<PAGE>
As Filed with the Securities and Exchange Commission on February 27, 1996
Registration No. 33-28479
811-4827
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 16 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 17 [X]
FLAG INVESTORS INTERNATIONAL FUND, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
135 East Baltimore Street
Baltimore, MD 21202
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (410) 727-1700
----------------
Edward J. Veilleux
135 East Baltimore Street
Baltimore, MD 21202
---------------------------------------
(Name and address of agent for service)
Copy to:
Richard W. Grant, Esquire
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
------
X on March 1, 1996 pursuant to paragraph (b)
------
60 days after filing pursuant to paragraph (a)(1)
------
75 days after filing pursuant to paragraph (a)(2)
------
on [date] pursuant to paragraph (a) of Rule 485.
------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------------------------------------------------------
Title of Securities Amount Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Unit Aggregate Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of 244,138 shares $14.40 $100(1)
Common Stock
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Registrant has calculated the maximum aggregate offering price pursuant to
Rule 24e-2 under the Investment Company Act of 1940 (the "1940 Act") for
its fiscal year ended October 31, 1995. Registrant had actual aggregate
redemptions of 224,000 shares for its fiscal year ended October 31, 1995.
Because of credits for prior net redemptions, Registrant has used no
available redemptions for reductions pursuant to Rule 24f-2(c) under the
1940 Act and has previously used no available redemptions for reductions
pursuant to Rule 24e-2(a) of the 1940 Act during the current year.
Registrant elects to use redemptions in the aggregate amount of 224,000
shares for reductions in its current amendment.
================================================================================
Registrant has elected to maintain registration of an indefinite number of
shares of Common Stock pursuant to Rule 24f-2 under the Investment Company Act
of 1940. Registrant's Rule 24f-2 Notice for its fiscal year ended October 31,
1995 was filed with the Commission on December 20, 1995.
- --------------------------------------------------------------------------------
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
(Class A Shares)
Cross Reference Sheet
February 27, 1996
<TABLE>
<CAPTION>
Registration
Items Required by Form N-1A Statement Heading
- --------------------------- -----------------
<S> <C> <C>
Part A - Information Required in a Prospectus
- ------
Item 1. Cover Page........................................... Cover Page
Item 2. Synopsis............................................. Fee Table
Item 3. Condensed Financial Information...................... Financial Highlights;
Performance Information
Item 4. General Description of Registrant.................... Investment Program;
Investment Restrictions;
General Information
Item 5. Management of the Fund............................... Management of the Fund;
Investment Advisor and
Sub-Advisor; Distributor;
Custodian, Transfer
Agent, Accounting
Services
Item 5A. Management's Discussion of Fund
Performance.......................................... *
Item 6. Capital Stock and Other Securities................... Cover Page; Dividends
and Taxes; General
Information
Item 7. Purchase of Securities Being Offered................. How to Invest in the
Fund; Distributor
Item 8. Redemption or Repurchase............................. How to Redeem Shares
Item 9. Pending Legal Proceedings............................ **
</TABLE>
- --------
* Information required by Item 5A is contained in Registrant's 1995 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
<TABLE>
<CAPTION>
Part B - Information Required in a Statement
- ------ of Additional Information
<S> <C> <C>
Item 10. Cover Page........................................... Cover Page
Item 11. Table of Contents.................................... Table of Contents
Item 12. General Information and History...................... General Information and
History
Item 13. Investment Objectives and Policies................... Investment Objective and
Policies
Item 14. Management of the Fund............................... Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities................................ Control Persons and
Principal Holders of
Securities
Item 16. Investment Advisory and Other Services............... Investment Advisory and
Other Services;
Custodian, Accounting
Services and Transfer
Agent; Independent
Auditors
Item 17. Brokerage Allocation.................................... Brokerage
Item 18. Capital Stock and Other Securities................... Capital Shares;
Reports
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered.......................... Valuation of Shares and
Redemption
Item 20. Tax Status........................................... Federal Tax Treatment of
Dividends and
Distributions
Item 21. Underwriters......................................... Distribution of Fund
Shares and
Administration
Item 22. Calculation of Performance Data...................... Performance Information
Item 23. Financial Statements................................. Financial Statements
</TABLE>
Part C - Other Information
- ------
Part C contains the information required by the items
contained therein under the items set forth in the form.
<PAGE>
LOGO
FLAG INVESTORS
INTERNATIONAL FUND, INC.
(Class A Shares)
This mutual fund (the "Fund") is an open-end diversified management
investment company seeking long-term growth of capital primarily through
investment in a diversified portfolio of marketable equity securities of
issuers located outside of the United States.
Class A Shares of the Fund ("Class A Shares") are available through Alex.
Brown & Sons Incorporated, as well as through Participating Dealers and
Shareholder Servicing Agents. (See "How to Invest in the Fund.").
This Prospectus sets forth basic information that investors should know
about the Fund prior to investing, and should be retained for future
reference. A Statement of Additional Information dated March 1, 1996 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.
- ------------------------------------------------------------------------------
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS
The date of this Prospectus is March 1, 1996
<PAGE>
FLAG INVESTORS
INTERNATIONAL FUND, INC.
(Class A Shares)
135 East Baltimore Street
Baltimore, Maryland 21202
TABLE OF CONTENTS
------
Page
1. Fee Table ........................................ 2
2. Financial Highlights ............................. 3
3. Investment Program ............................... 6
4. Investment Restrictions .......................... 9
5. How to Invest in the Fund ........................ 9
6. How to Redeem Shares ............................. 15
7. Telephone Transactions ........................... 16
8. Dividends and Taxes .............................. 17
9. Management of the Fund ........................... 19
10. Investment Advisor and Sub-Advisor ............... 19
11. Distributor ...................................... 21
12. Custodian, Transfer Agent, Accounting Services ... 22
13. Performance Information .......................... 22
14. General Information .............................. 23
- ------------------------------------------------------------------------------
No person has been authorized to give any information or to make
representations not contained in this Prospectus in connection with any
offering made by this Prospectus and, if given or made, such information
must not be relied upon as having been authorized by the Fund or its
distributor. This Prospectus does not constitute an offering by the Fund or
by its distributor in any jurisdiction in which such offering may not
lawfully be made. Shares may be offered only to residents of those states
in which such shares are eligible for purchase.
- ------------------------------------------------------------------------------
1
<PAGE>
=============================================================================
1. FEE TABLE
- ------------------------------------------------------------------------------
Shareholder Transaction Expenses:
(as a percentage of offering price)
- -----------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases .............. 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends ... None
Deferred Sales Charge .................................. None*
- ------------------------------------------------------------------------------
Annual Fund Operating Expenses (net of fee waivers):
(as a percentage of average daily net assets)
- ------------------------------------------------------------------------------
Management Fees (net of fee waivers) ................... .08%**
12b-1 Fees ............................................. .25%
Other Expenses ......................................... 1.17%
Total Fund Operating Expenses (net of fee waivers) ..... 1.50%**
- ------------------------------------------------------------------------------
* Purchases of $1 million or more are not subject to an initial sales
charge, however, a contingent deferred sales charge of .50% may be
imposed on such purchases. (See "How to Invest in the Fund -- Offering
Price.")
** The Fund's investment advisor has agreed to voluntarily waive its fees to
the extent required so that Total Fund Operating Expenses do not exceed
1.50% of the Class A Shares' average net assets. Absent fee waivers,
Management Fees would be .75% and Total Fund Operating Expenses would be
2.17% of the Class A Shares' average net assets.
EXAMPLE:
You would pay the following
expenses on a $1,000
investment, assuming (1) 5%
annual return and (2)
redemption at the end of
each time period:*
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------
$60 $91 $126 $230
- ------------------------------------------------------------------------------
* Absent fee waivers, for the one, three, five and ten-year periods,
expenses would be higher.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Fund will bear directly and indirectly. A
person who purchases Class A Shares through a financial institution may be
charged separate fees by the financial institution. (For more complete
descriptions of the various costs and expenses, see "How to Invest in the
2
<PAGE>
Fund -- Offering Price", "Investment Advisor and Sub-Advisor" and
"Distributor.") The Expenses and Example appearing in the table above are
based on the Fund's expenses for the Class A Shares for the fiscal year ended
October 31, 1995, which (net of fee waivers) were 1.50% of the Class A
Shares' average net assets.
The rules of the SEC require that the maximum sales charge (in the Class A
Shares' case, 4.50% of the offering price) be reflected in the above table.
However, certain investors may qualify for reduced sales charges. (See "How
to Invest in the Fund -- Offering Price.") Due to the continuous nature of
Rule 12b-1 fees, long-term shareholders of the Fund may pay more than the
equivalent of the maximum front-end sales charges permitted by the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. ("NASD
Rules"). The foregoing table has not been audited by Deloitte & Touche LLP,
the Fund's independent auditors.
==============================================================================
2. FINANCIAL HIGHLIGHTS
The financial highlights included in this table have been derived from the
Fund's financial statements for the periods indicated and have been audited
by Deloitte & Touche LLP, independent auditors. The financial statements and
related notes for the fiscal year ended October 31, 1995 and the independent
auditors' report thereon of Deloitte & Touche 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 October 31,
1995, which can be obtained at no charge by calling the Fund at (800)
767-FLAG.
3
<PAGE>
(For a Class A Share outstanding throughout each period)
- -----------------------------------------------------------------------------
For the Year
-----------------------------------------------
1995 1994 1993** 1992
--------- -------- --------- ---------
Per Share Operating
Performance:
Net asset value at
beginning of period $13.97 $13.05 $9.11 $10.63
--------- --------- --------- ----------
Income from Investment
Operations:
Net investment income 0.09 0.18 0.49 0.16
Net realized and
unrealized gain/(loss)
on investments(1) (1.37) 1.58 3.45 (1.62)
--------- --------- --------- ----------
Total from Investment
Operations (1.28) 1.76 3.94 (1.46)
Less Distributions:
Dividends from net
investment income and
short-term gains -- (0.84) -- (0.06)
Distributions from net
realized long-term
gains -- -- -- --
--------- --------- --------- ----------
Total distributions -- (0.84) -- (0.06)
--------- --------- --------- ----------
Net asset value at end of
period $12.69 $13.97 $13.05 $9.11
========= ========= ========= ==========
Total Return *** (9.16)% 13.98% 43.25% (13.80)%
Ratios to Average Net
Assets:
Expenses(2) 1.50% 1.50% 1.50% 1.50%
Net investment
income(3) 0.68% 0.75% 1.91% 0.73%
Supplemental Data:
Net assets at end of
period (000) $12,483 $15,487 $15,008 $19,780
Portfolio turnover rate 35% 43% 48% 63%
- ------
* Annualized.
** Investment Company Capital Corp. and The Glenmede Trust Company became
the Fund's investment advisor and sub-advisor, respectively, on August
23, 1993.
*** Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges.
4
<PAGE>
=============================================================================
November 18,
1986
(commence-
ment of
operations)
through
Ended October 31, October 31,
---------------------------------------------- -------------
1991 1990 1989 1988 1987
------- --------- --------- --------- -------------
$11.80 $13.71 $11.78 $10.81 $10.00
------ --------- --------- --------- -------------
0.15 0.60 0.10 0.11 0.03
(0.55) (1.33) 1.92 1.57 0.78
------ --------- --------- --------- -------------
(0.40) (0.73) 2.02 1.68 0.81
-- (0.57) (0.09) (0.16) --
(0.77) (0.61) -- (0.55) --
----- --------- --------- --------- -------------
(0.77) (1.18) (0.09) (0.71) --
----- ---------- --------- --------- -------------
$10.63 $11.80 $13.71 $11.78 $10.81
===== ========= ========= ========= =============
(3.15)% (6.63)% 17.25% 16.21% 8.1%
1.50% 1.50% 1.49% 1.46% 1.48%*
1.17% 1.48% 0.62% 0.87% 1.41%*
$38,830 $44,406 $32,325 $35,259 $38,227
73% 62% 95% 96% 72%
- -----------
(1) Current year and prior year includes net realized currency loss. Realized
currency gain (loss) is included in net income for the years ended
October 31, 1993, 1992 and 1991, respectively.
(2) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 2.17%, 1.97%, 2.13%, 1.92%, 1.90%, 1.75%, 1.82%,
1.79% and 1.85% during the periods ended October 31, 1995, 1994, 1993,
1992, 1991, 1990, 1989, 1988, and 1987, respectively.
(3) Without the waiver of advisory fees, the ratio of net investment income
to average net assets would have been 0.02%, 0.28%, 1.28%, 0.31%, 0.77%,
1.21%, 0.29%, 0.54%, and 0.78% during the periods ended October 31, 1995,
1994, 1993, 1992, 1991, 1990, 1989, 1988, and 1987, respectively.
5
<PAGE>
===============================================================================
3. INVESTMENT PROGRAM
..............................................................................
INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS
The investment objective of the Fund is long-term growth of capital. The
foregoing investment objective is a fundamental policy of the Fund and cannot
be changed without shareholder approval. The Fund seeks to achieve this
objective by investing primarily in common stocks and other equity securities
of companies located outside the United States. The Fund's assets will
usually consist of issues listed on recognized foreign securities exchanges.
The Fund is, however, free to hold securities that are not so listed, and may
invest up to 15% of its net assets in such securities. There can be no
assurance the Fund will achieve its objective.
Investment Company Capital Corp., the Fund's investment advisor ("ICC"),
and The Glenmede Trust Company, the Fund's sub-advisor ("Glenmede")
(collectively, the "Advisors"), are responsible for managing the Fund's
investments. (See "Investment Advisor and Sub-Advisor.") Glenmede manages the
Fund's investments on a day-to-day basis and utilizes a disciplined,
value-based investment management style to construct the Fund's international
equity portfolio. Markets, and individual securities within each market, are
compared on the basis of fundamental value, quality, and prospective earnings
potential.
The Fund's assets will normally be invested primarily in equity securities
of companies located outside the United States. For these purposes, equity
securities consist of not only common stock but securities convertible into
common stock and American Depository Receipts, which are securities issued in
the United States that represent ownership rights in foreign countries. The
Fund diversifies investments by issuer and does not concentrate in any one
industry. In addition, the Fund allocates its investments among geographic
regions and individual countries and, normally, expects to have 65% of its
total assets invested in at least three different foreign countries. (See
"Investment Restrictions.")
If the Fund is not fully invested in equity securities, any assets not so
invested may be invested in securities issued or guaranteed by the United
States government or any of its agencies or instrumentalities; shares of
open- or closed-end investment companies that invest exclusively in such
securities; fixed income securities issued by U.S. or foreign corporations,
or by foreign governments, that are determined by the Advisors to be of high
6
<PAGE>
quality; U.S. and foreign short-term money market instruments (consisting of
government obligations; time deposits, bankers acceptances, and certificates
of deposit of creditworthy banks; commercial paper and short-term corporate
debt securities, which are rated in the top two categories published by
Moody's Investors Service, Inc. or by Standard & Poor's Ratings Group or, if
unrated, are of comparable quality as determined by the Advisors under
guidelines established by the Fund's Board of Directors; and repurchase
agreements with respect thereto). Under normal circumstances, no more than
35% of the Fund's assets may be invested in fixed income securities and money
market instruments. For defensive purposes, however, up to 100% of such
assets may be invested in money market instruments.
The Fund may also enter into forward currency exchange contracts in order
to hedge against uncertainty in the level of future foreign exchange rates in
the purchase and sale of investment securities, but it may not enter into
such contracts for speculative purposes. The Fund will use these instruments
primarily for transaction hedging (i.e., to protect against adverse currency
movements between a security's trade and settlement dates) but reserves the
right occasionally to use forward contracts to hedge the value of securities
denominated in a particular currency against a decline in the value of that
currency. A forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts may be
bought or sold to protect the Fund, to some degree, against a possible loss
resulting from an adverse change in the relationship between foreign
currencies and the U.S. dollar. This method of protecting the value of the
Fund's investment securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the securities.
It simply establishes a rate of exchange at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain which might result should the value of the
currency increase.
The Fund may also invest in securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, as amended ("Rule 144A
Securities") that have been determined to be liquid by the Advisors under
standards approved by the Fund's Board of Directors, and may invest up to 10%
of its net assets in Rule 144A Securities that are illiquid (see "Investment
Restrictions"). Rule 144A Securities may become illiquid if qualified
institutional buyers are not interested in acquiring the securities.
7
<PAGE>
.............................................................................
SPECIAL RISK CONSIDERATIONS
Foreign investments involve substantial and different risks which should
be carefully considered by any potential investor. In general, less
information is publicly available about foreign companies than is available
about companies in the United States. Most foreign companies are not subject
to uniform audit and financial reporting standards, practices and
requirements comparable to those in the United States.
Foreign stock markets are generally not as developed or efficient as those
in the United States. In most foreign markets volume and liquidity are less
than in the United States and, at times, volatility of price can be greater
than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges. There is
generally less government supervision and regulation of foreign stock
exchanges, brokers and companies than in the United States. The settlement
periods for foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity.
Although the Fund intends to invest in securities of companies and
governments of developed, stable nations, there is also the possibility of
adverse changes in investment or exchange control regulations, expropriation
or confiscatory taxation, limitations on the removal of funds or other
assets, political or social instability, or diplomatic developments which
could adversely affect investments, assets or securities transactions of the
Fund in some foreign countries.
The dividends and interest payable on certain of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount available for distribution to the Fund's
shareholders. The expense ratio of the Fund can be expected to be higher than
those of investment companies investing in domestic securities due to the
additional cost of custody of foreign securities. A more detailed description
of the costs of operation of the Fund is contained under "Investment Advisor
and Sub-Advisor" and "Distributor" and in the Statement of Additional
Information. Portfolio securities held by the Fund which are listed on
foreign exchanges may be traded on days that the Fund does not value its
securities, such as Saturdays and the customary U.S. business holidays on
which the New York Stock Exchange is closed. As a result, the net asset value
of Class A Shares may be significantly affected on days when shareholders do
not have access to the Fund.
8
<PAGE>
===============================================================================
4. INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of restrictions which
reflect both self-imposed standards and federal and state regulatory
limitations. The investment restrictions recited below are matters of
fundamental policy and may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. Accordingly, the Fund will
not:
1) Concentrate 25% or more of its total assets in securities of issuers in
any one industry (for these purposes, banks and insurance companies are
considered to be separate industries);
2) Invest more than 5% of its total assets in the securities of any single
issuer;
3) Invest in the securities of any single issuer if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of such
issuer;
4) Borrow money except as a temporary measure to facilitate settlements and
for extraordinary or emergency purposes and then only from banks and in an
amount not exceeding 10% of the value of the total assets of the Fund at
the time of such borrowing, provided that, while borrowings by the Fund
equalling 5% or more of the Fund's total assets are outstanding, the Fund
will not purchase securities; and
5) Invest more than 10% of the value of its net assets in illiquid
securities, including time deposits of over seven days' duration.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
===============================================================================
5. HOW TO INVEST IN THE FUND
Class A Shares may be purchased from Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland 21202 ("Alex. Brown"), through any
securities dealer which has entered into a dealer agreement with Alex. Brown
("Participating Dealer") or through any financial institution which has
entered into a shareholder servicing agreement with the Fund ("Shareholder
Servicing Agents"). Class A Shares may also be purchased by completing the
Application Form attached to this Prospectus and returning it, together with
payment of the purchase price (including any applicable front-end sales
charge), to the address shown on the Application Form.
9
<PAGE>
The minimum initial investment is $2,000, except that the minimum initial
investment for shareholders of any other Flag Investors fund or class is $500
and the minimum initial investment for participants in the Fund's Automatic
Investing Plan is $250. Each subsequent investment must be at least $100,
except that the minimum subsequent investment under the Fund's Automatic
Investing Plan is $250 for quarterly investments and $100 for monthly
investments. (See "Purchases Through Automatic Investing Plan" below.) There
is no minimum investment requirement for qualified retirement plans (i.e.,
401(k) plans or pension and profit sharing plans). IRA accounts are, however,
subject to the $2,000 minimum initial investment requirement. There is no
minimum investment requirement for spousal IRA accounts.
The Fund reserves the right to suspend the sale of Class A Shares at any
time at the discretion of Alex. Brown and the Fund's investment advisor.
Orders for purchases of Class A Shares are accepted on any day on which the
New York Stock Exchange is open for business ("Business Day"). Purchase
orders for Class A Shares will be executed at the per share purchase price
equal to the net asset value next determined after receipt of the purchase
order plus any applicable front-end sales charge (the "Offering Price") on
the date such net asset value is determined (the "Purchase Date"). Purchases
made by mail must be accompanied by payment of the Offering Price. Purchases
made through Alex. Brown, a Participating Dealer or Shareholder Servicing
Agent must be in accordance with such entity's payment procedures. Alex.
Brown may, in its sole discretion, refuse to accept any purchase order.
The net asset value per share is determined once daily as of the close of
the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on
each Business Day. Net asset value per share is calculated by valuing all
assets held by the Fund, deducting liabilities, and dividing the resulting
amount by the number of then outstanding Class A Shares. For this purpose,
portfolio securities are given their market value where feasible. If a
portfolio security is traded on a national exchange, whether U.S. or foreign,
or on an automated dealer quotation system, on the valuation date, the last
quoted sale price is generally used. In the case of securities listed on more
than one exchange, the Fund will use the latest sale price on the exchange
where the stock is primarily traded as determined by the Advisors under
procedures established and monitored by the Fund's Board of Directors.
Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
Advisors under procedures established from time to time and monitored by the
Fund's Board of Directors. Investments with maturities of less than 60
10
<PAGE>
days are valued at amortized cost, which constitutes fair value as determined
by the Fund's Board of Directors. Any assets and liabilities initially
expressed in foreign currency values will be translated into U.S. dollar
values at the prevailing market rates of such currencies against U.S. dollars
at the time of valuation.
.............................................................................
OFFERING PRICE
Class A Shares may be purchased from Alex. Brown, Participating Dealers or
Shareholder Servicing Agents at the Offering Price, which includes a sales
charge which is calculated as a percentage of the Offering Price and
decreases as the amount of the purchase increases, as shown below:
Sales Charge
as Percentage of Dealer
------------------------------ Retention
Offering Net Amount as Percentage of
Amount of Purchase Price Invested Offering Price
------------ ............ ------------ -------------- -----------------
Less than $ 50,000 .... 4.50% 4.71% 4.00%
$ 50,000 - $ 99,999 .... 3.50% 3.63% 3.00%
$ 100,000 - $249,999..... 2.50% 2.56% 2.00%
$ 250,000 - $499,999..... 2.00% 2.04% 1.50%
$ 500,000 - $999,999..... 1.50% 1.52% 1.25%
$1,000,000 and over ..... None* None* None*
- ------
* Purchases of $1 million or more may be subject to a contingent deferred
sales charge. (See below.) The distributor may make payments to dealers in
the amount of .50% of the Offering Price.
A shareholder who purchases additional Class A Shares may obtain reduced
sales charges, as set forth in the table above, through a right of
accumulation. In addition, an investor may obtain reduced sales charges as
set forth above through a right of accumulation of purchases of Class A
Shares and purchases of shares of other Flag Investors funds with the same
sales charge and purchases of shares of Flag Investors Intermediate-Term
Income Fund, Inc. and Flag Investors Maryland Intermediate Tax Free Income
Fund, Inc. (the "Intermediate Funds"). The applicable sales charge will be
determined based on the total of (a) the shareholder's current purchase plus
(b) an amount equal to the then current net asset value or cost, whichever is
higher, of all Class A Shares and of all Flag Investors shares described
above and any Flag Investors Class D shares held by the shareholder. To
obtain the reduced sales charge through a right of accumulation, the
shareholder must provide Alex. Brown, either directly or through a
Participating Dealer or Shareholder Servicing Agent, as applicable, with
sufficient information to verify that the shareholder has such a right. The
Fund may amend or terminate this right of accumulation at any time as to
subsequent purchases.
11
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The term "purchase" refers to an individual purchase by a single
purchaser, or to concurrent purchases which will be aggregated, by a
purchaser, the purchaser's spouse and their children under the age of 21
years purchasing Class A Shares for their own account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of Intent, which states the investor's intention
to invest at least $50,000 within a 13-month period in Class A Shares. Each
purchase of Class A Shares under a Letter of Intent will be made at the
Offering Price applicable at the time of such purchase to the full amount
indicated on the Letter of Intent. A Letter of Intent is not a binding
obligation upon the investor to purchase the full amount indicated. The
minimum initial investment under a Letter of Intent is 5% of the full amount.
Class A Shares purchased with the first 5% of the full amount will be held in
escrow (while remaining registered in the name of the investor) to secure
payment of the higher sales charge applicable to the Class A Shares actually
purchased if the full amount indicated is not invested. Such escrowed shares
will be involuntarily redeemed to pay the additional sales charge, if
necessary. When the full amount indicated has been purchased, the escrowed
shares will be released. An investor who wishes to enter into a Letter of
Intent in conjunction with an investment in Class A Shares may do so by
completing the appropriate section of the Application Form attached to this
Prospectus.
No sales charge will be payable at the time of purchase on investments of
$1 million or more of Class A Shares. However, a contingent deferred sales
charge may be imposed on such investments in the event of a redemption
within 24 months following the purchase, at the rate of .50% on the lesser of
the value of the Class A Shares redeemed or the total cost of such shares. No
contingent deferred sales charge will be imposed on purchases of $3 million
or more of Class A Shares redeemed within 24 months of purchase if the
Participating Dealer and Alex. Brown have entered into an agreement under
which the Participating Dealer agrees to return any payments received on the
sale of such shares. In determining whether a contingent deferred sales
charge is payable, and, if so, the amount of the charge, it is assumed that
Class A Shares not subject to such charge are the first redeemed followed by
other Class A Shares held for the longest period of time.
The Fund may sell Class A Shares at net asset value (without sales charge)
to the following: (i) banks, bank trust departments, registered investment
advisory companies, financial planners and broker-dealers purchasing Class A
Shares on behalf of their fiduciary and advisory clients, provided such
clients have paid an account management fee for these services (investors may
12
<PAGE>
be charged a fee if they effect transactions in Fund shares through a broker
or agent); (ii) qualified retirement plans; (iii) participants in a Flag
Investors fund payroll savings plan program; (iv) investors who have redeemed
Class A Shares, or shares of any other mutual fund in the Flag Investors
family of funds with the same sales charges, or who have redeemed shares of
the Intermediate Funds which they had held for at least 24 months prior to
redemption, in an amount that is not more than the total redemption proceeds,
provided that the purchase is within 90 days after the redemption; and (v)
current or retired Directors of the Fund, and directors and employees (and
their immediate families) of Alex. Brown, the Advisors, Participating Dealers
and their respective affiliates.
Class A Shares may also be purchased through a Systematic Purchase Plan.
An investor who wishes to take advantage of such a plan should contact Alex.
Brown or a Participating Dealer or Shareholder Servicing Agent.
..............................................................................
PURCHASES BY EXCHANGE
As permitted pursuant to any rule, regulation or order promulgated by the
SEC, shareholders of other Flag Investors funds may exchange their Class A
shares of those funds for an equal dollar amount of Class A Shares. Except as
provided below, Class A Shares issued pursuant to this offer will not be
subject to the sales charges described above or any other charge.
Shareholders of Flag Investors Cash Reserve Prime Class A Shares may exchange
into Class A Shares upon payment of the difference in sales charges, as
applicable.
When a shareholder acquires Class A Shares through an exchange from
another fund in the Flag Investors family of funds, the Fund will combine the
period for which the original shares were held prior to the exchange with the
holding period of the Class A Shares acquired in the exchange for purposes of
determining what, if any, contingent deferred sales charge is applicable upon
a redemption of any such shares. Shareholders of the Intermediate Funds may
exchange into Class A Shares upon payment of the difference in sales charges,
as applicable, except that the exchange will be made at net asset value if
the shares of such funds have been held for more than 24 months.
