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[GRAPHIC OMITTED]
REAL ESTATE SECURITIES FUND, INC.
(Class A and Class B Shares)
Prospectus & Application -- May 1, 1998, as
supplemented through March 31, 1999
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This mutual fund (the "Fund") seeks total return primarily through investments
in equity securities of companies that are principally engaged in the real
estate industry.
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 you with alternatives as to sales load and
Fund expenses. (See "How to Buy Shares.")
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated May 1, 1998 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
Risk Factors ............................... 4
Investment Restrictions .................... 5
The Fund's Net Asset Value ................. 5
How to Buy Shares .......................... 5
How to Redeem Shares ....................... 7
Telephone Transactions ..................... 8
How to Choose the Class That Is Right
For You ................................. 9
Dealer Compensation ........................ 9
Dividends and Taxes ........................ 9
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, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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.
<PAGE>
FEE TABLE
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<TABLE>
<CAPTION>
Class A Class B
Shares Shares
Initial Sales Deferred
Charge Sales Charge
Alternative Alternative
--------------- -------------------
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .............................................. 4.50%* None
Maximum Sales Charge Imposed on Reinvested Dividends .............................. 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 (net of fee waivers) .............................................. 0.32%*** 0.32%***
12b-1 Fees ........................................................................ 0.25% 0.75%
Other Expenses (including a 0.25% shareholder servicing fee for Class B Shares) ... 0.68% 0.93%****
----- -----
Total Fund Operating Expenses (net of fee waivers) ................................ 1.25%*** 2.00%***
===== =====
</TABLE>
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* If you purchase $1 million or more of Class A Shares, you will not have to
pay an initial sales charge. You may, however, be required to pay a
contingent deferred sales charge when you redeem your shares. (See "How to
Buy Shares" and "How to Redeem Shares.")
** You will be required to pay a contingent deferred sales charge if you
redeem your Class B Shares within six years of purchase. The amount of the
charge declines in relation to the time you hold your shares. Class B
Shares will automatically convert to Class A Shares six years after
purchase. (See "How to Redeem Shares.")
*** The Fund's investment advisor currently intends to waive its fee or to
reimburse the Fund on a voluntary basis to the extent required so that
Total Fund Operating Expenses do not exceed 1.25% of the Class A Shares'
average daily net assets and 2.00% of the Class B Shares' average daily net
assets. Absent fee waivers, Management Fees would be 0.65% of the Fund's
average daily net assets and Total Fund Operating Expenses would be 1.58%
of the Class A Shares' average daily net assets and 2.33% of the Class B
Shares' average daily net assets.
**** A portion of the shareholder servicing fee is allocated to your securities
dealer and qualified banks for services provided and expenses incurred in
maintaining your account, responding to your inquiries, and providing you
with information on your investments.
<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 invest-
ment, assuming (1) 5% annual return and (2) redemption at
the end of each time period:*
Class A Shares ......................................... $57 $83 $111 $189
Class B Shares ......................................... $60 $93 $128 $196**
You would pay the following expenses on the same invest-
ment, assuming no redemption:*
Class B Shares ......................................... $20 $63 $108 $196**
</TABLE>
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* Absent fee waivers, expenses would be higher.
** Expenses assume that Class B Shares are converted to Class A Shares at the
end of six years. Therefore, the expense figures assume six years of Class
B expenses and four years of Class A expenses.
<PAGE>
The Expenses and Example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and
expenses that you will bear directly and indirectly when you invest in the
Fund. If you purchase shares of either class through a financial institution,
you may be charged separate fees by that institution.
The rules of the SEC require that the maximum sales charge be reflected in
the above table. However, you may qualify for reduced sales charges or no sales
charge at all. (See "How to Buy Shares.") Due to the continuous nature of Rule
12b-1 fees, you may pay more than the equivalent of the maximum sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD Rules") if you hold your shares for a long time.
1
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FINANCIAL HIGHLIGHTS
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The financial highlights included in this table are a part of the Fund's
financial statements for the periods indicated and have been audited by
PricewaterhouseCoopers LLP, independent accountants. The financial statements
and financial highlights for the fiscal year ended December 31, 1997 and the
report thereon of PricewaterhouseCoopers LLP are included in the Statement of
Additional Information. Additional performance information is contained in the
Fund's Annual Report for the fiscal year ended December 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 January 3, 1995(1)
Year Ended December 31, through December 31,
-------------------------- ----------------------
1997 1996 1995
------------ ------------ ----------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period .................................. $ 13.89 $ 11.20 $10.00
------- ------- ------
Income from Investment Operations:
Net investment income ..................... 0.52 0.61 0.56
Net realized and unrealized gain on
investments ............................. 2.44 2.90 1.21
------- ------ ------
Total from Investment Operations .......... 2.96 3.51 1.77
------- ------ ------
Less Distributions:
Distributions from net investment
income .................................. (0.60) (0.58) (0.49)(2)
Distributions from net realized
capital gains ........................... (0.47) (0.22) (0.05)
Return of capital ......................... -- (0.02) (0.03)(2)
------- ------- ------
Total distributions ....................... (1.07) (0.82) (0.57)
------- ------- ------
Net asset value at end of period .......... $ 15.78 $ 13.89 $11.20
======= ======= ======
Total Return(3) ............................ 22.01% 32.70% 18.19%
Ratios to Average Daily Net Assets:
Expenses(4) ............................... 1.25% 1.25% 1.25%(6)(7)
Net investment income(5) .................. 3.87% 5.29% 6.09%(6)(7)
Supplemental Data:
Net assets at end of period (000) ......... $41,773 $19,816 $7,171
Portfolio turnover rate ................... 35% 23% 28%
Average commissions per share(8) .......... $0.0479 $0.0475 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------
For the Period
For the January 3, 1995(1)
Year Ended December 31, through December 31,
-------------------------- -----------------------
1997 1996 1995
------------ ------------ -----------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period .................................. $ 13.84 $ 11.18 $ 10.00
------- ------- -------
Income from Investment Operations:
Net investment income ..................... 0.42 0.52 0.50
Net realized and unrealized gain on
investments ............................. 2.42 2.89 1.20
------- ------- -------
Total from Investment Operations .......... 2.84 3.41 1.70
------- ------- -------
Less Distributions:
Distributions from net investment
income .................................. (0.50) (0.51) (0.42)(2)
Distributions from net realized
capital gains ........................... (0.47) (0.22) (0.05)
Return of capital ......................... -- (0.02) (0.05)(2)
------- ------- -------
Total distributions ....................... (0.97) (0.75) (0.52)
------- ------- -------
Net asset value at end of period .......... $ 15.71 $ 13.84 $ 11.18
======= ======= =======
Total Return(3) ............................ 21.11% 31.67% 17.40%
Ratios to Average Daily Net Assets:
Expenses(4) ............................... 2.00% 2.00% 2.00%(6)(7)
Net investment income(5) .................. 3.12% 4.46% 5.39%(6)(7)
Supplemental Data:
Net assets at end of period (000) ......... $ 9,799 $ 5,295 $ 3,016
Portfolio turnover rate ................... 35% 23% 28%
Average commissions per share(8) .......... $0.0479 $0.0475 --
</TABLE>
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(1) Commencement of operations.
(2) Distributions per share have been reclassified to reflect the actual return
of capital amounts for 1995.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees and the reimbursement of expenses, the
ratio of expenses to average daily net assets would have been 1.58%, 2.28%
and 3.25% (annualized) for Class A Shares and 2.33%, 3.03% and 4.05%
(annualized) for Class B Shares for the years ended December 31, 1997 and
1996 and the period ended December 31, 1995, respectively.
(5) Without the waiver of advisory fees and the reimbursement of expenses, the
ratio of net investment income to average daily net assets would have been
3.54%, 4.26% and 3.89% (annualized) for Class A Shares and 2.79%, 3.43%
and 3.09% (annualized) for Class B Shares for the years ended December 31,
1997 and 1996 and the period ended December 31, 1995, respectively.
(6) Annualized.
(7) Effective January 1, 1996, the Fund's expense and net investment income
ratios are based on average daily net assets. Prior to that date they were
based on average monthly net assets. Under the prior method, the ratio of
expenses to average net assets was 1.19% for the Class A Shares and 1.90%
for the Class B Shares and the ratio of net investment income to average
net assets was 5.95% for the Class A Shares and 5.25% for the Class B
Shares.
