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[GRAPHIC OMITTED]
FLAG INVESTORS
VALUE BUILDER FUND, INC.
(Class A and Class B Shares)
Prospectus & Application -- August 1, 1997
As Supplemented Through September 1, 1997
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This mutual fund (the "Fund") is designed to maximize total return through a
combination of long-term growth of capital and current income.
Shares of the Fund are available through your securities dealer or the Fund's
transfer agent. This Prospectus relates to Flag Investors Class A Shares
("Class A Shares") and Flag Investors Class B Shares ("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.")
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, 1997, as supplemented
through September 1, 1997, 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.
TABLE OF CONTENTS
Fee Table .............................. 1
Financial Highlights ..................... 2
Investment Program ..................... 3
Investment Restrictions .................. 4
How to Invest in the Fund ............... 5
How to Redeem Shares ..................... 8
Telephone Transactions .................. 9
Dividends and Taxes ..................... 10
Management of the Fund .................. 10
Investment Advisor and Sub-Advisor ...... 10
Distributor .............................. 11
Custodian, Transfer Agent and
Accounting Services .................. 12
Performance Information .................. 12
General Information ..................... 13
Application .............................. A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY BANKERS TRUST COMPANY OR ANY OTHER 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.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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FEE TABLE
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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
(as a percentage of offering price) .................................... None None
Maximum Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, whichever is lower) ........................... 0.50%* 4.00%**
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees ......................................................... 0.82% 0.82%
12b-1 Fees ............................................................ 0.25% 0.75%
Other Expenses (including a .25% shareholder servicing
fee for Class B Shares) ................................................ 0.20% 0.45%***
------ --------
Total Fund Operating Expenses .......................................... 1.27% 2.02%
====== ========
</TABLE>
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* Purchases of $1 million or more of Class A Shares by persons not otherwise
eligible for sales load waivers are not subject to an initial sales charge;
however, a contingent deferred sales charge of .50% may be imposed upon
redemption. (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.")
*** A portion of the shareholder servicing fee is allocated to member firms of
the National Association of Securities Dealers, Inc. and qualified banks
for services provided and expenses incurred in maintaining shareholder
accounts, responding to shareholder inquiries and providing information on
their investments.
Example:
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<TABLE>
<S> <C> <C> <C> <C>
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
-------- --------- --------- ----------
Class A Shares ....................................... $57 $83 $112 $191
Class B Shares ....................................... $61 $93 $129 $198*
You would pay the following expenses on the same
investment, assuming no redemption:* 1 year 3 years 5 years 10 years
-------- --------- --------- ----------
Class B Shares ....................................... $21 $63 $109 $198*
</TABLE>
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*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," "Investment Advisor and Sub-Advisor" and "Distributor.")
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 Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD Rules").
1
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FINANCIAL HIGHLIGHTS
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The financial highlights included in the following tables 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, 1997 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, 1997, which can be
obtained at no charge by calling the Fund at (800) 767-FLAG.
(For a share outstanding throughout each period)
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<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------
For the Period
For the Year Ended March 31, June 15, 1992(1)
----------------------------------------------------- through
1997 1996 1995 1994 March 31, 1993
------------ ------------ ------------ ----------- ------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................ $ 14.68 $ 12.02 $ 11.23 $ 11.25 $ 10.00
-------- -------- -------- -------- ----------
Income from Investment
Operations:
Net investment income ......... 0.39 0.36 0.35 0.40 0.18
Net realized and unrealized
gain/(loss) on investments ... 2.49 3.03 0.80 (0.04) 1.18
-------- -------- -------- -------- ----------
Total from Investment
Operations .................. 2.88 3.39 1.15 0.36 1.36
Less Distributions:
Distributions from net
investment income and net
realized short-term gains ... (0.36) (0.41) (0.35) (0.38) (0.11)
Distributions from net realized
long-term gains ............... (0.06) (0.32) (0.01) -- --
-------- -------- -------- -------- ----------
Total Distributions ............ (0.42) (0.73) (0.36) (0.38) (0.11)
-------- -------- -------- -------- ----------
Net asset value at end of
period ........................ $ 17.14 $ 14.68 $ 12.02 $ 11.23 $ 11.25
======== ======== ======== ======== ==========
Total Return(2) ............... 19.90% 28.86% 10.57% 3.14% 13.73%
Ratios to Average Daily
Net Assets:
Expenses(3) .................. 1.27% 1.31% 1.35% 1.35% 1.35%(5)
Net investment income(4) ...... 2.51% 2.72% 3.07% 3.14% 2.88%(5)
Supplemental Data:
Net assets at end of period
(000) ........................ $278,130 $200,020 $146,986 $131,097 $ 83,535
Portfolio turnover rate ...... 13% 15% 18% 8% 8%
Average commissions per
share(6) ..................... $ 0.066 -- -- -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------
For the Year For the Period
Ended March 31, January 3, 1995(1)
---------------------- through
1997 1996 March 31, 1995
----------- --------- --------------------
<S> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................ $ 14.71 $ 12.01 $ 11.14
------- ------- ----------
Income from Investment
Operations:
Net investment income ......... 0.26 0.21 0.08
Net realized and unrealized
gain/(loss) on investments ... 2.51 3.05 0.79
------- ------- ----------
Total from Investment
Operations .................. 2.77 3.26 0.87
Less Distributions:
Distributions from net
investment income and net
realized short-term gains ... (0.26) (0.24) --
Distributions from net realized
long-term gains ............... (0.06) (0.32) --
------- ------- ----------
Total Distributions ............ (0.32) (0.56) --
------- ------- ----------
Net asset value at end of
period ........................ $ 17.16 $14.71 $ 12.01
======= ======= ==========
Total Return(2) ............... 19.00% 27.89% 7.81%
Ratios to Average Daily
Net Assets:
Expenses(3) .................. 2.02% 2.06% 2.10%(5)
Net investment income(4) ...... 1.84% 1.97% 2.94%(5)
Supplemental Data:
Net assets at end of period
(000) ........................ $17,311 $4,178 $ 341
Portfolio turnover rate ...... 13% 15% 18%
Average commissions per
share(6) ..................... $ 0.066 -- --
</TABLE>
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(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.40%, 1.38% and 1.70% (annualized) for Class A
Shares for the years ended March 31, 1995, March 31, 1994 and the period
ended March 31, 1993, respectively, and 2.17% (annualized) for Class B
Shares for the period ended March 31, 1995.