The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day,
provided that the exchange request is received prior to 4:00 p.m. (Eastern
Time). Exchange requests received after 4:00 p.m. (Eastern Time) will be
effected on the next Business Day.
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<PAGE>
Shareholders of any mutual fund not affiliated with the Fund who have paid
a sales charge may exchange shares of such fund for an equal dollar amount of
Class A Shares by submitting to Alex. Brown or a Participating Dealer the
proceeds of the redemption of such shares, together with evidence of the
payment of a sales charge and the source of such proceeds. Class A Shares
issued pursuant to this offer will not be subject to the sales charges
described above or any other charge.
The exchange privilege with respect to other Flag Investors funds may also
be exercised by telephone. (See "Telephone Transactions" below.) The exchange
privilege may be exercised only in those states where the class of shares of
such other funds may legally be sold. Investors should receive and read the
applicable prospectus prior to tendering shares for exchange. The Fund may
modify or terminate this offer of exchange at any time on 60 days' prior
written notice to shareholders.
...............................................................................
PURCHASES THROUGH AUTOMATIC INVESTING PLAN
Shareholders may purchase Class A Shares regularly by means of an
Automatic Investing Plan with a pre-authorized check drawn on their checking
accounts. Under this plan, the shareholder may elect to have a specified
amount invested monthly or quarterly in Class A Shares. The amount specified
will be withdrawn from the shareholder's checking account using the
pre-authorized check and will be invested in Class A Shares at the applicable
Offering Price determined on the date the amount is available for investment.
Participation in the Automatic Investing Plan may be discontinued either by
the Fund or the shareholder upon 30 days' prior written notice to the other
party. A shareholder who wishes to enroll in the Automatic Investing Plan may
do so by completing the appropriate section of the Application Form attached
to this Prospectus.
...............................................................................
DIVIDEND REINVESTMENT PLAN
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Class A Shares.
A shareholder who wishes to enroll in the Dividend Reinvestment Plan should
check the appropriate box on the Application Form or call (800) 553-8080 for
additional information.
Alternately, shareholders may have their distributions invested in Class A
shares of other funds in the Flag Investors family of funds or in shares of the
Intermediate Funds. Shareholders who are interested in this option should call
(800) 553-8080 for additional information.
Reinvestments of distributions will be effected without a sales charge.
14
<PAGE>
===============================================================================
6. HOW TO REDEEM SHARES
Shareholders may redeem all or part of their investment on any Business
Day by transmitting a redemption order through Alex. Brown, a Participating
Dealer, a Shareholder Servicing Agent or by regular or express mail to the
Fund's transfer agent (the "Transfer Agent"). Shareholders may also redeem
Class A Shares by telephone (in amounts up to $50,000). (See "Telephone
Transactions" below.) A redemption order is effected at the net asset value
per share (reduced by any applicable contingent deferred sales charge) next
determined after receipt of the order (or, if stock certificates have been
issued for the Class A Shares to be redeemed, after the tender of the stock
certificates for redemption). Redemption orders received after 4:00 p.m.
(Eastern Time) will be effected at the net asset value next determined on the
following Business Day. Payment for redeemed Class A Shares will be made by
check and will be mailed within seven days after receipt of a duly authorized
telephone redemption request or of a redemption order fully completed and, as
applicable, accompanied by the documents described below:
1) A letter of instructions, specifying the shareholder's account number with
a Participating Dealer, if applicable, and the number of Class A Shares or
dollar amount to be redeemed, signed by all owners of the Class A Shares
in the exact names in which their account is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of each
registered owner by a member of the Federal Deposit Insurance Corporation,
a trust company, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency, or savings
association;
3) If Class A Shares are held in certificate form, stock certificates either
properly endorsed or accompanied by a duly executed stock power for Class
A Shares to be redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of Class A Shares will be
paid on the next dividend payable date. If all of the Class A Shares in a
shareholder's account have been redeemed on a dividend payable date, the
dividend will be remitted by check to the shareholder.
The Fund has the power under its Articles of Incorporation to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' written notice.
15
<PAGE>
...............................................................................
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who hold Class A Shares having a value of $10,000 or more may
arrange to have a portion of their Class A Shares redeemed monthly or
quarterly under the Fund's Systematic Withdrawal Plan. Such payments are
drawn from income dividends, and, to the extent necessary, from share
redemptions (which would be a return of principal and, if reflecting a gain,
would be taxable). If redemptions continue, a shareholder's account may
eventually be exhausted. Because share purchases include a sales charge that
will not be recovered at the time of redemption, a shareholder should not
have a withdrawal plan in effect at the same time he is making recurring
purchases of Class A Shares. A shareholder who wishes to enroll in the
Systematic Withdrawal Plan may do so by completing the appropriate section of
the Application Form attached to this Prospectus.
===============================================================================
7. TELEPHONE TRANSACTIONS
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Class A Shares in amounts up to $50,000, by
notifying the Transfer Agent by telephone at (800) 553-8080 on any Business
Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time) or by regular
or express mail at its address listed under "Custodian, Transfer Agent,
Accounting Services." Telephone transaction privileges are automatic.
Shareholders may specifically request that no telephone redemptions or
exchanges be accepted for their accounts. This election may be made on the
Application Form or at any time thereafter by completing and returning
appropriate documentation supplied by the Transfer Agent.
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or
the close of the New York Stock Exchange, whichever is earlier, is effective
that day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be
effected at the net asset value (less any applicable contingent deferred
sales charge on redemptions) as determined on the next Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, telephone
transaction requests will be recorded and investors may be required to provide
16
<PAGE>
additional telecopied instructions of such transaction requests. The
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent telephone instructions if either of them does not employ these
procedures. If these procedures are employed, neither the Fund nor the
Transfer Agent will be responsible for any loss, liability, cost or expense
for following instructions received by telephone that either of them
reasonably believes to be genuine. During periods of extreme economic or
market changes, shareholders may experience difficulty in effecting telephone
transactions. In such event, requests should be made by regular or express
mail. Class A Shares held in certificate form may not be exchanged or
redeemed by telephone. (See "How to Invest in the Fund--Purchases by
Exchange" and "How to Redeem Shares.")
===============================================================================
8. DIVIDENDS AND TAXES
...............................................................................
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of annual dividends. The Fund
may distribute to shareholders any taxable net capital gains on an annual
basis or, alternatively, may elect to retain net capital gains and pay taxes
thereon.
Unless the shareholder elects otherwise, all dividends and net capital
gains distributions, if any, will be reinvested in additional Class A Shares
at net asset value. Shareholders may elect to have income dividends and
capital gains distributions paid in cash. Shareholders wishing to change
their election must give written notice to the Transfer Agent (see
"Custodian, Transfer Agent, Accounting Services"), either directly or through
their Participating Dealer or Shareholder Servicing Agent, at least five days
before the next date on which dividends or distributions will be paid.
...............................................................................
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a general summary of certain federal tax
considerations affecting the Fund and the shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the Fund or the
shareholders, and the discussion here is not intended as a substitute for
careful tax planning.
The following summary is based on current tax laws and regulations, which
may be changed by legislative, judicial or administrative action. The
Statement of Additional Information sets forth further information concerning
taxes.
17
<PAGE>
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended. As long as the Fund qualifies for this tax treatment, it will be
relieved of federal income tax on amounts distributed to shareholders, but
U.S. shareholders, unless otherwise exempt, will pay federal income or
capital gains taxes on the amounts so distributed regardless of whether such
distributions are paid in cash or reinvested in additional Class A Shares.
Distributions from the Fund out of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, are
taxed to shareholders as long-term capital gains regardless of how long the
shareholder has held the shares. All other income distributions are taxed to
the shareholders as ordinary income. Shareholders will be advised annually as
to the tax status of all distributions.
Ordinarily, shareholders will include all dividends declared by the Fund
as income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
Investors should be careful to consider the tax implications of buying
shares just prior to a distribution. The price of shares purchased at that
time may reflect the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will nevertheless be taxable on the entire
amount of the distribution received.
Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To
the extent that the Fund is liable for foreign income taxes so withheld, it
intends to operate so as to meet the requirements of the Code to pass through
to its shareholders credit for foreign income taxes paid. Although the Fund
intends to meet the requirements of the Code to pass through such taxes,
there can be no assurance that it will be able to do so.
Distributions by the Fund to shareholders who are non-resident alien
individuals, foreign trusts or estates, foreign corporations or foreign
partnerships may be subject to federal income tax treatment that differs from
the treatment described above. (See the Statement of Additional Information.)
The sale, exchange, or redemption of Class A Shares is a taxable event for
the shareholder.
18
<PAGE>
The Fund intends to make sufficient distributions or deemed distributions
of its ordinary income and capital gain net income prior to the end of each
calendar year to avoid liability for federal excise tax.
Shareholders are urged to consult with their tax advisors concerning the
application of the rules described above to their particular circumstances
and the application of U.S. federal, state and local income taxes to an
investment in the Fund.
===============================================================================
9. MANAGEMENT OF THE FUND
The overall business 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,
accounting services agent and transfer agent. The day-to-day operations of
the Fund are delegated to the Fund's officers, to Alex. Brown, the Fund's
distributor, to ICC, the Fund's investment advisor, and to Glenmede, the
Fund's sub-advisor. Two Directors and all of the officers of the Fund are
officers or employees of Alex. Brown, ICC or Glenmede. The other Directors of
the Fund have no affiliation with Alex. Brown, ICC or Glenmede.
The Fund's Directors and officers are as follows:
* Truman T. Semans Chairman and Director
* Richard T. Hale Director
James J. Cunnane Director
John F. Kroeger Director
Louis E. Levy Director
Eugene J. McDonald Director
Carl W. Vogt Director
Harry Woolf Director
John W. Church, Jr. President
Andrew B. Williams Executive Vice President
Gary V. Fearnow Vice President
Edward J. Veilleux Vice President
Brian C. Nelson Vice President and Secretary
Joseph A. Finelli Treasurer
Laurie D. DePrine Assistant Secretary
- ------
* Messrs. Semans and Hale are "interested persons" of the Fund within the
meaning of Section 2(a)(19) under the Investment Company Act of 1940, as
amended (the "1940 Act").
===============================================================================
10. INVESTMENT ADVISOR AND SUB-ADVISOR
ICC is the Fund's investment advisor and Glenmede is the Fund's
sub-advisor. ICC is also the investment advisor to, and Alex. Brown acts as
distributor for, other mutual funds in the Flag Investors family of funds and
Alex. Brown Cash Reserve Fund, Inc., which funds had approximately $4.4
billion of net assets as of December 31, 1995. Glenmede provides fiduciary
and investment services to endowment funds, foundations, employee benefit
plans and other institutions and individuals. At December 31, 1995, Glenmede
had over $8.7 billion in assets in the accounts for which it serves in
various capacities including as executor, trustee, or investment advisor.
19
<PAGE>
Pursuant to the terms of the Investment Advisory Agreement, ICC supervises
and manages all of the Fund's operations. Under the Investment Advisory and
Sub-Advisory Agreements, ICC delegates to Glenmede certain of its duties,
provided that ICC continues to supervise the performance of Glenmede and to
report thereon to the Fund's Board of Directors. Pursuant to the terms of the
Sub-Advisory Agreement, Glenmede is responsible for the decisions to buy and
sell securities for the Fund, for broker-dealer selection, and for
negotiation of commission rates under standards established and periodically
reviewed by the Board of Directors. The Board has established procedures
under which Glenmede may allocate transactions to Alex. Brown, provided that
compensation to Alex. Brown on each transaction is reasonable and fair
compared to the commission, fee or other remuneration received or to be
received by other broker-dealers in connection with comparable transactions
involving similar securities during a comparable period of time. In addition,
consistent with NASD Rules, and subject to seeking the most favorable price
and execution available and such other policies as the Board may determine,
Glenmede 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 has voluntarily agreed to waive a portion of its advisory fees so that
the total operating expenses of the Fund do not exceed 1.50% of the Fund's
average daily net assets. (See "Fee Table.") Glenmede has also agreed to
waive, on a voluntary basis, a portion of its fee in an amount proportionate
to the amount by which ICC's fees may be reduced as described above. As
compensation for its services, for the fiscal year ended October 31, 1995,
ICC received a fee (net of fee waivers) equal to .08% of the Fund's average
daily net assets and from such fee paid Glenmede a fee (net of fee waivers)
equal to .06% of the Fund's average daily net assets.
ICC is a wholly-owned subsidiary of Alex. Brown, the Fund's distributor.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent,
Accounting Services.") Glenmede, a limited purpose trust company, is a
wholly-owned subsidiary of The Glenmede Corporation. The address of ICC is
135 East Baltimore Street, Baltimore, Maryland 21202. The address of Glenmede
is One Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania 19103.
...............................................................................
PORTFOLIO MANAGERS
Messrs. John W. Church, Jr., the Fund's President, and Andrew B. Williams,
CFA, the Fund's Executive Vice President, have shared primary responsibility
for managing the Fund's assets since August, 1993.
20
<PAGE>
Mr. Church is senior vice president and chief investment officer of
Glenmede. Prior to joining Glenmede, he was vice president in charge of
investment strategy at Girard (Mellon) Bank, where he was employed for
sixteen years. Before Girard Bank, Mr. Church spent two years at the
investment counseling firm of Franklin, Cole & Co., New York, and four years
at Chemical Bank, New York. Mr. Church received an A.B. in Economics from
Bowdoin College in 1954. He is a member and past president of the Financial
Analysts of Philadelphia, and a member of the Philadelphia Securities
Association.
Mr. Williams is vice president, equity analyst and international equity
manager of Glenmede. Before joining Glenmede, he served as vice president in
investment research at Shearson Lehman Brothers in New York. Before that, he
worked at Provident National Bank as a research analyst. Mr. Williams
received an M.B.A. in Finance from Temple University in 1981 and an A.B. in
History from Trinity College in 1976. He is a member of the Financial
Analysts of Philadelphia and is a Chartered Financial Analyst.
===============================================================================
11. DISTRIBUTOR
Alex. Brown acts as distributor of the Class A Shares. Alex. Brown is an
investment banking firm which offers a broad range of investment services to
individual, institutional, corporate and municipal clients. It is a
wholly-owned subsidiary of Alex. Brown Incorporated which has engaged
directly and through subsidiaries and affiliates in the investment business
since 1800. Alex. Brown is a member of the New York Stock Exchange and other
leading securities exchanges. Headquartered in Baltimore, Maryland, Alex.
Brown has offices throughout the United States and, through subsidiaries,
maintains offices in London, England, Geneva, Switzerland and Tokyo, Japan.
The Fund has adopted a Distribution Plan for the Class A Shares pursuant
to Rule 12b-1 under the 1940 Act (the "Plan"). As compensation for providing
distribution services to the Class A Shares for the fiscal year ended October
31, 1995, Alex. Brown received a fee equal to .25% of the Class A Shares'
average daily net assets. This fee may be more or less than Alex. Brown's
actual expenses. Alex. Brown expects to allocate on a proportional basis most
of its annual distribution fee to its investment representatives or up to all
of its fee to Participating Dealers as compensation for their ongoing
shareholder services, including processing purchase and redemption requests
and responding to shareholder inquiries.
21
<PAGE>
In addition, the Fund may enter into Shareholder Servicing Agreements with
certain financial institutions such as banks, to act as Shareholder Servicing
Agents, pursuant to which Alex. Brown will allocate a portion of its
distribution fee as compensation for such financial institutions' ongoing
shareholder services. Such financial institutions may impose separate fees in
connection with these services and investors should review this Prospectus in
conjunction with any such institution's fee schedule. Amounts allocated to
Participating Dealers and Shareholder Servicing Agents may not exceed amounts
payable to Alex. Brown under the Plan.
Payments under the Plan are made as described above, regardless of Alex.
Brown's actual cost of providing distribution services. If the cost of
providing distribution services to the Fund in connection with the sale of
the Class A Shares is less than .25% of the Class A Shares' average daily net
assets for any period, the unexpended portion of the distribution fee may be
retained by Alex. Brown. Alex. Brown will from time to time and from its own
resources pay or allow additional discounts or promotional incentives in the
form of cash or other compensation (including merchandise or travel) to
Participating Dealers.
===============================================================================
12. CUSTODIAN, TRANSFER AGENT,
ACCOUNTING SERVICES
Boston Safe Deposit and Trust Company, located at One Boston Place,
Boston, Massachusetts 02108, acts as custodian of the Fund's assets.
Investment Company Capital Corp., 135 East Baltimore Street, Baltimore,
Maryland 21202 (telephone: (800) 553-8080) is the Fund's transfer and
dividend disbursing agent and, effective April 10, 1995, provides accounting
services to the Fund. As compensation for providing accounting services, ICC
receives from the Fund an annual fee equal to $25,000 plus a percentage of
the Fund's average daily net assets in excess of $10 million at a maximum
rate of .08% of net assets, and declining at various asset levels to a
minimum rate of .002% on assets in excess of $1 billion. (See the Statement
of Additional Information.) ICC also serves as the Fund's investment advisor.
===============================================================================
13. PERFORMANCE INFORMATION
From time to time the Fund may advertise its performance including
comparisons to other mutual funds with similar investment objectives and to
stock or other relevant indices. All such advertisements will show the
average annual total return, net of the Fund's maximum sales charge, over
one, five and ten year periods or, if such periods have not yet elapsed,
22
<PAGE>
shorter periods corresponding to the life of the Fund. Such total return
quotations will be computed by finding average annual compounded rates of
return over such periods that would equate an assumed initial investment of
$1,000 to the ending redeemable value, net of the maximum sales charge and
other fees according to the required standardized calculation. The
standardized calculation is required by the SEC to provide consistency and
comparability in investment company advertising and is not equivalent to a
yield calculation. If the Fund compares its performance to other funds or to
relevant indices, 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 which monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Europe, Australia and Far
East Index, an unmanaged foreign securities index monitored by Morgan Stanley
Capital International, S.A. and to the Standard & Poor's 500 Stock Index and
the Dow Jones Industrial Average, both of which are recognized indices of
domestic market performance. The Fund may also use total return performance
data as reported in the following national financial and industry
publications that monitor the performance of mutual funds: Money Magazine,
Forbes, Business Week, Barron's, IBC/Donoghue's Money Fund Report, Investor's
Daily and The Wall Street Journal.
Performance will fluctuate and any statement of performance should not be
considered as representative of the future performance of the Fund.
Shareholders should remember that performance is generally a function of the
type and quality of instruments held by the Fund, operating expenses and
market conditions. Any fees charged by banks with respect to customer
accounts through which Class A Shares may be purchased, although not included
in calculations of performance, will reduce performance results.
===============================================================================
14. GENERAL INFORMATION
...............................................................................
CAPITAL SHARES
The Fund was organized as a Massachusetts business trust on September 3,
1986 and reorganized as a Maryland corporation on August 16, 1993, pursuant to
an Agreement and Plan of Reorganization and Liquidation approved by
23
<PAGE>
shareholders on June 16, 1993. The Fund is authorized to issue ten million
shares of capital stock, with a par value of $.001 per share. Shares of the
Fund have equal rights with respect to voting. Voting rights are not
cumulative, so the holders of more than 50% of the outstanding shares voting
together for election of Directors may elect all the members of the Board of
Directors of the Fund. In the event of liquidation or dissolution of the Fund,
each share is entitled to its portion of the Fund's assets after all debts and
expenses have been paid. The fiscal year end of the Fund is October 31.
The Board of Directors may classify any authorized but unissued shares
into classes and may establish certain distinctions between classes relating
to additional voting rights, payments of dividends, rights upon liquidation
or distribution of the assets of the Fund and any other restrictions
permitted by law and the Fund's charter.
...............................................................................
ANNUAL MEETINGS
Unless required under applicable Maryland law, the Fund does not expect to
hold annual meetings of shareholders. However, shareholders of the Fund
retain the right, under certain circumstances, to request that a meeting of
shareholders be held for the purpose of considering the removal of a Director
from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting.
...............................................................................
REPORTS
The Fund furnishes shareholders with semi-annual and 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 auditors, Deloitte
& Touche LLP.
...............................................................................
FUND COUNSEL
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
...............................................................................
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their shares should contact the
Transfer Agent at (800) 553-8080, Alex. Brown at (800) 767-FLAG, or a
Participating Dealer or Shareholder Servicing Agent, as appropriate.
24
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
NEW ACCOUNT APPLICATION
- -----------------------------------------------------------------------------
Make check payable to "Flag Investors International Fund, Inc."
and mail with this application to:
Alex. Brown & Sons Incorporated/Flag Investors Funds
P.O. Box 419426
Kansas City, MO 64141-6426
Attn: Flag Investors International Fund, Inc.
For assistance in completing this application please call: 1-800-553-8080,
8:30 a.m. to 5:30 p.m., Eastern Time, Monday-Friday
To open an IRA account, call 1-800-767-3524 to request an IRA application
I enclose a check for $____________ payable to "Flag Investors International
Fund, Inc." for the purchase of Class A Shares of the Fund. The minimum
initial purchase is $2,000, except that the minimum initial purchase for
shareholders of any other Flag Investors Fund or class is $500 and the
minimum initial purchase for participants in the Fund's Automatic Investing
Plan is $250. Each subsequent purchase requires a $100 minimum, except that
the minimum subsequent purchase under the Fund's Automatic Investing Plan is
$250 for quarterly purchases and $100 for monthly purchases. The Fund
reserves the right not to accept checks for more than $50,000 that are not
certified or bank checks.
- ------------------------------------------------------------------------------
YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
Existing Account No., if any: ________________________________________________
INDIVIDUAL OR JOINT TENANT
______________________________________________________________________________
First Name Initial Last Name
______________________________________________________________________________
Social Security Number
______________________________________________________________________________
Joint Tenant Initial Last Name
CORPORATIONS, TRUSTS, PARTNERSHIPS, ETC.
Name of Corporation, Trust or Partnership
______________________________________________________________________________
Tax ID Number Date of Trust
______________________________________________________________________________
Name of Trustees (If to be included in the Registration)
______________________________________________________________________________
For the Benefit of
GIFTS TO MINORS
______________________________________________________________________________
Custodian's Name (only one allowed by law)
______________________________________________________________________________
Minor's Name (only one)
______________________________________________________________________________
Social Security Number of Minor
under the ___________________Uniform Gifts to Minors Act
State of Residence
MAILING ADDRESS
______________________________________________________________________________
Street
______________________________________________________________________________
City State Zip
( )
______________________________________________________________________________
Daytime Phone
<PAGE>
==============================================================================
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 of Flag Investors
International Fund, Inc. in an aggregate amount at least equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
==============================================================================
RIGHT OF ACCUMULATION--(OPTIONAL)
[ ] I already own shares of the Flag Investors Fund(s) (except Class B
shares) set forth below to be applied for a reduced sales charge. List the
account numbers of other Flag Investors Funds that you or your immediate
family (spouse and children under 21) already own that qualify for reduced
sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
DISTRIBUTION OPTIONS
Please check appropriate boxes. If none of the options is selected, all
distributions will be reinvested in additional shares of the Fund at no sales
charge.
Income Dividends
[ ] Reinvested in additional shares
[ ] Paid in Cash
Capital Gains
[ ] Reinvested in additional shares
[ ] Paid in Cash
Call (800)553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
- ------------------------------------------------------------------------------
AUTOMATIC INVESTING PLAN (OPTIONAL)
[ ] I authorize you as Agent for the Automatic Investing Plan to
automatically invest $______ for me, on a monthly or quarterly basis, on or
about the 20th of each month or if quarterly, the 20th of January, April,
July and October, and to draw a bank draft in payment of the investment
against my checking account. (Bank drafts may be drawn on commercial banks
only.)
Minimum Initial Investment: $250
Subsequent Investments (check one):
[ ] Monthly ($100 minimum)
[ ] Quarterly ($250 minimum)
______________________________________________________________________________
Bank Name
______________________________________________________________________________
Existing Flag Investors Fund Account No., if any
Please attach a voided check.
______________________________________________________________________________
Depositor's Signature Date
______________________________________________________________________________
Depositor's Signature Date
(if joint acct., both must sign)
- ------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
[ ] Beginning the month of ______, 19____ please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of $______ from
Class A Shares that I own, payable to the account registration address as
shown above. (Participation requires minimum account value of $10,000.)
Frequency (check one):
[ ] Monthly
[ ] Quarterly (January, April, July, and October)
<PAGE>
- ------------------------------------------------------------------------------
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 pre-designated bank account, please
provide the following information:
Bank: _________________________ Bank Account No: _________________
Address: _________________________ Bank Account Name: _______________
- ------------------------------------------------------------------------------
SIGNATURE AND TAXPAYER CERTIFICATION
I have received a copy of the Fund's prospectus dated March 1, 1996. Unless
the box below is checked, I certify under penalties of perjury, (1) that the
number shown on this form is my correct taxpayer identification number and
(2) that I am not subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. [ ] Check here
if you are subject to backup withholding.
If a non-resident alien, please indicate country of residence:______
I acknowledge that the telephone redemption and exchange privileges are
automatic and will be effected as described in the Fund's current prospectus
(see "Telephone Transactions"). I also acknowledge that I may bear the risk
of loss in the event of fraudulent use of such privileges. If I do not want
telephone redemption or exchange privileges, I have so indicated on this
Application.
______________________________________________________________________________
Signature Date
______________________________________________________________________________
Signature (if joint acct., both must sign) Date
For Dealer Use Only
Dealer's Name: ____________________ Dealer Code: __________________________
Dealer's Address: ____________________ Branch Code: __________________________
____________________
Representative: ____________________ Rep. No. __________________________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------
FLAG INVESTORS INTERNATIONAL FUND, INC.
135 East Baltimore Street
Baltimore, Maryland 21202
-----------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH A
PROSPECTUS WHICH MAY BE OBTAINED FROM YOUR
PARTICIPATING DEALER OR SHAREHOLDER SERVICING AGENT
OR BY WRITING OR CALLING ALEX. BROWN & SONS
INCORPORATED, 135 EAST BALTIMORE STREET, BALTIMORE,
MARYLAND 21202, (800) 767-FLAG.
Statement of Additional Information Dated: March 1, 1996
Relating to the Prospectus Dated: March 1, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
1. General Information and History............................................................... 1
2. Investment Objective and Policies............................................................. 1
3. Valuation of Shares and Redemption............................................................ 3
4. Federal Tax Treatment of Dividends and Distributions.......................................... 4
5. Management of the Fund........................................................................ 8
6. Investment Advisory and Other Services........................................................ 12
7. Distribution of Fund Shares................................................................... 14
8. Brokerage..................................................................................... 17
9. Capital Shares................................................................................ 18
10. Reports....................................................................................... 19
11. Custodian, Accounting Services and Transfer Agent............................................. 19
12. Independent Auditors.......................................................................... 20
13. Performance Information....................................................................... 20
14. Control Persons and Principal Holders of Securities........................................... 21
15. Financial Statements.......................................................................... 21
</TABLE>
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Flag Investors International Fund, Inc. (the "Fund") is an
open-end management investment company. Under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), all mutual funds are required
to furnish prospective investors with certain information concerning the
activities of the company being considered for investment. The Fund currently
offers one class of shares: Flag Investors International Fund Class A Shares
(the "Shares").