(8) Disclosure is required for fiscal years beginning on or 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
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Investment Objective and Policies
The investment objective of the Fund is total return primarily through
investments in equity securities of companies that are principally engaged in
the real estate industry.
Under normal conditions at least 65% of the Fund's total assets will be
invested in the equity securities of companies principally engaged in the real
estate industry. A company is "principally engaged" in the real estate industry
if (i) it derives at least 50% of its revenues or profits from the ownership,
construction, management, financing or sale of residential, commercial or
industrial real estate or (ii) it has at least 50% of the fair market value of
its assets invested in residential, commercial or industrial real estate.
Companies in the real estate industry may include among others: real estate
investment trusts ("REITs"), master limited partnerships that invest in
interests in real estate and that are traded on a national securities exchange;
real estate brokers or developers; and companies with substantial real estate
holdings, such as paper and lumber producers. When the Fund invests in REITs or
master limited partnerships, shareholders indirectly bear a proportionate share
of the operating expenses of the underlying entity, in addition to the similar
expenses of the Fund. The Fund may invest up to 10% of its total assets in
securities of foreign real estate companies.
REITs pool investors' funds for investment primar-ily in income producing real
estate or real estate related loans or interests. Generally, REITs can be
classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents and capital gains from appreciation realized
through property sales. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive their income primarily from interest payments.
Hybrid REITs combine the characteristics of both Equity and Mortgage REITs.
Under normal conditions the portfolio may invest up to 35% of its total
assets in securities of companies outside the real estate industry and
nonconvertible debt securities such as bonds. The Fund's investment advisor and
sub-advisor (collectively, the "Advisors") currently anticipate that
investments outside the real estate industry will be primarily in securities of
companies whose products and services are related to the real estate industry.
They may include manufacturers and distributors of building supplies, financial
institutions that make or service mortgages and companies whose real estate
assets are substantial relative to their stock market valuations, such as
retailers and railroads.
<PAGE>
The Fund may invest up to 5% of its net assets in zero coupon or other
original issue discount securities. The debt securities purchased by the Fund
will be of investment grade or better quality (i.e., of a quality equivalent to
the ratings Baa or better of Moody's Investors Service, Inc. ("Moody's") or BBB
or better of Standard & Poor's Ratings Group ("S&P"). While classified as
"investment grade," securities rated Baa by Moody's or BBB by S&P have
speculative characteristics. The ratings categories of S&P and Moody's are
described more fully in the Appendix to the Statement of Additional
Information.
For temporary defensive purposes the Fund may invest up to 100% of its
assets in short-term money market instruments consisting of securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements, certificates of deposit and bankers' acceptances issued
by banks or savings and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year, high-grade commercial
paper rated, at the time of purchase, in the top two categories by a national
rating agency or determined to be of comparable quality by the Fund's
investment advisor or subadvisor at the time of purchase and other long- and
short-term debt instruments that are rated A or higher by S&P or Moody's at the
time of purchase, and may hold a portion of its assets in cash. The Fund has
the ability to invest in warrants, futures contracts and options, but has no
intention to do so during the coming year.
Subject to the Fund's overall investment limitations on investing in
illiquid securities and restricted securities, the Fund may purchase Rule 144A
Securities. Rule 144A Securities are restricted securities in that they have
not been registered under the Securities Act of 1933, but they may be traded
between certain qualified institutional investors, including investment
companies. The presence or absence of a secondary market in these securities
may affect their value. The Fund's Board of Directors has established
guidelines and procedures to be utilized to determine the liquidity of such
securities.
Repurchase Agreements
The Fund may agree to purchase U.S. Treasury securities from creditworthy
financial institutions, such as banks and 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
expose the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations.
3
<PAGE>
When-Issued Securities
The Fund may purchase securities, at their current market value, on a
forward commitment or when-issued basis. A segregated account of the Fund
consisting of cash or other liquid securities equal at all times to the amount
of the when-issued commitments will be established and maintained by the Fund
at the Fund's custodian. While the Fund will purchase securities on a forward
commitment or when-issued basis only with the intention of acquiring the
securities, the Fund may choose to sell the securities before the settlement
date. The value of securities so purchased or sold is subject to market
fluctuation and no interest accrues to the purchaser during this period.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have
their computer systems adjusted for the year 2000 transition, and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its
shareholders may experience losses if these assurances prove to be incorrect or
if issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others, with which the Fund does business experience
difficulties as a result of year 2000 issues.
RISK FACTORS
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Because the Fund invests primarily in the real estate industry, its
investments may be subject to certain risks. These risks include: declines in
the value of real estate, risks related to general local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, demographic trends and variations in rental income.
Generally, increases in interest rates will decrease the value of high yielding
securities and increase the cost of obtaining financing, which could directly
and indirectly decrease the value of the Fund's investments. The Fund's share
price and investment return fluctuate, and your investment when redeemed may be
worth more or less than the original cost.
Because the Fund may invest in REITs, it may also be subject to certain
risks associated with the direct investments of the REITs. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while Mortgage REITs may be affected by the quality of credit extended. Equity
and Mortgage REITs are dependent upon management skill, have limited
diversification and are subject to the risks of financing projects. Such REITs
are also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code of 1986, as amended, or failing to
maintain their exemptions from registration under the Investment Company Act of
1940, as amended (the "1940 Act").
Investing in securities issued by foreign corporations involves
considerations and possible risks not typically associated with investing in
securities issued by domestic corporations. The values of foreign investments
are affected by changes in currency rates or exchange control regulations,
application of foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in the United
States or abroad) or changed circumstances in dealings between nations. Costs
are incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions are generally higher than in the United
States, and foreign securities markets may be less liquid, more volatile and
less subject to governmental supervision than in the United States. Investments
in foreign countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards, potential difficulties in enforcing
contractual obligations and the possibility of extended settlement periods. For
additional risk disclosure see "Repurchase Agreements" and "When-Issued
Securities."
4
<PAGE>
INVESTMENT RESTRICTIONS
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The following investment restrictions numbered 1 and 2 are matters of
fundamental policy and may not be changed without shareholder approval.
Investment restriction number 3 may be changed by a vote of the majority of the
Board of Directors. The Fund will not:
1) With respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer or invest more than 5% of the
value of its total assets in the securities of any one issuer, except the
U.S. Government, its agencies and instrumentalities;
2) Concentrate 25% or more of its total assets in securities of issuers in any
one industry, except that the Fund will concentrate in the real estate
industry (for these purposes the U.S. Government and its agencies and
instrumentalities are not considered an issuer); or
3) Invest more than 10% of the Fund's net assets in illiquid securities,
including repurchase agreements with maturities of greater than seven days.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
THE FUND'S NET ASSET VALUE
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The following sections describe how to buy and redeem shares of the Fund.
The price you pay or receive is based on the Fund's net asset value per
share. When you buy Class A Shares, the price you pay may be increased by a
sales charge. When you redeem shares of either class, the price you receive may
be reduced by a sales charge. Read the sections on how to buy shares and how to
redeem shares for details on how and when these charges may or may not be
imposed.
The net asset value per share of each class is determined on each
business day as of the close of trading on the New York Stock Exchange
(ordinarily 4:00 p.m. Eastern Time). It is calculated by subtracting the
liabilities attributable to a class from its proportionate share of the Fund's
assets and dividing the result by the outstanding shares of the class. Because
the different classes have different distribution or service fees, their net
asset values may differ from time to time.
In valuing the Fund's assets, its investments are priced at their market
value which is normally based on current prices but which may be determined
according to "fair value" procedures approved by the Fund's Board of Directors.
You may buy or redeem shares on any day on which the New York Stock
Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that
day, the price you pay or receive will be based on the next Business Day's net
asset value per share.