(4) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 3.02%, 3.11% and 2.53%
(annualized) for Class A Shares for the years ended March 31, 1995, March
31, 1994 and the period ended March 31, 1993, respectively, and 2.87%
(annualized) for Class B Shares for the period ended March 31, 1995.
(5) Annualized.
(6) Disclosure is required for the fiscal years beginning after September 1,
1995. Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
2
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INVESTMENT PROGRAM
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Investment Objective, Policies and Risk
Considerations
The Fund's investment objective 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.
The Fund's investment advisor (the "Advisor") and the Fund's sub-advisor
(the "Sub-Advisor") (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 in yields
and interest rates and changes in fiscal and monetary policies.
Under normal market conditions, between 40% and 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, 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 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 by S&P or Moody's, 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. Up to 10% of the Fund's assets may be invested in lower
quality debt obligations (securities rated BB or lower by S&P or Ba or lower by
Moody's). Securities that were investment grade at the time of purchase, but
are subsequently downgraded to BB, Ba or lower will be included in the 10%
category. In the event that any security owned by the Fund is downgraded, the
Advisors will review the situation and take appropriate action, but will not be
required automatically to sell any such security. 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. (See "Investments in Non-Investment
Grade Securities" below.)
<PAGE>
The Fund may also purchase obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including certain
mortgage-related debt securities), and may invest in high quality short-term
debt securities such as commercial paper rated A-1 or A-1+ by S&P or P-1 by
Moody's.
Investments in Non-Investment Grade
Securities
Lower rated debt obligations, 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. In addition, C- or D-rated
securities may be regarded as having extremely poor prospects of ever attaining
investment standing. 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
3
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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
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 following table 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, 1997,
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 .72%
AA .53%
A 3.43%
BBB 9.05%
BB 5.4%
B 2.99%
Unrated 0%
Investments in Repurchase Agreements
The Fund may agree to purchase U.S. Government securities from
creditworthy financial institutions, such as banks or broker-dealers subject to
the seller's agreement to repurchase the securities at an established time and
price. Default by or bankruptcy proceedings with respect to the seller may,
however, expose the Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.
Investments in Securities of Foreign Issuers
From time to time, the Fund may invest in American Depositary Receipts,
which are interests in securities of foreign companies, and up to 10% of the
Fund's total assets in debt and equity securities of foreign issuers not
publicly traded in the United States when the Advisors believe that such
investments provide good opportunities for achieving income and capital gains
without undue risk. Nevertheless, foreign investments involve different risks
from investments in the United States, including currency market and political
risks. Accordingly, the Advisors intend to seek securities of companies in, and
governments of, developed, stable nations.
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 notes or
bonds issued by the U.S. Treasury Department or by other agencies of the U.S.
Government.
<PAGE>
The Fund may write covered call options on common stock that 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 repurchase agreements with remaining maturities in excess
of seven days, provided that no more than 5% of its total assets may be
invested 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
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.
INVESTMENT RESTRICTIONS
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The Fund's investment program is subject to a number of restrictions that
reflect both self-imposed standards and federal regulatory limitations. The
investment restrictions recited below are matters of fundamental policy and may
not be changed without shareholder approval. 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);
4
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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; or
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).
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
HOW TO INVEST IN THE FUND
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Class A and Class B Shares may be purchased from the Fund's distributor
(the "Distributor") through any securities dealer that is authorized to service
shareholder accounts ("Participating Dealers") or through any financial
institution that is authorized to service shareholder accounts ("Shareholder
Servicing Agents"). Shares of either class may also be purchased by completing
the Application Form attached to this Prospectus and returning it, together
with payment of the purchase price, to 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. (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.
The Fund reserves the right to suspend the sale of shares at any time at
the discretion of the Distributor and the Advisors. Orders for purchases of
shares are accepted on any day on which the New York Stock Exchange is open for
business (a "Business Day"). Purchase orders 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 by mail must be accompanied by payment of the Offering
Price. Purchases made through the Distributor or a Participating Dealer or
Shareholder Servicing Agent must be in accordance with such entity's payment
procedures. The Distributor may, in its sole discretion, refuse to accept any
purchase order.
<PAGE>
The net asset value per share is determined daily as of the close of the
New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on each
Business Day. Net asset value per share of a class is calculated by valuing its
share of the Fund's assets, deducting all liabilities attributable to that
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. 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/service fees, the net asset value per share
of the classes differs at times.
Offering Price
Shares may be purchased from the Distributor, Participating Dealers or
Shareholder Servicing Agents at the Offering Price which for Class A Shares
includes a sales charge that is calculated as a percentage of the Offering
Price and for Class B Shares is net asset value.
5
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<PAGE>
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Class A Shares
The sales charge on Class A Shares, which decreases as the amount of
purchase increases, is shown below:
Sales Charge
as % of Dealer
------------------------ Compensation
Offering Net Amount as % of
Amount of Purchase Price Invested Offering Price
- ------------------------------------------------------------------
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*
- ------------------------------------------------------------------
* Purchases of $1 million or more may be subject to a contingent deferred sales
charge. (See below.) The Distributor may make payments to Participating
Dealers and Shareholder Servicing Agents in the amount of up to 1.00% 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 Class A shares of Flag Investors Short-Intermediate Income
Fund, Inc. (formerly, 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 the Distributor,
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 Class A Shares for their own account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of Intent that states the investor's intention to
invest at least $50,000 within a 13-month period in Class A Shares. Each
purchase of Class A 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 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 Class A 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 Class A 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 the Distributor 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 Class A
Shares not subject to such charge are the first redeemed followed by other
Class A Shares held for the longest period of time.