Important information concerning the Fund is included in the Fund's
Prospectus which may be obtained without charge from Alex. Brown & Sons
Incorporated ("Alex. Brown"), 135 East Baltimore Street, Baltimore, Maryland
21202, (telephone: (800) 767-FLAG) or from Participating Dealers that offer
Shares to prospective investors. Prospectuses may also be obtained from
Shareholder Servicing Agents. Some of the information required to be in this
Statement of Additional Information is also included in the Fund's current
Prospectus. To avoid unnecessary repetition, references are made to related
sections of the Prospectus. In addition, the Prospectus and this Statement of
Additional Information omit certain information about the Fund and its
business that is contained in the Registration Statement relating to the Fund
and its Shares filed with the SEC. Copies of the Registration Statement as
filed, including such omitted items, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
The Fund was organized as a Massachusetts business trust on
September 3, 1986. The Fund filed a registration statement with the SEC
registering itself as an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") and its Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and commenced operations on November 18, 1986. On August
16, 1993, the Fund reorganized as a Maryland corporation pursuant to an
Agreement and Plan of Reorganization and Liquidation approved by shareholders
on June 16, 1993.
Under a license agreement dated August 16, 1993, between the
Fund and Alex. Brown Incorporated, Alex. Brown Incorporated licenses to the
Fund the "Flag Investors" name and logo but retains the rights to that name
and logo, including the right to permit other investment companies to use
them.
2. INVESTMENT OBJECTIVE AND POLICIES
Investment Objective
The Fund's investment objective is long-term growth of
capital. As more fully described in the Fund's Prospectus, the Fund seeks to
achieve this objective primarily through investment in a diversified portfolio
of marketable equity securities of issuers domiciled outside of the United
States.
Investment Restrictions
The Fund's investment program is subject to a number of
investment restrictions which reflect self-imposed standards as well as
federal and state regulatory limitations. The investment restrictions recited
below are in addition to those described in the Fund's Prospectus, and are
matters of fundamental policy and may not be changed without the affirmative
vote of a majority of the Fund's outstanding Shares. The percentage
limitations contained in these restrictions apply at the time of purchase of
securities. Accordingly, the Fund will not:
1. Invest in real estate or mortgages on real estate;
<PAGE>
2. Purchase or sell commodities or commodities contracts,
except that the Fund may enter into forward currency exchange
contracts;
3. Purchase a security if, as a result, more than 5% of the
value of the Fund's total assets would be invested in securities with
legal or contractual restrictions on resale ("restricted
securities");
4. Act as an underwriter of securities within the meaning of
the federal securities laws except insofar as it might be deemed to
be an underwriter upon disposition of certain portfolio securities
acquired within the limitation on purchases of restricted securities;
5. Issue senior securities;
6. Make loans of money or portfolio securities, except that
the Fund may purchase or hold debt instruments, including time
deposits, in accordance with its investment objectives and policies;
7. Effect short sales of securities;
8. Purchase securities on margin (but the Fund may obtain
such short-term credits as may be necessary for the clearance of
transactions); or
9. Purchase participations or other direct interests in oil,
gas or other mineral exploration or development programs.
The following are investment restrictions that may be
changed by a vote of the majority of the Board of Directors. The Fund will
not:
1. Purchase any securities of unseasoned issuers which have
been in operation directly or through predecessors for less than
three years (for this purpose, the Fund's management considers
certain privatized government companies to be seasoned issuers);
2. Invest in shares of any other open-end investment company
registered under the Investment Company Act, unless otherwise
permitted by law. (If the Board of Directors votes to approve
investments in shares of any other investment company, the Fund might
incur sales charges, management fees and other expenses in connection
with any such investment, which charges would be a Fund expense and
accordingly might have some impact on the Fund's net asset value);
3. Purchase or retain the securities of any issuer if to the
knowledge of the Fund any officer or Director of the Fund or its
investment advisor or sub-advisor owns beneficially more than .5% of
the outstanding securities of such issuer and together they own
beneficially more than 5% of the securities of such issuer;
4. Invest in companies for the purpose of exercising
management or control;
5. Invest in puts or calls or any combination thereof,
except that the Fund may enter into forward foreign currency
contracts; or
6. Purchase warrants, if by reason of such purchase more
than 5% of the Fund's net assets (taken at market value) will be
invested in warrants, valued at the lower of cost or market. Included
within this amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on the New York
-2-
<PAGE>
or American Stock Exchange. For the purpose of the foregoing
calculations, warrants acquired by the Fund in units or attached to
securities will be deemed to be without value and therefore not
included within the limitations of the preceding sentence;
7. Invest in real estate limited partnerships or oil, gas or
mineral leases.
Other Considerations
The Fund's investments in convertible securities rated below
investment grade will not exceed 5% of the value of its total assets.
3. VALUATION OF SHARES AND REDEMPTION
Valuation
The net asset value per Share is determined once daily as of
4:00 p.m. (Eastern Time), each day on which the New York Stock Exchange is
open for business (a "Business Day"). The New York Stock Exchange is open for
business on all weekdays except for the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
For the purpose of determining the price at which Shares are
redeemed, the net asset value per share is calculated by valuing all
securities held by the Fund, deducting the Fund's actual and accrued
liabilities (including liability for dividends declared) and dividing the
resulting amount by the number of outstanding Shares. For this purpose,
securities which are listed on a securities exchange are valued on the basis
of their last quoted sale price (or, in the absence of recorded sales, at the
last available bid price). If a security is listed on more than one exchange,
the last quoted sale on the exchange where the security is primarily traded is
used. Securities or other assets for which market quotations are not readily
available are valued at their fair value so determined in good faith by the
Advisor under procedures established and monitored by the Board of Directors.
Short-term obligations with maturities of 60 days or less will be valued at
amortized cost, which constitutes fair value as determined by the Directors.
Redemption
The Fund may suspend the right of redemption or postpone the
date of payment during any period when (a) trading on the New York Stock
Exchange is restricted by applicable rules and regulations of the SEC; (b) the
New York Stock Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC so that valuation of the net assets
of the Fund is not reasonably practicable.
Under normal circumstances, the Fund will redeem Shares by
check as described in the Prospectus. However, if the Board of Directors
determines that it would be in the best interests of the remaining
shareholders to make payment of the redemption price in whole or in part by a
distribution in kind of readily marketable securities from the portfolio of
the Fund in lieu of cash, in conformity with applicable rules of the SEC, the
Fund will make such distributions in kind. In the unlikely event that Shares
are redeemed in kind, the redeeming shareholder, will incur brokerage costs in
later converting the assets into cash. The method of valuing portfolio
securities is described under "Valuation of Shares," and such valuation will
be made as of the same time the redemption price is determined. The Fund,
however, has elected to be governed by Rule 18f-1 under the Investment Company
Act pursuant to which the Fund is obligated to redeem Shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund during any
-3-
<PAGE>
90-day period for any one shareholder. A corporate shareholder requesting a
redemption must have on file with the Fund's Transfer Agent, Alex. Brown, a
Participating Dealer or Shareholder Servicing Agent all required resolutions
and certificates, such as resolutions authorizing the redemption and
secretary's certificates.
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following discussion of federal income tax consequences
is based on the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations issued thereunder as in effect on the date of this Statement
of Additional Information. New legislation, as well as administrative changes
or court decisions, may significantly change the conclusions expressed herein,
and may have a retroactive effect with respect to the transactions
contemplated herein.
The following is only a summary of certain additional
federal tax considerations generally affecting the Fund and its shareholders
that are not described in the Fund's Prospectus. No attempt is made to present
a detailed explanation of the tax treatment of the Fund or its shareholders,
and the discussion here and in the Fund's Prospectus is not intended as a
substitute for careful tax planning.
Qualification as Regulated Investment Company
The Fund has been and expects to be taxed as a regulated
investment company ("RIC") under Subchapter M of the Code. As a RIC, the Fund
is exempt from federal income tax on its net investment income and capital
gains which it distributes to shareholders, provided that it distributes at
least 90% of its investment company taxable income (net investment income and
the excess of net short-term capital gains over net long-term capital losses)
for the taxable year (the "Distribution Requirement"), and satisfies certain
other requirements of the Code that are described below. Distributions of
investment company taxable income made during the taxable year or, under
certain specified circumstances, within 12 months after the close of the
taxable year, will satisfy the Distribution Requirement. The Distribution
Requirement for any year may be waived if the Fund establishes to the
satisfaction of the Internal Revenue Service that it is unable to satisfy the
Distribution Requirement by reason of distributions previously made for the
purpose of avoiding liability for federal excise tax (as discussed below).
In addition to satisfaction of the Distribution Requirement,
in order to qualify as a RIC the Fund must (1) derive at least 90% of its
gross income from dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities or foreign currencies, and other income (including but not limited
to gains from options, futures or forward contracts) derived with respect to
its business of investing in such stocks, securities or currencies (the
"Income Requirement"); and (2) derive less than 30% of its gross income
(exclusive of certain gains from designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from gains on
the sale or other disposition of any of the following investments if such
investments are held for less than three months (the "Short-Short Gain Test"):
(a) stock or securities (as defined in Section 2(a)(36) of the Investment
Company Act); (b) options, futures, or forward contracts (other than options,
futures, or forward contracts on foreign currencies); and (c) foreign
currencies (or options, futures, or forward contracts on foreign currencies)
but only if such currencies (or options, futures, or forward contracts) are
not directly related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stock or securities).
Income derived by the Fund from a partnership or trust
satisfies the Income Requirement only to the extent such income is
attributable to items of income of the partnership or trust that would satisfy
the Income Requirement if they were realized by the Fund in the same manner as
realized by the partnership or trust. Future Treasury regulations may provide
that foreign currency gains that are not "directly related" to the Fund's
-4-
<PAGE>
principal business of investing in stock or securities (or in options and
futures with respect to stock or securities) will not satisfy the Income
Requirement. It is unclear to what extent gross income from certain currency
related transactions will be treated as not satisfying the Income Requirement
under these Treasury regulations or whether the Treasury regulations, when
issued, will have only prospective effect. Consequently, the Fund will attempt
to operate so that its gross income from certain currency related transactions
will be less than 10% of the gross income of the Fund in any taxable year that
could be subject to these Treasury regulations until such time as the
applicable Treasury regulations are issued or the Fund receives a satisfactory
opinion of counsel or private letter ruling from the Service that income from
such currency transactions may be considered "qualifying income" for purposes
of the Income Requirement.
Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities or currencies that it has held for
less than three months. In addition, until such time as Treasury regulations
are issued indicating in which circumstances the writing and purchasing of
options on foreign currency and the investment in forward foreign currency
exchange contracts and currencies is directly related to a regulated
investment company's principal business of investing in stock or securities
(or options and futures with respect to stock or securities), the Fund may
have to limit (1) the sale or offsetting of forward foreign currency exchange
contracts that it has held for less than three months; (2) the exercise or
closing of appreciated options on foreign currency that it has held for less
than three months; and (3) certain other transactions involving foreign
currencies.
Many of the forward foreign currency exchange contracts that
the Fund enters into will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year, regardless of
whether a taxpayer's obligations (or rights) thereunder have terminated (by
delivery, exercise, entering into a closing transaction or otherwise) as of
such date. Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is combined with any other gain or loss
that was previously recognized upon the termination of other Section 1256
contracts during that taxable year and is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. The Fund may
elect not to have the year-end deemed sale rule apply to Section 1256
contracts that are part of a "mixed straddle" with other investments of the
Fund that are not Section 1256 contracts (the "Mixed Straddle Election").
Gains and losses with respect to certain foreign currency contracts are
treated as ordinary income or loss pursuant to Section 988 of the Code.
In order to qualify as a RIC, at the close of each quarter
of its taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of
other RICs, and securities of other issuers (as to which the Fund has not
invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other RICs), or in two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses (the "Asset Diversification Test"). The above
limitations are imposed on the Fund as investment restrictions as set forth in
the Prospectus under the heading "Investment Restrictions." Generally, the
Fund will not lose its status as a RIC if it fails to meet the Asset
Diversification Test solely as a result of a fluctuation in value of portfolio
assets not attributable to a purchase.
For purposes of the Asset Diversification Test, it is
unclear under present law who should be treated as the issuers of options on
foreign currencies and of forward foreign currency exchange contracts,
although it has been suggested that the issuer in each case would be the
foreign central bank or foreign government backing the particular currency.
-5-
<PAGE>
Fund Distributions
The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year. Such
distributions will generally be taxable to shareholders as ordinary income,
regardless of whether such distributions are paid in cash or are reinvested in
Shares. Shareholders receiving any distribution from the Fund in the form of
additional Shares will generally be treated as receiving a taxable
distribution in an amount equal to the fair market value of the Shares
received, determined as of the reinvestment date.
Corporate shareholders will be entitled to the 70% dividends
received deduction on Fund distributions to the extent of qualifying dividends
received by the Fund each year. Generally, a dividend will be treated as a
qualifying dividend if it has been received from a domestic corporation.
Because most of the Fund's income will be from foreign securities, only a
small portion, if any, of the Fund's distributions will qualify for the
dividends received deduction. Moreover, for the purposes of the alternative
minimum tax and the environmental tax, corporate shareholders will generally
be required to take the full amount of any dividend received from the Fund
into account in determining "adjusted current earnings."
The Fund may either retain or distribute to shareholders as
a capital gains distribution the excess of its net long-term capital gains
over its net short-term capital losses ("net capital gains") for each taxable
year. If such gains are distributed as a capital gains distribution, they are
taxable to shareholders as long-term capital gains, regardless of the length
of time the shareholder has held Shares, whether such gains were recognized by
the Fund prior to the date on which a shareholder acquired Shares and whether
the distribution was paid in cash or reinvested in Shares. The aggregate
amount of distributions designated by the Fund as capital gains distributions
may not exceed the net capital gains of the Fund for any taxable year,
determined by excluding any net capital losses or net long-term capital losses
attributable to transactions occurring after October 31 of such year and by
treating any such losses as if they arose on the first day of the following
taxable year. Shareholders will be advised annually as to the U.S. federal
income tax status of distributions made during the year.
Conversely, if the Fund elects to retain its net capital
gains for any taxable year it will be taxed thereon (except to the extent of
any available capital loss carryovers) at the corporate tax rate. In such
event, it is expected that the Fund also will elect to have shareholders
treated as having received a distribution of such gains, with the result that
they will be required to report their respective shares of such gains on their
returns as long-term capital gains, will receive a refundable tax credit for
their allocable share of tax paid by the Fund on the gains, and will increase
the tax basis for their Shares by an amount equal to 65 percent of the deemed
distribution.
Investors should be careful to consider the tax implications
of purchasing Shares just prior to the next dividend date of any ordinary
income dividend or capital gains distribution. Those purchasing just prior to
an ordinary income dividend or capital gains distribution will be taxable on
the entire amount of the distribution received, even though the net asset
value per share on the date of such purchase reflected the amount of such
distribution.
If for any taxable year the Fund does not qualify as a RIC,
all of its taxable income will be subject to tax at regular corporate rates
without any deduction for distributions to shareholders, and such
distributions will be taxable to shareholders as ordinary dividends to the
extent of the Fund's current and accumulated earnings and profits. Such
distributions will generally be eligible for the dividends received deduction
in the case of corporate shareholders.
The Fund will be required in certain cases to withhold and
remit to the United States Treasury 31% of distributions paid to any
shareholder (1) who has provided either an incorrect tax identification number
-6-
<PAGE>
or no number at all, (2) who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of interest or dividend
income properly, or (3) who has failed to certify to the Fund that such
shareholder is not subject to backup withholding.
Miscellaneous Considerations
A 4% non-deductible federal excise tax is imposed on RICs
that fail to distribute in each calendar year an amount equal to 98% of
ordinary income for the calendar year and 98% of "capital gain net income"
(excess of long and short-term capital gains over long and short-term capital
losses) for the one-year period ending on October 31 of such calendar year.
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a RIC is treated as having distributed any amount
on which it is subject to income tax for any taxable year ending in such
calendar year.
The Fund intends to make sufficient distributions of its
ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the federal excise tax. However,
investors should note that the Fund may in certain circumstances be required
to liquidate portfolio investments in order to make sufficient distributions
to avoid excise tax liability and, in addition, that the liquidation of
investments in such circumstances may affect the ability of the Fund to
satisfy the Short-Short Gain test.
Generally, gain or loss on the sale of Shares will be
capital gain or loss, which will be long-term if the Shares have been held for
more than one year and otherwise will be short-term. However, investors should
be aware that any loss realized upon the sale, exchange or redemption of
Shares held for six months or less will be treated as a long-term capital loss
to the extent any capital gains distributions have been paid with respect to
such Shares (or any undistributed net capital gains of the Fund with respect
to such Shares have been included in determining the investor's long-term
capital gains). In addition, any loss realized on a sale or other disposition
of Shares will be disallowed to the extent an investor repurchases (or enters
into a contract or option to repurchase) Shares within a period of 61 days
(beginning 30 days before and ending 30 days after the disposition of the
Shares). Investors should particularly note that this loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.
Foreign Income Taxes
As described in the Prospectus, investment income received
by the Fund from sources within foreign countries may be subject to foreign
income taxes withheld at the source. The United States has entered into tax
treaties with many foreign countries which entitle the Fund to a reduced rate
of, or exemption from, taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the Fund's assets
to be invested in various countries is not known.
If more than 50% of the value of the Fund's total assets at
the close of its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign income taxes paid by the Fund (the "Foreign Tax
Election"). Pursuant to the Foreign Tax Election, shareholders would be
required (i) to include in gross income, even though not actually received,
their respective pro-rata shares of the foreign income taxes paid by the Fund;
(ii) either to deduct their pro-rata share of foreign taxes in computing their
taxable income, or to use such share (subject to various Code limitations) as
a foreign tax credit against federal income tax (but not both). In determining
the source and character of distributions received from the Fund for purposes
of the foreign tax credit limitation rules of the Code, shareholders would, if
the Fund makes the Foreign Tax Election, be required to treat their pro-rata
shares of such foreign taxes and allocable portions of Fund distributions as
foreign source income.
-7-
<PAGE>
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, a foreign trust or estate, foreign corporation,
or foreign partnership ("Foreign Shareholder"), depends on whether the income
from the Fund is "effectively connected" with a U.S. trade or business carried
on by such shareholder.
If the income from the Fund is not effectively connected
with a U.S. trade or business carried on by a Foreign Shareholder,
distributions of net investment income will be subject to U.S. withholding tax
at the rate of 30% (or such lower treaty rate as may be applicable) upon the
gross amount of the distribution. Furthermore, Foreign Shareholders will
generally be exempt from U.S. federal income tax on gains realized on the sale
of Shares, distributions of net long-term capital gains, and amounts retained
by the Fund which are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a
U.S. trade or business carried on by a Foreign Shareholder, then distributions
of net investment income and net long-term capital gains, and any gains
realized upon the sale of Shares, will be subject to U.S. federal income tax
at the rates applicable to U.S. citizens or domestic corporations.
The Fund may be required to withhold U.S. federal income tax
on distributions that are otherwise exempt from withholding tax (or taxable at
a reduced treaty rate) if the Foreign Shareholder does not comply with
Internal Revenue Service certification requirements.
The tax consequences to a Foreign Shareholder entitled to
claim the benefits of an applicable tax treaty may be different from those
described herein. Furthermore, Foreign Shareholders are strongly urged to
consult their own tax advisors with respect to the particular tax consequences
to them of an investment in the Fund. For various reasons dependent upon the
application of specific U.S. tax rules, Foreign Shareholders may determine
that an investment in the Fund results in adverse tax consequences.
Local Tax Considerations
Rules of U.S. state and local taxation of dividend and
capital gains distributions from regulated investment companies often differ
from the rules for U.S. federal income taxation described above. Shareholders
are urged to consult their tax advisers as to the consequences of these and
other U.S. state and local tax rules regarding an investment in the Fund.
5. MANAGEMENT OF THE FUND
The overall business affairs of the Fund are the
responsibility of the 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, custodian, accounting services agent and transfer agent. The
day-to-day operations of the Fund are delegated to the Fund's executive
officers and to its investment advisor, Investment Company Capital Corp.
("ICC"), and sub-advisor, The Glenmede Trust Company ("Glenmede")
(collectively, the "Advisors"). Two Directors and all of the officers of the
Fund are officers or employees of Alex. Brown, ICC or Glenmede. The other
Directors of the Fund have no affiliation with Alex. Brown, ICC or Glenmede.
-8-
<PAGE>
Directors and Officers
The Directors and executive officers of the Fund, their
respective dates of birth and their principal occupations during the last five
years are set forth below. Unless otherwise indicated, the address of each
Director and executive officer is 135 East Baltimore Street, Baltimore,
Maryland 21202.
*TRUMAN T. SEMANS, Chairman and Director (10/27/27)
Managing Director, Alex. Brown & Sons Incorporated; Formerly,
Vice Chairman, Alex. Brown & Sons Incorporated.
*RICHARD T. HALE, Director (7/17/45)
Managing Director, Alex. Brown & Sons Incorporated; Chartered
Financial Analyst.
JAMES J. CUNNANE, Director (3/11/38)
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141.
Managing Director, CBC Capital (merchant banking), 1993-Present;
Formerly, Senior Vice-President and Chief Financial Officer, General
Dynamics Corporation (defense) 1989-1993 and Director, The Arch Fund
(mutual fund).
JOHN F. KROEGER, Director (8/11/24)
P.O. Box 464, 24875 Swan Road - Martingham, St. Michaels,
Maryland 21663. Director/Trustee, AIM Funds; Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm) and
General Manager, Shell Oil Company.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director,
Kimberly-Clark Corporation (personal consumer products) and Household
International (finance and banking); Chairman of the Quality Control
Inquiry Committee, American Institute of Certified Public
Accountants; Formerly, Trustee, Merrill Lynch Funds for Institutions,
1991-1993; Adjunct Professor, Columbia University-Graduate School of
Business, 1991-1992; Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705. President, Duke Management
Company (investments); Executive Vice President, Duke University
(education, research and healthcare).
CARL W. VOGT, Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2604. Senior Partner, Fulbright & Jaworski
L.L.P. (law); Formerly, Chairman National Transportation
Safety Board; Director, National Railroad Passenger Corporation
(Amtrak) and Member, Aviation System Capacity Advisory Committee
(Federal Aviation Administration).
HARRY WOOLF, Director (8/12/23)
Institute for Advanced Study, South Olden Lane, Princeton, New Jersey
08540. Professor-at-Large Emeritus, Institute for Advanced Study;
Director, ATL and Spacelabs Medical Corp. (medical equipment) and
Family Health International (non-profit research and education);
Trustee, Reed College (education); Director, Research America
(non-profit medical research); Formerly, Trustee, Rockefeller
Foundation; and Director, Merrill Lynch Cluster C Funds (registered
investment companies).
- --------
* A director who is an "interested person" of the Fund as that term is
defined in Section 2(a)(19) of the Investment Company Act.
-9-
<PAGE>
JOHN W. CHURCH, JR., President (11/25/32)
The Glenmede Trust Company, One Liberty Place, 1650 Market Street,
Philadelphia, Pennsylvania 19103. Senior Vice President and Chief
Investment Officer, The Glenmede Trust Company.
ANDREW B. WILLIAMS, Executive Vice President (4/28/54)
The Glenmede Trust Company, One Liberty Place, 1650 Market Street,
Philadelphia, Pennsylvania 19103. Vice President, The Glenmede Trust
Company.
GARY V. FEARNOW, Vice President (12/6/44)
Managing Director, Alex. Brown & Sons Incorporated and Manager,
Special Products Department, Alex. Brown & Sons Incorporated.
EDWARD J. VEILLEUX, Vice President (8/26/43)
Principal, Alex. Brown & Sons Incorporated; President, Investment
Company Capital Corp. (registered investment advisor); Vice
President, Armata Financial Corp. (registered broker-dealer).
BRIAN C. NELSON, Vice President and Secretary (7/31/59)
Vice President, Alex. Brown & Sons Incorporated, Investment Company
Capital Corp. (registered investment advisor) and Armata Financial
Corp. (registered broker-dealer); Assistant Secretary, The Glenmede
Fund, Inc. and The Glenmede Portfolios (mutual funds).
JOSEPH A. FINELLI, Treasurer (1/24/57)
Vice President, Alex. Brown & Sons Incorporated, September
1995-Present; Treasurer, The Glenmede Fund, Inc. and The Glenmede
Portfolios (mutual funds), December 1995-Present; Formerly, Vice
President and Treasurer, The Delaware Group of Funds (mutual funds)
and Vice President, Delaware Management Company Inc., 1980-August
1995.
LAURIE D. DePRINE, Assistant Secretary (1/1/66)
Asset Management Department, Alex. Brown & Sons Incorporated,
1991-Present; Formerly, Student, 1989-1991.
Directors and officers of the Fund are also directors and
officers of some or all of the other investment companies managed,
administered, advised or distributed by Alex. Brown or its affiliates. There
are currently 12 funds in the Flag Investors/ISI Funds and Alex. Brown Cash
Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as a
Director of eight funds in the Fund Complex. Mr. Hale serves as President and
Director of one fund, Vice President and Director of one fund and as a
Director of 10 other funds in the Fund Complex. Messrs. Cunnane, Kroeger,
Levy, McDonald and Woolf serve as Directors of each fund in the Fund Complex.
Mr. Vogt serves as a director of four funds in the Fund Complex. Mr. Church and
Mr. Williams serve as President and Vice President, respectively, of the Fund.
Mr. Fearnow serves as Vice President of 10 funds in the Fund Complex. Mr.
Veilleux serves as Executive Vice President of one fund and as Vice President
of each of the other funds in the Fund Complex. Mr. Nelson serves as Vice
President and Secretary, Mr. Finelli serves as Treasurer, and Ms. DePrine
serves as Assistant Secretary, respectively, for each of the funds in the Fund
Complex.
-10-
<PAGE>
Some of the Directors of the Fund are customers of, and have
had normal brokerage transactions with, Alex. Brown in the ordinary course of
business. All such transactions were made on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated
persons. Additional transactions may be expected to take place in the future.
Officers of the Fund receive no direct remuneration in such
capacity from the Fund. Officers and Directors of the Fund who are officers or
directors of Alex. Brown or Glenmede may be considered to have received
remuneration indirectly. As compensation for his services as director, each
Director who is not an "interested person" of the Fund (as defined in the
Investment Company Act) (a "Non-Interested Director") receives an aggregate
annual fee (plus reimbursement for reasonable out-of-pocket expenses incurred
in connection with his attendance at board and committee meetings) from all
Flag Investors/ISI Funds and Alex. Brown Cash Reserve Fund, Inc. for which he
serves. In addition, the Chairman of the Fund Complex's Audit Committee
receives an aggregate annual fee from the Fund Complex. Payment of such fees
and expenses is allocated among all such funds described above in direct
proportion to their relative net assets. For the fiscal year ended October 31,
1994, Non-Interested Directors' fees attributable to the assets of the Fund
totalled approximately $2,004. The following table shows aggregate
compensation paid to each of the Fund's Directors by the Fund and the Fund
Complex, respectively, in the fiscal year ended October 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Total Compensation From the
Aggregate Compensation From Fund and Fund Complex Paid to
Name of Person, the Fund for the Fiscal Year Directors for the Fiscal Year
Position Ended October 31, 1995 Ended October 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Truman T. Semans $0 $0
Chairman
*Richard T. Hale $0 $0
Director
James J. Cunnane $89(1) $29,250 for service on 13
Director Boards in the Fund Complex(2)
N. Bruce Hannay** $127(1) $39,000 for service on 13
Director Boards in the Fund Complex(2)
John F. Kroeger $139(1) $42,900 for service on 13
Director Boards in the Fund Complex(2)
Louis E. Levy $127(1) $39,000 for service on 13
Director Boards in the Fund Complex(2)
Eugene J. McDonald $127(1) $39,000 for service on 13
Director Boards in the Fund Complex(2)
Carl W. Vogt*** N/A N/A
Director
Harry Woolf $127(1) $39,000 for service on 13
Director Boards in the Fund Complex(2)
</TABLE>
-11-
<PAGE>
* A Director who is an "interested person" as defined in the Investment
Company Act.