HOW TO BUY SHARES
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You may buy either class of the Fund's shares through your securities
dealer or through any financial institution that is authorized to act as a
shareholder servicing agent. Contact them for details on how to enter and pay
for your order. You may also buy shares by sending your check (along with a
completed Application Form) directly to the Fund. The Application Form, which
includes instructions, is attached to this Prospectus.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment may be
as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your initial
investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be
5
<PAGE>
as low as $250. If you participate in the monthly plan, your subsequent
investments may be as low as $100. If you participate in the quarterly
plan, your subsequent investments may be as low as $250. Refer to the
section on the Fund's Automatic Investing Plan for details.
o There is no minimum investment requirement for qualified retirement
plans such as 401(k), pension or profit sharing plans.
Purchase Price
The price you pay to buy shares will be the Fund's offering price which
is calculated by adding any applicable sales charges to the net asset value per
share of the class you are buying. The amount of any sales charge included in
your purchase price will be according to the following schedule.
Class A Sales
Charge as % of
-------------------------
Offering Net Amount Class B Sales
Amount of Purchase Price Invested Charge
- ---------------------------------------------------------------------------
Less than $ 50,000......... 4.50% 4.71% None
$ 50,000 - $ 99,999......... 3.50% 3.63% None
$ 100,000 - $249,999......... 2.50% 2.56% None
$ 250,000 - $499,999......... 2.00% 2.04% None
$ 500,000 - $999,999......... 1.50% 1.52% None
$1,000,000 and over........... None None None
- ---------------------------------------------------------------------------
Although you do not pay an initial sales charge when you invest
$1,000,000 or more in Class A Shares or when you buy any amount of Class B
Shares, you may have to pay a sales charge when you redeem your shares. Refer
to the section on how to redeem shares for details.
The sales charge you pay on your current purchase of Class A Shares may
be reduced under the circumstances listed below.
Rights of Accumulation. If you are also purchasing Class A shares of this
or any other Flag Investors fund or if you already have investments in Class A
or Class D shares, you may combine the value of your purchases with the value
of your existing investments to determine whether you qualify for a reduced
sales charge. (For this purpose your existing investments will be valued at the
higher of cost or current value.) You may also combine your purchases and
investments with those of your spouse and your children under the age of 21 for
this purpose. You must be able to provide sufficient information to verify that
you qualify for this right of accumulation.
Letter of Intent. If you anticipate making additional purchases of Class
A Shares over the next 13 months, you may combine the value of your current
purchase with the value of your anticipated purchases to determine whether you
qualify for a reduced sales charge. You will be required to sign a letter of
<PAGE>
intent specifying the total value of your anticipated purchases and to
initially purchase at least 5% of the total. When you make each purchase during
the period, you will pay the sales charge applicable to their combined value.
If, at the end of the 13-month period, the total value of your purchases is
less than the amount you indicated, you will be required to pay the difference
between the sales charges you paid and the sales charges applicable to the
amount you actually did purchase. Some of the shares you own will be redeemed
to pay this difference.
Purchases at Net Asset Value. You may buy Class A Shares without paying a
sales charge under the following circumstances:
1) If you are buying shares in any of the following types of accounts:
(i) A fiduciary or advisory account with a bank, bank trust department,
registered investment advisory company, financial planner or
securities dealer purchasing shares on your behalf. To qualify for
this provision you must be paying an account management fee for the
fiduciary or advisory services. You may be charged an additional fee
by your securities dealer or servicing agent if you buy shares in this
manner;
(ii) A qualified retirement plan;
(iii) A Flag Investors fund payroll savings plan program.
2) If you are reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the last 90 days.
3) If you are exchanging an investment in another Flag Investors fund for an
investment in this Fund (see "Purchases by Exchange" for a description of
the conditions).
4) If you are a current or retired Director of the Fund, a director, an
employee or a member of the immediate family of an employee of any of the
following (or their respective affiliates): the Distributor, the Advisors
and any broker-dealer authorized to sell shares of the Fund.
Purchases by Exchange
You may exchange shares of any other Flag Investors fund with the same
sales charge structure for an equal dollar amount of Class A or B Shares, as
applicable, without payment of the sales charges described above or any other
charge. If you exchange Class A shares of any Flag Investors fund with a lower
sales charge structure into Class A Shares, you will be charged the difference
in sales charges unless (with the exception of Flag Investors Cash Reserve
Prime
6
<PAGE>
Class A Shares) you have owned the shares for at least 24 months. You may enter
both your redemption and purchase orders on the same Business Day or, if you
have already redeemed the shares of the other fund, you may enter your purchase
order within 90 days of the redemption. The Fund may modify or terminate these
offers of exchange at any time on 60 days' prior written notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
Investing Regularly
You may make regular investments in the Fund through any of the following
methods. If you wish to enroll in any of these programs or if you need any
additional information, complete the appropriate section of the attached
Application Form or contact your securities dealer, your servicing agent, or
the Transfer Agent.
Automatic Investing Plan. You may elect to make a regular monthly or
quarterly investment in either class of shares. The amount you decide upon will
be withdrawn from your checking account using a pre-authorized check. When the
money is received by the Transfer Agent, it will be invested in the class of
shares selected at that day's offering price. Either you or the Fund may
discontinue your participation upon 30 days' notice.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares at net
asset value. You may elect to receive your distributions in cash or to have
your distributions invested in shares of other Flag Investors funds. To make
either of these elections or to terminate automatic reinvestment, complete the
appropriate section of the attached Application Form or notify the Transfer
Agent, your securities dealer or your servicing agent at least five days before
the date on which the next dividend or distribution will be paid.
Systematic Purchase Plan. You may also purchase either class of shares
through a Systematic Purchase Plan. Contact your securities dealer or servicing
agent for details.
<PAGE>
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem either class of the Fund's shares through your securities
dealer or servicing agent. Contact them for details on how to enter your order
and for information as to how you will be paid. If your shares are in an
account with the Fund, you may also redeem shares by contacting the Transfer
Agent by mail or (if you are redeeming less than $50,000) by telephone. The
Transfer Agent will mail your redemption check within seven days after it
receives your order in proper form. Refer to the section on telephone
transactions for more information on this method of redemption.
Your securities dealer, your servicing agent or the Transfer Agent may
require the following documents before they redeem your shares:
1) A letter of instructions specifying your account number and the number of
shares or dollar amount you wish to redeem. The letter must be signed by all
owners of the shares exactly as their names appear on the account.
2) If you are redeeming more than $50,000, a guarantee of your signature by a
member of the Federal Deposit Insurance Corporation, a trust company, broker,
dealer, securities exchange or association, clearing agency, savings
association or (if authorized by state law) credit union.
3) Any stock certificates representing the shares you are redeeming. The
certificates must be either properly endorsed or accompanied by a duly
executed stock power.
4) Any additional documents that may be required if your account is in the name
of a corporation, partnership, trust or fiduciary.
Redemption Price
The price you receive when you redeem shares will be the net asset value
of the class of shares you are redeeming less any applicable sales charge. The
amount of any sales charge deducted from your redemption price will be
determined according to the following schedule.
Sales Charge as a Percentage
of the Dollar Amount Subject to Charge
- --------------------------------------------------
Class A Class B
Years Since Purchase Shares Shares
- --------------------------------------------------
First ................ 0.50%* 4.00%
Second ............... 0.50%* 4.00%
Third ................ None 3.00%
Fourth ............... None 3.00%
Fifth ................ None 2.00%
Sixth ................ None 1.00%
Thereafter ........... None None
- --------------------------------------------------
* You will pay a sales charge when you redeem Class A Shares only if you bought
those shares at net asset value as part of an investment of $1,000,000 or
more.
7
<PAGE>
Determination of Sales Charge. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:
1) The sales charge is applied to the lesser of the cost of the shares or their
current market value.
2) No sales charge will be applied to shares you own as a result of reinvesting
dividends or distributions.
3) If you have purchased shares at various times, the sales charge will be
applied first to shares you have owned for the longest period of time.
4) If you acquired the shares through an exchange of shares of another Flag
Investors fund, the period of time you held the original shares will be
combined with the period of time you held the shares being redeemed to
determine the years since purchase.
Waiver of Sales Charge. You may redeem shares without paying a sales
charge under any of the following circumstances:
1) If you are exchanging your shares for shares of another Flag Investors fund
with the same sales charge structure.
2) If your redemption represents the minimum required distribution from an
individual retirement account or other retirement plan.
3) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under the
following conditions:
(i) The account is registered in your name either individually, as a joint
tenant with rights of survivorship, as a participant in community
property, or as a minor child under the Uniform Gifts or Uniform
Transfers to Minors Acts.