<PAGE>
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 Class A shares of the
Intermediate Funds that 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
6
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<PAGE>
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after the redemption; and (v) current or retired Directors of the Fund and
directors and employees (and their immediate families) of the Advisors,
Distributor, Participating Dealers and their respective affiliates.
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 the
Distributor, a Participating Dealer or Shareholder Servicing Agent.
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. 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.
Contingent Deferred Sales Charge
Year Since Purchase (as a percentage of the dollar
Payment was Made amount subject to charge)
- -------------------------------------------------------------------------------
First ..................................................... 4.0%
Second .................................................. 4.0%
Third ..................................................... 3.0%
Fourth .................................................. 3.0%
Fifth ..................................................... 2.0%
Sixth ..................................................... 1.0%
Thereafter ............................................... None*
- -------------------------------------------------------------------------------
*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 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 Acts. 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.
<PAGE>
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 the
Distributor 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 with
the same sales load structure. Shares issued pursuant to this offer will not be
subject to the sales charges described above or any other charge. In addition,
shareholders of Class A shares 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
7
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<PAGE>
- --------------------------------------------------------------------------------
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
thereafter to any applicable contingent deferred sales charge.
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) or the
close of the New York Stock Exchange, whichever is earlier. 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 the Distributor 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. Class A 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 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.
Purchases Through Dividend Reinvestment
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Fund shares of the
same class. Unless the shareholder elects otherwise, all income and capital
gains distributions will be reinvested in additional Fund shares at net asset
value, without a sales charge. Shareholders may elect to terminate automatic
reinvestment by giving written notice to the Transfer Agent at the address
listed on the inside back cover of this Prospectus, 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.
<PAGE>
Alternately, shareholders may have their distributions invested in shares
of other funds in the Flag Investors family of funds. Shareholders who are
interested in this option should call the Transfer Agent for additional
information.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shareholders may redeem all or part of their investments on any Business
Day by transmitting a redemption order through 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 any amount
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) or the close of the New York Stock Exchange, whichever is
earlier, will be effected at the net asset
8
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<PAGE>
- --------------------------------------------------------------------------------
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 upon 60 days' written notice.
Shares will not be redeemed involuntarily as a result of a decline in account
value due to a decline in net asset value alone.
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 Class A 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 Class A 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 enroll in the Fund's
Systematic Withdrawal Plan may do so by completing the appropriate section of
the Application Form attached to this Prospectus.
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 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 on the inside back cover of this Prospectus.
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.
<PAGE>
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
transaction requests will be recorded and investors may be required to provide
additional telecopied instructions of such transaction requests. If these
procedures are employed, 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
9
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<PAGE>
- --------------------------------------------------------------------------------
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.")
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.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences is based
on current tax laws and regulations, which may be changed by legislative,
judicial, or administrative action. No attempt has been made to present a
detailed explanation of the federal, state or local income tax treatment of the
Fund or the shareholders, and the discussion here is not intended as a
substitute for careful tax planning. Accordingly, shareholders are advised to
consult their tax advisors regarding specific questions as to federal, state
and local income taxes.
The Statement of Additional Information sets forth further information
concerning taxes.
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, it
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.
The sale, exchange, or redemption of Fund shares is a taxable event for
the shareholder.
<PAGE>
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 executive officers, the Advisors and the Distributor. A majority of the
Directors of the Fund have no affiliation with the Advisors or the Distributor.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the "Sub-
Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and BT Alex. Brown
Cash
10
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<PAGE>
- --------------------------------------------------------------------------------
Reserve Fund, Inc., which funds had approximately $5.5 billion of net assets as
of May 31, 1997. ABIM is a registered investment advisor with approximately
$6.3 billion under management as of May 31, 1997.
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 certain affiliates or to the Distributor, provided
that compensation 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 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,
1997, ICC received from the Fund a fee equal to .82% of the Fund's average
daily net assets and, for the same period, ICC paid ABIM a fee equal to .60% of
the Fund's average daily net assets.
ICC is an indirect subsidiary of Bankers Trust New York Corporation. ABIM
is a limited partnership affiliated with the Advisor. Buppert, Behrens & Owen,
Inc., a company organized and owned by three employees of ABIM, owns a 49%
limited partnership interest and a 1% general partnership interest in ABIM. BT
Alex. Brown Incorporated ("BT Alex. Brown") owns a 1% general partnership
interest in ABIM and BT Alex. Brown Holdings, Inc. owns the remaining limited
partnership interest.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent and
Accounting Services.")
Portfolio Manager
Mr. Hobart C. Buppert, II has primary responsibility for managing the
Fund's assets. From the Fund's inception until July 31, 1997, he shared that
responsibility with Messrs. J. Dorsey Brown, III and Lee S. Owen.
Hobart C. Buppert, II -- 25 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, respectively. He is a
member of the Baltimore Security Analysts Society and the Financial Analysts
Federation.
<PAGE>
DISTRIBUTOR
- --------------------------------------------------------------------------------
Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors"
or the "Distributor") acts as distributor of each class of the Fund's shares.
Prior to September 1, 1997, Alex. Brown & Sons Incorporated served as
distributor for each class of the Fund's shares for the same compensation and
on substantially the same terms and conditions as ICC Distributors. ICC
Distributors is a registered broker-dealer that offers distribution services to
a variety of registered investment companies including other funds in the Flag
Investors family of funds and BT Alex. Brown Cash Reserve Fund, Inc. ICC
Distributors is not affiliated with either the Advisor or the Sub-Advisor.
The Fund has adopted a Distribution Agreement and related Plans of
Distribution with respect to the Class A Shares and the Class B Shares (the
"Plans"), pursuant to Rule 12b-1 under the Investment Company Act. In addition,
the Fund may enter into agreements with certain financial institutions,
including certain banks and BT Alex. Brown, to provide shareholder services,
pursuant to which the Distributor will allocate up to all 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.