** Retired effective January 31, 1996.
*** Appointed to the Board on January 30, 1996.
(1) Of the amounts paid to Messrs. Cunnane, Hannay, Kroeger, Levy,
McDonald and Woolf, no portion of such amounts was deferred pursuant
to the Fund's deferred compensation plan.
(2) One of these funds ceased operations on May 17, 1995.
The Fund Complex has adopted a Retirement Plan (the
"Retirement Plan") for Directors who are not employees of the Fund, the Fund's
Advisor or their respective affiliates (the "Participants"). After completion
of five years of service, each Participant will be entitled to receive an
annual retirement benefit equal to a percentage of the fee earned by him in
his last year of service. Upon retirement, each Participant will receive
annually 10% of such fee for each year that he served after completion of the
first five years, up to a maximum annual benefit of 50% of the fee earned by
him in his last year of service. The fee will be paid quarterly, for life, by
each Fund for which he serves. The Retirement Plan is unfunded and unvested.
Messrs. Kroeger and Woolf have qualified but have not yet received benefits.
The Fund has two Participants, a Director who retired effective December 31,
1994 and a Director who retired effective January 31, 1996, each of whom has
qualified for the Retirement Plan and who will be paid a quarterly fee of
$4,875 by the Fund Complex for the rest of his life. Such fee is allocated to
each fund in the Fund Complex based upon the relative net assets of such fund
to the Fund Complex.
Beginning in December, 1994, any Director who receives fees
from the Fund is permitted to defer a minimum of 50%, or up to all, of his
annual compensation pursuant to a Deferred Compensation Plan.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of
Ethics pursuant to Rule 17j-1 under the Investment Company Act. The Code of
Ethics significantly restricts the personal investing activities of all
employees of the Advisors and the directors and officers of Alex. Brown. As
described below, the Code of Ethics imposes additional, more onerous,
restrictions on the Fund's investment personnel, including the portfolio
managers and employees who execute or help execute a portfolio manager's
decisions or who obtain contemporaneous information regarding the purchase or
sale of a security by the Fund.
The Code of Ethics requires that all employees of the
Advisors, any director or officer of Alex. Brown, and all Non-Interested
Directors, preclear any personal securities investments (with limited
exceptions, such as non-volitional purchases or purchases which are part of an
automatic dividend reinvestment plan). The preclearance requirement and
associated procedures are designed to identify any substantive prohibition or
limitation applicable to the proposed investment. The substantive restrictions
applicable to investment personnel include a ban on acquiring any securities
in an initial public offering, a prohibition from profiting on short-term
trading in securities and preclearance of the acquisition of securities in
private placements. Furthermore, the Code of Ethics provides for trading
"blackout periods" that prohibit trading by investment personnel and certain
other employees within periods of trading by the Fund in the same security.
6. INVESTMENT ADVISORY AND OTHER SERVICES
On March 24, 1993, the Board of Directors of the Fund and
Bessemer Trust Company, N.A. ("Bessemer") mutually agreed that Bessemer would
resign as advisor to the Fund at such time as a new advisory agreement with
ICC became effective. Bessemer had acted as the Fund's advisor since November
6, 1986, the date of commencement of operations of the Fund. The Board
approved an Investment Advisory Agreement between the Fund and ICC and a
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<PAGE>
Sub-Advisory Agreement between the Fund and Glenmede on March 24, 1993 and on
June 16, 1993, the shareholders of the Fund approved these agreements,
effective August 16, 1993.
The Advisors
ICC is a wholly owned subsidiary of Alex. Brown, the Fund's
distributor. ICC is also the investment advisor to Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag
Investors Intermediate-Term Income Fund, Inc., Flag Investors Maryland
Intermediate Tax Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc. and Flag Investors Equity Partners Fund, Inc., which are also
distributed by Alex. Brown. Glenmede, a limited purpose trust company,
provides fiduciary and investment services to individuals, endowment funds,
foundations, employee benefit plans and other institutions. At December 31,
1995, Glenmede had over $8.7 billion in assets in the accounts for which it
serves in various capacities, including as executor, trustee or investment
advisor. Glenmede is a wholly-owned subsidiary of The Glenmede Corporation.
Under the Investment Advisory Agreement, ICC supervises and
manages all aspects of the Fund's operations, except for distribution
services; formulates and implements continuing programs for the purchase and
sale of securities, consistent with the investment objective and policies of
the Fund; provides the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors; provides
the Fund with, or obtains for it, adequate office space and all necessary
office equipment and services, including telephone service, utilities,
stationery, supplies and similar items for the Fund's principal office;
obtains and evaluates pertinent information about significant developments and
economic, statistical and financial data, domestic, foreign or otherwise,
whether affecting the economy generally or the Fund, and whether concerning
the individual issuers whose securities are included in the Fund's portfolio
or the activities in which they engage, or with respect to securities which
the Advisor considers desirable for inclusion in the Fund's portfolio;
determines which issuers and securities shall be represented in the Fund's
portfolio and regularly report thereon to the Fund's Board of Directors; takes
all actions necessary to carry into effect the Fund's purchase and sale
programs; supervises the operations of the Fund's custodian, transfer and
dividend disbursing agent, and accounting services agent; provides the Fund
with such administrative and clerical services for the maintenance of certain
shareholder records, as are deemed advisable by the Fund's Board of Directors;
and arranges, but does not pay for, the periodic updating of Prospectuses and
supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and state Blue Sky
authorities. ICC has delegated certain of these responsibilities to Glenmede.
Any investment program undertaken by ICC or Glenmede will at all times be
subject to the policies and control of the Fund's Board of Directors. Neither
ICC nor Glenmede shall be liable to the Fund or its shareholders for any act
or omission by ICC or Glenmede or any losses sustained by the Fund or its
shareholders except in the case of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duty.
As compensation for its services, ICC is entitled to receive
a fee from the Fund, calculated daily and paid monthly, at the annual rate of
.75% of the Fund's average daily net assets. This fee is higher than that paid
by most mutual funds, however, in ICC's opinion, is comparable to fees paid by
other investment companies with similar investment objectives and policies. As
compensation for its services, Glenmede is entitled to receive a fee from ICC,
payable from its advisory fee, calculated daily and paid monthly, at the
annual rate of .55% of the Fund's average daily net assets. The services of
the Advisors to the Fund are not exclusive and the Advisors are free to, and
do, render similar services to others.
-13-
<PAGE>
Each of the Investment Advisory Agreement and Sub-Advisory
Agreement will continue in effect for an initial term of two years and from
year to year thereafter as specifically approved (a) at least annually by the
Fund's Board of Directors or by a vote of a majority of the outstanding Shares
(as defined under "Capital Shares") and (b) by the affirmative vote of a
majority of the Non-Interested Directors who have no direct or indirect
financial interest in each of such agreements by votes cast in person at a
meeting called for such purpose. Each of the Investment Advisory Agreement and
Sub-Advisory Agreement was most recently approved in the foregoing manner by
the Fund's Board of Directors on September 25, 1995. The Fund or ICC may
terminate the Investment Advisory Agreement upon sixty days' written notice,
without penalty, by the vote of a majority of the Directors who are not
parties to the Investment Advisory Agreement or interested persons of any such
party or by the vote of a majority of the outstanding Shares (as defined under
"Capital Shares"). The Investment Advisory Agreement will terminate
automatically in the event of its assignment. The Sub-Advisory Agreement has
similar termination provisions. As compensation for investment advisory
services for the fiscal years ended October 31, 1995 and October 31, 1994, ICC
was entitled to receive fees of $98,840 and $114,033, respectively, and from
such amounts waived fees of $68,946 and $19,363, respectively, and paid
Glenmede fees of $26,600 and $31,274, respectively. During the same period,
Glenmede waived fees of $19,020 and $52,350, respectively. For the period from
August 23, 1993 through October 31, 1993, ICC waived all advisory fees
($63,646). For the same period, Glenmede waived all sub-advisory fees
($3,995). For the fiscal period from November 1, 1992 through August 22, 1993,
Bessemer (the Fund's advisor during this period) received fees from the Fund
in the aggregate amount of $125,061 and waived fees of $34,411.
ICC has agreed, if necessary, to waive a portion of its fees
in order to limit the overall expense ratio of the Fund to comply with state
expense limitations. Currently, the most restrictive of such limitations would
require ICC to reduce its fees or reimburse the Fund, to the extent required,
so that the ordinary expenses of the Fund (excluding brokerage commissions,
interest, taxes and extraordinary expenses such as legal claims, liabilities,
litigation costs and indemnification related thereto) do not exceed 2.5% of
the first $30 million of the Fund's average daily net assets, 2.0% of the next
$70 million of the Fund's average daily net assets and 1.5% of the Fund's
average daily net assets in excess of $100 million. In addition, if required
to do so by any applicable state securities laws or regulations, ICC will
reimburse the Fund to the extent required to prevent the expense limitations
of any state law or regulation from being exceeded. ICC has also agreed to
reduce its annual advisory fees, if necessary, so that the Fund's annual
operating expenses do not exceed 1.50% of the Fund's average daily net assets.
Glenmede has agreed to reduce its aggregate fees for any fiscal year in an
amount proportionate to the amount by which ICC's fees may be reduced as
described above.
ICC also serves as the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. (See
"Custodian, Accounting Services, Transfer Agent.")
7. DISTRIBUTION OF FUND SHARES
The Distribution Agreement provides that Alex. Brown has the
exclusive right to distribute Shares either directly or through other
broker-dealers and further provides that Alex. Brown will: solicit and receive
orders for the purchase of Shares, accept or reject such orders on behalf of
the Fund in accordance with the Fund's currently effective Prospectus and
transmit such orders as are accepted to the Fund's transfer agent as promptly
as possible, receive requests for redemption and transmit such redemption
requests to the Fund's transfer agent as promptly as possible, respond to
inquiries from the Fund's shareholders concerning the status of their accounts
with the Fund, provide the Fund's Board of Directors with quarterly reports
required by Rule 12b-1, and take all actions deemed necessary to carry into
effect the distribution of the Shares. Alex. Brown has not undertaken to sell
any specific number of Shares. The Distribution Agreement further provides
that, in connection with the distribution of Shares, Alex. Brown will be
responsible for all of the promotional expenses. The services by Alex. Brown
-14-
<PAGE>
to the Fund are not exclusive, and Alex. Brown shall not be liable to the Fund
or its shareholders for any act or omission by Alex. Brown or any losses
sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
Alex. Brown and certain broker-dealers ("Participating
Dealers") have entered into Sub-Distribution Agreements with respect to the
Shares ("Sub-Distribution Agreements") pursuant to which Participating Dealers
have agreed to process investor purchase and redemption orders and to respond
to inquiries from shareholders concerning the status of their accounts and the
operations of the Fund.
As compensation for providing distribution services for the
Shares as described above, Alex. Brown receives an annual fee, paid monthly,
equal to .25% of the average daily net assets of the Class A Shares. Alex.
Brown expects to allocate a substantial portion of the annual distribution fee
to its investment representatives and up to all of its fee to Participating
Dealers. For the fiscal years ended October 31, 1995, October 31, 1994 and
October 31, 1993, Alex. Brown received 12b-1 fees in the amount of $32,947,
$38,112 and $39,514, respectively, and paid from such fees approximately
$90,337, $32,794, and $37,197 respectively, to its investment representatives
as compensation and $4,889, $1,872 and $0, respectively, to Participating
Dealers and financial institutions as compensation. In addition, in the fiscal
year ended October 31, 1995, Alex. Brown incurred expenses of $0 for
advertising and $8,235 for printing and mailing prospectuses to prospective
shareholders.
Pursuant to Rule 12b-1 under the Investment Company Act,
which provides that investment companies may pay distribution expenses,
directly or indirectly, only pursuant to a plan adopted by the investment
company's Board of Directors and approved by its shareholders, the Fund has
adopted a Plan of Distribution (the "Plan"). The maximum amount payable under
the Plan to Alex. Brown for distribution and other shareholder servicing
assistance is an amount calculated on an average net asset basis and paid
monthly, equal to .25% of the Shares' average daily net assets, unless and
until a change in payment is authorized and approved by the Board of
Directors. Alex. Brown is authorized to make payments out of its fee to its
investment representatives, Participating Dealers and Shareholder Servicing
Agents. Payments to Participating Dealers and Shareholder Servicing Agents may
not exceed fees payable to Alex. Brown under the Plan.
The Distribution Agreement, including the form of
Sub-Distribution Agreement, and the Plan was most recently approved by the
Fund's Board of Directors, including a majority of the Non-Interested
Directors, on September 25, 1995. The Distribution Agreement and the Plan will
remain in effect from year to year as specifically approved (a) at least
annually by the Fund's Board of Directors or by a vote of a majority of the
outstanding Shares and (b) by the affirmative vote of a majority of the
Non-Interested Directors, by votes cast in person at a meeting called for such
purpose.
In approving the Plan, the Directors concluded, in the
exercise of reasonable business judgment, that there was a reasonable
likelihood that the Plan would benefit the Fund and its shareholders. The Plan
will be renewed only if the Directors make a similar determination in each
subsequent year. The Plan may not be amended to increase materially the fee to
be paid pursuant to the Distribution Agreement without the approval of the
shareholders of the Fund. The Plan may be terminated at any time and the
Distribution Agreement may be terminated at any time upon 60 days' notice, in
either case without penalty, by a vote of a majority of the Fund's
Non-Interested Directors or by a vote of a majority of the Fund's outstanding
Shares (as defined under "Capital Shares"). Any Shareholder Servicing
Agreement may be terminated at any time, without penalty, upon ten days'
notice. Any Sub-Distribution Agreement may be terminated at any time, without
penalty, upon 10 days' notice or by the vote of a majority of the Fund's
Non-Interested Directors. The Distribution Agreement, the Plan, any
Sub-Distribution Agreement and any Shareholder Servicing Agreement shall
automatically terminate in the event of assignment.
-15-
<PAGE>
During the continuance of the Plan, the Fund's Board of
Directors will be provided for their review, at least quarterly, a written
report concerning the payments made under the Plan to Alex. Brown pursuant to
the Distribution Agreement, to any Participating Dealers pursuant to
Sub-Distribution Agreements and to any Shareholder Servicing Agents pursuant
to Shareholder Servicing Agreements. Such reports shall be made by the persons
authorized to make such payments. In addition, during the continuance of the
Plan, the selection and nomination of the Fund's Non-Interested Directors
shall be committed to the discretion of the Non-Interested Directors then in
office.
In addition, the Fund may enter into Shareholder Servicing
Agreements with certain financial institutions, such as banks, to act as
Shareholder Servicing Agents, pursuant to which Alex. Brown will allocate a
portion of its distribution fee as compensation for such financial
institutions' ongoing shareholder services. Although banking laws and
regulations prohibit banks from distributing shares of open-end investment
companies such as the Fund, according to interpretations by various bank
regulatory authorities, financial institutions are not prohibited from acting
in other capacities for investment companies, such as the shareholder
servicing capacities described above. Should future legislative, judicial or
administrative action prohibit or restrict the activities of the Shareholder
Servicing Agents in connection with the Shareholder Servicing Agreements, the
Fund may be required to alter materially or discontinue its arrangements with
the Shareholder Servicing Agents. Such financial institutions may impose
separate fees in connection with these services and investors should review
the Prospectus and this Statement of Additional Information in conjunction
with any such institution's fee schedule. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
In the fiscal years ended October 31, 1995, October 31, 1994
and October 31, 1993, Alex. Brown received sales commissions of $21,396,
$41,462 and $14,136 and from such amounts retained $12,184, $27,986 and
$12,995 in each such year, respectively.
Except as described elsewhere, the Fund pays or causes to be
paid all continuing expenses of the Fund, including, without limitation:
investment advisory and distribution fees; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and corporate fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing certificates representing Shares; all costs and expenses
in connection with the registration and maintenance of registration of the
Fund and its Shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the costs
and expenses of printing, including typesetting, and distributing Prospectuses
and statements of additional information of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and Directors'
meetings and of preparing, printing and mailing proxy statements and reports
to shareholders; fees and travel expenses of Non-Interested Directors and
Non-Interested members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in Shares or in cash; charges and expenses of any outside
service used for pricing of the Shares; fees and expenses of legal counsel,
including counsel to the Non-Interested Directors, and independent
accountants, in connection with any matter relating to the Fund; membership
dues of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the
Fund's operations unless otherwise explicitly assumed by ICC or Alex. Brown.
-16-
<PAGE>
8. BROKERAGE
Glenmede is responsible for decisions to buy and sell
securities for the Fund, for the broker-dealer selection, and for negotiation
of commission rates, subject to the supervision of ICC. Purchases and sales of
securities on a securities exchange are effected through brokers who charge a
commission for their services. If the transaction is completed on a United
States securities exchange, the brokerage commissions are subject to
negotiation between Glenmede and the broker. Commission rates for brokerage
commissions on foreign stock exchanges are, however, generally fixed. Glenmede
may direct purchase and sale orders to any broker, including, to the extent
and in the manner permitted by applicable law, Alex. Brown.
In over-the-counter transactions orders are placed directly
with a principal market maker and such purchases normally include a mark-up
over the bid to the broker-dealer based on the spread between the bid and
asked price for the security. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter. On occasion, certain money market investments may be purchased
directly from an issuer without payment of a commission or concession. The
Fund will not deal with Alex. Brown in any transaction in which Alex. Brown
acts as a principal, that is, an order will not be placed with Alex. Brown if
execution of the trade involves Alex. Brown serving as a principal with
respect to any part of the Fund's order, nor will the Fund buy or sell
over-the-counter securities with Alex. Brown acting as market maker.
If Alex. Brown is participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with rules of the SEC. The Fund believes that the limitation
will not affect its ability to carry out its present investment objective.
Glenmede's primary consideration in effecting securities
transactions is to obtain the best price and execution of orders on an overall
basis. As described below, however, to the extent that the prices and
execution offered by more than one broker-dealer are comparable, Glenmede may,
in its discretion, effect transactions with dealers that furnish statistical
research or other information or services which are deemed by Glenmede to be
beneficial to the Fund's investment program. Certain research services
furnished by broker-dealers may be useful to Glenmede with clients other than
the Fund. Similarly, any research services received by Glenmede through
placement of portfolio transactions of other clients may be of value to
Glenmede in fulfilling its obligations to the Fund. No specific value can be
determined for research and statistical services furnished without cost to
Glenmede by a broker-dealer. Glenmede is of the opinion that, because the
material must be analyzed and reviewed by its staff, its receipt does not tend
to reduce expenses, but may be beneficial in supplementing the Advisors'
research and analysis. Therefore, such services may tend to benefit the Fund
by improving Glenmede's investment advice. Glenmede's policy is to pay a
broker-dealer higher commissions for particular transactions than might be
charged if a different broker had been chosen when, in the Advisor's opinion,
this policy furthers the overall objective of obtaining best price and
execution. Subject to periodic review by the Fund's Board of Directors,
Glenmede is also authorized to pay broker-dealers other than Alex. Brown
higher commissions on brokerage transactions for the Fund in order to secure
research and investment services described above. The allocation of orders
among broker-dealers and the commission rates paid by the Fund will be
reviewed periodically by the Board. For the fiscal year ended October 31,
1995, Glenmede directed $10,471,945 in principal value of brokerage
transactions to broker dealers and paid $40,660 of related commissions because
of research services provided to the Fund.
Subject to the above considerations, the Board of Directors
has authorized the Fund to effect portfolio transactions, on an agency basis,
through Alex. Brown pursuant to certain policies and procedures incorporating
the standards of Rule 17e-1 of the SEC under the Investment Company Act which
requires that the commissions paid Alex. Brown must be "reasonable and fair
compared to the commission, fee or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
-17-
<PAGE>
similar securities during a comparable period of time." Rule 17e-1 also
contains requirements for the review of such transactions by the Board of
Directors and requires ICC and Glenmede to furnish reports and to maintain
records in connection with such reviews. The Class A Distribution Agreement
between Alex. Brown and the Fund does not provide for any reduction in the
fees to be received by Alex. Brown from the Fund as a result of profits
resulting from brokerage commissions on transactions of the Fund effected
through Alex. Brown. For the fiscal years ended October 31, 1995, October 31,
1994 and October 31, 1993, the Fund paid no brokerage commissions to Alex.
Brown. The Fund is required to identify any securities of its "regular brokers
or dealers" (as such term is defined in the Investment Company Act) which the
Fund has acquired during its most recent fiscal year. As of October 31, 1995,
the Fund held a 5.75% repurchase agreement issued by Goldman Sachs & Co.
valued at $297,000. Goldman Sachs & Co. is a "regular broker or dealer" of the
Fund.
The Advisors manage other investment accounts. It is
possible that, at times, identical securities will be acceptable for the Fund
and one or more of such other accounts; however, the position of each account
in the securities of the same issuer may vary and the length of time that each
account may choose to hold its investment in such securities may likewise
vary. The timing and amount of purchase by each account will also be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more of these
accounts is considered at or about the same time, transactions in such
securities will be allocated among the accounts in a manner deemed equitable
by the Advisors. The Advisors may combine such transactions, in accordance
with applicable laws and regulations, in order to obtain the best net price
and most favorable execution. Such simultaneous transactions, however, could
adversely affect the ability of the Fund to obtain or dispose of the full
amount of a security which it seeks to purchase or sell and may favorably or
unfavorably affect the price received on the purchase or sale of portfolio
securities.
9. CAPITAL SHARES
Under the Fund's Articles of Incorporation, the Fund has 10
million authorized Shares of common stock, par value of $.001 per share. The
Board of Directors may increase or decrease the number of authorized Shares
without shareholder approval.
The Fund's Articles of Incorporation provide for the
establishment of separate series or separate classes of Shares by the
Directors at any time without shareholder approval. The Fund currently has one
Series and the Board has designated two classes of shares: Flag Investors
International Fund Class A Shares and Flag Investors International Fund Class
B Shares. The Class B Shares are not currently being offered. Shares of the
Fund, regardless of series or class, would have equal rights with respect to
voting, except that with respect to any matter affecting the rights of the
holders of a particular series or class, the holders of each series or class,
would vote separately. In general, each such series would be managed
separately and shareholders of each series would have an undivided interest in
the net assets of that series. For tax purposes, the series would be treated
as separate entities. Generally, each class of Shares would be identical to
every other class in a particular series and expenses of the Fund (other than
12b-1 and any applicable service fees) are prorated between all classes of a
series based upon the relative net assets of each class. Any matters affecting
any class exclusively would be voted on by the holders of such class.
Shareholders of the Fund do not have cumulative voting
rights, and therefore the holders of more than 50% of the outstanding Shares
voting together for election of Directors may elect all the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
There are no preemptive, conversion or exchange rights
applicable to any of the Shares. The Fund's issued and outstanding Shares are
fully paid and non-assessable. In the event of liquidation or dissolution of the
-18-
<PAGE>
Fund, each Share is entitled to its portion of the Fund's assets (or the assets
allocated to a separate series of shares if there is more than one series)
after all debts and expenses have been paid.
As used in this Statement of Additional Information the term
"majority of the outstanding Shares" means the vote of the lesser of (i) 67%
or more of the Shares present at the meeting if the holders of more than 50%
of the outstanding Shares are present or represented by proxy, or (ii) more
than 50% of the outstanding Shares.
10. REPORTS
The Fund furnishes shareholders with semi-annual and 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 auditors.
11. CUSTODIAN, ACCOUNTING SERVICES AND TRANSFER AGENT
Boston Safe Deposit and Trust Company ("Boston Safe
Deposit"), located at One Boston Place, Boston, Massachusetts 02108, acts as
custodian of the Fund's assets. Boston Safe Deposit has presented information
to the Fund's Board of Directors regarding any non-branch correspondent
institutions with which it may enter into agreements to hold the Fund's assets
abroad and, based upon its review of such information, the Board has found
such arrangements to comply with the requirements of Rule 17f-5 under the
Investment Company Act and to be consistent with the best interests of the
Fund and its shareholders. Boston Safe Deposit receives such compensation from
the Fund for its services as may be agreed to from time to time by Boston Safe
Deposit and the Fund. Investment Company Capital Corp., 135 East Baltimore
Street, Baltimore, Maryland 21202 (telephone: (800) 553-8080) has been
retained to act as the Fund's transfer and dividend disbursing agent. As
compensation for providing these services, the Fund pays ICC up to $10.12 per
account per year, plus reimbursement for out-of-pocket expenses incurred in
connection therewith. For the fiscal year ended October 31, 1995, such fees
totalled $17,002.
Effective April 10, 1995, ICC also provides certain
accounting services to the Fund. As compensation for these services, ICC
receives an annual fee, calculated daily and paid monthly as shown below.
<TABLE>
<CAPTION>
Average Net Assets Basis Points Incremental Fee
- ------------------ ------------ ---------------
<S> <C> <C>
0 - $10,000,000 0.250% 25,000 (fixed fee)
$10,000,001 - $24,999,999 0.080% 37,000
$25,000,001 - $50,000,000 0.060% 52,000
$50,000,001 - $75,000,000 0.040% 62,000
$75,000,001 - $99,999,999 0.035% 70,750
$100,000,000 - $500,000,000 0.017% 138,750
$500,000,000 - $1,000,000,000 0.006% 168,750
over $1,000,000,000 0.002% 168,750 +
</TABLE>
For the period from April 10, 1995 through October 31, 1995,
ICC received accounting fees of $15,370.
ICC also serves as the Fund's investment advisor.
-19-
<PAGE>
12. INDEPENDENT AUDITORS
The annual financial statements of the Fund are audited by
Deloitte & Touche LLP. Deloitte & Touche LLP has offices at 2 Hilton Court,
P.O. Box 319, Parsippany, New Jersey 07054.
13. PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the
Fund to that of other mutual funds and to stock or other relevant indices in
advertisements or in reports to shareholders, performance will be stated in
terms of total return, rather than in terms of yield. The total return
quotations, under the rules of the SEC must be calculated according to the
following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of
the 1, 5, or 10 year periods (or
fractional portion thereof) of a
hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods.
Under the foregoing formula the time periods used in
advertising will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertising for
publication, and will cover one, five, and ten year periods or a shorter
period dating from the effectiveness of the Fund's registration statement. In
calculating the ending redeemable value, the maximum sales load is deducted
from the initial $1,000 payment and all dividends and distributions by the
Fund are assumed to have been reinvested at net asset value as described in
the Prospectus on the reinvestment dates during the period. Total return, or T
in the formula above, is computed by finding the average annual compounded
rates of return over the 1, 5 and 10 year periods (or fractional portion
thereof) that would equate the initial amount invested to the ending
redeemable value. Any sales loads that might in the future be made applicable
at the time to reinvestments would be included as would any recurring account
charges that might be imposed by the Fund.
The Fund may also from time to time include in such
advertising a total return figure that is not calculated according to the
formula set forth above in order to compare more accurately the Fund's
performance with other measures of investment return. For example, in
comparing the Fund's total return with data published by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. or Morningstar, Inc., or
with the performance of the Europe, Australia and Far East Index, the Standard
& Poor's 500 Stock Index or the Dow Jones Industrial Average, the Fund
calculates its annual total return for the specified periods of time by
assuming the investment of $10,000 in Shares and assuming the reinvestment of
each dividend or other distribution at net asset value on the reinvestment
date. For this alternative computation, the Fund assumes that the $10,000
invested in Shares is net of all sales charges (as distinguished from the
computation required by the SEC where the $1,000 payment is reduced by sales
charges before being invested in Shares). The Fund will, however, disclose the
maximum sales charge and will also disclose that the performance data do not
reflect sales charges and that inclusion of sales charges would reduce the
performance quoted. Such alternative total return information will be given no
greater prominence in such advertising than the information prescribed under
SEC rules and all advertisements containing performance data will include a
legend disclosing that such performance data represent past performance and
that the investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
-20-
<PAGE>
Calculated according to the SEC rules, for the one year
period ended September 30, 1995, the ending redeemable value of a hypothetical
$1,000 payment for Shares was $892, resulting in a total return for such
Shares equal to (10.8)%. For the five year period ended September 30, 1995,
the ending redeemable value of a hypothetical $1,000 payment for Shares was
$1,284, resulting in an average annual total return for such Shares equal to
5.1%. For the period from the effectiveness of the Fund's registration
statement on November 18, 1986 through the end of the Fund's most recent
calendar quarter on September 30, 1995, the ending redeemable value of a
hypothetical $1,000 payment for Shares was $1,659, resulting in an average
annual total return for such Shares equal to 5.9%.