<PAGE>
(ii) Either you or your representative notifies your securities dealer,
servicing agent or the Transfer Agent that such circumstances exist.
4) If you are redeeming Class A Shares, your original investment was at least
$3,000,000 and your securities dealer has agreed to return to the Distributor
any payments received when you bought your shares.
Automatic Conversion of Class B Shares. Your Class B Shares, along with
any reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares six years after your purchase. This
conversion will be made on the basis of the relative net asset values of the
classes and will not be a taxable event to you.
Other Redemption Information
If you own Fund shares having a value of at least $10,000, you may
arrange to have some of your shares redeemed monthly or quarterly under the
Fund's Systematic Withdrawal Plan. Each redemption under this plan involves all
the tax and sales charge implications normally associated with Fund
redemptions. Contact your securities dealer, your servicing agent or the
Transfer Agent for information on this plan.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be paid to you by check, whether or not that is the payment
option you have selected.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are automatically entitled
to telephone transaction privileges unless you specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information at the
time your account is opened and prior to effecting each telephone transaction.
You may be required to provide additional telecopied instructions. If these
procedures are employed, neither the Fund nor the Transfer Agent will bear any
liability for following instructions received by telephone that they reasonably
believe to be genuine. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail. If you hold your shares in certificate form,
you may not exchange or redeem them by telephone.
8
<PAGE>
HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU
- --------------------------------------------------------------------------------
Your decision as to which class of the Fund's shares is best for you
should be based upon a number of factors including the amount of money you
intend to invest and the length of time you intend to hold your shares.
If you choose Class A Shares, you will pay a sales charge when you buy
your shares but the amount of the charge declines as the amount of your
investment increases. You will pay lower expenses while you hold the shares
and, except in the case of investments of $1,000,000 or more, no sales charge
if you redeem them.
If you choose Class B Shares, you will pay no sales charge when you buy
your shares but your annual expenses will be higher than Class A Shares. You
will pay a sales charge if you redeem your shares within six years of purchase,
but the amount of the charge declines the longer you hold your shares and, at
the end of six years, your shares convert to Class A Shares thus eliminating
the higher expenses.
In general, if you intend to invest more than $100,000, your combined
sales charges and expenses are lower with Class A Shares. If you intend to
invest less than $100,000 and expect to hold your shares for more than six
years, your combined sales charges and expenses are lower with Class B Shares.
Your securities dealer or servicing agent may receive different levels of
compensation depending upon which class of shares you buy.
DEALER COMPENSATION
- --------------------------------------------------------------------------------
Your securities dealer is paid a commission when you buy shares and is
paid a servicing fee for as long as you hold your shares.
Dealer Compensation as a % of
Offering Price
---------------------------------
Amount of Purchase Class A Shares Class B Shares
- ---------------------------------------------------------------
Less than $ 50,000 ....... 4.00% 4.00%
$ 50,000 - $ 99,999 ....... 3.00% 4.00%
$ 100,000 - $249,999 ....... 2.00% 4.00%
$ 250,000 - $499,999 ....... 1.50% 4.00%
$ 500,000 - $999,999 ....... 1.25% 4.00%
$1,000,000 and over ........ * 4.00%
- ---------------------------------------------------------------
* Your securities dealer may be paid up to 1.00% of the Offering Price
In addition to the commissions shown above, your securities dealer may be
paid an annual fee equal to 0.25% of the value of your Class A Shares or Class
B Shares for as long as you hold them. The annual fee will begin when you buy
your shares.
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its net investment company taxable income (including net short-term capital
gains) in the form of monthly dividends. The Fund also intends to distribute to
shareholders any net capital gains (the excess of net long-term capital gains
over net short-term capital losses) on an annual basis.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences
affecting the Fund and its shareholders 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 tax treatment of the Fund or its shareholders and the
discussion here is not intended as a substitute for careful tax planning.
Accordingly, you are advised to consult with your tax advisor regarding
specific questions.
The Statement of Additional Information sets forth further information
concerning taxes.
The Fund is treated as a separate entity for federal income tax purposes.
The Fund intends to qualify for the special tax treatment afforded regulated
investment companies under the Internal Revenue Code of 1986, as amended, so
that the Fund will not pay federal income tax on net investment company taxable
income and net capital gains distributed to its shareholders. In addition, the
Fund expects to make sufficient distributions prior to the end of each calendar
year to avoid liability for federal excise tax.
9
<PAGE>
You will be taxed on dividends from the Fund's net investment company
taxable income as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Capital gains
distributions from the Fund are classified as either short-term or long-term
depending upon how long the Fund held the securities it sold to generate the
gains. You will be taxed on the distributions according to the category
stipulated by the Fund regardless of how long you have held your Fund shares.
Only a portion of the dividends paid by the Fund is expected to qualify for the
dividends received deduction available to corporate shareholders. You will be
advised annually as to the federal income tax status of all distributions.
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 paid by the Fund and received by you on December 31 of
the year in which the dividends were declared.
The sale, exchange, or redemption of Fund shares is a taxable event for
you.
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 to the Distributor. A majority
of the Directors of the Fund are not affiliated 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 LaSalle Investment Management (Securities), L.P.
(formerly, ABKB/LaSalle Securities Limited Partnership) ("LaSalle" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is the investment advisor to
mutual funds with approximately $8.8 billion of net assets as of December 31,
1998. In addition to this Fund, these include other funds in the Flag Investors
family of funds and BT Alex. Brown Cash Reserve Fund, Inc. LaSalle is a
Maryland limited partnership that is indirectly controlled by Jones Lang
LaSalle Incorporated, an international real estate investment management
company. At December 31, 1998, LaSalle advised mutual funds with approximately
$70.2 million in net assets.
ICC supervises and manages all of the Fund's operations. Under the
Investment Advisory and Sub-Advisory Agreements, ICC delegates to LaSalle
certain of its duties, provided that ICC continues to supervise the performance
of LaSalle and report thereon to the Fund's Board of Directors. Pursuant to the
terms of the Sub-Advisory Agreement, LaSalle is responsible for decisions to
buy and sell securities for the Fund, for broker-dealer selection, and for
negotiation of commission rates. The Board has established procedures under
which LaSalle may allocate transactions to certain affiliates, 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, LaSalle 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.
ICC and LaSalle currently intend to waive, on a voluntary basis, their
annual fees to the extent necessary so that the Fund's annual expenses do not
exceed 1.25% of the Class A Shares' average daily net assets and 2.00% of the
Class B Shares' average daily net assets. As compensation for its services for
the fiscal year ended December 31, 1997, ICC received a fee (net of fee
waivers) equal to 0.32% of the Fund's average daily net assets and, for the
same period, ICC paid LaSalle a fee (net of fee waivers) equal to 0.20% of the
Fund's average daily net assets.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. An affiliate of ICC provides custody
services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
On November 30, 1998, Bankers Trust Corporation entered into an Agreement
and Plan of Merger with Deutsche Bank AG under which Bankers Trust
10
<PAGE>
Corporation would merge with and into a subsidiary of Deutsche Bank AG.
Deutsche Bank AG is a major global banking institution that is engaged in a
wide range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking and insurance. The
transaction is contingent upon various regulatory approvals, and continuation
of the Fund's advisory relationship with ICC and sub-advisory relationship with
LaSalle thereafter is subject to the approval of Fund shareholders. On March
30, 1999, the Board of Directors approved, subject to shareholder approval, a
new advisory agreement between ICC and the Fund and a new sub-advisory
agreement among the Fund, ICC and LaSalle in the event the merger is approved
and completed. If the transaction is approved and completed, Deutsche Bank AG,
as ICC's new parent company, will control its operations as investment advisor.
ICC believes that, under this new arrangement, the services provided to the
Fund will be maintained at their current level.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICC became a subsidiary of Bankers Trust Corporation in a
merger that occurred after these events took place. Pursuant to its agreement
with the U.S. Attorney's Office, Bankers Trust pleaded guilty to misstating
entries in the bank's books and records and agreed to pay a $60 million fine to
federal authorities. Separately, Bankers Trust agreed to pay a $3.5 million
fine to the State of New York. The events leading up to the guilty pleas did
not arise out of the investment advisory or mutual fund management activities
of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC may not be
able to continue to provide investment advisory services to the Fund. The SEC
has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Managers
William K. Morrill, Jr., the Fund's President, and Keith R. Pauley, the
Fund's Executive Vice President, have shared primary responsibility for
managing the Fund's assets from its inception. Since September 28, 1998, they
have shared those responsibilities with James A. Ulmer III, a Vice President of
the Fund.