As compensation for providing distribution services for the Class A
Shares, ICC Distributors receives a fee equal to .25% of the average daily net
assets of the Class A Shares.
11
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<PAGE>
- --------------------------------------------------------------------------------
As compensation for providing distribution and shareholders service for
the Class B Shares, ICC Distributors receives a distribution fee equal to .75%
of the Class B Shares' average daily net assets and a shareholder servicing fee
equal to .25% of the Class B Shares' average daily net assets. The distribution
fee is used to compensate ICC Distributors for its services and expenses in
distributing the Class B Shares. The shareholder servicing fee is used to
compensate 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 the
Distributor's actual cost of providing distribution services and may be used to
pay the Distributor's overhead expenses. If the cost of providing distribution
services to the Fund is less than the payments received, the unexpended portion
of the distribution fees may be retained as profit by the Distributor. ICC
Distributors 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.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services to the Fund for the fiscal year ended March
31, 1997, ICC received a fee equal to .03% of the Fund's average daily net
assets. (See the Statement of Additional Information.) PNC Bank, National
Association acts as custodian of the Fund's assets. The Fund's Board of
Directors has approved Bankers Trust Company, a subsidiary of Bankers Trust New
York Corporation and an affiliate of the Fund, as custodian. Currently, it is
anticipated that Bankers Trust Company will provide custodial services to the
Fund effective September 22, 1997.
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., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services that monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Lehman Brothers 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.
<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.
12
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<PAGE>
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
Capital Shares
The Fund is an open-end, diversified management investment company,
organized under the laws of the State of Maryland on March 5, 1992 and is
authorized to issue 75 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 the 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 is entitled to its pro rata portion of
the Fund's assets after all debts and expenses have been paid.
The Board of Directors 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 two other classes of shares in
addition to the shares offered hereby: "Flag Investors Value Builder Fund Class
D Shares," which are not currently being offered, and "Flag Investors Value
Builder Fund Institutional Shares." Additional information concerning the
Fund's Institutional Shares may be obtained by calling the Distributor at (800)
767-FLAG. 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
and, accordingly, the net asset value per share of classes may differ at times.
Annual Meetings
Unless required under applicable Maryland law, the Fund does not expect
to hold annual meetings of shareholders. However, 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 the
Fund at (800) 767-FLAG, the Transfer Agent at (800) 553-8080, or a
Participating Dealer or Shareholder Servicing Agent, as appropriate.
13
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<PAGE>
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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 419663
Kansas City, MO 64141-6663
Attn: Flag Investors Value Builder Fund, Inc.
For assistance in completing this Application please call: 1-800-553-8080,
Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
To open an IRA account, please call 1-800-767-3524 for an IRA information kit.
I wish to purchase the following class of shares of the Fund, in the amount
indicated below. (Please check the applicable box and indicate the amount of
purchase.)
[ ] Class A Shares (4.5% maximum initial sales charge) in the amount of
$____________________
[ ] Class B 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
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First Name Initial Last Name
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Social Security Number
- --------------------------------------------------------------------
Joint Tenant Initial Last Name
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)
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For the Benefit of
<PAGE>
Gifts to Minors
- --------------------------------------------------------------------
Custodian's Name (only one allowed by law)
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Minor's Name (only one)
- --------------------------------------------------------------------
Social Security Number of Minor
under the _____________________ Uniform Gifts to Minors Act
State of Residence
Mailing Address
- --------------------------------------------------------------------
Street
- --------------------------------------------------------------------
City State Zip
( )
- --------------------------------------------------------------------
Daytime Phone
Letter of Intent (Class A Shares only) (Optional)
[ ] I agree to the Letter of Intent and Escrow Arrangement 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 of Flag Investors Value Builder
Fund, Inc., in an aggregate amount at least equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
Right of Accumulation (Optional)
List the Account numbers of other Flag Investors Funds (except Class B shares)
that you or your immediate family already own that qualify for reduced sales
charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Distribution Options
Please check the appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional shares of the same class 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
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
A-1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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 per class [ ] Monthly ($100 minimum per class)
Subsequent Investments (check one): [ ] Quarterly ($250 minimum per
class)
Plese attach a voided check.
- ------------------------------------------ -------------------------------------
Bank Name Depositor's Signature Date
- ------------------------------------------ -------------------------------------
Existing Flag Investors Fund Account No. Depositor's Signature (if Date
If any 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 pre-designated bank account, please
provide the following information:
Bank: Bank Account No.:
---------------------------- ---------------------
Address: Bank Account Name:
---------------------------- ---------------------
----------------------------
<PAGE>
Signature and Taxpayer Certification
- -------------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above, I
have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a
penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-553-8080)
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes:__________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
- -------------------------------------------------------------------------------
I have received a copy of the Fund's prospectus dated August 1, 1997, as
supplemented through September 1, 1997. 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.
- -------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- -------------------------------------------------------------------------------
- --------------------------------- --------------------------------------
Signature Date Signature (if joint acct., Date
both must sign)
- -------------------------------------------------------------------------------
- --------------------
For Dealer Use Only
- --------------------
Dealer's Name: Dealer Code:
------------------------------ ----------------------
Dealer's Address: Branch Code:
--------------------------- ----------------------
---------------------------
Representative: Rep. No.:
---------------------------- ------------------------
A-2
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<PAGE>
- --------------------------------------------------------------------------------
FLAG INVESTORS VALUE BUILDER FUND, INC.
(Class A and Class B Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
One South Street P.O. Box 7558
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
One South Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
1-800-553-8080
Custodian Fund Counsel
PNC BANK, NATIONAL ASSOCIATION MORGAN, LEWIS & BOCKIUS LLP
Airport Business Park 2000 One Logan Square
200 Stevens Drive Philadelphia, Pennsylvania 19103
Lester, Pennsylvania 19113
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
FLAG INVESTORS
VALUE BUILDER FUND, INC.
(Institutional Shares)
Prospectus & Application -- August 1, 1997
As Supplemented Through September 1, 1997
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") is designed to maximize total return through a
combination of long-term growth of capital and current income.