Calculated according to the alternative computation, which
assumes no sales charges and reinvestment of all distributions, for the one
year period ended October 31, 1995, the ending redeemable value of a
hypothetical $10,000 investment in Shares was $9,071, resulting in a total
return equal to (9.3)%. For the five year period ended October 31, 1995, the
ending redeemable value of a hypothetical $10,000 investment in Shares was
$12,381, resulting in an average annual total return equal to 4.4%. For the
period from the effectiveness of the Fund's registration statement on November
18, 1986 through the end of the Fund's most recent fiscal year on October 31,
1995, the ending redeemable value of a hypothetical $10,000 investment in
Shares was $17,027, resulting in an average annual total return equal to 6.1%.
The Fund's annual portfolio turnover rate (the lesser of the
value of the purchases or sales for the year divided by the average monthly
market value of the portfolio during the year, excluding securities with
maturities of one year or less) may vary from year to year, as well as within
a year, depending on market conditions. The Fund's portfolio turnover rate for
the fiscal years ended October 31, 1995 and October 31, 1994 was 35% and 43%,
respectively.
14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 8, 1996, to Fund management's knowledge, the
following persons owned of record or beneficially 5% or more of the Fund's
outstanding Shares.
Name and Address Percentage of Ownership
- ---------------- -----------------------
Alex. Brown & Sons Incorporated 75.15%*
135 East Baltimore Street
Baltimore, MD 21202
- ------
*To Fund Management's knowledge, Alex. Brown owns beneficially less than 1% of
such shares.
As of February 8, 1996, the Directors and executive officers
as a group owned less than 1% of the Fund's total outstanding Shares.
15. FINANCIAL STATEMENTS
See next page.
-21-
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets October 31, 1995
<TABLE>
<CAPTION>
<C> <S> <C> <C>
PERCENT
NO. OF VALUE OF NET
SHARES SECURITY (NOTE A) ASSETS
- ------------------------------------------------------------
COMMON STOCK--96.6%
AUSTRALIA--3.5%
40,000 Burns Philip & Co. $ 89,529 0.7 %
25,422 Lend Lease Corp. 353,400 2.8
442,929 3.5
CANADA--1.7%
70 Bank of Nova Scotia* 1,474 --
5,000 Magna International 216,250 1.7
217,724 1.7
FINLAND--0.6%
5,000 Outokumpu Oy 'A' 79,500 0.6
FRANCE--7.6%
4,258 Elf Aquitaine 290,342 2.3
2,549 Generale des Eaux 237,227 1.9
4,356 Lafarge Coppee SA 289,086 2.3
9,680 Lagardere Groupe,
Warrants Expiring
6/30/97* 3,370 --
4,000 Technip ADR 129,984 1.1
950,009 7.6
GERMANY--5.6%
10,000 Deutsche Bank AG 450,674 3.6
6,000 Veba AG 245,408 2.0
696,082 5.6
HONG KONG--3.3%
50,000 Dao Heng Bank
Group Ltd. 183,357 1.5
125,000 Hong Kong 225,000 1.8
Land Holdings
408,357 3.3
<PAGE>
<CAPTION>
PERCENT
NO. OF VALUE OF NET
SHARES SECURITY (NOTE A) ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------
ITALY--3.4%
8,756 Assicurazioni Generali $ 204,453 1.6 %
21,300 Benetton Group SpA 220,832 1.8
425,285 3.4
JAPAN--27.0%
6,600 Acom Co., Ltd. 215,112 1.7
5,000 Amway 190,858 1.5
2,000 Aoyama ADR 54,028 0.4
10,000 Canon, Inc. 171,283 1.4
600 Chukyo Coca-Cola 5,814 --
10,000 Daiwa House 149,750 1.2
50 East Japan Railway Co. 236,371 1.9
25,000 Hitachi Ltd. 256,925 2.1
12,000 Honda Motor Co. 209,063 1.7
20,000 Kao Corp. 242,733 1.9
1,500 Kyocera Corp. ADR 248,250 2.0
14,000 Matsushita Electric 198,689 1.6
20,000 Nishimatsu Construction
Co. 225,115 1.8
4,000 Rohm Company 243,124 2.0
11,000 Sankyo Co. 242,243 1.9
7,000 Sharp Corp. 97,288 0.8
20,000 Toda Construction 163,649 1.3
10,000 Yamanouchi 223,158 1.8
Pharmaceutical
3,373,453 27.0
MALAYSIA--2.0%
94,666 Malaysian International 249,808 2.0
Shipping Corp. Berhad
'F'
MEXICO--0.9%
33,750 Cementos Astsk 'B' SA 108,940 0.9
</TABLE>
[LOGO]
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (CONCLUDED) October 31, 1995
<TABLE>
<CAPTION>
PERCENT
NO. OF VALUE OF NET
SHARES SECURITY (NOTE A) ASSETS
<C> <S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK (CONTINUED)
NETHERLANDS--9.4%
13,114 Algemene Bank Nederland 4.4%
Amsterdam-Rotterdam $ 550,848
10,100 Bols Wessanew 199,645 1.6
15,000 IHC Caland NV Holdings 426,698 3.4
1,177,191 9.4
NORWAY--1.5%
4,300 Kvaerner 180,820 1.5
SPAIN--7.0%
10,000 Banco Central Hispano 207,377 1.7
25,000 Dragados & Construcciones
SA 327,869 2.6
6,000 Repsol SA 179,262 1.4
10,000 Vallehermoso SA 161,885 1.3
876,393 7.0
SWEDEN--3.1%
11,000 Pharmacia Aktiebolag ADR 385,000 3.1
SWITZERLAND--2.1%
1,260 Schweizerischer Bankverein 258,269 2.1
(Swiss Bank Corp.),
Registered Shares
THAILAND--2.8%
30,000 Siam Commercial 350,556 2.8
Bank Ltd. 'F'
UNITED KINGDOM--15.1%
22,967 Argyll Group PLC 116,973 0.9
16,149 The Boots Co. PLC 143,040 1.2
20,000 Grand Metropolitan PLC 138,557 1.1
174,000 Mirror Group Newspapers
PLC* 459,610 3.7
25,000 National Power PLC 194,945 1.6
50,000 Scottish Power PLC 276,007 2.2
80,000 Tomkins PLC ADS 315,707 2.5
40,000 WH Smith, Class A 240,419 1.9
1,885,258 15.1
<PAGE>
<CAPTION>
NO. OF
SHARES/ PERCENT
PAR VALUE OF NET
(000) SECURITY (NOTE A) ASSETS
<C> <S> <C> <C>
- -----------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $10,816,426) $ 12,065,574 96.6%
PREFERRED STOCK--0.1%
HONG KONG
16 Dairy Farm International
Holdings Ltd., Cvt. (Cost
$16,000) 12,380 0.1
------------- -----
REPURCHASE AGREEMENT--2.4%
$297 GOLDMAN SACHS & CO., 5.75%
Dated 10/31/95, to be
repurchased on 11/1/95,
collateralized by U.S.
Treasury Notes with a
market value of $303,540.
(Cost $297,000) 297,000 2.4
------------- -----
TOTAL INVESTMENT IN
SECURITIES
(Cost $11,129,426)** 12,374,954 99.1
OTHER ASSETS IN EXCESS OF
LIABILITIES, NET 108,190 0.9
------------- -----
NET ASSETS $ 12,483,144 100.0%
------------- -----
------------- -----
NET ASSET VALUE AND
REDEMPTION VALUE
PER SHARE
($12,483,144 DIVIDED BY
983,508
shares outstanding) $12.69
MAXIMUM OFFERING PRICE PER
SHARE
($12.69 DIVIDED BY .955) $13.29
</TABLE>
- --------------------------------------------------------------------------------
*Non-income producing security.
**Also, aggregate cost for federal tax purposes.
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME (NOTE A):
Dividends.......................................................... $ 372,311
Interest........................................................... 21,951
Less: Foreign taxes withheld..................................... (105,880)
------------
Total income................................................... 288,382
------------
EXPENSES:
Investment advisory fee (Note B)................................... 98,840
Distribution fee (Note B).......................................... 32,947
Printing and postage............................................... 29,502
Audit.............................................................. 28,499
Legal.............................................................. 24,999
Accounting fee (Note B)............................................ 24,531
Transfer agent fees (Note B)....................................... 17,002
Custodian fees..................................................... 10,998
Miscellaneous...................................................... 8,150
Registration fees.................................................. 8,001
Directors' fees.................................................... 2,004
Insurance.......................................................... 608
------------
Total expenses................................................... 286,081
Less: Fees waived (Note B)......................................... (87,966)
------------
Net expenses..................................................... 198,115
------------
Net investment income.............................................. 90,267
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain from security transactions....................... 790,584
Net realized foreign exchange loss................................. (123,605)
Change in unrealized appreciation/(depreciation) of investments.... (2,231,677)
Change in unrealized appreciation/(depreciation) on translation of
assets and liabilities denominated in foreign currencies......... 41,662
------------
Net loss on investments.......................................... (1,523,036)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $ (1,432,769)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------
<S> <C> <C>
1995 1994
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................................................... $ 90,267 $ 113,910
Net realized gain from security transactions
and foreign exchange transactions............................................. 666,979 2,076,386
Change in unrealized appreciation/(depreciation) of investments................. (2,231,677) (260,712)
Change in unrealized appreciation/(depreciation) on translation
of assets and liabilities denominated in foreign currencies................... 41,662 (35,059)
-------------- -----------------
Net increase/(decrease) in net assets resulting from operations................. (1,432,769) 1,894,525
-------------- -----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income........................................................... -- (876,034)
-------------- -----------------
CAPITAL SHARE TRANSACTIONS (NOTE C):
Proceeds from sale of 99,262 and 258,474 shares, respectively................... 1,243,444 3,528,455
Value of 58,430 shares issued in reinvestment of dividends...................... -- 758,523
Cost of 224,000 and 358,707 shares repurchased, respectively.................... (2,814,795) (4,826,680)
-------------- -----------------
Total decrease in net assets derived from capital share transactions............ (1,571,351) (539,702)
-------------- -----------------
Total increase/(decrease) in net assets......................................... (3,004,120) 478,789
NET ASSETS:
Beginning of period............................................................. 15,487,264 15,008,475
-------------- -----------------
End of period................................................................... $ 12,483,144 $ 15,487,264
-------------- -----------------
-------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
[LOGO]
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)*
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of the year.............................. $ 13.97 $ 13.05 $ 9.11 $ 10.63 $ 11.80
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income................................................. 0.09 0.18 0.49 0.16 0.15
Net realized and unrealized gain/(loss) on investments(1)............. (1.37) 1.58 3.45 (1.62) (0.55)
------- ------- ------- ------- -------
Total from Investment Operations...................................... (1.28) 1.76 3.94 (1.46) (0.40)
Less Distributions:
Dividends from net investment income
and short-term gains................................................ -- (0.84) -- (0.06) --
Distributions from net realized
long-term gains..................................................... -- -- -- -- (0.77)
------- ------- ------- ------- -------
Total distributions .................................................. -- (0.84) -- (0.06) (0.77)
------- ------- ------- ------- -------
Net asset value at end of year........................................ $ 12.69 $ 13.97 $ 13.05 $ 9.11 $ 10.63
======= ======= ======= ======= =======
Total Return............................................................ (9.16)% 13.98% 43.25% (13.80)% (3.15)%
Ratio to Average Net Assets:
Expenses(2)........................................................... 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income(3).............................................. 0.68% 0.75% 1.91% 0.73% 1.17%
Supplemental Data:
Net assets at end of the year (000)................................... $12,483 $15,487 $15,008 $19,780 $38,830
Portfolio turnover ratio.............................................. 35% 43% 48% 63% 73%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Computed based upon average shares outstanding.
(1)Current year and prior year includes net realized currency loss. Realized
currency gain/(loss) is included in net income for the years ended
October 31, 1993, 1992 and 1991, respectively.
(2)Without the waiver of advisory fees (Note B), the ratio of expenses to
average net assets would have been 2.17%, 1.97%, 2.13%, 1.92% and 1.90%
for the years ended October 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
(3)Without the waiver of advisory fees (Note B), the ratio of net investment
income to average net assets would have been 0.02%, 0.28%, 1.28%, 0.31%
and 0.77% for the years ended October 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES - Flag
Investors International Fund, Inc. ("the Fund") was organized as a
Massachusetts business trust on September 3, 1986 and commenced operations
November 18, 1986. The Fund was reorganized as a Maryland corporation on
August 16, 1993. The Fund is registered under the Investment Company Act of
1940 as a diversified, open-end management investment company seeking
long-term growth of capital primarily through investment in a diversified
portfolio of marketable equity securities of issuers domiciled outside of the
United States. Significant accounting policies are as follows:
SECURITY VALUATION - Securities that are listed on a securities exchange are
valued on the basis of their last quoted sale price (or, in the absence of
recorded sales, at the last available bid price). If a security is listed on
more than one exchange, the last quoted sale price on the exchange where the
security is primarily traded is used. Securities or other assets for which
market quotations are not readily available are valued at their fair value so
determined in good faith by the Investment Advisor under procedures
established and monitored by the Board of Directors. Short-term obligations
with maturities of 60 days or less are valued at amortized cost.
FOREIGN CURRENCY TRANSACTIONS - The books and records of the Fund are
maintained in U.S. dollars. Transactions denominated in foreign currencies
are recorded in the Fund's records at the rate prevailing when earned or
incurred. Asset and liability accounts that are denominated in foreign
currencies are adjusted to reflect the current exchange rate. Transaction
gains or losses resulting from changes in the exchange rate during the
reporting period or upon settlement of the foreign currency transactions are
reported in realized and unrealized gain/(loss) on investments for the
current period.
The Fund is authorized to enter into forward foreign exchange contracts as a
hedge against either specific transactions or portfolio positions. Such
contracts are not reflected in the Fund's financial statements. However, the
net income or loss from such contracts is recorded from the date the contract
is entered into. Premiums or discounts are amortized over the life of the
contracts.
FEDERAL INCOME TAX - No provision is made for federal income taxes as it is
the Fund's intention to continue to qualify as a regulated investment company
and to make requisite distributions to the shareholders that will be
sufficient to relieve it from all or substantially all federal income and
excise taxes. The Fund's policy is to annually distribute to shareholders
substantially all of its taxable net investment income and net realized
capital gains.
OTHER - Security transactions are accounted for on the trade date and the
cost of investments sold or redeemed is determined by use of the specific
identification method for both financial reporting and income tax purposes.
Interest income is recorded on an accrual basis and includes, when
applicable, the pro rata amortization of premiums and accretion of discounts.
Dividend income is recorded on the ex-dividend date.
B. INVESTMENT ADVISORY FEES, TRANSACTIONS WITH
AFFILIATES AND OTHER FEES - Investment Company Capital Corp. ("ICC"), a
subsidiary of Alex. Brown & Sons Incorporated ("Alex. Brown"), serves as the
Fund's investment advisor and The Glenmede Trust Company ("Glenmede") is the
[LOGO]
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONCLUDED)
Fund's subadvisor. As compensation for its services, ICC receives from the
Fund a fee, calculated daily and paid monthly, equal to .75% of the Fund's
average daily net assets.
As compensation for its subadvisory services, Glenmede receives a fee from
ICC, calculated daily and paid monthly, equal to .55% of the Fund's average
daily net assets.
ICC and Glenmede have voluntarily agreed to waive a portion of their fees so
that the total operating expenses of the Fund do not exceed 1.50% of the
Fund's average daily net assets. For the year ended October 31, 1995, ICC and
Glenmede waived $68,946 and $19,020, respectively.
As compensation for its accounting services, ICC receives from the Fund an
annual fee, calculated daily and paid monthly from the Fund's average daily
net assets. ICC earned $15,370 for accounting services for the period April
10, 1995 through October 31, 1995.
As compensation for its transfer agent services, ICC receives from the Fund a
per account fee, calculated and paid monthly. ICC earned $17,002 for transfer
agent services for the year ended October 31, 1995.
As compensation for providing distribution services, Alex. Brown receives
from the Fund an annual fee, payable monthly, at the annual rate of .25% of
the Fund's average daily net assets. For the year ended October 31, 1995,
distribution fees were $32,947.
C. CAPITAL SHARE TRANSACTIONS - The Fund is authorized to issue up to 10
million shares of capital stock, par value $0.001 per share, all of which
shares are designated as common stock.
D. INVESTMENT TRANSACTIONS - Purchases and sales
of investment securities, other than short-term obligations, aggregated
$4,441,914 and $6,263,964, respectively, for the year ended October 31, 1995.
At October 31, 1995, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $1,617,567
and aggregated gross unrealized depreciation for all securities in which
there is an excess of tax cost over value was $372,039.
E. CAPITAL LOSS CARRYFORWARD - At October 31,
1995, there was a tax capital loss carryforward of approximately $4,988,000,
of which $2,049,000 expires in 1999, $2,350,000 in 2000 and $589,000 in 2001.
This carryforward will be used to offset future net capital gains, if any.
F. NET ASSETS - At October 31, 1995, net assets
consisted of:
<TABLE>
<S> <C>
Paid-in capital.................... $ 16,552,986
Undistributed net investment
income........................... 103,231
Accumulated net realized loss from
security and foreign exchange
transactions..................... (5,423,572)
Unrealized appreciation of
investments...................... 1,245,528
Unrealized translation gain........ 4,971
------------
$ 12,483,144
------------
------------
</TABLE>
[LOGO]
<PAGE>
[LOGO]
FLAG INVESTORS
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders,
Flag Investors International Fund, Inc.:
We have audited the accompanying statement of net assets of Flag Investors
International Fund, Inc. as of October 31, 1995, the related statements of
operations for the year then ended and changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1995 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Flag Investors
International Fund, Inc. as of October 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
December 6, 1995
[LOGO]
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement.
(a) Financial statements:
(1) Included in Part A of the Registration Statement:
- Financial Highlights for the fiscal years ended
October 31, 1995, October 31, 1994, October 31,
1993, October 31, 1992, October 31, 1991, October
31, 1990, October 31, 1989 and October 31, 1988
and for the period November 18, 1986 (commencement
of operations) through October 31, 1987
(2) Included in Part B of the Registration Statement:
- Statement of Net Assets as of October 31, 1995
- Statement of Operations for the fiscal year ended
October 31, 1995
- Statements of Changes in Net Assets for the fiscal
years ended October 31, 1995 and October 31, 1994
- Financial Highlights for the fiscal years ended
October 31, 1995, October 31, 1994, October 31,
1993, October 31, 1992, and October 31, 1991
- Notes to Financial Statements
- Independent Auditors' Report
(3) All required financial statements are included in
Parts A and B hereof. All other financial statements
and schedules are inapplicable.
(b) Exhibits:
Exhibit
Number Description
(1) (a) Articles of Incorporation of Registrant, filed
herewith.
(b) Registrant's Articles Supplementary, filed
herewith.
(c) Registrant's Articles Supplementary, filed
herewith.
(2) Registrant's By-laws, filed herewith.
C-1
<PAGE>
(3) None
(4)(1) Specimen Security with respect to Flag Investors
Shares.
(5) (a) Investment Advisory Agreement between Registrant
and Investment Company Capital Corp., filed
herewith.
(b) Sub-Advisory Agreement among Registrant,
Investment Company Capital Corp. and The
Glenmede Trust Company, filed herewith.
(6) (a) Distribution Agreement with respect to Flag
Investors International Fund Class A Shares
between Registrant and Alex. Brown & Sons
Incorporated, filed herewith.
(b) Form of Sub-Distribution Agreement between Alex.
Brown & Sons Incorporated and Participating
Dealers, filed herewith.
(c) Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents,
filed herewith.
(7) None.
(8) (a) Custody Agreement between Registrant and Boston
Safe Deposit and Trust Company, filed herewith.
(b) Form of Sub-Custody Agreement between Boston
Safe Deposit and Trust Company and
Sub-Custodians, filed herewith.
(9) Master Services Agreement between Registrant and
Investment Company Capital Corp., with Appendices
for the provision of Transfer Agency and
Accounting Services, filed herewith.
(10) Opinion of Counsel with respect to issuance of shares
of Flag Investors International Fund, Inc., filed
herewith.
(11) Consent of Deloitte & Touche LLP, filed herewith.
(12) None.
(13) Form of Subscription Agreement between Flag Investors
International Fund and Investors, filed herewith.
(14) None.
(15) Registrant's Distribution Plan with respect to Flag
Investors International Fund Class A Shares, filed
herewith.
(16) Schedule of Computation of Performance Quotations
(unaudited), filed herewith.
(18) Rule 18f-3 Plan, filed herewith.
(24) Powers of Attorney, filed herewith.
(27) Financial Data Schedule, filed herewith.
- --------
1 Incorporated by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-28479), filed with the Securities and Exchange Commission on February
24, 1994.
C-2
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities.
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders of
each class of securities of the Registrant.
The following information is given as of Janary 11, 1996:
Number of
Title of Class Record Holders
-------------- --------------
Common Stock Class A 745
Item 27. Indemnification.
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, included as Exhibit 1(b) to this Registration Statement and
incorporated herein by reference, provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of
the Corporation shall have any liability to the Corporation or
its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such
person is a director or officer at the time of any proceeding
in which liability is asserted.
C-3
<PAGE>
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to
the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents
in the By-Laws of the Corporation or by resolution or
agreement to the fullest extent permitted by the Maryland
General Corporation law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time
amended. No further amendment to the Charter of the
Corporation shall decrease, but may expand, any right of any
person under this Article VIII based on any event, omission or
proceeding prior to such amendment.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event of a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person in connection with the securities being registered) the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue. In the absence of a
determination by a court of competent jurisdiction, the determinations that
indemnification against such liabilities is proper, and advances can be made,
are made by a majority of a quorum of the disinterested, non-party directors of
the Fund, or an independent legal counsel in a written opinion, based on review
of readily available facts.
Item 28. Business and Other Connections of Investment Advisor.
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
(a) Investment Advisor
During the last two fiscal years, no director or officer of Investment
Company Capital Corp., the Fund's Investment Advisor, has engaged in any other
business, profession, vocation or employment of a substantial nature other than
that of the business of investment management and, through affiliates,
investment banking.
C-4
<PAGE>
(b) Sub-Advisor
Set forth below are the names and business connections of the directors
and principal executive officers of The Glenmede Trust Company who are engaged
in any other business, profession, vocation, or employment of a substantial
nature.
<TABLE>
<CAPTION>
Name and Position with Glenmede Business Connections
- ------------------------------- --------------------
<S> <C>
Susan W. Catherwood - Director Director, The Glenmede Corporation; Board
Member, Philadelphia Electric Company.
Thomas W. Langfitt, M.D. - Director, Chairman, Chairman and Chief Executive Officer, The
Chief Executive Officer Glenmede Corporation; Board Member, New York
Life Insurance Company, SmithKline Beecham
Corporation and Sun Company, Inc.
Robert E. McDonald - Director Director, The Glenmede Corporation.
G. Thompson Pew, Jr. - Director Principal, Philadelphia Investment Banking Company.
J. Howard Pew II - Director Director, The Glenmede Corporation.
J.N. Pew III - Director Director, The Glenmede Corporation.
J.N. Pew IV, M.D. - Director Internal Medicine, Private Practice; Director, The
Glenmede Corporation.
R. Anderson Pew - Director Chief Executive Officer, Radnor Corporation; Director,
The Glenmede Corporation.
Richard F. Pew - Director Businessman/Rancher; Director, The Glenmede Corp.
Ethel Benson Wister - Director Director, The Glenmede Corporation
Rebecca W. Rimel - Director, President Executive Vice President, The Glenmede Corporation
and CEO, The Pew Charitable Trusts
(Division of Glenmede)
James L. Kermes - Director, President
and CEO
A.E. Piscopo - Executive Vice President, Chief Executive Vice President, The Glenmede
Operating Officer Corporation.
Kathleen Crenny - Vice President and Controller Vice President and Controller, The Glenmede Corporation.
Mary V. Burke - Secretary Secretary, The Glenmede Corporation.
Katherine E. Koch - Treasurer Treasurer, The Glenmede Corporation.
</TABLE>
C-5
<PAGE>
Item 29. Principal Underwriters.
(a) Alex. Brown & Sons Incorporated acts as distributor for the Alex.
Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Emerging Growth Fund, Inc., the Flag Investors Shares class of Total
Return U.S. Treasury Fund, Inc., the Flag Investors Shares class of Managed
Municipal Fund, Inc., Flag Investors Intermediate-Term Income Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag Investors Maryland Intermediate Tax
Free Income Fund, Inc., Flag Investors Real Estate Securities Fund, Inc. and
Flag Investors Equity Partners Fund, Inc., all registered open-end management
investment companies.
<TABLE>
<CAPTION>
(b)
Name and Principal Position and Officers with Position and Offices
Business Address* Principal Underwriters with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Alvin B. Krongard Chief Executive Officer, Director None
Benjamin Howell Chairman, Director None
Griswold, IV
Mayo A. Shattuck III President, Director None
Robert E. Price Secretary and General Counsel None
Beverly L. Wright Chief Financial Officer and None
Treasurer
</TABLE>
- ------------
* 135 East Baltimore Street, Baltimore, Maryland 21202
(c) Not Applicable.
Item 30. Location of Accounts and Records.
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the Rules
[17 CFR 270.31a-1 to 31a-3] promulgated thereunder, furnish the name and address
of each person maintaining physical possession of each such account, book or
other document.
Investment Company Capital Corp., the Registrant's investment advisor,
transfer and dividend disbursing agent and accounting services provider, 135
East Baltimore Street, Baltimore, Maryland 21202, will maintain physical
possession of each such account, book or other document of Registrant except for
the records maintained by The Glenmede Trust Company, One Liberty Place, 1650
Market Street, Philadelphia, Pennsylvania, 19103 relating to its functions as
the Registrant's sub-advisor, the records maintained by Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202 relating to
its functions as the Registrant's distributor, the records maintained by Boston
Safe Deposit and Trust Company, One Boston Place, Boston, Massachusetts 02108
relating to its functions as the Registrant's custodian.
C-6
<PAGE>
Item 31. Management Services.
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
None.
Item 32. Undertakings.
Furnish the following undertakings in substantially the following form
in all initial Registration Statements filed under the 1933 Act:
(a) Not Applicable.
(b) Not Applicable.
(c) A copy of the Registrant's latest Annual Report to Shareholders is
available upon request, without charge by contacting Registrant at
(800) 767-3524.
C-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 16
to the Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this amendment to the Registration Statement
to be signed on its behalf by the undersigned thereto duly authorized in the
City of Baltimore, in the State of Maryland, on the 26th day of February 1996.
FLAG INVESTORS INTERNATIONAL
FUND, IND.
By: /s/ John W. Church, Jr.
