Act and
other applicable securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and
records at all times during ICC's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided
by ICC to the Fund or the Fund's authorized representative at the Fund's
expense.
5. Cooperation With Accountants. In addition to any obligations
set forth in an Appendix hereto, ICC shall cooperate with the Fund's
independent accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the
expression of such accountants' opinion of the Fund's financial statements or
otherwise, as such may be required by the Fund from time to time.
6. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act, and any laws, rules and regulations of
governmental authorities having jurisdiction. ICC undertakes to comply with
all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, the
Commodities Exchange Act (if applicable), and all laws, rules and regulations
of governmental authorities having jurisdiction with respect to the
performance by ICC of its duties under this Agreement, including the
Appendices hereto.
7. Expenses.
(a) ICC shall bear all expenses of its employees and overhead
incurred in connection with its duties under this Agreement and shall pay all
salaries and fees of the Fund's directors and officers who are employees of
ICC.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor, administrator and distributor; the charges and
expenses of any registrar, any custodian or depositary appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any stock 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 corporate fees payable
by the Fund to federal, state or other governmental agencies; the cost and
expense of engraving or printing of stock certificates representing Shares;
all costs and expenses in connection with maintenance of registration of the
Fund and its Shares with the SEC and various states and other jurisdictions
(including filing fees and legal fees and disbursements of counsel); the
expenses of printing, including typesetting, and distributing prospectuses 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 members of any advisory board or committee other than such
directors or members who are "interested persons" of the Fund (as defined in
the 1940 Act); 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; charges
and expenses of legal counsel, including counsel to the directors of the Fund
who are not "interested persons" of the Fund (as defined in the 1940 Act),
and of independent accountants, in connection with any matter relating to the
Fund; a portion of 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.
-2-
<PAGE>
8. Liability; Indemnification. Neither ICC nor any of its
officers, directors or employees shall be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which
this Agreement, including the Appendices hereto, relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its or
their part in the performance of, or from reckless disregard by it or them
of, its or their obligations and duties under this Agreement. The Fund
agrees to indemnify and hold harmless ICC and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940
Act, and any state and foreign securities and blue sky laws, all as currently
in existence or as amended from time to time) and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action or thing which ICC takes or does or omits to take
or do at the request or on the direction of or in reliance on the advice of
the Fund; provided, that neither ICC nor any of its nominees shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of ICC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
and obligations under this Agreement. Notwithstanding anything else in this
Agreement or any Appendix hereto to the contrary, ICC shall have no liability
to the Fund for any consequential, special or indirect losses or damages
which the Fund may incur or suffer as a consequence of ICC's performance of
the services provided in this Agreement or any Appendix hereto.
9. Responsibility of ICC. ICC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by ICC in writing. In the performance of its
duties hereunder, ICC shall be obligated to exercise care and diligence and
to act in good faith and to use its best efforts within reasonable limits in
performing services provided for under this Agreement, but ICC shall not be
liable for any act or omission which does not constitute willful misfeasance,
bad faith or gross negligence on the part of ICC or reckless disregard by ICC
of its duties under this Agreement. Notwithstanding anything in this
Agreement to the contrary, ICC shall have no liability to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur
or suffer by or as a consequence of ICC's performance of the services
provided hereunder.
10. Non-Exclusivity. The services of ICC to the Fund are not to
be deemed exclusive and ICC shall be free to render accounting or other
services to others (including other investment companies) and to engage in
other activities. It is understood and agreed that directors, officers or
employees of ICC may serve as directors or officers of the Fund, and that
directors or officers of the Fund may serve as directors, officers and
employees of ICC to the extent permitted by law; and that directors, officers
and employees of ICC are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, directors or officers of any other firm or corporation, including
other investment companies.
11. Notice. Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, to the Fund at
_______________________________________, Attention: ____________, or to ICC
at 135 E. Baltimore Street, Baltimore, Maryland 21202, Attention: Mr. Edward
J. Veilleux.
12. Miscellaneous.
(a) This Agreement shall become effective as of the date
first above written and shall remain in force until terminated. This
Agreement, or any Appendix hereto, may be terminated at any time without the
payment of any penalty, by either party hereto on sixty (60) days' written
notice to the other party.
(b) This Agreement shall be construed in accordance with the
laws of the State of Maryland.