Mr. Morrill, Managing Director and Chief Executive Officer of LaSalle,
has nearly 18 years of investment experience and has been a portfolio manager
with LaSalle or its predecessors since 1986.
Mr. Pauley, Managing Director of LaSalle, has over 12 years of investment
experience and has been a portfolio manager with LaSalle or its predecessors
since 1986.
Mr. Ulmer, a Principal of LaSalle, has over 30 years of experience in
real estate and REIT investment, development and investment banking. Prior to
joining LaSalle, in April of 1997, Mr. Ulmer was a portfolio analyst and
strategist for AIRES Real Estate Services from 1993 to 1997. Prior to 1993, Mr.
Ulmer was President of the Parkway Companies, owners and developers of office
and industrial properties, and a bank and real estate securities analyst for T.
Rowe Price Associates.
DISTRIBUTOR
- --------------------------------------------------------------------------------
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has
served as distributor of each class of the Fund's shares since August 31, 1997.
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 and Class B Shares (the "Plans"),
pursuant to Rule 12b-1 under the 1940 Act. In addition, the Fund may enter into
agreements with certain financial institutions, including certain banks and BT
Alex. Brown Incorporated, to provide shareholder services, pursuant to which
the Distributor may allocate on a proportional basis up to all of its
distribution fee as compensation for such financial institutions' ongoing
shareholder services. Such financial institutions may charge you separately for
these services.
As compensation for providing distribution services for the Class A
Shares for the period from August 31, 1997 through December 31, 1997, the
Distributor received a fee equal to 0.25% (annualized) of the average daily net
assets of the Class A Shares.
11
<PAGE>
As compensation for providing distribution and shareholder services for
the Class B Shares for the period from August 31, 1997 through December 31,
1997, the Distributor received a distribution fee equal to 0.75% (annualized)
of the Class B Shares' average daily net assets and a shareholder servicing fee
equal to 0.25% of the Class B Shares' average daily net assets. The
distribution fee is used to compensate the Distributor for its services and
expenses in distributing the Class B Shares. The shareholder servicing fee is
used to compensate the Distributor, securities dealers and servicing agents for
services provided and expenses incurred in maintaining your account, responding
to your inquiries and providing you with information on your 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 Distributor may
retain the unexpended portion of the distribution fee. ICC Distributors or the
Advisor and their respective affiliates may make payments from their own
resources to securities dealers and servicing agents. Payments by the
Distributor may include additional discounts or promotional incentives in the
form of cash or other compensation (including merchandise or travel).
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
December 31, 1997, ICC received a fee equal to 0.09% of the Fund's average
daily net assets. Bankers Trust acts as custodian of the Fund's assets. (See
the Statement of Additional Information.)
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise its performance, including
comparisons to other mutual funds with similar investment objectives and to
relevant indices. Any quotations of yield of the Fund will be determined by
dividing the net investment income earned by the Fund during a 30-day period by
the maximum offering price per share on the last day of the period and
annualizing the result on a semi-annual basis. All advertisements of
performance 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
compounded 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, such as the Wilshire Real Estate Index, its 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
Fund may also use total return performance data as reported in national
financial and industry publication that monitor the performance of mutual funds
such as 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. 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 your bank
with respect to the account through which your shares may be purchased,
although not included in calculations of performance, will reduce your
performance results.
12
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Description of Shares
The Fund is an open-end diversified management investment company
organized under the laws of the State of Maryland on May 2, 1994 and is
authorized to issue 30 million shares of capital stock, with a par value of
$.001 per share. Each share has one vote and is entitled to dividends and
distributions when and if declared by 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 fiscal year-end
of the Fund is December 31.
The Board of Directors of the Fund is authorized to establish additional
series of shares of capital stock, each of which would evidence interests in a
separate portfolio of securities, and separate classes of each series of the
Fund. The shares offered by this Prospectus have been designated "Flag Investors
Real Estate Securities Fund Class A Shares" and "Flag Investors Real Estate
Securities Fund Class B Shares." The Board has no present intention of
establishing any additional series of the Fund but the Fund has another class of
shares, "Flag Investors Real Estate Securities Fund Institutional Shares."
Additional information concerning the Fund's Institutional Shares may be
obtained by calling the Fund 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 the classes may differ at times.
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders unless
required by Maryland law. 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
You will be furnished 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, PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your shares, contact the Fund at (800)
767-FLAG, the Transfer Agent at (800) 553-8080 or your securities dealer or
servicing agent.
13
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND, INC.
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Make check payable to "Flag Investors Real Estate For assistance in completing this Application please call:
Securities Fund, Inc." and mail with this Application to: 1-800-553-8080, Monday through Friday, 8:30 a.m. to 5:30 p.m.
Flag Investors Funds (Eastern Time).
P.O. Box 419663
Kansas City, MO 64141-6663 To open an IRA account, please call 1-800-767-3524 for an IRA information
Attn: Flag Investors Real Estate Securities Fund, Inc. 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 $__________
- ------------------------------------------------------------------------------------------------------------------------------------
Your Account Registration (Please Print)
- ------------------------------------------------------------------------------------------------------------------------------------
Existing Account No., if any: _______________
Individual or Joint Tenant Gifts to Minors
- ------------------------------------------------------- ----------------------------------------------------------------------
First Name Initial Last Name Custodian's Name (only one allowed by law)
- ------------------------------------------------------- ----------------------------------------------------------------------
Social Security Number Minor's Name (only one)
- ------------------------------------------------------- ------------------------------- -----------------------------------
Joint Tenant Initial Last Name Social Security Number of Minor Minor's Date of Birth (Mo./Day/Yr.)
under the _____________________ Uniform Gifts to Minors Act
State of Residence
Corporations, Trusts, Partnerships, etc. Mailing Address
- ------------------------------------------------------- ----------------------------------------------------------------------
Name of Corporation, Trust or Partnership Street
- ---------------------- -------------------------- ----------------------------------------------------------------------
Tax ID Number Date of Trust City State Zip
( )
- ------------------------------------------------------- ----------------------------------------------------------------------
Name of Trustees (if to be included in the Registration) Daytime Phone
- -------------------------------------------------------
For the Benefit of
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Letter of Intent (Optional)
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] I agree to the Letter of Intent and Escrow Agreement set forth in the accompanying Prospectus. Although I am not obligated to do
so, I intend to invest over a 13-month period in Class A Shares, as shown below, in an aggregate amount at least equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1 000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Right of Accumulation (Optional)
- ------------------------------------------------------------------------------------------------------------------------------------
List the Account numbers of other Flag Investors Funds that you or your immediate family already own that qualify you 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.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
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
Subsequent Investments (check one): [ ] Monthly ($100 minimum per class) [ ] Quarterly ($250 minimum per class)
-----------------------------
Please attach a voided check.
-----------------------------
- --------------------------------------------------------------- -----------------------------------------------------------------
Bank Name Depositor's Signature Date
- --------------------------------------------------------------- -----------------------------------------------------------------
Existing Flag Investors Fund Account No., if any Depositor's Signature Date
(if joint acct., both must sign)
- ------------------------------------------------------------------------------------------------------------------------------------
Systematic Withdrawal Plan (Optional)
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Beginning the month of ___________ , 19__ please send me checks on a monthly or quarterly basis, as indicated below, in the
amount of (complete as applicable) $___________ from Class A Shares and/or $___________ from Class B Shares that I own, payable
to the account registration address as shown above. (Participation requires minimum account value of $10,000 per class.)