--------------------------
John W. Church, Jr.,
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities on the date(s) indicated:
*/s/ Truman T. Semans Director February 26, 1996
- ---------------------------- --------------------
Truman T. Semans Date
*/s/ Richard T. Hale Director February 26, 1996
- ---------------------------- --------------------
Richard T. Hale Date
*/s/ James J. Cunnane Director February 26, 1996
- ---------------------------- --------------------
James J. Cunnane Date
*/s/ John F. Kroeger Director February 26, 1996
- ---------------------------- --------------------
John F. Kroeger Date
*/s/ Louis E. Levy Director February 26, 1996
- ---------------------------- --------------------
Louis E. Levy Date
*/s/ Eugene J. McDonald Director February 26, 1996
- ---------------------------- --------------------
Eugene J. McDonald Date
/s/ Carl W. Vogt Director February 26, 1996
- ---------------------------- --------------------
Carl W. Vogt Date
*/s/ Harry Woolf Director February 26, 1996
- ---------------------------- --------------------
Harry Woolf Date
/s/ John W. Church, Jr. President February 26, 1996
- ---------------------------- --------------------
John W. Church, Jr. Date
/s/ Joseph A. Finelli Chief Financial February 26, 1996
- ---------------------------- and Accounting --------------------
Joseph A. Finelli Officer Date
*By: /s/ Brian C. Nelson
------------------------
Brian C. Nelson
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
EDGAR
Exhibit
Number Description
- ------- -----------
EX-99.B (1) (a) Registrant's Articles of Incorporation, filed herewith.
EX-99.B (1) (b) Registrant's Articles Supplementary, filed herewith.
EX-99.B (1) (c) Registrant's Articles Supplementary, filed herewith.
EX-99.B (2) Registrant's By-Laws, filed herewith.
(3) None.
(4) Specimen Security with respect to Flag Investors Shares is
hereby incorporated by reference to Post-Effective Amendment
No. 13 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-28479), filed with the Securities and
Exchange Commission on February 24, 1994.
EX-99.B (5) (a) Investment Advisory Agreement between Registrant and
Investment Company Capital Corp., filed herewith.
EX-99.B (5) (b) Sub-Advisory Agreement among Registrant, Investment
Company Capital Corp. and The Glenmede Trust Company,
filed herewith.
EX-99.B (6) (a) Distribution Agreement with respect to Flag
Investors International Fund Class A Shares between
Registrant and Alex. Brown & Sons Incorporated,
filed herewith.
EX-99.B (6) (b) Form of Sub-Distribution Agreement between Alex.
Brown & Sons Incorporated and Participating Dealers,
filed herewith.
EX-99.B (6) (c) Shareholder Servicing Agreement between Registrant
and Shareholder Servicing Agents, filed herewith.
(7) None.
EX-99.B (8) (a) Custody Agreement between Registrant and Boston Safe
Deposit and Trust Company, filed herewith.
EX-99.B (8) (b) Form of Sub-Custody Agreement between Boston Safe
Deposit and Trust Company and Sub-Custodians, filed
herewith.
<PAGE>
EDGAR
Exhibit
Number Description
- ------- -----------
EX-99.B (9) Master Services Agreement between Registrant and Investment
Company Capital Corp. with Appendices for the provision of
Transfer Agency and Accounting Services, filed herewith.
EX-99.B (10) Opinion of Counsel, filed herewith.
EX-99.B (11) Consent of Deloitte & Touche LLP, filed herewith.
(12) None.
EX-99.B (13) Form of Subscription Agreement between Registrant Fund and
Investors, filed herewith.
(14) None.
EX-99.B (15) Registrant's Distribution Plan with respect to Flag
Investors International Fund Class A Shares, filed herewith.
EX-99.B (16) Schedule of Computation of Performance Quotations
(unaudited), filed herewith.
EX-99.B (18) Rule 18f-3 Plan, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith.
EX-27 Financial Data Schedule, filed herewith.
<PAGE>
EX-99.B(1)(a)
ARTICLES OF INCORPORATION
OF
FLAG INVESTORS INTERNATIONAL FUND, INC.
ARTICLE I
THE UNDERSIGNED, Edward J. Veilleux, whose post office address
is 135 East Baltimore Street, Baltimore, Maryland 21202, being at least eighteen
years of age, does hereby act as an incorporator, under and by virtue of the
General Laws of the State of Maryland authorizing the formation of corporations
and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is Flag Investors International
Fund, Inc.
ARTICLE III
The purpose for which the Corporation is formed is to act as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act").
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and
other investments including assets in cash.
(2) To issue and sell shares of its capital stock in such
amounts and on such terms and conditions and for such purposes and for such
amount or kind of consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose
of, resell, transfer, reissue or cancel (all without the vote or consent of the
shareholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by law and by the Charter of the
Corporation.
(4) To enter into a written contract or contracts with any
person or persons providing for a delegation of the management of all or part of
this Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors of the Corporation. Any such contract or
contracts may be made with any person even though such person may be an officer,
<PAGE>
other employee, director or shareholder of this Corporation or a corporation,
partnership, trust or association in which any such officer, other employee,
director or shareholder may be interested.
(5) To enter into a written contract or contracts appointing
one or more underwriters, distributors or agents for the sale of the shares of
the Corporation on such terms and conditions as the Board of Directors of the
Corporation may deem reasonable and proper, and to allow such person or persons
a commission on the sale of such shares. Any such contract or contracts may be
made with any person even though such person may be an officer, other employee,
director or shareholder of this Corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
shareholder may be interested.
(6) To enter into a written contract or contracts employing
such custodian or custodians for the safekeeping of the property of the
Corporation and of its shares, such dividend disbursing agent or agents, and
such transfer agent or agents and registrar or registrars for its shares, and
such agent or agents for accounting and other administrative services on such
terms and conditions as the Board of Directors of the Corporation may deem
reasonable and proper for the conduct of the affairs of the Corporation, and to
pay the fees and disbursements of such custodians, dividend disbursing agents,
transfer agents, registrars and accounting and administrative services agents
out of the income and/or any other property of the Corporation. Notwithstanding
any other provisions of the Charter or the By-Laws of the Corporation, the Board
of Directors of the Corporation may cause any or all of the property of the
Corporation to be transferred to, or to be acquired and held in the name of, a
custodian so appointed or any nominee or nominees of this Corporation or nominee
or nominees of such custodian satisfactory to the Board of Directors of the
Corporation.
(7) To employ the same person, partnership (general or
limited), association, trust or corporation in any multiple capacity under
Sections (4), (5) and (6) of this Article, who may receive compensation from the
Corporation in as many capacities in which such person, partnership (general or
limited), association, trust or corporation shall serve the Corporation.
(8) To do any and all such further acts or things and to
exercise any and all such further powers or rights as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of the purposes stated in Article III
hereof.
The Corporation shall be authorized to exercise and enjoy all
of the powers, rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the
Corporation in the State of Maryland is c/o Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland 21202. The name of the resident agent
of the Corporation in this State is Edward J. Veilleux, a citizen of this State,
who resides there, and the post office address of the resident agent is 135 East
Baltimore Street, Baltimore, Maryland 21202.
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ARTICLE VI
Section 1. The total number of shares of capital stock which
the Corporation shall have the authority to issue is ten million shares, of the
par value of 1 mil ($.001) per share and of the aggregate par value of ten
thousand dollars ($10,000), all of which shares are designated Common Stock.
Unless otherwise prohibited by law, so long as the Corporation is registered as
an open-end investment company under the 1940 Act, the Board of Directors of the
Corporation shall have the power and authority, without the approval of the
holders of any outstanding shares, to increase or decrease the number of shares
of capital stock, or the number of shares of capital stock of any class or
series, that the Corporation has authority to issue.
Section 2. Any fractional share shall carry proportionately
all the rights of a whole share, excepting any right to receive a certificate
evidencing such fractional share, but including, without limitation, the right
to vote and the right to receive dividends.
Section 3. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the Charter and
the By-Laws of the Corporation. All shares issued pursuant to the Charter of the
Corporation for which the price or consideration fixed thereon shall have been
paid shall be deemed to be fully paid and non-assessable.
Section 4. The Board of Directors of the Corporation shall
have authority to classify and reclassify any authorized but unissued shares of
capital stock from time to time by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of the capital stock; provided that the Board of Directors of the
Corporation shall not classify or reclassify any of such shares into any class
or series of stock which is prior to any class or series of capital stock then
outstanding with respect to rights upon the liquidation, dissolution or winding
up of the affairs of, or upon any distribution of the general assets of, the
Corporation, except that there may be variations so fixed and determined among
different series and classes as to investment objectives, purchase price, right
of redemption, special rights as to dividends, and in liquidation, with respect
to assets belonging to a particular series or class, voting powers and
conversion rights. Subject to the provisions of Section 7 of this Article VI and
applicable law, the power of the Board of Directors of the Corporation to
classify or reclassify any of the shares of capital stock shall include, without
limitation, authority to classify or reclassify any such stock into a class or
classes of capital stock and to divide and classify shares of any class into one
or more series of such class, by determining, fixing or altering one or more of
the following:
(A) The distinctive designation of such class or
series and the number of shares to constitute such class or series;
provided that, unless otherwise prohibited by the terms of such class
or series, the number of shares of any class or series may be decreased
by the Board of Directors of the Corporation in connection with any
classification or reclassification of unissued shares and the number of
shares of such class or series may be increased by the Board of
Directors of the Corporation in connection with any such classification
or reclassification, and any shares of any class or series which have
been redeemed, purchased or otherwise acquired by the Corporation shall
remain part of the authorized capital stock and be subject to
classification and reclassification as provided herein.
(B) Whether or not and, if so, the rates, amounts and
times at which, and the conditions under which, dividends shall be
payable on shares of such class or series.
(C) Whether or not shares of such class or series
shall have voting rights in addition to any general voting rights
provided by law and the Charter of the Corporation and, if so, the
terms of such additional voting rights.
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(D) The rights of the holders of shares of such class
or series upon the liquidation, dissolution or winding up of the
affairs, or upon any distribution of the assets, of the Corporation.
(E) Any other rights, restrictions, including
restrictions on transferability, and qualifications of shares of such
class or series, not inconsistent with law and the Charter of the
Corporation.
Section 5. The Board of Directors of the Corporation shall
have authority to issue from time to time shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors of the
Corporation may deem advisable, subject to such limitations as may be set forth
in the Charter or the By-Laws of the Corporation or in the Maryland General
Corporation Law.
Section 6. No holder of stock of the Corporation shall, as
such holder, have any preemptive right to purchase or subscribe for any shares
of the capital stock of the Corporation or any other security of the Corporation
which it may issue or sell (whether out of the number of shares authorized by
the Charter of the Corporation, or out of any shares of the capital stock of the
Corporation acquired by it after the issue thereof, or otherwise) other than
such right, if any, as the Board of Directors of the Corporation, in its
discretion, may determine.
Section 7. Shares of Common Stock of the Corporation shall
have the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(A) Assets Belonging to a Class. All consideration
received by the Corporation for the issue or sale of stock of any class
of Common Stock, together with all assets in which such consideration
is invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class of shares of Common Stock with respect
to which such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights of creditors,
and shall be so handled upon the books of account of the Corporation.
Such consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of
such proceeds in whatever form, are herein referred to as "assets
belonging to" such class. Any assets, income, earnings, profits, and
proceeds thereof, funds or payments which are not readily attributable
to any particular class shall be allocable among any one or more of the
classes in such manner and on such basis as the Board of Directors of
the Corporation, in its sole discretion, shall deem fair and equitable.
(B) Liabilities Belonging to a Class. The assets
belonging to any class of Common Stock shall be charged with the
liabilities in respect of such class, and shall also be charged with
such class's share of the general liabilities of the Corporation
determined as hereinafter provided. The determination of the Board of
Directors of the Corporation shall be conclusive as to the amount of
such liabilities, including the amount of accrued expenses and
reserves; as to any allocation of the same to a given class; and as to
whether the same are allocable to one or more classes. The liabilities
so allocated to a class are herein referred to as "liabilities
belonging to" such class. Any liabilities which are not readily
attributable to any particular class shall be allocable among any one
or more of the classes in such manner and on such basis as the Board
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of Directors of the Corporation, in its sole discretion, shall deem
fair and equitable.
(C) Dividends and Distributions. Shares of each class
of Common Stock shall be entitled to such dividends and distributions,
in stock or in cash or both, as may be declared from time to time by
the Board of Directors of the Corporation, acting in its sole
discretion, with respect to such class, provided, however, that
dividends and distributions on shares of a class of Common Stock shall
be paid only out of the lawfully available "assets belonging to such
class" as such phrase is defined in Section 7(A) of this Article VI.
(D) Liquidating Dividends and Distributions. In the
event of the liquidation or dissolution of the Corporation,
shareholders of each class of Common Stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to shareholders, but other than general assets not
belonging to any particular class of stock, the assets belonging to
such class; and the assets so distributable to the shareholders of any
class of Common Stock shall be distributed among such shareholders in
proportion to the number of shares of such class held by them and
recorded on the books of the Corporation. In the event that there are
any general assets not belonging to any particular class of stock and
available for distribution, such distribution shall be made to the
holders of stock of all classes of Common Stock in proportion to the
asset value of the respective classes of Common Stock determined as
hereinafter provided.
(E) Voting. Each shareholder of each class of Common
Stock shall be entitled to one vote for each share of Common Stock,
irrespective of the class, then standing in his name on the books of
the Corporation, and on any matter submitted to a vote of shareholders,
all shares of Common Stock then issued and outstanding and entitled to
vote shall be voted in the aggregate and not by class except that: (i)
when expressly required by law, shares of Common Stock shall be voted
by individual class and (ii) only shares of Common Stock of the
respective class or classes affected by a matter shall be entitled to
vote on such matter. At all meetings of the shareholders, the holders
of one-third of the shares of stock of the Corporation entitled to vote
at the meeting, present in person or by proxy, shall constitute a
quorum for the transaction of any business, except as otherwise
provided by statute or by the Charter of the Corporation. In the
absence of a quorum, no business may be transacted, except that the
holders of a majority of the shares of stock present in person or by
proxy and entitled to vote may adjourn the meeting from time to time,
without notice other than announcement at the meeting, except as
otherwise required by the By-Laws of the Corporation, until the holders
of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present, any business
may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting, in person or by proxy,
of holders of the number of shares of stock of the Corporation in
excess of a majority thereof which may be required by the laws of the
State of Maryland, the 1940 Act, or any other applicable statute, the
Charter or the By-Laws of the Corporation, for action upon any given
matter shall not prevent action at such meeting upon any other matter
or matters which may properly come before the meeting, if there shall
be present at the meeting, in person or by proxy, holders of the number
of shares of stock of the Corporation required for action in respect of
such other matter or matters.
(F) Redemption. To the extent the Corporation has
funds or other property legally available therefor, each holder of
shares of Common Stock of the Corporation shall be entitled to require
the Corporation to redeem all or any part of the shares of Common Stock
of the Corporation standing in the name of such holder on the books of
the Corporation, and all shares of Common Stock issued by the
Corporation shall be subject to redemption by the Corporation, at the
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redemption price of such shares as in effect from time to time as may
be determined by the Board of Directors of the Corporation in
accordance with the provisions hereof, subject to the right of the
Board of Directors of the Corporation to suspend the right of
redemption of shares of Common Stock of the Corporation or postpone the
date of payment of such redemption price in accordance with provisions
of applicable law. Without limiting the generality of the foregoing,
the Corporation shall, to the extent permitted by applicable law, have
the right at any time to redeem the shares owned by any holder of
Common Stock of the Corporation (i) if such redemption is, in the
opinion of the Board of Directors of the Corporation, desirable in
order to prevent the Corporation from being deemed a "personal holding
company" within the meaning of the Internal Revenue Code, as now or
hereafter in force, (ii) if the value of such shares in the account
maintained by the Corporation or its transfer agent for any class of
Common Stock is less than Five Hundred Dollars ($500.00) provided,
however, that each shareholder shall be notified that the value of his
account is less than Five Hundred Dollars ($500.00) and allowed sixty
(60) days to make additional purchases of shares before such redemption
is processed by the Corporation or (iii) if the net income with respect
to any particular class of Common Stock should be negative or it should
otherwise be appropriate to carry out the Corporation's
responsibilities under the 1940 Act, in each case subject to such
further terms and conditions as the Board of Directors of the
Corporation may from time to time adopt. The redemption price of shares
of Common Stock of the Corporation shall, except as otherwise provided
in this Section 7(F), be the net asset value thereof as determined by
the Board of Directors of the Corporation from time to time in
accordance with the provisions of applicable law, less such redemption
fee or other charge, if any, as may be fixed by resolution of the Board
of Directors of the Corporation. Payment of the redemption price shall
be made in cash by the Corporation at such time and in such manner as
may be determined from time to time by the Board of Directors of the
Corporation unless, in the opinion of the Board of Directors of the
Corporation, which shall be conclusive, conditions exist which make
payment wholly in cash unwise or undesirable; in such event the
Corporation may make payment wholly or partly by securities or other
property included in the assets belonging or allocable to the class of
the shares redemption of which is being sought, the value of which
shall be determined as provided herein.
(G) Conversion or Exchange. Each holder of any class
of Common Stock of the Corporation, who either surrenders his share
certificate in good delivery form to the Corporation or, if the shares
in question are not represented by certificates, delivers to the
Corporation a written request in good order signed by the shareholder,
shall, subject to such procedures as may be established by the Board of
Directors of the Corporation, be entitled to convert or exchange the
shares in question on the basis hereinafter set forth, into shares of
stock of any other class of the Corporation. The Corporation shall
determine the net asset value, as provided herein, of the shares to be
converted and may deduct therefrom a conversion or exchange cost, in an
amount determined within the discretion of the Board of Directors of
the Corporation. Within five (5) business days after such surrender and
payment of any conversion or exchange cost, the Corporation shall issue
to the shareholder such number of shares of stock of the class desired
as, taken at the net asset value thereof determined as provided herein
in the same manner and at the same time as that of the shares
surrendered, shall equal the net asset value of the shares surrendered,
less any conversion or exchange cost as aforesaid. Any amount
representing a fraction of a share may be paid in cash at the option of
the Corporation. Any conversion or exchange cost may be paid and/or
assigned by the Corporation to the underwriter and/or to any other
entity, as it may elect.
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(H) Restrictions on Transferability. If, in the
opinion of the Board of Directors of the Corporation, concentration in
the ownership of shares of Common Stock might cause the Corporation to
be deemed a personal holding company within the meaning of the Internal
Revenue Code, as now or hereafter in force, the Corporation may at any
time and from time to time refuse to give effect on the books of the
Corporation to any transfer or transfers of any share or shares of
Common Stock in an effort to prevent such personal holding company
status.
ARTICLE VII
The number of directors of the Corporation shall be eight (8),
which number may be increased or decreased pursuant to the By-Laws of the
Corporation but shall never be less than three (3) except for any period during
which shares of the Corporation are held by less than three shareholders. The
name of the director who shall act until the directors are elected by the
Corporation's shareholders or until his successor is duly elected and qualify
is:
Edward J. Veilleux
ARTICLE VIII
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall have any
liability to the Corporation or its shareholders for damages. This limitation on
liability applies to events occurring at the time a person serves as a director
or officer of the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses to its
officers to the same extent as to its directors and to such further extent as is
consistent with law. The Board of Directors of the Corporation may make further
provision for indemnification of directors, officers, employees and agents in
the By-Laws of the Corporation or by resolution or agreement to the fullest
extent permitted by the Maryland General Corporation Law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time amended. No further
amendment to the Charter of the Corporation shall decrease, but may expand, any
right of any person under this Article VIII based on any event, omission or
proceeding prior to such amendment.
ARTICLE IX
Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practices by or
pursuant to the direction of the Board of Directors of the Corporation, as to
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the amount of assets, obligations or liabilities of the Corporation, as to the
amount of net income of the Corporation from dividends and interest for any
period or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation or as to
any other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or shares of capital stock of the
Corporation, and any reasonable determination made in good faith by the Board of
Directors of the Corporation as to whether any transaction constitutes a
purchase of securities on "margin", a sale of securities "short", or an
underwriting of the sale of, or a participation in any underwriting or selling
group in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all holders
of its capital stock, past, present and future, and shares of the capital stock
of the Corporation are issued and sold on the condition and understanding,
evidenced by the purchase of shares of capital stock or acceptance of share
certificates, that any and all such determinations shall be binding as
aforesaid. No provision of the Charter of the Corporation shall be effective (i)
to require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or (ii) to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE X
The duration of this Corporation shall be perpetual.
ARTICLE XI
Section 1. The Corporation reserves the right from time to
time to make any amendments to its Charter which may now or hereafter be
authorized by law, including any amendments changing the terms or contract
rights, as expressly set forth in its Charter, of any of its outstanding stock
by classification, reclassification or otherwise, but no such amendment which
changes such terms or contract rights of any of its outstanding stock shall be
valid unless such amendment shall have been authorized by not less than a
majority of the aggregate number of the votes entitled to be cast thereon by a
vote at a meeting or by the unanimous written consent of the Directors of the
Corporation as provided in the Corporation's By-Laws.
Section 2. Notwithstanding any provision of the General Laws
of the State of Maryland requiring any action to be taken or authorized by the
affirmative vote of a greater proportion than the majority of the total number
of shares of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding of that class of
stock entitled to vote thereon, except as otherwise provided in the Charter of
the Corporation.
Section 3. So long as permitted by Maryland law, the books of
the Corporation may be kept outside of the State of Maryland at such place or
places as may be designated from time to time by the Board of Directors of the
Corporation or in the By-Laws of the Corporation.
Section 4. In furtherance, and not in limitation, of the
powers conferred by the laws of the State of Maryland, the Board of Directors of
the Corporation is expressly authorized:
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(A) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by the By-Laws of the
Corporation to the shareholders, and except as otherwise required by
the 1940 Act.
(B) From time to time to determine whether and to
what extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
shareholders, and no shareholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by
law or authorized by resolution of the Board of Directors or of the
shareholders of the Corporation.
(C) Without the assent or vote of the shareholders,
to authorize the issuance from time to time of shares of the stock of
any class of the Corporation, whether now or hereafter authorized, for
such consideration as the Board of Directors of the Corporation may
deem advisable.
(D) Without the assent or vote of the shareholders,
to authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the property of the
Corporation, real and personal.
(E) Notwithstanding anything in the Charter of the
Corporation to the contrary, to establish in its absolute discretion
the basis or method for determining the value of the assets belonging
to any class, and the net asset value of each share of any class of the
Corporation for purposes of sales, redemptions, repurchases of shares
or otherwise.
(F) To determine in accordance with generally
accepted accounting principles and practices what constitutes net
profits, earnings, surplus or net assets in excess of capital, and to
determine what accounting periods shall be used by the Corporation for
any purpose, whether annual or any other period, including daily; (i)
to set apart out of any funds of the Corporation such reserves for such
purposes as it shall determine and to abolish the same; (ii) to declare
and pay any dividends and distributions in cash, securities or other
property from surplus or any funds legally available therefor, at such
intervals (which may be as frequently as daily) or on such other
periodic basis, as it shall determine; (iii) to declare such dividends
or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of
the effectiveness of such declarations; (iv) to establish payment dates
for dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations
thereof; and (v) to provide for the payment of declared dividends on a
date earlier or later than the specified payment date in the case of
shareholders of the Corporation redeeming their entire ownership of
shares of any class of the Corporation.
(G) In addition to the powers and authorities granted
herein and by statute expressly conferred upon it, the Board of
Directors of the Corporation is authorized to exercise all such powers
and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of Maryland law,
the Charter and the By-Laws of the Corporation.
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IN WITNESS WHEREOF, the undersigned incorporator of Flag
Investors International Fund, Inc. has signed these Articles of Incorporation on
this 15th day of March, 1993.
/s/ Edward J. Veilleux
----------------------
Edward J. Veilleux
Incorporator
WITNESS:
/s/ Brian C. Nelson
- -------------------
Name:
THE UNDERSIGNED incorporator of Flag Investors International
Fund, Inc. who executed the foregoing Articles of Incorporation of which this
Certificate is made a part hereby acknowledges the same to be his act and
further acknowledges that, to the best of his knowledge, the matters and facts
set forth therein are true in all material respects under the penalties of
perjury.
/s/ Edward J. Veilleux
----------------------
Edward J. Veilleux
Incorporator
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<PAGE>
EX-99.B(1)(b)
FLAG INVESTORS INTERNATIONAL FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS INTERNATIONAL FUND, INC. (the "Corporation")
having its principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law has adopted a
resolution classifying and designating the Corporation's previously
unclassified ten million (10,000,000) shares of Common Stock, par value
$.001 per share, having an aggregate value of $10,000.00, as follows:
eight million (8,000,000) shares are designated "Flag Investors
International Fund Class A Shares" (the "Class A Shares"), and two
million (2,000,000) shares remain undesignated.
SECOND: Immediately before the designation and classification
of the Class A Shares pursuant to these Articles Supplementary, the
Corporation was authorized to issue ten million (10,000,000) shares of
Common Stock, par value $.001 per share, having an aggregate par value
of $10,000.00, of which ten million (10,000,000) shares were designated
Common Stock in the Corporation's Articles of Incorporation, but which,
out of authorized but unissued shares, had been designated Flag
Investors International Fund Shares and renamed Flag Investors
International Fund Class A Shares by the Corporation's Board of
Directors as authorized in the Corporation's Articles of Incorporation.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as
amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors International Fund, Inc.
has caused these Articles Supplementary to be executed by one of its
Vice-Presidents and its corporate seal to be affixed and attested by its
Secretary on this 15th day of December 1993.
[CORPORATE SEAL]
FLAG INVESTORS INTERNATIONAL FUND, INC.
By: /s/ Edward J. Veilleux
-----------------------------------
Vice-President
Attest: /s/ Brian C. Nelson
--------------------------
Secretary
The undersigned, Vice President of FLAG INVESTORS
INTERNATIONAL FUND, INC., who executed on behalf of said corporation the
foregoing Articles Supplementary to the Articles of Incorporation of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles Supplementary to the Articles of
Incorporation to be the corporate act of said corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Edward J. Veilleux
-------------------------------
Edward J. Veilleux
<PAGE>
EX-99.B(1)(c)
FLAG INVESTORS INTERNATIONAL FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS INTERNATIONAL FUND, INC. (the "Corporation")
having its principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law has adopted a
resolution designating the Corporation's classified ten million (10,000,000)
shares of Common Stock, par value $.001 per share, having an aggregate value of
$10,000.00, as follows: eight million (8,000,000) shares are designated "Flag
Investors International Fund Class A Shares" (the "Class A Shares"), one million
(1,000,000) shares are designated "Flag Investors International Fund Class B
Shares" (the "Class B Shares"), and one million (1,000,000) shares remain
undesignated.
SECOND: Immediately before the designation of the Class B
Shares pursuant to these Articles Supplementary, the Corporation was authorized
to issue ten million (10,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of $10,000.00, of which eight million
(8,000,000) shares were designated "Flag Investors International Fund Class A
Shares" (the "Class A Shares") and two million (2,000,000) shares remained
undesignated.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors International Fund, Inc.
has caused these Articles Supplementary to be executed by one of its Vice
Presidents and its corporate seal to be affixed and attested by its Secretary on
this 31st day of December, 1994.
[CORPORATE SEAL]
FLAG INVESTORS INTERNATIONAL FUND, INC.
By: /s/ Edward J. Veilleux
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Vice President
Attest: /s/ Brian C. Nelson
-----------------------
Secretary
The undersigned, Vice President of FLAG INVESTORS
INTERNATIONAL FUND, INC., who executed on behalf of said corporation the
foregoing Articles Supplementary to the Articles of Incorporation of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles Supplementary to the Articles of
Incorporation to be the corporate act of said corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Edward J. Veilleux
---------------------------------------
Edward J. Veilleux
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EX-99.B(2)
BY-LAWS
OF
FLAG INVESTORS INTERNATIONAL FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of
the Corporation shall be in the city of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal
executive office of the Corporation shall be in the City of Baltimore,
State of Maryland.