-3-
<PAGE>
(c) If any provisions of this Agreement shall be held or made
invalid in whole or in part, the other provisions of this Agreement shall
remain in force. Invalid provisions shall, in accordance with the intent and
purpose of this Agreement, be replaced by mutual consent of the parties with
such valid provisions which in their economic effect come as close as legally
possible to such invalid provisions.
(d) Except as otherwise specified in the Appendices hereto,
ICC shall be entitled to rely on any notice or communication believed by it
to be genuine and correct and to have been sent to it by or on behalf of the
Fund.
(e) ICC agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
prior, present, or potential shareholders, except, after prior notification
to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where ICC may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Fund.
(f) Any part of this Agreement or any Appendix attached
hereto may be changed or waived only by an instrument in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
FLAG INVESTORS VALUE BUILDER FUND, INC.
By:
--------------------------------
Title:
INVESTMENT COMPANY CAPITAL CORP.
By:
--------------------------------
Title:
-4-
<PAGE>
Appendix I
TRANSFER AGENCY SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
FLAG INVESTORS VALUE BUILDER FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the Master
Services Agreement dated as of ____________ ___, 19___ (the "Master Services
Agreement") between FLAG INVESTORS VALUE BUILDER FUND, INC. and INVESTMENT
COMPANY CAPITAL CORP. Defined terms not otherwise defined herein shall have
the meaning set forth in the Master Services Agreement.
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall mean
any officer of the Fund and any other person, who is fully authorized by the
Fund's Board of Directors, to give Oral and Written Instructions on behalf of
the Fund. Such persons are listed in the Certificate attached hereto.
(b) "Oral Instructions". The term "Oral Instructions" shall mean
oral instructions received by ICC from an Authorized Person or from a person
reasonably believed by ICC to be an Authorized Person.
(c) "Written Instructions". The term "Written Instructions" shall
mean written instructions signed by two Authorized Persons and received by
ICC. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Instructions. Unless otherwise provided in this Appendix, ICC
shall act only upon Oral and Written Instructions. ICC shall be entitled to
rely upon any Oral and Written Instruction it receives from an Authorized
Person (or from a person reasonably believed by ICC to be an Authorized
Person) pursuant to this Agreement. ICC may assume that any Oral or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of the Fund's Articles of Incorporation, the Master Services
Agreement, or any Appendix attached thereto, or of any vote, resolution or
proceeding of the Fund's Board of Directors or shareholders.
The Fund agrees to forward to ICC Written Instructions confirming
Oral Instructions so that ICC receives the Written Instructions by the close
of business on the same day that such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by ICC shall
in no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. The Fund further agrees that ICC shall
incur no liability to the Fund in acting upon Oral or Written Instructions
provided such instructions reasonably appear to have been received from an
Authorized Person.
If ICC is in doubt as to any action it should or should not take,
ICC may request directions or advice, including Oral or Written Instructions,
from the Fund. ICC shall be protected in any action it takes or does not
take in reliance upon directions, advice or Oral or Written Instructions it
receives from the Fund or from counsel and which ICC believes, in good faith,
to be consistent with those directions, advice or Oral or Written
Instructions. Notwithstanding the foregoing, ICC shall have no obligation
(i) to seek such directions, advice or Oral or Written Instructions, or (ii)
to act in accordance with such directions, advice or Oral or Written
Instructions unless, under the terms of other provisions of this Appendix,
the same is a condition of ICC's properly taking or not taking such action.
<PAGE>
3. Description of Services.
(a) General Services to be Provided. ICC shall provide to the
Fund the following services on an ongoing basis:
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with shareholders,
if necessary, to complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in conjunction with
proxy solicitations; solicit and tabulate proxies;
receive and tabulate proxy cards for meetings of the
Fund's shareholders;
(vi) Countersign securities;
(vii) Direct shareholder confirmation of activity;
(viii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(ix) Mail duplicate confirmation to broker-dealers of their
clients' activity, whether executed through the broker-
dealer or directly with ICC;
(x) Provide periodic shareholder lists and statistics to the
Fund;
(xi) Provide detail for underwriter/broker confirmations;
(xii) Mail periodic year-end tax and statement information;
(xiii) Provide timely notification to investment advisor,
accounting agent, and custodian of Fund activity; and
(xiv) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) Purchase of Shares. ICC shall issue and credit an account of
an investor, in the manner described in the Prospectus, once it receives:
(i) a purchase order; (ii) proper information to establish a shareholder
account; and (iii) confirmation of receipt by, or crediting of funds for such
order to, the Fund's custodian.