Frequency (check one): [ ] Monthly [ ] Quarterly (January, April, July, and October)
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
I understand that I will automatically have telephone redemption privileges (for amounts up to $50,000) and telephone exchange
privileges (with respect to other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/we do not want: [ ] Telephone redemption privileges [ ] Telephone exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If you would prefer redemptions mailed to a
predesignated bank account, please provide the following information:
Bank: ____________________________________________________ Bank Account No.: _______________________________________________
Address: ____________________________________________________ Bank Account Name: _______________________________________________
____________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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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
your 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 acknowledge that I am of legal age in the state of my residence. I have received a copy of the Fund's prospectus. 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 hae 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., both must sign) Date
- --------------------------------------------------------------------------------
- ----------------------
For Dealer Use Only
- ----------------------
Dealer's Name: ________________________________________________________________________ Dealer Code: ____________________________
Dealer's Address: ________________________________________________________________________ Branch Code: ____________________________
________________________________________________________________________
Representative: ________________________________________________________________________ Rep. No.: ____________________________
</TABLE>
A-2
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND, INC.
(Class A and Class B Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
LaSALLE INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
(SECURITIES), L.P. Two Portland Square
100 East Pratt Street Portland, Maine 04101
Baltimore, Maryland 21202
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 20201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
REPRS
4/99
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
FLAG INVESTORS
REAL ESTATE SECURITIES FUND, INC.
(Institutional Shares)
Prospectus & Application -- May 1, 1998, as
supplemented through March 31, 1999
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") seeks total return primarily through investments
in equity securities of companies that are principally engaged in the real
estate industry.
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, certain qualified retirement plans,
or investment advisory affiliates of BT Alex. Brown Incorporated ("BT Alex.
Brown"). (See "How to Buy Institutional Shares.")
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated May 1, 1998 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
Risk Factors ............................... 4
Investment Restrictions .................... 5
The Fund's Net Asset Value ................. 5
How to Buy Institutional Shares ............ 5
How to Redeem Institutional Shares ......... 6
Telephone Transactions ..................... 6
Dividends and Taxes ........................ 6
Management of the Fund ..................... 7
Investment Advisor and Sub-Advisor ......... 7
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, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
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 ................................... None
Maximum Sales Charge Imposed on Reinvested Dividends ........................ None
Maximum Deferred Sales Charge ............................................... None
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees (net of fee waivers) ........................................ 0.32%*
12b-1 Fees .................................................................. None
Other Expenses .............................................................. 0.68%
-----
Total Fund Operating Expenses (net of fee waivers) .......................... 1.00%*
=====
</TABLE>
- -----------
* The Fund's investment advisor currently intends to waive its fee or to
reimburse the Fund on a voluntary basis to the extent required so that Total
Fund Operating Expenses do not exceed 1.00% of the Institutional Shares'
average daily net assets. Absent fee waivers, Management Fees would be 0.65%
of the Fund's average daily net assets and Total Fund Operating Expenses
would be 1.33% of the Institutional Shares' average daily net assets.
<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 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period:* ....................... $10 $32 $55 $122
</TABLE>
- -----------
* Absent fee waivers, expenses would be higher.
The Expenses and Example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and
expenses that you will bear indirectly when you invest in Institutional Shares.
If you purchase Institutional Shares through a financial institution, you may
be charged separate fees by that institution.
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights included in this table have been derived from the
Fund's financial statements for the period indicated and have been audited by
PricewaterhouseCoopers LLP., independent accountants. The financial statements
and financial highlights for the fiscal year ended December 31, 1997 and the
report thereon of PricewaterhouseCoopers LLP. are included in the Statement of
Additional Information. Additional performance information is contained in the
Fund's Annual Report for the fiscal year ended December 31, 1997 which can be
obtained at no charge by calling the Fund at (800) 767-FLAG.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
For the Period
March 31, 1997(1)
through
December 31, 1997
------------------
Per Share Operating Performance:
Net asset value at beginning of period ................ $ 14.19
-------
Income from Investment Operations:
Net investment income ................................. 0.47
Net realized and unrealized gain on
investments ......................................... 2.14
-------
Total from Investment Operations ...................... 2.61
-------
Less Distributions:
Dividends from net investment income .................. (0.42)
Distributions from net realized capital gains ......... (0.47)
--------
Total distributions ................................... (0.89)
--------
Net asset value at end of period ...................... $ 15.91
========
Total Return ........................................... 18.84%
Ratios to Average Daily Net Assets:
Expenses(2)............................................ 1.00%(4)
Net investment income(3)............................... 4.30%(4)
Supplemental Data:
Net assets at end of period (000) ..................... $ 288
Portfolio turnover rate ............................... 35%(4)
Average commissions per share ......................... $0.0479
- -----------
(1) Commencement of operations.
(2) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.39% (annualized) for the period ended December
31, 1997.
(3) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 3.91% (annualized) for the period
ended December 31, 1997.
(4) Annualized.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective and Policies
The investment objective of the Fund is total return primarily through
investments in equity securities of companies that are principally engaged in
the real estate industry.
Under normal conditions at least 65% of the Fund's total assets will be
invested in the equity securities of companies principally engaged in the real
estate industry. A company is "principally engaged" in the real estate industry
if (i) it derives at least 50% of its revenues or profits from the ownership,
construction, management, financing or sale of residential, commercial or
industrial real estate or (ii) it has at least 50% of the fair market value of
its assets invested in residential, commercial or industrial real estate.
Companies in the real estate industry may include among others: real estate
investment trusts ("REITs"), master limited partnerships that invest in
interests in real estate and that are traded on a national securities exchange;
real estate brokers or developers; and companies with substantial real estate
holdings, such as paper and lumber producers. When the Fund invests in REITs or
master limited partnerships, shareholders indirectly bear a proportionate share
of the operating expenses of the underlying entity, in addition to the similar
expenses of the Fund. The Fund may invest up to 10% of its total assets in
securities of foreign real estate companies.
REITs pool investors' funds for investment primarily in income-producing
real estate or real estate related loans or interests. Generally, REITs can be
classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents and capital gains from appreciation realized
through property sales. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive their income primarily from interest payments.
Hybrid REITs combine the characteristics of both Equity and Mortgage REITs.
Under normal conditions the portfolio may invest up to 35% of its total
assets in securities of companies outside the real estate industry and
nonconvertible debt securities such as bonds. The Fund's investment advisor and
sub-advisor (collectively, the "Advisors") currently anticipate that
investments outside the real estate industry will be primarily in securities of
companies whose products and services are related to the real estate industry.
They may include manufacturers and distributors of building supplies, financial
institutions that make or service mortgages and companies whose real estate
assets are substantial relative to their stock market valuations, such as
retailers and railroads.
The Fund may invest up to 5% of its net assets in zero coupon or other
original issue discount securities. The debt securities purchased by the Fund
will be of investment grade or better quality (i.e., of a quality equivalent to
the ratings Baa or better of Moody's Investors Service, Inc. ("Moody's") or BBB
or better of Standard & Poor's Ratings Group ("S&P")). While classified as
"investment grade," securities rated Baa by Moody's or BBB by S&P have
speculative characteristics. The ratings categories of S&P and Moody's are
described more fully in the Appendix to the Statement of Additional
Information.
For temporary defensive purposes the Fund may invest up to 100% of its
assets in short-term money market instruments consisting of securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements, certificates of deposit and bankers' acceptances issued
by banks or savings and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year, high-grade commercial
paper rated, at the time of purchase, in the top two categories by a national
rating agency or determined to be of comparable quality by the Fund's
investment advisor or sub-advisor at the time of purchase and other long- and
short-term debt instruments that are rated A or higher by S&P or Moody's at the
time of purchase, and may hold a portion of its assets in cash. The Fund has
the ability to invest in warrants, futures contracts and options, but has no
intention to do so during the coming year.
Subject to the Fund's overall investment limitations on investing in
illiquid securities and restricted securities, the Fund may purchase Rule 144A
Securities. Rule 144A Securities are restricted securities in that they have
not been registered under the Securities Act of 1933, but they may be traded
between certain qualified institutional investors, including investment
companies. The presence or absence of a secondary market in these securities
may affect their value. The Fund's Board of Directors has established
guidelines and procedures to be utilized to determine the liquidity of such
securities.
Repurchase Agreements
The Fund may agree to purchase U.S. Treasury securities from creditworthy
financial institutions, such as banks and 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
expose the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations.