Section 3. Other Offices. The Corporation may have
such other offices in such places as the Board of Directors may
from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meetings. An annual meeting of the
shareholders of the Corporation shall not be required to be held in any year in
which shareholders are not required to elect directors under the Investment
Company Act of 1940, as amended (the "1940 Act") even if the Corporation is
holding a meeting of the shareholders for a purpose other than the election of
directors. If the Corporation is required by the 1940 Act to hold a meeting to
elect directors, the meeting shall be designated as the Annual Meeting of
shareholders for that year and shall be held within 120 days after the
occurrence of an event requiring the election of directors. The Board of
Directors may, in its discretion, hold a meeting to be designated as the Annual
Meeting of shareholders on a date within the month of March, in any year where
an election of directors by shareholders is not required under the 1940 Act. The
date of an Annual Meeting shall be set by appropriate resolution of the Board of
Directors, and shareholders shall vote on the election of directors and transact
any other business as may properly be brought before the Annual Meeting.
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Section 2. Special Meetings. Special meetings of the
shareholders, unless otherwise provided by law or by the Charter of the
Corporation, may be called for any purpose or purposes by a majority of the
Board of Directors or the President, and shall be called by the President or
Secretary on the written request of the shareholders as provided by the Maryland
General Corporation Law. Such request shall state the purpose or purposes of the
proposed meeting and the matters proposed to be acted on at it; provided,
however, that unless requested by shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the shareholders held during the preceding twelve
(12) months.
Section 3. Place of Meetings. The regular meeting, if any, and
any special meeting of the shareholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice; Shareholder
List. (a) Notice of the place, date and time of the holding of each regular and
special meeting of the shareholders and the purpose or purposes of the meeting
shall be given personally or by mail, not less then ten nor more than ninety
days before the date of such meeting, to each shareholder entitled to vote at
such meeting and to each other shareholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid. The notice of every
meeting of shareholders may be accompanied by a form of proxy approved by the
Board of Directors in favor of such actions or persons as the Board of Directors
may select.
(b) Notice of any meeting of shareholders shall
be deemed waived by any shareholder who shall attend such meeting in person or
by proxy, or who shall, either before or after the meeting, submit a signed
waiver of notice which is filed with the records of the meeting. A meeting of
shareholders convened on the date for which it was called may be adjourned from
time to time without further notice to a date not more than 120 days after the
original record date.
(c) At least five (5) days prior to each meeting
of shareholders, the officer or agent having charge of the share transfer books
of the Corporation shall make a complete list of shareholders entitled to vote
at such meeting, in alphabetical order with the address of and the number of
shares held by each shareholder.
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Section 5. Organization. At each meeting of the shareholders,
the Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the shareholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
Section 6. Voting. (a) Except as otherwise provided by statute
or the Charter of the Corporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any
meeting of shareholders may authorize another person or persons to act for him
by a proxy signed by such shareholder or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is permitted by law.
Except as otherwise provided by statute, the Charter or the Corporation or these
By-Laws, any corporate action to be taken by vote of the shareholders shall be
authorized by a majority of the total votes cast at a meeting of shareholders at
which a quorum is present by the holders of shares present in person or
represented by proxy and entitled to vote on such action, except that a
plurality of all the votes cast at a meeting at which a quorum is present is
sufficient to elect a director.
(c) If a vote shall be taken on any question
other than the election of directors, which shall be by written ballot, then
unless required by statute or these By-Laws, or determined by the chairman of
the meeting to be advisable, any such vote need not be by ballot. On a vote by
ballot, each ballot shall be signed by the shareholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
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Section 7. Inspectors. The Board may, in advance of any
meeting of shareholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any shareholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except
as otherwise provided by statute any action required to be taken at any regular
or special meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of shareholders' meetings: (i) a unanimous written consent which sets
forth the action and is signed by each shareholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the
Charter of the Corporation, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the shareholders by law or by the Charter
of the Corporation or these By-Laws.
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Section 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number of
directors shall in no event be less than three (except for any period during
which shares of the corporation are held by fewer than three shareholders) nor
more than fifteen. Any vacancy created by an increase in directors may be filled
in accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be shareholders.
Section 3. Election and Term of Directors. Directors shall be
elected by majority vote of a quorum cast by written ballot at the regular
meeting of shareholders, if any, or at a special meeting held for that purpose.
The term of office of each director shall be from the time of his election and
qualification and until his successor shall have been elected and shall have
qualified, or until his death, or until he shall have resigned, or have been
removed as hereinafter provided in these By-Laws, or as otherwise provided by
statute or the Charter of the Corporation.
Section 4. Resignation. A Director of the Corporation may
resign at any time by giving written notice of his resignation to the Board or
the Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the
Corporation may be removed by the shareholders by a vote of a majority of the
votes entitled to be cast for the election of directors.
Section 6. Vacancies. The shareholders may elect a successor
to fill a vacancy on the Board of Directors which results from the removal of a
Director. A majority of the remaining Directors, whether or not sufficient to
constitute a quorum, may fill a vacancy on the Board of Directors which results
from any cause except an increase in the number of directors, and a majority of
the entire Board of Directors may fill a vacancy which results from an increase
in the number of Directors; provided, however, that no vacancies shall be filled
by action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the shareholders of the Corporation. In the event that at any
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time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the shareholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of shareholders and until his successor is elected and qualifies. A
Director elected by the shareholders of the Corporation to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 7. Regular Meetings. Regular meetings of the
Board may be held with notice at such times and places as may be
determined by the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board may
be called by the Chairman of the Board, the President, or by a majority of the
directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
Section 9. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter provided, in
which notice shall be stated the time and place of the meeting. Notice of each
such meeting shall be delivered to each director, either personally or by
telephone, telegraph, cable or wireless, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, or by commercial delivery services addressed to him at his residence or
usual place of business, at least three days before the day on which such
meeting is to be held.
Section 10. Waiver of Notice of Special Meetings. Notice of
any special meeting need not be given to any Director who shall, either before
or after the meeting, sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting. Except as otherwise
specifically required by these By-Laws, a notice or waiver of notice of any
meeting need not state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than
three members, of the members of the entire Board shall be present in person at
any meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter of the Corporation, these By-Laws, the 1940 Act or other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board; provided, however, that
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the approval of any contract with an investment adviser or principal
underwriter, as such terms are defined in the 1940 Act, which the Corporation
enters into or any renewal or amendment thereof, the approval of the fidelity
bond required by the 1940 Act, and the selection of the Corporation's
independent public accountants shall each require the affirmative vote of a
majority of the Directors who are not interested persons, as defined in the 1940
Act, of the Corporation. In the absence of a quorum at any meeting of the Board,
a majority of the Directors present thereat may adjourn the meeting from time to
time, but not for a period greater than thirty (30) days at any one time, to
another time and place until a quorum shall attend. Notice of the time and place
of any adjourned meeting shall be given to the Directors who were not present at
the time of the adjournment and, unless such time and place were announced at
the meeting at which the adjournment was taken, to the other Directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time
appoint one of its members as Chairman of the Board, who shall serve at the
pleasure of the Board and who shall perform and execute such duties and powers
as may be conferred upon or assigned to him by the Board or these By-Laws, but
who shall not by reason of performing and executing these duties and powers be
deemed an officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if one has been selected and is present,
shall preside. In the absence or inability of the Chairman of the Board to
preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside at it. The Secretary (or, in his absence or
inability to act, any person appointed by the Chairman) shall act as secretary
of the meeting and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee; provided, however, that for so long as
the Corporation is registered as an investment company under the 1940 Act, this
Section shall be inapplicable to the approval of any investment advisory
agreement, sub-advisory agreement or any plan (or agreement containing a plan)
pursuant to Rule 12b-1 under the 1940 Act.
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Section 15. Meeting by Conference Telephone. Members of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time; provided, however, that for so
long as the Corporation is registered as an investment company under the 1940
Act, this Section shall be inapplicable to the approval of any investment
advisory agreement, sub-advisory agreement or any plan (or agreement containing
a plan) pursuant to Rule 12b-1 under the 1940 Act.
Section 16. Compensation. Any Director, whether or not he is a
salaried officer, employee or agent of the Corporation, may be compensated for
his services as director or as a member of a committee, or as Chairman of the
Board or chairman of a committee, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the
directors may from time to time determine.
Section 17. Investment Policies. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the shareholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by
resolution adopted by a majority of the entire Board, designate an Executive
Committee, Compensation Committee, Audit Committee and Nomination Committee,
each of which shall consist of two or more of the directors of the Corporation,
which committee shall have and may exercise all the powers and authority of the
Board with respect to all matters other than as set forth in Section 3 of this
Article IV.
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Section 2. Other Committees of the Board. The Board of
Directors may from time to time, by resolution adopted by a majority of the
whole Board, designate one or more other committees of the Board, each such
committee to consist of two or more directors and to have such powers and duties
as the Board of Directors may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No committee of the
Board shall have power or authority to:
(a) recommend to shareholders any action requiring
authorization of shareholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an
investment adviser or principal underwriter, as such terms are defined in the
1940 Act, or take any other action required to be taken by the Board of
Directors by the 1940 Act;
(c) amend or repeal these By-Laws or adopt new
By-Laws;
(d) declare dividends or other distributions or
issue capital stock of the Corporation; and
(e) approve any merger or share exchange which
does not require shareholder approval.
Section 4. General. One-third, but not less than two members,
of the members of any committee shall be present in person at any meeting of
such committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence or disqualification of
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
All committees shall keep written minutes of their proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
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ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint such other officers,
agents and employees as it may deem necessary or proper. Any two or more offices
may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. The Board may from time to time elect or appoint, or
delegate to the President the power to appoint, such other officers (including
one or more Assistant Vice Presidents, one or more Assistant Treasurers and one
or more Assistant Secretaries) and such agents, as may be necessary or desirable
for the business of the Corporation. Such other officers and agents shall have
such duties and shall hold their offices for such terms as may be prescribed by
the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board, the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3. Removal of Officer. Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate such power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Such removal shall be without prejudice to such person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
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Section 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
Section 6. Bonds or other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief
executive officer of the Corporation. In the absence of the Chairman of the
Board (or if there be none), he shall preside at all meetings of the
shareholders and of the Board of Directors. He shall have, subject to the
control of the Board of Directors, general charge of the business and affairs of
the Corporation. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers.
Section 8. The Vice Presidents. In the absence or disability
of the President, or when so directed by the President, any Vice President
designated by the Board of Directors may perform any or all of the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of which the
President is a member or chairman by designation of ex-officio, except when
designated by the Board. Each Vice President shall perform such other duties as
from time to time may be conferred upon or assigned to him by the Board or the
President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be
responsible for, all the funds and securities of the Corporation, except those
which the Corporation has placed in the custody of a bank or trust company or
member of a national securities exchange (as that term is defined in the
Securities Exchange Act of 1934) pursuant to a written agreement designating
such bank or trust company or member of a national securities exchange as
custodian of the property of the Corporation;
(b) keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation;
(c) cause all moneys and other valuables to be
deposited to the credit of the Corporation;
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(d) receive, and give receipts for, moneys due
and payable to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or authorized by
the Board, taking proper vouchers therefor; and
(f) in general, perform all the duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability
of the Treasurer, or when so directed by the Treasurer, any Assistant Treasurer
may perform any or all of the duties of the Treasurer, and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings of the Board, the
committees of the Board and the shareholders;
(b) see that all notices are duly given in accordance
with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 12. Assistant Secretaries. In the absence or
disability of the Secretary, or when so directed by the Secretary, any Assistant
Secretary may perform any or all of the duties of the Secretary, and, when so
acting, shall have all the powers of, and be subject to all restrictions upon,
the Secretary. Each Assistant Secretary shall perform such other duties as
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from time to time may be conferred upon or assigned to him by the Board of
Directors, the President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any Director.
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing the
number of shares of stock of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by the President, a
Vice President, or the Chairman of the Board, and countersigned by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 2. Rights of Inspection. There shall be kept at the
principal executive office, which shall be available for inspection during usual
business hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
shareholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been shareholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual business hours the Corporation's
books of account and stock ledger in accordance with the General Laws of the
State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of
the Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly
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executed and filed with the Secretary or with a transfer agent or transfer
clerk, and on surrender of the certificate or certificates, if issued, for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of shareholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
Section 4. Transfer Agents and Registrars. The Corporation may
have one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
Section 5. Record Date and Closing of Transfer Books. The
Board of Directors may set a record date for the purpose of making any proper
determination with respect to shareholders, including which shareholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise either rights. The record date
may not be more than ninety (90) days before the date on which the action
requiring the determination will be taken; and, in the case of a meeting of
shareholders, the record date shall be at least ten (10) days before the date of
the meeting. The Board of Directors shall not close the books of the Corporation
against transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates.
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss, theft, destruction or
mutilation of such certificate, and the Corporation may issue a new certificate
of stock in the place of any certificate theretofore issued by it which the
owner thereof shall allege to have been lost, stolen or destroyed or which shall
have been mutilated, and the Board may, in its discretion, require such
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<PAGE>
owner or his legal representatives to give to the Corporation a bond in such
sum, limited or unlimited, and in such form and with such surety or sureties, as
the Board in its absolute discretion shall determine, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss or destruction of any such certificate, or issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board, in its
absolute discretion, may refuse to issue any such new certificate, except
pursuant to legal proceedings under the laws of the State of Maryland.
Section 8. Stock Leaders. The Corporation shall not be
required to keep original or duplicate stock ledgers at its principal office in
the City of Baltimore, Maryland, but stock ledgers shall be kept at the
office(s) of the Transfer Agent(s) of the Corporation's capital stock.
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing
the name of the Corporation, which shall be in the charge of the secretary. The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of
the Corporation shall end on the last day of October in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
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Section 2. Custodians. All securities and other investments
shall be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Money market
instruments, bonds or other securities at any time owned by the Corporation may
be held on behalf of the Corporation or sold, transferred or otherwise disposed
of subject to any limits imposed by these By-Laws, and pursuant to authorization
by the Board and, when so authorized to be held on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name of
the Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the Board of Directors or the shareholders in
accordance with the provisions of the 1940 Act.
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<PAGE>
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the shareholders based upon each such examination shall be mailed to
each shareholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify
its directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify its officers to the same extent as its Directors and to such further
extent as is consistent with law. The Corporation shall indemnify its Directors
and officers who while serving as Directors or officers also serve at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the fullest extent consistent with
law. This Article XIII shall not protect any such person against any liability
to the Corporation or any shareholder thereof to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Section 2. Advances. Any current or former director
or officer of the Corporation claiming indemnification within the scope of
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this Article XIII shall be entitled to advances from the Corporation for payment
of the reasonable expenses incurred by him in connection with proceedings to
which he is a party in the manner and to the full extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933 (the "1933 Act")
and the 1940 Act, as such statutes are now or hereafter in force.
Section 3. Procedure. On the request of any current or former
director or officer requesting indemnification or an advance under this Article
XIII, the Board of Directors shall determine, or cause to be determined, in a
manner consistent with the Maryland General Corporation Law, the 1933 Act and
the 1940 Act, as such statutes are now or hereafter in force, whether the
standards required by this Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this
Article XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested directors or otherwise, both as to action by a Director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Maryland Law. References to the Maryland
General Corporation Law in this Article XIII are to such law as
from time to time amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the shareholders or at any special meeting of the shareholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
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<PAGE>
EX-99.B(5)(a)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 16th day
of August, 1993 by and between FLAG INVESTORS INTERNATIONAL FUND, INC., a
Maryland corporation (the "Fund"), and FLAG INVESTORS MANAGEMENT CORP., a
Maryland corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor
under the Investment Advisors Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter into an
agreement under which the Advisor will provide investment advisory and
administrative services for the Fund on the terms and conditions hereinafter set
forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints
the Advisor to act as the Fund's investment advisor. The Advisor shall manage
the Fund's affairs and shall supervise all aspects of the Fund's operations
(except as otherwise set forth herein), including the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
assets, subject at all times to the policies and control of the Fund's Board of
Directors. The Advisor shall give the Fund the benefit of its best judgment,
efforts and facilities in rendering its service as Advisor.
2. Delivery of Documents. The Fund has furnished the Advisor
with copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation filed with the
Department of Assessments and Taxation of the State of Maryland on
March 16, 1993 and all amendments thereto (such Articles of
Incorporation, as presently in effect and as shall from time to time be
amended, are herein called the "Articles of Incorporation");
(b) The Fund's Bylaws and all amendments thereto (such
Bylaws, as presently in effect and as they shall from time to time be
amended, are herein called the "Bylaws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Advisor and approving
this Agreement;
(d) The Fund's Notification of Registration filed pursuant
to Section 8(a) of the Investment Company Act of 1940 on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
(the "SEC") on September 3, 1986;
(e) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No.
33-8479) and under the 1940 Act as filed with the SEC on September 3,
1986 relating to the shares of the Fund, and all amendments thereto;
and
<PAGE>
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are
herein called "Prospectus").
The Fund will furnish the Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties of Investment Advisor. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Fund's
operations, except for distribution services;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment
objective and policies of the Fund;
(c) provide the Fund with such executive, administrative
and clerical services as are deemed advisable by the Fund's Board of
Directors;
(d) provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery, supplies and similar items
for the Fund's principal office;
(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio;
(f) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(g) take all actions necessary to carry into effect the
Fund's purchase and sale programs;
(h) supervise the operations of the Fund's Custodian,
transfer and dividend disbursing agent, and accounting services agent;
(i) provide the Fund with such administrative and clerical
services for the maintenance of certain shareholder records, as are
deemed advisable by the Fund's Board of Directors; and
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns,
reports to the Fund's shareholders and reports to and filing with the
SEC and state Blue Sky authorities.
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<PAGE>
4. Broker-Dealer Relationships. In the event that the Advisor
is responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting securities transactions will be to
obtain the best price and execution on an overall basis. In performing this
function the Advisor shall comply with applicable policies established by the
Board of Directors and shall provide the Board of Directors with such reports as
the Board of Directors may require in order to monitor the Fund's portfolio
transaction activities. In certain instances the Advisor may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Fund. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Fund to
such broker-dealers other than Alex. Brown & Sons Incorporated ("Alex. Brown")
who also provide research or statistical material or other services to the Fund
or the Advisor. Such allocation shall be in such amounts and proportions as the
Advisor shall determine and the Advisor will report on said allocation regularly
to the Board of Directors of the Fund, indicating the broker-dealers to whom
such allocations have been made and the basis therefor.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking the most
favorable price and execution available and such other policies as the Directors
may determine, the Advisor may consider services in connection with the sale of
shares of the Fund as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund.
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct Alex. Brown to execute
portfolio transactions for the Fund on an agency basis. The commissions paid to
Alex. Brown must be, as required by Rule 17e-1 under the 1940 Act, "reasonable
and fair compared to the commission, fee or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." If the purchase or sale
of securities consistent with the investment policies of the Fund or one or more
other account of the Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Advisor. Alex. Brown and the Advisor may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution.
The Fund will not deal with the Advisor or Alex. Brown in any
transaction in which the Advisor or Alex. Brown acts as a principal with respect
to any part of the Fund's order. If Alex. Brown is participating in an
underwriting or selling group, the Fund may not buy portfolio securities
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<PAGE>
from the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.
5. Control by Board of Directors. Any management or
supervisory activities undertaken by the Advisor pursuant to this Agreement, as
well as any other activities undertaken by the Advisor on behalf of the Fund
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the
Fund under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the Bylaws; and
(e) any other applicable provisions of Federal and State
law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without
cost to the Fund, the services of one or more officers of the Fund, to the
extent that such officers may be required by the Fund for the proper conduct of
its affairs.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution, the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State or
other governmental agencies; the costs and the expenses of the engraving or
printing of certificates representing shares of the Fund; all costs and expenses
in connection with registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of Fund's shares; charges
and expenses of legal counsel, including counsel to the Directors of the Fund
who are not "interested persons" (as defined in the 1940 Act) of the Fund and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
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<PAGE>
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors,
including a majority of the Fund's Directors who are not "interested persons"
(as defined in the 1940 Act) of the Fund, and of the shareholders of the Fund,
the Advisor may delegate to a sub-advisor its duties enumerated in Section 3
hereof. The Advisor shall continue to supervise the performance of any such
sub-advisor and shall report regularly thereon to the Fund's Board of Directors,
but shall not be responsible for the sub-advisor's performance under the
sub-advisory agreement.
(b) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Fund which are not required by this Agreement
upon the request of the Fund's Board of Directors. Such services will be
performed on behalf of the Fund, and the Advisor's charge in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not required to pay or assume under this Agreement
shall not relieve the Advisor of any of its obligations to the Fund nor obligate
the Advisor to pay or assume any similar Fund expense on any subsequent
occasions.
9. Compensation. For the services to be rendered and the
expenses to be assumed by the Advisor, the Fund shall pay to the Advisor monthly
compensation at an annual rate of .75% of the Fund's average daily net assets.
Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for the part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of Section 10 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by Section 10 hereof.
10. Expense Limitation. In the event the operating expenses of
the Fund, including all investment advisory and administrative fees, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by the securities laws or
regulations thereunder of any state in which the Fund's shares are qualified for
sale, as such limitations may be raised or lowered from time to time, the
Advisor shall reduce its investment advisory fee to the extent of its share of
such excess expenses and, if required pursuant to any such laws or regulations,
will reimburse the Fund for its share of annual operating expenses in excess of
any expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund.
11. Non-Exclusivity. The services of the Advisor to the Fund
are not to be deemed to be exclusive, and the Advisor shall be free to render
investment advisory or other services to others (including other investment
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<PAGE>
companies) and to engage in other activities, so long as its services under this
Agreement are not impaired thereby. It is understood and agreed that officers or
directors of the Advisor may serve as officers or Directors of the Fund, and
that officers or Directors of the Fund may serve as officers or directors of the
Advisor to the extent permitted by law; and that the officers and directors of
the Advisor are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, trustees or directors of any other firm, trust or corporation,
including other investment companies.
12. Term and Renewal. This Agreement shall become effective as
of the date hereof and shall continue in force and effect, subject to Section 13
hereof, for two years from the date hereof. Following the expiration of its
initial two-year term, this Agreement shall continue in force and effect from
year to year, provided that such continuance is specifically approved at least
annually:
(a) (i) by the Fund's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund; and
(b) by the affirmative vote of a majority of the Directors
who are not parties to this Agreement or "interested persons" (as defined in
the 1940 Act) of a party to this Agreement (other than as Directors of the Fund)
by votes cast in person at a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated, without the
payment of any penalty, by the Fund upon vote of the Fund's Board of Directors
or a vote of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act) or by the Advisor, upon sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
14. Liability of Advisor. In the performance of its duties
hereunder, the Advisor shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to ensure
the accuracy of all services performed under this Agreement, but the Advisor
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under the Agreement.
15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Fund and of the Advisor for this purpose shall be 135 East Baltimore Street,
Baltimore, Maryland 21202.
16. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective offices as of the day
and year first above written.
[SEAL] FLAG INVESTORS INTERNATIONAL FUND, INC.
Attest: /s/ Edward J. Veilleux By: /s/ Brian C. Nelson
------------------------ ------------------------
[SEAL] FLAG INVESTORS MANAGEMENT CORP.
Attest: /s/ Laurie DePrine By: /s/ Edward J. Veilleux
------------------------ ------------------------
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<PAGE>
EX-99.B(5)(b)
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 16th day of August, 1993 by
and among FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland corporation (the
"Fund"), FLAG INVESTORS MANAGEMENT CORP., a Maryland corporation (the
"Advisor"), and THE GLENMEDE TRUST COMPANY, a limited purpose trust company
chartered under the laws of the Commonwealth of Pennsylvania (the
"Sub-Advisor").
WHEREAS, the Advisor is the investment advisor to the Fund,
which is an open-end, diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Advisor wish to retain the
Sub-Advisor for purposes of rendering advisory services to the Fund and the
Advisor in connection with the Advisor's responsibilities to the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Advisor. The Fund hereby appoints the
Sub-Advisor to act as the Fund's Sub-Advisor under the supervision of the Fund's
Board of Directors and the Advisor, and the Sub-Advisor hereby accepts such
appointment, all subject to the terms and conditions contained herein.
2. Delivery of Documents. The Fund has furnished the
Sub-Advisor with copies properly certified or authenticated of each of the
following:
(a) The Fund's Articles of Incorporation, filed with the
Department of Assessments and Taxation of the State of Maryland on
March 16, 1993 and all amendments thereto (such Articles of
Incorporation, as presently in effect as they shall from time to time
be amended, are herein called the "Articles of Incorporation");
(b) The Fund's Bylaws and all amendments thereto (such Bylaws,
as presently in effect as they shall from time to time be amended, are
herein called the "Bylaws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Sub-Advisor and
approving this Agreement;
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act of 1940 on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on September 3, 1986;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-8479)
and under the 1940 Act as filed with the SEC on September 3, 1986
relating to the shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are
herein called "Prospectus").
<PAGE>
The Fund will furnish the Sub-Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties of Sub-Advisor. In carrying out its obligations
under Section 1 hereof, the Sub-Advisor shall:
(a) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(b) take all actions necessary to carry into effect the Fund's
purchase and sale programs;
(c) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Fund's Advisor and Board of Directors; and
(d) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio.
4. Broker-Dealer Relationships. In circumstances when the
Sub-Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of its brokerage commission
rates, the Sub-Advisor's primary consideration in effecting security
transactions will be to obtain the best price and execution on an overall basis.
In performing this function the Sub-Advisor shall comply with applicable
policies established by the Board of Directors and shall provide the Board of
Directors with such reports as the Board of Directors may require in order to
monitor the Fund's portfolio transaction activities. In certain instances the
Sub-Advisor may make purchases of underwritten issues at prices which include
underwriting fees. In selecting a broker-dealer to execute each particular
transaction, the Sub-Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may determine, the Sub-Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker-dealer that
provides brokerage and research services to the Sub-Advisor an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Sub-Advisor's overall responsibilities with
respect to the Fund. The Sub-Advisor is further authorized to allocate the
orders placed by it on behalf of the Fund to such broker-dealers other than
Alex. Brown & Sons Incorporated ("Alex. Brown") who also provide research or
statistical material or other services to the Fund or the Sub-Advisor. Such
allocation shall be in such amounts and proportions as the Sub-Advisor shall
determine and the Sub-Advisor will report on said allocation regularly to the
Board of Directors of the Fund, indicating the broker-dealers to whom such
allocations have been made and the basis therefor.
2
<PAGE>
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking the most
favorable price and execution available and such other policies as the Directors
may determine, the Sub-Advisor may consider services in connection with the sale
of shares of the Fund as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund.
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct Alex. Brown to execute
portfolio transactions for the Fund on an agency basis. The commissions paid to
Alex. Brown must be, as required by Rule 17e-1 under the 1940 Act, "reasonable
and fair compared to the commission, fee or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." If the purchase or sale
of securities consistent with the investment policies of the Fund or one or more
other accounts of the Sub-Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Sub-Advisor. Alex. Brown and the Sub-Advisor may
combine such transactions, in accordance with applicable laws and regulations,
in order to obtain the best net price and most favorable execution.
The Fund will not deal with the Sub-Advisor or Alex. Brown in
any transaction in which the Sub-Advisor or Alex. Brown acts as a principal with
respect to any part of the Fund's order. If Alex. Brown is participating in an
underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with rules of the SEC.
5. Control by Fund's Board of Directors. Any recommendations
concerning the Fund's investment program for the Fund proposed by the
Sub-Advisor to the Fund and the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Sub-Advisor on behalf of the Fund
pursuant hereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Sub-Advisor shall at all times
conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder, as amended;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the Bylaws; and
(e) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund, the Sub-Advisor and the Advisor as follows:
(a) The Sub-Advisor shall furnish, at its expense and without
cost to the Fund, the services of the President and Executive Vice
President of the Fund, to the extent that such officers may be required
by the Fund for the proper conduct of its affairs.