(c) Redemption of Shares. ICC shall redeem the Fund's shares only
in accordance with the provisions of the Prospectus and each shareholder's
individual directions. Shares shall be redeemed at such time as the
shareholder tenders his or her shares and directs the method of redemption in
accordance with the terms set forth in the Prospectus. If securities are
received in proper form, Shares shall be redeemed before the funds are
provided to ICC. When the Fund provides ICC with funds, redemption proceeds
will be wired (if requested) or a redemption check issued. All redemption
checks shall be drawn to the recordholder unless third party payment
authorizations have been signed by the recordholder and delivered to ICC.
I-2
<PAGE>
(d) Dividends and Distributions. Upon receipt of certified
resolutions of the Fund's Board of Directors authorizing the declaration and
payment of dividends and distributions, ICC shall issue the dividends and
distributions in shares, or, upon shareholder election, pay such dividends
and distributions in cash. Such issuance or payment shall be made after
deduction and payment of the required amount of funds to be withheld in
accordance with any applicable tax laws or other laws, rules or regulations.
The Fund's shareholders shall receive tax forms and other information, or
permissible substitute notice, relating to dividends and distributions, paid
by the Fund as are required to be filed and mailed by applicable law, rule or
regulation. ICC shall maintain and file with the IRS and other appropriate
taxing authorities reports relating to all dividends and distributions paid
by the Fund to its shareholders as required by tax or other law, rule or
regulation.
(e) Shareholder Account Services. If authorized in the
Prospectus, ICC shall arrange for the following services, in accordance with
the applicable terms set forth in the Prospectus: (i) the issuance of Shares
obtained through any pre-authorized check plan and direct purchases through
broker wire orders, checks and applications; (ii) exchanges of shares of any
fund for Shares of the Fund with which the Fund has exchange privileges;
(iii) automatic redemption from an account where that shareholder
participates in an automatic redemption plan; and (iv) redemption of Shares
from an account with a check writing privilege.
(f) Communications to Shareholders. Upon timely Written
Instructions, ICC shall mail all communications by the Fund to its
shareholders, including, reports to shareholders, confirmations of purchases
and sales of Shares, monthly or quarterly statements, dividend and
distribution notices, and proxy material.
(g) Records. ICC shall maintain records of the accounts for each
shareholder showing the following information: (i) name, address and U.S.
Tax Identification or Social Security number; (ii) number and class of Shares
held and number and class of Shares for which certificates, if any, have been
issued, including certificate numbers and denominations; (iii) historical
information regarding the account of each shareholder, including dividends
and distributions paid and the date and price for all transactions on a
shareholder's account; (iv) any stop or restraining order placed against a
shareholder's account; (v) any correspondence relating to the current
maintenance of a shareholder's account; (vi) information with respect to
withholdings; and (vii) any information required in order for ICC to perform
any calculations contemplated or required by this Appendix or the Master
Services Agreement.
(h) Lost or Stolen Certificates. ICC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued upon:
(i) the shareholder's pledge of a lost instrument bond or such other
appropriate indemnity bond issued by a surety company approved by ICC; and
(ii) completion of a release and indemnification agreement signed by the
shareholder to protect ICC.
(i) Shareholder Inspection of Stock Records. Upon requests from
Fund shareholders to inspect stock records, ICC will notify the Fund and the
Fund shall deliver Oral or Written Instructions granting or denying each such
request. Unless ICC has acted contrary to the Fund's Instructions, the Fund
agrees to release ICC from any liability for refusal or permission for a
particular shareholder to inspect the Fund's shareholder records.
I-3
<PAGE>
(j) Withdrawal of Shares and Cancellation of Certificates. Upon
receipt of Written Instructions, ICC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by
the number of shares surrendered by the Fund.
(k) Telephone Transactions. In accordance with the terms of the
Prospectus, ICC shall act upon shareholder requests made by telephone for
redemption or exchange of ISI shares; provided that (i) the shareholder has
authorized telephone transactions on the Fund's Account Application or
otherwise in writing, (ii) if the request is a redemption, the amount to be
redeemed does not exceed $10,000 and (iii) ICC has complied with the
identification and other security procedures required by the Fund in
connection with telephone transactions.
4. Fees. As compensation for the services performed by ICC for the
Fund pursuant to this Appendix, the Fund will pay to ICC such amounts as may
be agreed to from time to time by the parties in writing.