3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
When-Issued Securities
The Fund may purchase securities, at their current market value, on a
forward commitment or when-issued basis. A segregated account of the Fund
consisting of cash or other liquid securities equal at all times to the amount
of the when-issued commitments will be established and maintained by the Fund
at the Fund's custodian. While the Fund will purchase securities on a forward
commitment or when-issued basis only with the intention of acquiring the
securities, the Fund may choose to sell the securities before the settlement
date. The value of securities so purchased or sold is subject to market
fluctuation and no interest accrues to the purchaser during this period.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have
their computer systems adjusted for the year 2000 transition, and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its
shareholders may experience losses if these assurances prove to be incorrect or
if issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others, with which the Fund does business experience
difficulties as a result of year 2000 issues.
RISK FACTORS
- --------------------------------------------------------------------------------
Because the Fund invests primarily in the real estate industry, its
investments may be subject to certain risks. These risks include: declines in
the value of real estate, risks related to general and local economic
conditions, overbuilding and increased competition, increases in property taxes
and operating expenses, demographic trends and variations in rental income.
Generally, increases in interest rates will decrease the value of high yielding
securities and increase the cost of obtaining financing, which could directly
and indirectly decrease the value of the Fund's investments. The Fund's share
price and investment return fluctuate, and your investment when redeemed may be
worth more or less than the original cost.
Because the Fund may invest in REITs, it may also be subject to certain
risks associated with the direct investments of the REITs. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while Mortgage REITs may be affected by the quality of credit extended. Equity
and Mortgage REITs are dependent upon management skill, have limited
diversification and are subject to the risks of financing projects. Such REITs
are also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code of 1986, as amended, or failing to
maintain their exemptions from registration under the Investment Company Act of
1940, as amended.
Investing in securities issued by foreign corporations involves
considerations and possible risks not typically associated with investing in
securities issued by domestic corporations. The values of foreign investments
are affected by changes in currency rates or exchange control regulations,
application of foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in the United
States or abroad) or changed circumstances in dealings between nations. Costs
are incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions are generally higher than in the United
States, and foreign securities markets may be less liquid, more volatile and
less subject to governmental supervision than in the United States. Investments
in foreign countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards, potential difficulties in enforcing
contractual obligations and the possibility of extended settlement periods. For
additional risk disclosure see "Repurchase Agreements" and "When--Issued
Securities."
4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following investment restrictions numbered 1 and 2 are matters of
fundamental policy and may not be changed without shareholder approval.
Investment restriction number 3 may be changed by a vote of the majority of the
Board of Directors. The Fund will not:
1) With respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer or invest more than 5% of
the value of its total assets in the securities of any one issuer, except
the U.S. Government, its agencies and instrumentalities;
2) Concentrate 25% or more of its total assets in secur-ities of issuers
in any one industry, except that the Fund will concentrate in the real
estate industry (for these purposes the U.S. Government and its agencies
and instrumentalities are not considered an issuer); or
3) Invest more than 10% of the Fund's net assets in illiquid securities,
including repurchase agreements with maturities of greater than seven
days.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The following sections describe how to buy and redeem shares of the Fund.
The price you pay or receive is based on the Fund's net asset value per
share. The net asset value per share of a class is determined on each business
day as of the close of trading on the New York Stock Exchange (ordinarily 4:00
p.m. Eastern Time). It is calculated by subtracting the liabilities
attributable to a class from its proportionate share of the Fund's assets and
dividing the result by the outstanding shares of the class.
In valuing the Fund's assets, its investments are priced at their market
value which is normally based on current prices but which may be determined
according to "fair value" procedures approved by the Fund's Board of Directors.
You may buy or redeem shares on any day on which the New York Stock
Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that
day, the price you pay or receive will be based on the next Business Day's net
asset value per share.
HOW TO BUY INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may buy Institutional Shares if you are any of the following:
o An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or
charitable institution).
o A qualified retirement plan with assets of at least $75 million.
o An investment advisory affiliate of BT Alex. Brown purchasing shares
for the accounts of your investment advisory clients.
You may buy Institutional Shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy Institutional Shares by sending your check (along with
a completed Application Form) directly to the Fund. The Application Form, which
incudes instructions, is attached to this Prospectus.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
Investment Minimums
If you are an eligible institution, your initial investment must be at
least $500,000. There are no minimum initial investments for qualified
retirement plans or investment advisory affiliates of BT Alex. Brown. There are
no minimums for subsequent investments.
5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Purchases by Exchange
You may exchange Institutional shares of any other Flag Investors fund
for an equal dollar amount of Institutional Shares of the Fund. The Fund may
modify or terminate this offer of exchange at any time on 60 days' prior
written notice.
You may request an exchange through your securities dealer or your
servicing agent. Contact them for details on how to enter your order. If your
shares are in an account with the Fund's Transfer Agent, you may also request
an exchange directly through the Transfer Agent by express mail or telephone.
Other Information
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.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may redeem your shares through your securities dealer or your
servicing agent. Contact them for details on how to enter your order. If your
shares are in an account with the Fund, you may also redeem them by contacting
the Transfer Agent by telephone (if you are redeeming less than $500,000). You
will be paid for redeemed shares by wire transfer of funds to your securities
dealer, servicing agent or bank upon receipt of a duly authorized redemption
request as promptly as feasible and, under most circumstances, within three
Business Days.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be remitted by wire to your securities dealer, servicing
agent or bank.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $500,000 or exchange them for Institutional Shares of
another Flag Investors fund by calling the Transfer Agent on any Business Day
between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges unless you
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information at the
time your account is opened and prior to effecting each telephone transaction.
You may be required to provide additional telecopied instructions. If these
procedures are employed, neither the Fund nor the Transfer Agent will bear any
liability for following instructions received by telephone that they reasonably
believe to be genuine. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by express mail or facsimile. (See "How to Buy
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 net investment company taxable income (including net short-term capital
gains) in the form of monthly dividends. The Fund also intends to distribute to
shareholders any net capital gains (the excess of net long-term capital gains
over net short-term capital losses) on an annual basis.
Unless you elect otherwise, all income dividends and net capital gains
distributions, if any, will be reinvested in additional Institutional Shares at
net asset value. You may elect to terminate automatic reinvestment by giving
written notice to the Transfer Agent, either directly or through your
securities dealer or servicing agent, at least five days before the next date
on which dividends or distributions will be paid.
6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences
affecting the Fund and its shareholders 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 tax treatment of the Fund or its shareholders and the
discussion here is not intended as a substitute for careful tax planning.
Accordingly, you are advised to consult with your tax advisor regarding
specific questions. The Statement of Additional Information sets forth further
information concerning taxes.
The Fund is treated as a separate entity for federal income tax purposes.
The Fund intends to qualify for the special tax treatment afforded regulated
investment companies under the Internal Revenue Code of 1986, as amended, so
that the Fund will not pay federal income tax on net investment company taxable
income and net capital gains distributed to its shareholders. In addition, the
Fund expects to make sufficient distributions prior to the end of each calendar
year to avoid liability for federal excise tax.
You will be taxed on dividends from the Fund's net investment company
taxable income as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Capital gains
distributions from the Fund are classified as either short-term or long-term
depending upon how long the Fund held the securities it sold to generate the
gains. You will be taxed on the distributions according to the category
stipulated by the Fund regardless of how long you have held your Fund shares.
Only a portion of the dividends paid by the Fund is expected to qualify for the
dividends received deduction available to corporate shareholders. You will be
advised annually as to the federal income tax status of all distributions.
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 paid by the Fund and received by you in the year in which
the dividends were declared.
The sale, exchange, or redemption of Institutional Shares is a taxable
event for you.
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 to the Distributor. A majority
of Directors of the Fund are not affiliated 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 LaSalle Investment Management (Securities), L.P.
(formerly, ABKB/LaSalle Securities Limited Partnership) ("LaSalle" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is the investment advisor to
mutual funds with approximately $8.8 billion of net assets as of December 31,
1998. In addition to this Fund, these include other funds in the Flag Investors
family of funds and BT Alex. Brown Cash Reserve Fund, Inc. LaSalle is a
Maryland limited partnership that is indirectly controlled by Jones Lang
LaSalle Incorporated, an international real estate investment management
company. At December 31, 1998, LaSalle advised mutual funds with approximately
$70.2 million in net assets.