Flag Investors Institutional Shares of the Fund ("Institutional Shares") are
available through your securities dealer or the Fund's transfer agent and may
be purchased only by eligible institutions or by clients of investment advisory
affiliates of BT Alex. Brown Incorporated. (See "How to Invest in Institutional
Shares.")
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, 1997, as supplemented
through September 1, 1997 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.
TABLE OF CONTENTS
Fee Table ................................. 1
Financial Highlights ........................ 2
Investment Program ........................ 3
Investment Restrictions ..................... 5
How to Invest in Institutional Shares ...... 5
How to Redeem Institutional Shares ......... 6
Telephone Transactions ..................... 6
Dividends and Taxes ........................ 7
Management of the Fund ..................... 8
Investment Advisor and Sub-Advisor ......... 8
Distributor ................................. 8
Custodian, Transfer Agent and
Accounting Services ..................... 9
Performance Information ..................... 9
General Information ........................ 9
Application ................................. A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY BANKERS TRUST COMPANY OR ANY OTHER 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.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) ......... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price). None
Maximum Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) ............................................. None
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees ......................................................................... 0.82%
12b-1 Fees ............................................................................ None
Other Expenses ......................................................................... 0.20%
-------
Total Fund Operating Expenses .......................................................... 1.02%
=======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Example: 1 year 3 years 5 years 10 years
- ------- ------- -------- -------- ---------
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: ............. $10 $32 $56 $125
</TABLE>
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 Institutional Shares through a financial institution may
be charged separate fees by that institution. (For more complete descriptions
of the various costs and expenses, see "How to Invest in Institutional Shares,"
"Investment Advisor and Sub-Advisor" and "Distributor.")
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights included in the following 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, 1997 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, 1997, which can be obtained
at no charge by calling the Fund at (800) 767-FLAG.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Shares
-------------------------------------
For the Period
For the Year November 2, 1995(1)
Ended March through
31, 1997 March 31, 1996
-------------- --------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............... $ 14.77 $ 13.89
------- ---------
Income from Investment Operations:
Net investment income ................................. 0.41 0.13
Net realized and unrealized gain on investments ...... 2.53 1.17
------- ---------
Total from Investment Operations ..................... 2.94 1.30
------- ---------
Less Distributions:
Distributions from net investment income and
net realized short-term gains ..................... (0.38) (0.10)
Distributions from net realized long-term gains ...... (0.06) (0.32)
------- ---------
Total distributions .................................... (0.44) (0.42)
------- ---------
Net asset value at end of period $ 17.27 $ 14.77
======= =========
Total Return .......................................... 20.24% 21.12%
Ratios to Average Daily Net Assets:
Expenses ............................................. 1.02% 1.03%(2)
Net investment income ................................. 2.83% 2.89%(2)
Supplemental Data:
Net assets at end of period (000) ..................... $34,771 $ 11,768
Portfolio turnover rate .............................. 13% 15%
Average commissions per share(3) ..................... $ 0.066 --
</TABLE>
- --------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Annualized.
(3) Disclosure is required for the fiscal years beginning after September 1,
1995. Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk
Considerations
The Fund's investment objective 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.
The Fund's investment advisor (the "Advisor") and the Fund's sub-advisor
(the "Sub-Advisor") (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 in yields
and interest rates and changes in fiscal and monetary policies.
Under normal market conditions, between 40% and 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, 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 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 by S&P or Moody's, 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. Up to 10% of the Fund's assets may be invested in lower
quality debt obligations (securities rated BB or lower by S&P or Ba or lower by
Moody's). Securities that were investment grade at the time of purchase, but
are subsequently downgraded to BB, Ba or lower will be included in the 10%
category. In the event that any security owned by the Fund is downgraded, the
Advisors will review the situation and take appropriate action, but will not be
required automatically to sell any such security. 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. (See "Investments in Non-Investment
Grade Securities" below.)
The Fund may also purchase obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including certain
mortgage-related debt securities), and may invest in high quality short-term
debt securities such as commercial paper rated A-1 or A-1+ by S&P or P-1 by
Moody's.
<PAGE>
Investments in Non-Investment Grade
Securities
Lower rated debt obligations, 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. In addition, C- or D-rated securities may
be regarded as having extremely poor prospects of ever attaining investment
standing. 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
3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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
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 following table 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, 1997,
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 6.72%
AA .53%
A 3.43%
BBB 9.05%
BB 5.4%
B 2.99%
Unrated 0%
Investments in Repurchase Agreements
The Fund may agree to purchase U.S. Government securities from
creditworthy financial institutions, such as banks or broker-dealers, subject
to the seller's agreement to repurchase the securities at an established time
and price. Default by or bankruptcy proceedings with respect to the seller may,
however, expose the Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.
Investments in Securities of Foreign Issuers
From time to time, the Fund may invest in American Depositary Receipts,
which are interests in securities of foreign companies, and up to 10% of the
Fund's total assets in debt and equity securities of foreign issuers not
publicly traded in the United States when the Advisors believe that such
investments provide good opportunities for achieving income and capital gains
without undue risk. Nevertheless, foreign investments involve different risks
from investments in the United States, including currency market and political
risks. Accordingly, the Advisors intend to seek securities of companies in, and
governments of, developed, stable nations.
<PAGE>
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 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 that 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 repurchase agreements with remaining maturities in excess
of seven days, provided that no more than 5% of its total assets may be
invested 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
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund's investment program is subject to a number of restrictions that
reflect both self-imposed standards and federal regulatory limitations. The
investment restrictions recited below are matters of fundamental policy and may
not be changed without shareholder approval. 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; or
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).
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
HOW TO INVEST IN INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Institutions (e.g., banks and trust companies, savings institutions,
corporations, insurance companies, investment counselors, pension funds,
employee benefit plans, trusts, estates and educational, religious and
charitable institutions) and clients of investment advisory affiliates of BT
Alex. Brown Incorporated ("BT Alex. Brown") may purchase Institutional Shares
through the Fund's distributor (the "Distributor"), through any securities
dealer that is authorized to distribute Institutional Shares ("Participating
Dealers"), or by completing the Application Form attached to this Prospectus
and returning it, together with payment of the purchase price, as instructed in
the Application.