5. Delegation of Responsibilities. ICC may subcontract to any third
party all or any part of its obligations under this Appendix; provided that
any such subcontracting shall not relieve ICC of any of its obligations under
this Appendix. All subcontractors shall be paid by ICC.
I-4
<PAGE>
Appendix II
ACCOUNTING SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
FLAG INVESTORS VALUE BUILDER FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the
Master Services Agreement dated as of January 1, 1994 (the "Master Services
Agreement") between FLAG INVESTORS VALUE BUILDER FUND, INC. and INVESTMENT
COMPANY CAPITAL CORP. Defined terms not otherwise defined herein shall have
the meaning set forth in the Master Services Agreement.
1. Accounting Services to be Provided. ICC will perform the following
accounting functions if required:
(a) Journalize investment, capital share and income and expense;
(b) Verify investment buy/sell trade tickets when received from
the Fund's investment advisor and transmit trades to the Fund's custodian for
proper settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain tax lots for each security;
(e) Reconcile cash and investment balances with the custodian, and
provide the Fund's investment advisor with the beginning cash balance
available for investment purposes;
(f) Update the cash availability throughout the day as required by
the Fund's investment advisor;
(g) Post to and prepare the Fund's Statement of Net Assets and
Liabilities and the Statement of Operations;
(h) Calculate various contractual expenses (e.g., advisor and
custody fees);
(i) Monitor the expense accruals and notify Fund management of any
proposed adjustments;
(j) Control all disbursements from the Fund and authorize such
disbursements upon written instructions from the President or any other
officer of the Fund or the investment advisor;
(k) Calculate capital gains and losses;
(l) Determine the Fund's net income;
(m) Obtain security market quotes from independent pricing
services approved by the investment advisor, or if such quotes are
unavailable, then obtain such prices from the investment advisor, and in
either case calculate the market value of portfolio investments;
(n) Transmit or mail a copy of the daily portfolio valuation to
the Fund's investment advisor;
<PAGE>
(o) Compute the Fund's net asset value;
(p) As appropriate, compute the yields, total return, expense
ratios, portfolio turnover rate;
(q) Prepare a monthly financial statement, which will include the
following items:
. Schedule of Investments;
. Statement of Net Assets and Liabilities;
. Statement of Operations;
. Statement of Changes in Net Assets;
. Cash Statement;
. Schedule of Capital Gains and Losses;
(r) Assist in the preparation of:
. Federal and State Tax Returns;
. Excise Tax Returns;
. Annual, Semi-Annual and Quarterly Shareholder Reports;
. Rules 24 (e)-2 and 24 (f)-2 Notices;
. Annual and Semi-Annual Reports on Form N-SAR;
. Monthly and Quarterly Statistical Data Information
Reports Sent to Performance Tracking Companies;
(s) Assist in the Blue Sky and Federal registration and compliance
process;
(t) Assist in the review of registration statements; and
(u) Assist in monitoring compliance with Sub-Chapter M of the
Internal Revenue Code.
2. Records. ICC shall keep the following records: (a) all books and records
with respect to the Fund's books of account; and (b) records of the Fund's
securities transactions.
3. Liaison With Accountants. In addition to ICC's obligations relating to
the Fund's independent accountants set forth in the Master Services
Agreement, ICC shall act as liaison with the Fund's independent accountants
and shall provide account analyses, fiscal year summaries, and other audit
related schedules.
4. Compensation. For services performed by ICC pursuant to this Appendix,
the Fund will pay to ICC compensation for such services as the parties may
agree to from time to time in writing.
II-2
<PAGE>
EX-99.B(10)
[LETTERHEAD OF MORGAN, LEWIS & BUCKIUS]
June 12, 1992
Flag Investors Value Builder Fund, Inc.
135 East Baltimore Street
Baltimore, MD 21202
Gentlemen:
We have acted as counsel to you in connection with the organization of
Flag Investors Value Builder Fund, Inc. (the "Fund") and with the proposed
offering of thirty million shares of common stock of the Fund, par value
$.001 per share (the "Shares").
Having prepared the Articles of Incorporation and By-Laws of the Fund,
and having assisted in the preparation of the Fund's Registration Statement
on Form N-1A (File No. 33-46279) under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, including all
pre-effective amendments thereto (the "Registration Statement"), relating to
the offering of the Shares, and having assisted in the preparation of other
related documents, we are of the opinion that:
1. The Fund is a Maryland corporation validly organized and in good
standing under the laws of that state, authorized to issue up to 30,000,000
shares of its common stock, par value $.001 per share.