ICC supervises and manages all of the Fund's operations. Under the
Investment Advisory and Sub-Advisory Agreements, ICC delegates to LaSalle
certain of its duties, provided that ICC continues to supervise the performance
of LaSalle and report thereon to the Fund's Board of Directors. Pursuant to the
terms of the Sub-Advisory Agreement, LaSalle is responsible for decisions to
buy and sell securities for the Fund, for broker-dealer selection, and for
negotiation of commission rates. The Board has established procedures under
which LaSalle may allocate transactions to certain affiliates, 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 the
Conduct Rules of the National Association of Securities Dealers, Inc., and
subject to seeking the most favorable price and execution available and such
other policies as the Board may determine, LaSalle 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.
7
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<PAGE>
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ICC and LaSalle currently intend to waive, on a voluntary basis, their
annual fees to the extent necessary so that the Fund's annual expenses do not
exceed 1.00% of the Institutional Shares' average daily net assets. As
compensation for its services for the fiscal year ended December 31, 1997, ICC
received a fee (net of fee waivers) equal to 0.32% of the Fund's average daily
net assets and, for the same period, ICC paid LaSalle a fee (net of fee
waivers) equal to 0.20% of the Fund's average daily net assets.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. An affiliate of ICC provides custody
services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
On November 30, 1998, Bankers Trust Corporation entered into an Agreement
and Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation
would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is
a major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. The transaction is contingent upon
various regulatory approvals, and continuation of the Fund's advisory
relationship with ICC and sub-advisory relationship with LaSalle thereafter is
subject to the approval of Fund shareholders. On March 30, 1999, the Board of
Directors approved, subject to shareholder approval, a new advisory agreement
between ICC and the Fund and a new sub-advisory agreement among the Fund, ICC
and LaSalle in the event the merger is approved and completed. If the
transaction is approved and completed, Deutsche Bank AG, as ICC's new parent
company, will control its operations as investment advisor. ICC believes that,
under this new arrangement, the services provided to the Fund will be
maintained at their current level.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICC became a subsidiary of Bankers Trust Corporation in a
merger that occurred after these events took place. Pursuant to its agreement
with the U.S. Attorney's Office, Bankers Trust pleaded guilty to misstating
entries in the bank's books and records and agreed to pay a $60 million fine to
federal authorities. Separately, Bankers Trust agreed to pay a $3.5 million
fine to the State of New York. The events leading up to the guilty pleas did
not arise out of the investment advisory or mutual fund management activities
of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC may not be
able to continue to provide investment advisory services to the Fund. The SEC
has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Managers
William K. Morrill, Jr., the Fund's President, and Keith R. Pauley, the
Fund's Executive Vice President, have shared primary responsibility for
managing the Fund's assets from its inception. Since September 28, 1998, they
have shared those responsibilities with James A. Ulmer III, a Vice President of
the Fund.
Mr. Morrill, Managing Director and Chief Executive Officer of LaSalle,
has nearly 18 years of investment experience and has been a portfolio manager
with LaSalle or its predecessors since 1986.
Mr. Pauley, Managing Director of LaSalle, has over 12 years of investment
experience and has been a portfolio manager with LaSalle or its predecessors
since 1986.
Mr. Ulmer, a Principal of LaSalle, has over 30 years of experience in
real estate and REIT investment, development and investment banking. Prior to
joining LaSalle, in April of 1997, Mr. Ulmer was a portfolio analyst and
strategist for AIRES Real Estate Services from 1993 to 1997. Prior to 1993, Mr.
Ulmer was President of the Parkway Companies, owners and developers of office
and industrial properties, and a bank and real estate securities analyst for T.
Rowe Price Associates.
DISTRIBUTOR
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ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has
served as distributor of each class of the Fund's shares since August 31, 1997.
ICC Distributors receives no compensation for distributing the Institutional
Shares. 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 Distributoris not affiliated with either the Advisor or the Sub-
Advisor.
8
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<PAGE>
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ICC Distributors bears all expenses associated with advertisements,
promotional materials, sales literature and printing and mailing prospectuses
to other than Fund shareholders. The Advisor or its affiliates may make
payments from their own resources to securities dealers and servicing agents.
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
December 31, 1997, ICC received a fee equal to 0.09% of the Fund's average
daily net assets. Bankers Trust, acts as custodian of the Fund's assets. (See
the Statement of Additional Information.)
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise its performance, including
comparisons to other mutual funds with similar investment objectives and to
relevant indices. Any quotations of yield of the Fund will be determined by
dividing the net investment income earned by the Fund during a 30-day period by
the maximum offering price per share on the last day of the period and
annualizing the result on a semi-annual basis. All advertisements of
performance 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, such as the Wilshire Real Estate Index, its 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
Fund may also use total return performance data as reported in national
financial and industry publications that monitor the performance of mutual
funds such as 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. 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 your bank
with respect to the accounts through which your shares may be purchased,
although not included in calculations of performance, will reduce your
performance results.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Description of Shares
The Fund is an open-end diversified management investment company
organized under the laws of the State of Maryland on May 2, 1994 and is
authorized to issue 30 million shares of capital stock, with a par value of
$.001 per share. Each share has one vote and is entitled to dividends and
distributions when and if declared by 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 fiscal year-end
of the Fund is December 31.
The Board of Directors of the Fund is authorized to establish additional
series of shares of capital stock, each of which would evidence interests in a
separate portfolio of securities, and separate classes of each series of the
Fund. The shares offered by this Prospectus have been designated "Flag
Investors Real Estate Securities Fund Institutional Shares." The Board has no
present intention of establishing any additional series of the Fund but the
Fund has two other classes of shares, "Flag Investors Real Estate Securities
Fund Class A Shares" and "Flag Investors Real Estate Secur-rities Fund Class B
Shares." Additional information concerning the Fund's other classes of shares
may be obtained by calling the Fund 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 Institutional
9
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<PAGE>
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Shares. All classes of the Fund share a common investment objective, portfolio
of investments and advisoryfee, but the classes may have different
distribution/service fees or sales load structures and, accordingly, the net
asset value per share of the classes may differ at times.
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders unless
required by Maryland law. 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 the shareholder communications in
connection with the meeting.
Reports
You will be furnished 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, PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your Institutional Shares, contact the
Fund at (800) 767-FLAG, the Transfer Agent at (800) 553-8080, or your
securities dealer or servicing agent.
10
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<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
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<TABLE>
<CAPTION>
<S> <C>
Send completed Application by overnight carrier to: For assistance in completing this Application please call: 1-800-553-8080,
Flag Investors Funds Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
330 West 9th Street, First Floor
Kansas City, MO 64105
Attn: Flag Investors Real Estate Securities Fund, Inc.
If you are paying by check, make check payable to "Flag Investors Real Estate
Securities Fund, Inc." and mail with this Application. If you are paying by
wire, see instructions below.
- ------------------------------------------------------------------------------------------------------------------------------------
Your Account Registration (Please Print)
Name on Account Mailing Address
- ---------------------------------------------------------- -----------------------------------------------------------------
Name of Corporation, Trust or Partnership Name of Individual to Receive Correspondence
- -------------------------- -----------------------------------------------------------------
Tax ID Number Street
[ ] Corporation [ ] Partnership [ ] Trust -----------------------------------------------------------------
[ ] Non-Profit or Charitable Organization [ ] Other______ City State Zip
If a Trust, please provide the following: ( )
-----------------------------------------------------------------
Daytime Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Trust For the Benefit of
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
Initial Investment
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 Real Estate Securities 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 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 Flag Investors Funds
Acct. # 7518625
ABA # 1010-0362-1
Kansas City, Missouri 64105
Please include the following information in the wire:
o Flag Investors Real Estate Securities Fund, Inc. -- Institutional Shares
o The amount to be invested
o "For further credit to __________________________________."
(Investor's Fund Account Number)
<PAGE>
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
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
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
your 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. 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
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
</TABLE>
A-2
<PAGE>
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FLAG INVESTORS REAL ESTATE SECURITIES FUND, INC.
(Institutional Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
LaSALLE INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
(SECURITIES), L.P. Two Portland Square
100 East Pratt Street Portland, Maine 04101
Baltimore, Maryland 21202
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 20201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
REIPRS
(4/99)