The minimum initial investment in Institutional Shares is $500,000,
except that the minimum initial investment is $1,000,000 for qualified
retirement plans. There is no minimum for clients of investment advisory
affiliates of BT Alex. Brown or for subsequent investments. The Fund reserves
the right to suspend the sale of Institutional Shares at any time at the
discretion of the Distributor and the Advisors.
Orders for purchases of Institutional Shares are accepted on any day on
which the New York Stock Exchange is open for business (a "Business Day").
Purchase orders for Institutional Shares will be executed at a per share
purchase price equal to the net asset value next determined after receipt of
the purchase order. Purchases made through the Distributor or a Participating
Dealer must be in accordance with such entity's payment procedures. The
Distributor 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 its share of the Fund's assets, deducting all liabilities attributable
to that 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. 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.
Purchases by Exchange
Shareholders of other Flag Investors funds that offer Institutional
shares may exchange their Institutional shares of those funds for an equal
dollar amount of Institutional 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) or the close of the New York Stock Exchange,
whichever is earlier. Exchange requests received after 4:00 p.m. (Eastern Time)
will be effected on the next Business Day.
5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
The exchange privilege may be exercised by notifying the Fund's transfer
agent (the "Transfer Agent") by telephone on any Business Day between the hours
of 8:30 a.m. and 5:30 p.m. (Eastern Time) (See "Telephone Transactions" below)
or by regular or express mail at its address listed on the inside back cover of
this Prospectus.
The Fund may modify or terminate this offer of exchange at any time on 60
days' prior written notice to shareholders.
Other Information
Periodic statements of account from the Fund will reflect all dividends,
purchases and redemptions of Institutional Shares.
In the interest of economy and convenience and because of the operating
procedures for the Institutional Shares, certificates representing such shares
will not be issued. All purchases of Institutional Shares are confirmed and
credited to the shareholder's account on the Fund's books maintained by the
Transfer Agent or its agents. Shareholders will have the same rights and
ownership with respect to such shares as if certificates had been issued.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Shareholders may redeem all or part of their Institutional Shares on any
Business Day by transmitting a redemption order through a Participating Dealer,
or by regular or express mail to the Transfer Agent at its address listed on the
inside back cover of this Prospectus. Shareholders may also redeem Institutional
Shares by telephone (in amounts up to $500,000). (See "Telephone Transactions"
below.) A redemption request is effected at the net asset value per share next
determined after receipt of the order in proper form. Redemption orders received
after 4:00 p.m. (Eastern Time) or the close of the New York Stock Exchange,
whichever is earlier, will be effected at the net asset value next determined on
the following Business Day. Payment for redeemed Institutional Shares will be
made by wire transfer of funds to the shareholder's bank, or to a Participating
Dealer, as appropriate, upon receipt of a duly authorized redemption request as
promptly as feasible and, under most circumstances, within three Business Days.
Dividends payable up to the date of redemption of Institutional Shares
will be paid on the next dividend payable date. If all of the Institutional
Shares in an account have been redeemed on a dividend payment date, the
dividend will be remitted by wire to the shareholder's bank or to a
Participating Dealer, as appropriate.
The Fund has the power, under its Articles of Incorporation, to redeem
shareholder accounts amounting to less than $500 upon 60 days' written notice.
Institutional Shares will not be redeemed involuntarily as a result of a
decline in account value due to a decline in net asset value alone.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Institutional Shares in amounts up to $500,000,
by notifying the Transfer Agent by telephone 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 on the inside back cover of this Prospectus. 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 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
transaction requests will be recorded and investors may be required to provide
additional telecopied instructions of such transaction requests. If these
procedures are employed, 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
6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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 express mail or facsimile. (See "How to Invest in
Institutional Shares -- Purchases by Exchange" and "How to Redeem Institutional
Shares.")
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 Institutional Shares at net asset
value. Shareholders may elect to terminate automatic reinvestment by giving
written notice to the Transfer Agent at its address listed on the inside back
cover of this Prospectus, either directly or through a Participating Dealer, at
least five days before the next date on which dividends or distributions will be
paid.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences is based
on current tax laws and regulations, which may be changed by legislative,
judicial or administrative action. No attempt has been made to present a
detailed explanation of the federal, state or local income tax treatment of the
Fund or the shareholders, and the discussion here is not intended as a
substitute for careful tax planning. Accordingly, shareholders are advised to
consult their tax advisors regarding specific questions as to federal, state
and local income taxes.
The Statement of Additional Information sets forth further information
concerning taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Sub-chapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as the Fund qualifies for this tax treatment, it
will be relieved of federal income tax on that part of its net investment income
that is 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 Institutional 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.
The sale, exchange or redemption of Institutional Shares is a taxable
event for the shareholder.
7
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<PAGE>
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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 executive officers, to the Advisors and the Distributor. A majority of
Directors of the Fund have no affiliation with the Advisors or the Distributor.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the "Sub-
Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and BT Alex. Brown
Cash Reserve Fund, Inc., which funds had approximately $5.5 billion of net
assets as of May 31, 1997. ABIM is a registered investment advisor with
approximately $6.3 billion under management as of May 31, 1997.
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 certain affiliates or to the Distributor, provided
that compensation 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
National Association of Securities Dealers, Inc. ("NASD") Rules, and subject to
seeking the most favorable price and execution available and 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,
1997, ICC received from the Fund a fee equal to .82% of the Fund's average
daily net assets and, for the same period, ICC paid ABIM a fee equal to .60% of
the Fund's average daily net assets.