2. Upon the effectiveness of the Registration Statement, you will, in
jurisdictions where the Shares are qualified for sale, be authorized to make
a public offering of Shares pursuant to the terms of the offering as
described in the Prospectus filed as part of the Registration Statement, and
the Shares, when issued upon receipt of payment therefore as described in the
Prospectus, will be validly issued, fully paid and non-assessable by the
Fund.
We have not reviewed the securities laws of any state or territory in
connection with the proposed offering of Shares and we express no opinion as
to the legality of any offer of sale of Shares under any such state or
territorial securities laws.
This opinion is intended only for your use in connection with the
offering of Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as Exhibit 10 to the
Fund's Registration Statement on Form N-1A to be filed with the Securities
and Exchange Commission.
Very truly yours,
/s/ Morgan, Lewis & Bockius
<PAGE>
EX-99.B(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect to Post-Effective Amendment
No. 5 to the Registration Statement on Form N-1A (No. 33-46279) under the
Securities Act of 1933 of Flag Investors Value Builder Fund, Inc.:
^ The inclusion of our report dated May 1, 1995 on our audit of the
financial statements of Flag Investors Value Builder Fund, Inc. for the
fiscal year ended March 31, 1995.
^ The references to our Firm under the headings "Financial Highlights"
and "General Information" in the Prospectus and "Independent
Accountants" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 24, 1995
<PAGE>
EX-99.B(13)
FLAG INVESTORS VALUE BUILDER FUND, INC.
SUBSCRIPTION AGREEMENT
For and in consideration of the mutual agreements herein
contained, Alex. Brown Financial Corp. ("Alex. Brown") hereby agrees to purchase
from Flag Investors Value Builder Fund, Inc., a Maryland corporation (the
"Fund"), and the Fund agrees to sell 10,000 shares of the Fund's common stock,
par value $.001 per share, at a price of $10.00 per share (the "Shares"), upon
the terms and conditions set forth herein and as part of a public offering
pursuant to the terms and conditions of the Fund's Registration Statement on
Form N-1A (No. 33-46279), as amended and supplemented, initially filed with the
Securities and Exchange Commission on March 16, 1992.
Alex. Brown agrees to purchase such Shares and to pay
the full consideration therefor to the Fund upon demand.
Alex. Brown hereby confirms to the Fund its representations
that it is purchasing such Shares for investment purposes, with no present
intention of redeeming or reselling any portion thereof, and its agreement that
in the event it should dispose of any of such Shares, such transaction will be
effected by redeeming such Shares through the Fund.
ALEX. BROWN FINANCIAL CORP.
By: /s/ Beverly Wright
--------------------------
Title:
Dated: June 5, 1992
Subscription Accepted:
FLAG INVESTORS VALUE BUILDER FUND, INC.
By: /s/ Edward J. Veilleux
-------------------------
Title:Vice President
<PAGE>
EX-99.B(15)(a)
FLAG INVESTORS VALUE BUILDER FUND, INC.
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act") of Flag Investors Value Builder Fund, Inc.
(the "Fund"). Other capitalized terms herein have the meaning given to them
in the Fund's prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) Alex. Brown may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund
do not exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown
under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily
net assets of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other
investments, provided that expenses relating to such advertising and sales
material will be allocated among such other investment companies or
investments in an equitable manner, and any sales personnel so paid are not
required to devote their time solely to the sale of Shares.
<PAGE>
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown
and the Fund's Advisor are authorized to pay or cause to be paid on its
behalf and such payments shall not be included in the limitations contained
in this Plan. These expenses include: the fees of the Fund's Advisor and
Alex. Brown; the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any transfer, dividend or accounting agent
or agents appointed by the Fund; brokers' commissions chargeable to the Fund
in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to federal, state or other governmental agencies; the
costs and expenses of engraving or printing of certificates representing
shares of the Fund; all costs and expenses in connection with maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Directors or Director members of
any advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel to
the Directors of the Fund who are not interested persons (as defined in the
1940 Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Directors) of the
Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts
payable under the Plan to support the Fund's distribution effort. Alex.
Brown will report to the Board of Directors on any such expenditures as part
of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under
the Plan, the identity of the recipients of each such payment; (ii) the basis
on which the amount of the payment to such recipient was made; (iii) the
amounts of expenses authorized under this Plan and the purpose of each such
expense; and (iv) all costs of each item specified in Section 4 of this Plan
(making estimates of such costs where necessary or desirable), in each case
during the preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of
voting on this Plan; and (ii) by a vote of holders of at least a majority of
the Fund's outstanding voting securities (as defined in the 1940 Act). This
Plan shall, unless terminated as hereinafter provided, continue in effect
from year to year only so long as such continuance is specifically approved
at least annually by the vote of the Fund's Board of Directors and by the
vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at
any time by a vote of a majority of the Directors who are not interested
persons (as defined in the 1940 Act) or by the vote of the holders of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act). This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above.
-2-
<PAGE>
EX-99.B(15)(b)
Now Known As Class D Shares
FLAG INVESTORS VALUE BUILDER FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act") of the Flag Investors Class B Shares (the
"Shares") of Flag Investors Value Builder Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) Alex. Brown may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund
do not exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown
under the Distribution Agreement with respect to distribution of the Shares
which is an annual fee, calculated on an average daily net basis and paid
monthly, equal to .60% of the average daily net assets of the Shares of the
Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other
investments, provided that expenses relating to such advertising and sales
material will be allocated among such other investment companies or
investments in an equitable manner, and any sales personnel so paid are not
required to devote their time solely to the sale of Shares.
<PAGE>
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown
and the Fund's Advisor are authorized to pay or cause to be paid on its
behalf and such payments shall not be included in the limitations contained
in this Plan. These expenses include: the fees of the Fund's Advisor and
Alex. Brown; the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any transfer, dividend or accounting agent
or agents appointed by the Fund; brokers' commissions chargeable to the Fund
in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to federal state or other governmental agencies; the
costs and expenses of engraving or printing of certificates representing
shares of the Fund; all costs and expenses in connection with maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Directors or Director members of
any advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel including counsel to the
Directors of the Fund who are not interested persons (as defined in the 1940
Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Directors) of the
Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts
payable under the Plan to support the Fund's distribution effort. Alex.
Brown will report to the Board of Directors on any such expenditures as part
of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under
the Plan, the identity of the recipients of each such payment; (ii) the basis
on which the amount of the payment to such recipient was made; (iii) the
amounts of expenses authorized under this Plan and the purpose of each such
expense; and (iv) all costs of each item specified in Section 4 of this Plan
(making estimates of such costs where necessary or desirable), in each case
during the preceding calendar or fiscal quarter.
-2-
<PAGE>
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of
voting on this Plan; and (ii) by a vote of holders of at least a majority of
the Fund's outstanding voting securities (as defined in the 1940 Act). This
Plan shall unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by the vote of the Fund's Board of Directors and by the vote
of a majority of the Directors of the Fund who are not interested persons (as
defined in the 1940 Act), cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may be terminated at any time by a
vote of a majority of the Directors who are not interested persons (as
defined in the 1940 Act) or by the vote of the holders of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). This Plan
may not be amended to increase materially the amount of payments to be made
without shareholder approval, as set forth in (ii) above, and all amendments
must be approved in the manner set forth under (i) above.
-3-
<PAGE>
EX-99.B(15)(c)
FLAG INVESTORS VALUE BUILDER FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act") of the Flag Investors Class B Shares (the
"Shares") of Flag Investors Value Builder Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) Alex. Brown may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund
do not exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown
under the Distribution Agreement with respect to distribution of the Shares
which is an annual fee, calculated on an average daily net basis and paid
monthly, equal to .75% of the average daily net assets of the Shares of the
Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other
investments, provided that expenses relating to such advertising and sales
material will be allocated among such other investment companies or
investments in an equitable manner, and any sales personnel so paid are not
required to devote their time solely to the sale of Shares.
<PAGE>
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown
as distributor for the Shares is authorized to pay or cause to be paid on its
behalf and such payments shall not be included in the limitations contained
in this Plan. These expenses include: the fees of the Fund's investment
advisor and Alex. Brown; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions
to which the Fund is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with maintenance of registration of the Fund and its shares with
the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the
Fund supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
of proxy statements and reports to shareholders; fees and travel expenses of
Directors or Director members of any advisory board or committee; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not
interested persons (as defined in the 1940 Act) of the Fund and of
independent certified public accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification related
thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts
payable under the Plan to support the Fund's distribution effort. Alex.