ICC is an indirect subsidiary of Bankers Trust New York Corporation. ABIM
is a limited partnership affilated with the Advisor. Buppert, Behrens & Owen,
Inc., a company organized and owned by three employees of ABIM, owns a 49%
limited partnership interest and a 1% general partnership interest in ABIM. BT
Alex. Brown Incorporated owns a 1% general partnership interest in ABIM and BT
Alex. Brown Holdings, Inc. owns the remaining limited partnership interest.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent and
Accounting Services.")
<PAGE>
Portfolio Manager
Mr. Hobart C. Buppert, II has primary responsibility for managing the
Fund's assets. From the Fund's inception until July 31, 1997, he shared that
responsibility with Messrs. J. Dorsey Brown, III and Lee S. Owen.
Hobart C. Buppert, II -- 25 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, respectively. He is a
member of the Baltimore Security Analysts Society and the Financial Analysts
Federation.
DISTRIBUTOR
- --------------------------------------------------------------------------------
Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors"
or the "Distributor") acts as distributor of each class of the Fund's shares.
Prior to September 1, 1997, Alex. Brown & Sons Incorporated served as
distributor for each class of the Fund's shares for the same compensation and
on substantially the same terms and conditions as ICC Distributors. ICC
Distributors is a registered broker-dealer that
8
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<PAGE>
- --------------------------------------------------------------------------------
offers distribution services to a variety of registered investment companies
including other funds in the Flag Investors family of funds and BT Alex. Brown
Cash Reserve Fund, Inc. ICC Distributors is not affiliated with either the
Advisor or the Sub-Advisor. ICC Distributors receives no compensation for
distributing the Institutional Shares.
ICC Distributors bears all expenses associated with advertisements,
promotional materials, sales literature and printing and mailing prospectuses
to individuals and entities other than Fund shareholders.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp., is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services to the Fund for the fiscal year ended March
31, 1997, ICC received a fee equal to .03% of the Fund's average daily net
assets. (See the Statement of Additional Information.) PNC Bank, National
Association acts as custodian of the Fund's assets. The Fund's Board of
Directors has approved Bankers Trust Company, a subsidiary of Bankers Trust New
York Corporation and an affiliate of the Fund, as custodian. Currently, it is
anticipated that Bankers Trust Company will provide custodial services to the
Fund effective September 22, 1997.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its performance including
comparisons to other mutual funds with similar investment objectives and to
stock or other relevant indices. All such advertisements will show the average
annual total return 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 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.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services that monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Lehman Brothers 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.
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 financial institutions with respect to customer
accounts through which Institutional Shares may be purchased, although not
included in calculations of performance, will reduce performance results.
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Capital Shares
The Fund is an open-end, diversified management investment company,
organized under the laws of the State of Maryland on March 5, 1992 and is
authorized to issue 75 million shares of capital stock, with a par value of
$.001 per share. Shares 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 the 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 is entitled to its pro rata portion of the Fund's assets
after all debts and expenses have been paid.
9
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<PAGE>
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The Board of Directors 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 Institutional Shares." The Board has no present intention of
establishing any additional series of the Fund, but the Fund does have three
other classes of shares in addition to the shares offered hereby: "Flag
Investors Value Builder Fund Class A Shares" and "Flag Investors Value Builder
Fund Class B Shares," which are offered by a separate prospectus and "Flag
Investors Value Builder Fund Class D Shares," which are not currently being
offered. Additional information concerning the Fund's Class A Shares and Class
B Shares may be obtained by calling Alex. Brown at (800) 767-FLAG. Different
classes of the Fund may be offered to certaininvestors and holders of such
shares may be entitled to certain exchange privileges not offered to
Institutional Shares. All classes of the Fund share a common investment
objective, portfolio of investments and advisory fee, but the classes may have
different distribution fees or sales load structures and the net asset value
per share of the classes may differ at times.
Annual Meetings
Unless required under applicable Maryland law, the Fund does not expect
to hold annual meetings of shareholders. However, 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 Institutional Shares should
contact the Fund at (800) 767-FLAG, the Transfer Agent at (800) 553-8080 or a
Participating Dealer, as appropriate.
10
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<PAGE>
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FLAG INVESTORS VALUE BUILDER FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Send completed Application by overnight carrier to:
Flag Investors Funds
330 West Ninth Street, First Floor
Kansas City, MO 64105
Attn: Flag Investors Value Builder Fund, Inc.
For assistance in completing this Application please call: 1-800-553-8080,
Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
If you are paying by check, make check payable to "Flag Investors Value Builder
Fund, Inc." and mail with this Application. If you are paying by wire, see
instructions below.
- --------------------------------------------------------------------------------
Your Account Registration (Please Print)
Name on Account
- ---------------------------------------------------------------
Name of Corporation, Trust or Partnership
- ------------------------------------------------
Tax ID Number
[ ] Corporation [ ] Partnership [ ] Trust
[ ] Non-Profit or Charitable Organization [ ] Other _______
If a Trust, please provide the following:
- --------------------------------------------------------------
Date of Trust For the Benefit of
- --------------------------------------------------------------
Name of Trustees (if to be included in the Registration)
Mailing Address
- --------------------------------------------------------------
Name of Individual to Receive Correspondence
- --------------------------------------------------------------
Street
- --------------------------------------------------------------
City State Zip
( )
- --------------------------------------------------------------
Daytime Place
<PAGE>
Initial Investment
The minimum initial purchase for the Institutional Shares of the Fund is
$500,000, except that the minimum initial purchase is $1,000,000 for qualified
retirement plans. There is no minimum for clients of investment advisory
affiliates of BT Alex. Brown Incorporated or for subsequent investments.
Indicate the amount to be invested and the method of payment:
__ A. By Mail: Enclosed is a check in the amount of $________ payable to Flag
Investors Value Builder Fund, Inc.