Brown will report to the Board of Directors on any such expenditures as part
of its regular reports pursuant to Section 6 of this Plan.
-2-
<PAGE>
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under
the Plan, the identity of the recipients of each such payment; (ii) the basis
on which the amount of the payment to such recipient was made; (iii) the
amounts of expenses authorized under this Plan and the purpose of each such
expense; and (iv) all costs of each item specified in Section 4 of this Plan
(making estimates of such costs where necessary or desirable), in each case
during the preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of
voting on this Plan; and (ii) by a vote of holders of at least a majority of
the Fund's outstanding voting securities (as defined in the 1940 Act). This
Plan shall, unless terminated as hereinafter provided, continue in effect
from year to year only so long as such continuance is specifically approved
at least annually by the vote of the Fund's Board of Directors and by the
vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at
any time by a vote of a majority of the Directors who are not interested
persons (as defined in the 1940 Act) or by the vote of the holders of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act). This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above.
-3-
<PAGE>
EX-99.B(16)
Schedule of Computation of Performance Quotations
(unaudited)
This Schedule is included to illustrate how total return and yield will be
calculated. The examples presented use actual data for the Fund's Class A
Shares for the period of June 15, 1992 through September 30, 1992
(commencement of operations). The information for the Class B Shares is
computed for the same period, however the Fund commenced offering Class B
Shares on November 4, 1992.
1. Total Return
(a) Average Annual Total Return Pursuant to SEC Rules
Class A Shares
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial payment = $1,000
ERV = $1,053
n = 3.5 divided by 12
T = average annual total return = 5.31%
Class B Shares
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial payment = $1,000
ERV = $1,050
n = 3.5 divided by 12
T = average annual total return = 4.98%
(b) Aggregate Total Return Pursuant to SEC Rules
Class A Shares:
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial payment = $1,000
3.5 month ERV = $1,029
T = aggregate total return = 2.91%
<PAGE>
Class B Shares:
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial payment = $1,000
3.5 month ERV = $1,008
T = aggregate total return = .79%
(c) Average Annual Total Return Pursuant to Non-Standardized Computation
Class A Shares:
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial investment = $10,000
ERV = $11,416
n = 3.5 divided by 12
T = average annual total return = 14.16%
Class B Shares:
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial investment = $10,000
ERV = $12,124
n = 3.5 divided by 12
T = average annual total return = 21.24%
(d) Aggregate Total Return Pursuant to Non-Standardized Computation
Class A Shares:
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial payment = $10,000
3.5 month ERV = $10,776
T = aggregate total return = 7.76%
<PAGE>
Class B Shares:
The sum of 1 plus T, multiplied by P, raise the product to the
nth power = ERV
P = initial payment = $10,000
3.5 month ERV = $10,338
T = aggregate total return = 3.38%
<PAGE>
EX-99.B(24)
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, J. Dorsey Brown, III, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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/ J. Dorsey Brown, III
--------------------------
J. Dorsey Brown, III
Date: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder Fund, Inc. (the "Fund") to comply with the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act of
1940, as amended (the "1940 Act"), and any rules, regulations or requirements
of the Securities and Exchange Commission in respect thereof, in connection
with the Fund's Registration Statement on Form N-1A pursuant to the 1933 Act
and the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with
the Securities and Exchange Commission under the 1933 Act and the 1940 Act,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent, or
either of them or their substitute or substitutes, shall lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ James J. Cunnane
----------------------------------
James J. Cunnane
Date: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Diana M. Ellis, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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 Chief Financial and Accounting Officer 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/ Diana M. Ellis
---------------------------
Diana M. Ellis
Date: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, N. Bruce Hannay, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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/ N. Bruce Hannay
------------------------------
N. Bruce Hannay
Date: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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/ John F. Kroeger
------------------------------
John F. Kroeger
Date: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and
Brian C. Nelson, 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 Value Builder
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: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, W. James Price, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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/ W. James Price
------------------------------
W. James Price
Date: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J.
Veilleux and Brian C. Nelson, 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 Value Builder 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: July 22, 1994
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and
Brian C. Nelson, 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 Value Builder
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/ Harry Woolf
------------------------------
Harry Woolf
Date: July 22, 1994
<TABLE> <S> <C>
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<NAME> FLAG INVESTORS VALUE BUILDER
<S> <C>
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<PERIOD-END> MAR-31-1995
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