__ B. By Wire: A bank wire in the amount of $______________ has been sent
from__________________ _______________________
Name of Bank Wire Control Number
Wire Instructions
Follow the instructions below to arrange for a wire transfer for initial
investment:
o Send completed Application by overnight carrier to BT Alex. Brown
Incorporated/Flag Investors Funds at the address listed above.
o Call 1-800-553-8080 to obtain new investor's Fund account number.
o Wire payment of the purchase price to Investors Fiduciary
Trust Company ("IFTC"), as follows:
IFTC
a/c BT Alex. Brown Incorporated/Flag Investors Funds
Acct. # 7528167
ABA # 1010-0362-1
Kansas City, Missouri 64105
Please include the following information in the wire:
o Flag Investors Value Builder Fund, Inc. -- Institutional Shares
o The amount to be invested
o "For further credit to _________________________________ ."
(Investor's Fund Account Number)
- --------------------------------------------------------------------------------
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Institutional Shares of the
Fund.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in cash [ ] Paid in cash
- --------------------------------------------------------------------------------
<PAGE>
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $500,000) and exchange privileges (with respect to
Institutional Shares of other Flag Investors Funds) unless I mark one or both
of the boxes below:
No, I do not want: [ ] Telephone redemption privileges [ ] Telephone exchange
privileges
Redemptions effected by telephone will be wired to the bank account
designated below.
- --------------------------------------------------------------------------------
Bank Account Designation
(This Section Must Be Completed)
Please attach a blank, voided check to provide account and bank routing
information.
- --------------------------------------------------------------------------------
Name of Bank Branch
- --------------------------------------------------------------------------------
Bank Address City/State/Zip
- --------------------------------------------------------------------------------
Name(s) on Account
- --------------------------------------------------------------------------------
Account Number A.B.A. Number
A-1
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<PAGE>
- --------------------------------------------------------------------------------
Acknowledgment, Certificate and Signature
- --------------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Tax ID Number and (2) I am not subject to any backup withholding either
because (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
[ ] If no Tax ID Number has been provided above, I have applied, or intend
to apply, to the IRS for a Tax ID Number, and I understand that if I do
not provide such number to the Transfer Agent within 60 days of the date
of this Application or if I fail to furnish my correct Tax ID Number, I
may be subject to a penalty and a 31% backup withholding on
distributions and redemption proceeds. (Please provide your Tax ID
Number on IRS Form W-9. You may request such form by calling the
Transfer Agent at 800-553-8080.)
[ ] Non-U.S. Citizen/Taxpayer: Indicated country of residence for tax
purposes: ____________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
- -------------------------------------------------------------------------------
I have received a copy of the Fund's prospectus dated August 1, 1997, as
supplemented through September 1, 1997. 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.
- --------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
- --------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
<PAGE>
Person(s) Authorized to Conduct Transactions
The following person(s) ("Authorized Person(s)") are currently officers,
trustees, general partners or other authorized agents of the investor. Any
________ * of the Authorized Person(s) is, by lawful and appropriate action of
the investor, a person entitled to give instructions regarding purchases and
redemptions or make inquiries regarding the Account.
- ----------------------------- ---------------------------------
Name/Title Signature Date
- ----------------------------- ---------------------------------
Name/Title Signature Date
- ----------------------------- ---------------------------------
Name/Title Signature Date
- ----------------------------- ---------------------------------
Name/Title Signature Date
The signature appearing to the right of each Authorized Person is that person's
signature. Investment Company Capital Corp. ("ICC") may, without inquiry, act
upon the instructions (whether verbal, written, or provided by wire,
telecommunication, or any other process) of any person claiming to be an
Authorized Person. Neither ICC nor any entity on behalf of which ICC is acting
shall be liable for any claims or expenses (including legal fees) or for any
losses resulting from actions taken upon any instructions believed to be
genuine. ICC may continue to rely on the instructions made by any person
claiming to be an Authorized Person until it is informed through an amended
Application that the person is no longer an Authorized Person and it has a
reasonable period (not to exceed one week) to process the amended Application.
Provisions of this Application shall be equally Applicable to any successor of
ICC.
* If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from
any one Authorized Person. Written instructions will require signatures of
the number of Authorized Persons indicated in this space.
- ---------------------------------------------------------------------
<PAGE>
Certificate of Authority
Investors must complete one of the following two Certificates of Authority.
Certificate A: FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS (With a Board
of Directors or Board of Trustees.)
I _________________________ , Secretary of the above-named investor, do hereby
certify that at a meeting on_________ , at which a quorum was present
throughout, the Board of Directors (Board of Trustees) of the investor duly
adopted a resolution which is in full force and effect and in accordance with
the investor's charter and by-laws, which resolution did the following: (1)
empowered the officers/trustees executing this Application (or amendment) to do
so on behalf of the investor; (2) empowered the above-named Authorized Person(s)
to effect securities transactions for the investor on the terms described above;
(3) authorized the Secretary to certify, from time to time, the names and titles
of the officers of the investor and to notify ICC when changes in officers
occur; and (4) authorized the Secretary to certify that such a resolution has
been duly adopted and will remain in full force and effect until ICC receives a
duly-executed amendment to the Certification form.
Witness my hand and seal on behalf of the investor.
This___day of________ , 199__ Secretary_________________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the investor.
- --------------------------------------------------------------------------------
Signature and title Date
Certificate B: FOR PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all general partners/trustees of the
investor and that they have done the following under the authority of the
investor's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application (or amendment) to do so on behalf of
the investor; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the investor on the terms described above; (3)
authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the investor and to notify ICC when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until ICC receives a further duly-executed certification. (If there
are not enough spaces here for all necessary signatures, complete a separate
certificate containing the language of this Certificate B and attach it to the
Application).
- --------------------------------------------------------------------------------
Signature and title Date
- --------------------------------------------------------------------------------
Signature and title Date
A-2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FLAG INVESTORS VALUE BUILDER FUND, INC.
(Institutional Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
One South Street P.O. Box 7558
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
One South Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
1-800-553-8080
Custodian Fund Counsel
PNC BANK, NATIONAL ASSOCIATION MORGAN, LEWIS & BOCKIUS LLP
Airport Business Park 2000 One Logan Square
200 Stevens Drive Philadelphia, Pennsylvania 19103
Lester, Pennsylvania 19113
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