(b) The Sub-Advisor shall maintain, at its expense and without
cost to the Fund, a trading function in order to carry out its
obligations under Section 3 hereof to place orders for the purchase and
sale of portfolio securities for the Fund.
3
<PAGE>
(c) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to
the Advisor under the Investment Advisory Agreement between the Fund
and the Advisor; payments to the Fund's distributor under the Fund's
plan of distribution; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of
its cash, portfolio securities and other property, and any transfer,
dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by
the Fund to Federal, state or other governmental agencies; the costs
and expenses of the engraving or printing of certificates representing
shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and its shares
with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of the preparing, printing
and mailing of proxy statements and reports to shareholders; fees and
travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not "interested persons" (as
defined in the 1940 Act) of the Fund and of independent certified
public accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.
8. Compensation. For the services to be rendered hereunder by
the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly compensation
at the annual rate of .55% of the Fund's average daily net assets. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals paid monthly. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculations of the fees as set forth above. Subject to the provisions of
Section 10 hereof, payment of the Sub-Advisor's compensation for the preceding
month shall be made as promptly as possible after completion of the computations
contemplated in Section 10 hereof.
9. Additional Responsibilities. The Sub-Advisor may, but shall
not be under any duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Sub-Advisor's
charges in rendering such services will be billed monthly to the Fund, subject
to examination by the Fund's independent certified public accountants. Payment
or assumption by the Sub-Advisor of any Fund expense that the Sub-Advisor is not
required to pay or assume under this Agreement shall not relieve the Sub-
Advisor of any of its obligations to the Fund nor obligate the Sub-Advisor to
pay or assume any similar Fund expenses on any subsequent occasions.
10. Expense Limitation. If, for any fiscal year of the Fund,
the amount of the fee which the Advisor would otherwise receive from the Fund
pursuant to the Investment Advisory Agreement between the Fund and the Advisor
is reduced pursuant to the expense limitation provisions of the Investment
Advisory Agreement or pursuant to the voluntary waiver of the right to receive
such fee, the fee which the Sub-Advisor would otherwise receive from the Advisor
pursuant to Section 8 of this Agreement shall also be reduced proportionately,
and, if such amount should exceed such monthly fee, the Sub-Advisor agrees to
4
<PAGE>
repay the Advisor such amount of its fee previously received with respect to
such fiscal year as may be required to make up the deficiency no later than the
last day of the following month. In no event will the Sub-Advisor be required to
reimburse the Advisor for any amount in excess of the fee it receives pursuant
to this Agreement during the fiscal year of the Fund in which the reimbursement
is required.
11. Term. This Agreement shall become effective at 12:01 a.m.
on the date hereof and shall remain in force and effect, subject to Section 13
hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial two-year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" of a party to
this Agreement (other than as Directors of the Fund) by votes cast in
person at a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of Directors or
by vote of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days' written notice
to the Advisor and the Sub-Advisor. This Agreement may be terminated at any
time, without the payment of any penalty, by the Advisor or Sub-Advisor on sixty
(60) days' written notice to the Fund and the other party. Upon the termination
of the Investment Advisory Agreement, this Agreement shall automatically
terminate on sixty (60) days' written notice. The notice provided for herein may
be waived by any person to whom such notice is required. This Agreement shall
automatically terminate in the event of its assignment (as defined in Section
2(a)(4) of the 1940 Act).
14. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-Advisor
shall be free to render investment advisory or other services to others
(including other investment companies) and to engage in other activities, so
long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers or Directors of the Sub-Advisor may serve as
officers or directors of the Fund, and that officers or Directors of the Fund
may serve as officers or directors of the Sub-Advisor, to the extent permitted
by law; and that the officers and Directors of the Sub-Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, trustees or
directors of any other firm, trust or corporation, including other investment
companies.
15. Liability of Sub-Advisor. In the performance of its duties
hereunder, the Sub-Advisor shall be obligated to exercise care and diligence
and to act in good faith and to use its best efforts within reasonable limits to
ensure the accuracy of all services performed under this Agreement, but the Sub-
Advisor shall not be liable for any act or omission which does not constitute
willful misfeasance, bad faith or gross negligence on the part of the
Sub-Advisor or its officers, directors or employees, or reckless disregard by
the Sub-Advisor of its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Sub-Advisor for this purpose shall be 229 South 18th Street, Philadelphia,
Pennsylvania 19103 and the address of the Advisor and the Fund shall be 135 East
Baltimore Street, Baltimore, Maryland 21202.
5
<PAGE>
17. Questions and Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.
Attest: FLAG INVESTORS INTERNATIONAL FUND, INC.
/s/ Laurie D. DePrine By: /s/ Brian C. Nelson
- --------------------- ------------------------------
Attest: FLAG INVESTORS MANAGEMENT CORP.
/s/ Laurie D. DePrine By: /s/ Edward J. Veilleux
- --------------------- ------------------------------
Attest: THE GLENMEDE TRUST COMPANY
/s/ Laurie D. DePrine By: /s/ Andrew B. Williams
- --------------------- ------------------------------
6
<PAGE>
EX-99.B(6)(a)
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 16th day of August, 1993, by and
between FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the
exclusive distributor of the shares of Common Stock of the Fund (the "Shares")
and Alex. Brown wishes to become the distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the
payments contemplated by paragraph 5 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor
for the Shares for the period and on the terms set forth in this Agreement. The
Fund may from time to time issue separate series or classes of its shares of
common stock, or classify and reclassify shares of such series as classes, and
the appointment effected hereby shall constitute appointment for the
distribution of such additional series and classes unless the parties shall
otherwise agree in writing. Alex. Brown accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with
the Secretary of State of Maryland on March 16, 1993 and all amendments thereto
(the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
<PAGE>
(d) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC") on September 3,
1986;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-8479)
and under the 1940 Act as filed with the SEC on September 3, 1986 relating to
the Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares;
(c) provide the Board of Directors of the Fund with
quarterly reports as required by Rule 12b-1 under the 1940
Act.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown and securities
dealers who have valid Sub-Distribution Agreements with Alex. Brown.
Notwithstanding the provisions of the foregoing sentence, the Fund may issue its
Shares at their net asset value to any shareholder of the Fund purchasing such
Shares with dividends or other cash distributions received from the Fund
pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund. The Board of Directors may agree, on behalf of the Fund, to amendments to
this Agreement, provided that the Fund must obtain prior approval of the
shareholders of the Fund to any amendment which would result in a material
increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any amendments and supplements
thereto;
-2-
<PAGE>
(c) the provisions of the Articles of Incorporation
of the Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and
State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the extent that such
services are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any
promotional or sales literature used by Alex. Brown or furnished by Alex. Brown
to purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing;
(c) the Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to Federal, State or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and the Shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel) except as provided in subparagraph (a) above, the
expenses of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) or members of any advisory board or committee; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
Shares or in cash; charges and expenses of any outside service used for pricing
of the Shares; charges and expenses of legal counsel, including counsel to the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act), and of independent accountants, in connection with any matter relating to
the Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
-3-
<PAGE>
8. Delegation of Responsibilities. Alex. Brown may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and Alex. Brown's charge
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund or obligate Alex. Brown to pay or assume any similar
Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation
at the annual rate of .25% of the average daily net assets of the Fund. Except
as hereinafter set forth, continuing compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculations of the fees as set forth above. Payment of
Alex. Brown's compensation for the preceding month shall be made as promptly as
possible.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into
Sub-Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that directors,
officers or employees of Alex. Brown may serve as directors or officers of the
Fund, and that directors or officers of the Fund may serve as directors,
officers and employees of Alex. Brown to the extent permitted by law; and that
directors, officers and employees of Alex. Brown are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, directors or officers of any other firm or
corporation, including other investment companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act), and
-4-
<PAGE>
(b) by the affirmative vote of a majority of the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) and do not have a financial interest in the operation of this Agreement, by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the operation
of this Agreement, (iii) by vote of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act) or (iv) by Alex. Brown. The notice
provided for herein may be waived by each party. This Agreement shall
automatically terminate in the event of its assignment (as the term is defined
in the 1940 Act).
15. Liability. In the performance of its duties hereunder,
Alex. Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any act
or omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, it is agreed that the address of both
Alex. Brown and the Fund for this purpose shall be 135 East Baltimore Street,
Baltimore, Maryland 21202.
17. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] FLAG INVESTORS INTERNATIONAL FUND, INC.
Attest: /s/ Brian C. Nelson By /s/ Edward J. Veilleux
------------------- ----------------------
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest: /s/ Brian C. Nelson By /s/ Richard T. Hale
------------------- -------------------
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<PAGE>
EX-99.B(6)(b)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor (the "Distributor") of the Flag Investors
Funds (collectively, the "Funds", individually a "Fund"). The Funds are open-end
investment companies registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" used herein refers to the
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a
Participating Dealer and as such are authorized (i) to accept orders for the
purchase of Shares and to transmit to the Funds such orders and the payment made
therefore, (ii) to accept orders for the redemption of Shares and to transmit to
the Funds such orders and all additional material, including any certificates
for Shares, as may be required to complete the redemption and (iii) to assist
shareholders with the foregoing and other matters relating to their investments
in each Fund, in each case subject to the terms and conditions set forth in the
Prospectus of each Fund. You are to review each Share purchase or redemption
order submitted through you or with your assistance for completeness and
accuracy. You further agree to undertake from time to time certain shareholder
servicing activities for customers of yours who have purchased Shares and who
use your facilities to communicate with the Funds or to effect redemptions or
additional purchases of Shares.
2. Limitation of Authority. No person is authorized to make
any representations concerning the Funds or the Shares except those contained in
the Prospectus of each Fund and in such printed information as the Distributor
may subsequently prepare. No person is authorized to distribute any sales
material relating to any Fund without the prior written approval of the
Distributor.
3. Compensation. As compensation for such services, you will
look solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee
<PAGE>
(as we may determine from time to time in writing) computed as a percentage of
the average daily net assets maintained with each Fund during the preceding
period by shareholders who purchase their shares through you or with your
assistance, provided that said assets are at least $250,000 for each Fund for
which you are to be compensated, and provided that in all cases your name is
transmitted with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the
provisions contained in the Securities Act governing the distribution of
prospectuses to persons to whom you offer Shares. You further agree to deliver,
upon our request, copies of any amended Prospectus of the relevant Fund to
purchasers whose Shares you are holding as record owner and to deliver to such
persons copies of the annual and interim reports and proxy solicitation
materials of the Funds. We agree to furnish to you as many copies of each
Prospectus, annual and interim reports and proxy solicitation materials as you
may reasonably request.
5. Qualification to Act. You represent that you are a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"). Your expulsion or suspension from the NASD will automatically terminate
this Agreement on the effective date of such expulsion or suspension. You agree
that you will not offer Shares to persons in any jurisdiction in which you may
not lawfully make such offer due to the fact that you have not registered under,
or are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD, including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of
Shares under the Securities Act. The Funds intend to register or qualify in
certain states where registration or qualification is required. We will inform
you as to the states or other jurisdictions in which we believe the Shares have
been qualified for sale under, or are exempt from the requirements of, the
respective securities laws of such states. You agree that you will offer Shares
to your customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full
authority to take such action as it deems advisable in respect of all matters
pertaining to the offering of its Shares, including the right not to accept any
order for the purchase of Shares.
8. Record Keeping. You will (i) maintain all records required
by law to be kept by you relating to transactions in Shares and, upon request by
any Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to
you except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
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<PAGE>
without negligence. Nothing contained in this Agreement is intended to operate
as a waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either
party, without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to
the above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
-----------------------------------
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
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<PAGE>
EX-99.B(6)(c)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SHAREHOLDER SERVICING AGREEMENT
_________________, 19__
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement
with you concerning the provision of support services to your clients and
customers ("Customers") who may from time to time beneficially own shares of our
common stock ("Shares").
The terms and conditions of this Servicing Agreement are as
follows:
Section 1. (a) You agree to provide the following services to
Customers who may from time to time beneficially own Shares: (i) aggregating and
processing purchase and redemption requests for Shares from Customers and
placing net purchase and redemption orders with our distributor; (ii) processing
dividend payments from us on behalf of Customers; (iii) providing information
periodically to Customers showing their positions in Shares; (iv) arranging for
bank wires; (v) responding to Customer inquiries relating to the services
performed by you; (vi) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to Customers; and (viii) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. You will provide to Customers a schedule of any
fees that you may charge directly to them for such services. You hereby
represent that such fees are not unreasonable or excessive. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records
required by law relating to transactions in Shares and, upon our request,
promptly make such of these records available to us as we may reasonably request
in connection with our operations, and (ii) promptly notify us if you experience
any difficulty in maintaining the records described in the foregoing clauses in
an accurate and complete manner.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be a part of the space, equipment
and facilities currently used in your business, or any personnel employed by
you) as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Customers.
Section 3. Neither you nor any of your officers, employees,
agents or assignees are authorized to make any representations concerning us or
Shares except those contained in our then current prospectus for such Shares,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by us in writing.
<PAGE>
Section 4. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority to act as
agent for us in any matter or in any respect. You may, upon prior written notice
to us, delegate your responsibilities hereunder to another person or persons;
provided, however, that notwithstanding any such delegation, you will remain
responsible for the performance of all of your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees, agents or assignees
regarding your responsibilities hereunder or the purchase, redemption, transfer
or registration of Shares by or on behalf of Customers. You and your employees
will, upon request, be available during normal business hours to consult with us
or our designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will cause our distributor pay to you, and you
will accept as full payment therefor, a fee (as we may determine from time to
time in writing) computed as a percentage of the average daily net assets of the
Customers' Shares held of record by you from time to time, which fee will be
computed daily and payable no less often than annually. For purposes of
determining the fees payable under this Section 5, the average daily net assets
of the Customers' Shares will be computed in the manner specified in our
registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes of
purchases and redemptions. The fee rate stated above may be prospectively
increased or decreased by us or by our distributor, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of Shares, including the sale of such shares to you for the account of
any Customer or Customers.
Section 6. You will furnish us or our designees with such
information relating to your performance under this Agreement as we or they may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
shall otherwise cooperate with us and our designees (including, without
limitation, any auditors designated by us), in connection with the preparation
of reports to our Board of Directors concerning this Agreement and the monies
paid or payable by us pursuant hereto, as well as any other reports or filings
that may be required by law.
Section 7. We may enter into other similar services agreements
with any other person or persons without your consent.
Section 8. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our distributor, and
is terminable, without penalty, at any time by us or by you upon ten days'
notice to the other party hereto and shall automatically terminate in the event
of its assignment, as that term is defined in the Investment Company Act of
1940, as amended.
Section 9. This Agreement will be construed in accordance with
the laws of the State of Maryland.
Section 10. All notices and other communications to either you
or us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device, if to us at the address below, and if to you,
at the address specified by you after your signature below:
Flag Investors Family of Funds
135 East Baltimore Street
Baltimore, Maryland 21202
Attention: Edward J. Veilleux
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<PAGE>
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to us, at the address set forth in Section 10 above.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
Date: _______________ By: ________________________
Authorized Officer
Confirmed and Accepted:
Firm Name: _______________________________
By: ________________________________
Address: ________________________________
________________________________
Date: ________________________________
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<PAGE>
EX-99.B(8)(a)
CUSTODY AGREEMENT
AGREEMENT dated as of August 16, 1993 between BOSTON SAFE
DEPOSIT AND TRUST COMPANY ("Bank") and FLAG INVESTORS INTERNATIONAL FUND, INC.
("Company").
WITNESSETH:
WHEREAS, Company is a registered open-end investment company;
and
WHEREAS, the Company wishes to retain the Bank to provide
certain custodian services to the Company and the Bank is willing to furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment of Custodian; Custody Account. The Company
hereby constitutes and appoints the Bank as custodian of all the securities and
monies at the time owned by or in the possession of the Company during the
period of this Agreement. The Bank hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth. The Bank
agrees to establish and maintain (a) a separate custody account in the name of
the Company ("Custody Account") for any and all stocks, shares, bonds,
debentures, notes, mortgages or other obligations for the payment of money and
any certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same or evidencing or representing any
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<PAGE>
other rights or interests therein and other similar property (hereinafter called
"Securities") from time to time received by the Bank or any sub-custodian (as
defined in the second paragraph of Section 3 hereof) from or at the direction of
the Company; and (b) a separate deposit account or accounts in the name of each
Fund ("Deposit Account") for any and all cash and cash equivalents in any
currency received by the Bank or any sub-custodian from or at the direction of
the Company, which cash shall not be subject to withdrawal by draft or check.
The term "Property" as used herein shall mean all Securities, cash, cash
equivalents and other assets of the Company.
2. Maintenance of Property. Securities in a Custody Account
shall be held in such country or other jurisdiction as shall be specified from
time to time in Instructions (as defined in Section 9 hereof), provided that
such country or other jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or other jurisdiction in
which such Securities are to be presented for payment or are acquired for the
Custody Account, and cash in a Deposit Account shall be credited to an account
in such amounts and in the country or other jurisdiction as shall be specified
from time to time in Instructions, provided that such country or other
jurisdiction shall be one in which such cash in the legal currency for the
payment of public or private debts.
3. Eligible Foreign Custodians and Securities Depositories.
The Company authorizes the Bank to hold the Securities in the Custody Account(s)
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and the cash in the Deposit Account(s) in custody and deposit accounts,
respectively, which have been established by the Bank with one of its branches,
a branch of a qualified U.S. bank, an eligible foreign custodian or an eligible
foreign securities depository. If a Bank's branch, a branch of a qualified U.S.
bank or an eligible foreign custodian is selected to act as the Bank's
sub-custodian to hold any property, such entity is authorized to hold such in
its account with any eligible foreign securities depository in which it
participates so long as such foreign securities depository has been approved by
the Company. For purposes of this Agreement (a) "qualified U.S. bank" shall mean
a qualified U.S. bank as defined in Rule 17f-5 under the Investment Company Act
of 1940, as amended ("Rule 17f-5"); (b) "eligible foreign custodian" shall mean
(i) a banking institution or trust company incorporated or organized under the
laws of a country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereto) or (ii) a majority-owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders' equity
in excess of $100 million in U.S. currency (or a foreign currency equivalent
thereto); (c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
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<PAGE>
country other than the United States, which operates (i) the central system for
handling of securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
Hereinafter the term "sub-custodian" will refer to any Bank
branch, any branch of a qualified U.S. bank, any eligible foreign custodian or
any eligible foreign securities depository with which the Bank, as sub-custodian
for the Company, has entered into an agreement of the type contemplated
hereunder regarding Securities and/or cash held in or to be acquired for a
Custody Account or a Deposit Account.
If, after the initial approval of the sub-custodians by the
Company in connection with this Agreement, the Bank wishes to appoint other
sub-custodians to hold Property, it will so notify the Company and will provide
the Company with information reasonably necessary to determine any such new
sub-custodian's eligibility under Rule 17f-5, including a copy of the proposed
agreement with sub-custodian. The Company shall within 30 days after receipt of
such notice give a written approval or disapproval of the proposed action.
If the bank intends to remove any sub-custodian previously
approved, it shall so notify the Company and shall move the Property deposited
with such sub-custodian to another sub-custodian previously approved or to a new
sub-custodian, provided that the appointment of any new sub-custodian will be
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subject to the requirements set forth in the preceding paragraph. The Bank shall
take steps as may be required to remove any sub-custodian which has ceased to
meet the requirements of Rule 17f-5.
4. Use of Sub-Custodians. With respect to Property which is
maintained by the Bank in the physical custody of a sub-custodian pursuant to
Section 3:
(a) The Bank will identify on its books as belonging
to the Company any Property held by such sub-custodian.
(b) In the event that a sub-custodian permits any of
the Securities placed in its care to be held in an eligible foreign securities
depository, such sub-custodian will be required by its agreement with the Bank
to identify on its books such Securities as being held for the account of the
Bank as a custodian for its customers.
(c) Any Securities in a Custody Account held by a
sub-custodian of the Bank will be subject only to the instructions of the Bank
or its agents; and any Securities held in an eligible foreign securities
depository for the account of a sub-custodian will be subject only to the
instructions of such sub-custodian.
(d) The Bank will only deposit Property in an account
with a sub-custodian which includes exclusively the assets held by the Bank for
its customers, and the Bank will cause such account to be designated by such
sub-custodian as a special custody account for the exclusive benefit of
customers of the Bank.
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(e) Any agreement the Bank shall enter into with a
sub-custodian with respect to the holding of Property shall require that (i) the
Property is not subject to any right, charge, security interest, lien or claim
of any kind in factor of such sub-custodian or its creditors except for a claim
of payment for its safe custody or administration and (ii) beneficial ownership
of such Property is freely transferable without the payment of money or value
other than for safe custody or administration.
(f) The Bank shall allow independent public
accountants of the Company such reasonable access to the records of the Bank
relating to Property held in a Custody Account and a Deposit Account as required
by such accountants in connection with their examination of the books and
records pertaining to the affairs of the Company. The Bank shall, subject to
restrictions under applicable law, also obtain from any sub-custodian with which
the Bank maintains the physical possession of any Property an undertaking to
permit independent public accountants of the Company such reasonable access to
the records of such sub-custodian as may be required in connection with their
examination of the books and records pertaining to the affairs of the Company or
to supply a verifiable confirmation of the contents of such records. The Bank
shall furnish the Company such reports (or portions thereof) of the Bank's
external auditors as relate directly to the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement.
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(g) The Bank will supply to the Company at least
monthly a statement in respect to any Property in a Custody and a Deposit
Account held by each sub-custodian, including an identification of the entity
having possession of such Property, and the Bank will send to the Company an
advice or notification of any transfers of Property to or from the Custodian
Account and Deposit Account, indicating, as to Property acquired, the identity
of the entity having physical possession of such Property. In the absence of the
filing in writing with the Bank by the Company of exceptions or objections to
any such statement within ninety (90) days of the Company's receipt of such
statement, or within ninety (90) days after the date that a material defect in
reasonably discoverable, the Company shall be deemed to have approved such
statement; and in such case or upon written approval of the Company of any such
statement the Bank shall, to the extent permitted by law and provided the Bank
has met the standard of case in Section 12 hereof, be released, relieved and
discharged with respect to all matters and things set forth in such statement as
though such statement has been settled by the decree of a court of competent
jurisdiction in an action in which the Company and all persons having any equity
interest in the Company were parties.
(h) The Bank warrants to the Company that in its
opinion, after due inquiry, the established procedures to be followed by each of
its branches, each branch of a qualified U.S. bank, each eligible foreign
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<PAGE>
custodian and each eligible foreign securities depository holding Property for
the account of the Company pursuant to this Agreement afford protection for such
Property at least equal to that afforded by the Bank's established procedures
with respect to similar Property held by the Bank (and its securities
depositories) in Boston, MA.
(i) The Bank hereby warrants the Company that as of
the date of this Agreement it is maintaining a Bankers Blanket Bond and hereby
agrees to notify the Company in the event its Bankers Blanket Bond is canceled
or otherwise lapses.
5. Deposit Account Payments. Subject to the provisions of
Section 7, the Bank shall make, or cause its sub-custodian to make, payments of
cash credited to a Deposit Account only:
(a) in connection with the purchase of Securities and
the delivery of such Securities to, or the crediting of such Securities to the
particular Custody Account of, the Bank or its sub-custodian, each such payment
to be made at prices as confirmed by Instructions from Authorized Persons (as
defined in Section 10 hereof);
(b) for the purchase or redemption of shares of the
capital stock of the Company and the delivery to, or crediting to the account
of, the Bank or its sub-custodian of such shares to be so purchased or redeemed;
(c) for the payment of dividends, interest, taxes,
management or supervisory fees, capital distributions or operating expenses;
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(d) for the payments to be made in connection with
the conversion, exchange or surrender of Securities held in a Custody Account;
(e) for other proper corporate purposes; or
(f) upon the termination of this Custody Agreement as
hereinafter set forth. All payments of cash for a purpose permitted by
subsection (a), (b), (c) or (d) of this Section 5 will be made only upon receipt
by the Bank of Instructions from Authorized Persons which shall specify the
purpose for which the payment is to be made and the applicable subsection of
this Section 5. In the case of any payment to be made for the purpose permitted
by subsection (e) of this Section 5, the Bank must first receive a certified
copy of a resolution of the Board of Directors of the Company adequately
describing such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment shall be made.
Any payment pursuant to subsection (f) of this Section 5 will be made in
accordance with Section 17 hereof.
In the event that any payment made under this Section 5
exceeds the funds available in that Deposit Account, the Bank's foreign
sub-custodian may, in its discretion, advance funds in an amount equal to such
excess and such advance, shall be deemed an overdraft from the Bank's foreign
sub-custodian to that investment portfolio payable on demand, bearing interest
at the rate of interest customarily charges by the Bank's foreign
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subcustodian on similar overdrafts. If the Bank causes a Deposit Account to be
credited on the payable date for interest, dividends or redemptions, the Company
will promptly return to the Bank any such amount or property so credited upon
oral or written notification that neither the Bank nor its sub-custodian can
collect such amount or property in the ordinary course of business. The Bank or
its sub-custodian, as the case may be, shall have no duty or obligation to
institute legal proceeding or take any other action with respect to the
collection of such amount or property beyond its ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of
Section 7, Securities in a Custody Account will be transferred, exchanged or
delivered by the Bank or its sub-custodian only:
(a) upon sale of such Securities and receipt by the
Bank or its sub-custodian or payment therefor, each such payment to be in the
amount confirmed by Instruction from Authorized Persons;
(b) when such Securities are called, redeemed or
retired, or otherwise become payable. Notwithstanding the foregoing, the Bank or
its sub-custodian shall have no responsibility to the Company for monitoring or
ascertaining any call, redemption or retirement dates with respect to put bonds
which are owned by the Company and held by the Bank, its sub-custodian or their
respective nominees. Nor shall the Bank or its sub-custodian have any
responsibility or liability to the Company for any loss for any missed
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<PAGE>
payments or other defaults resulting therefrom unless the Bank or such
sub-custodian received timely notification from the Company specifying the time,
place and manner for the presentment of any such put bond held by the Bank, its
sub-custodian or their respective nominees. The Bank shall not be responsible
and assumes no liability to the Company for the accuracy or completeness of any
notification the Bank or any sub-custodian may furnish to the Company with
respect to put bonds;
(c) in exchange for or upon conversion into other
Securities alone or other Securities and cash pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to
their terms into other Securities;
(e) upon exercise of subscription, purchase or other
similar rights represented by such Securities;
(f) for the purpose of exchanging interim receipts or
temporary Securities for definitive Securities;
(g) for the purpose of redeeming in kind shares of
the capital stock of the Company against delivery to the Bank or its
sub-custodian of such shares to be redeemed;
(h) for other proper corporate purposes; or
(i) upon the termination of this Sub-Custodian
Agreement as hereinafter set forth. All transfers, exchanges or deliveries of
Securities in a Custody Account for a purpose permitted by either
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subsection (a), (b), (c), (d), (e) or (f) of this Section 6 will be made, except
as provided in Section 8 hereof, only upon receipt by the Bank of Instructions
from Authorized Persons which shall specify the purpose of the transfer,
exchange or delivery to be made and the applicable subsection of this Section 6.
In the case of any transfer or delivery to be made for the purpose permitted by
subsection (g) of this Section 6, the Bank must first receive Instructions from
Authorized Persons specifying the shares held by the Bank or its sub-custodian
to be so transferred or delivery of such shares shall be made. In the case of
any transfer, exchange or delivery to be made for the purpose permitted by
subsection (h) of this Section 6, the Bank must first receive a certified copy
of a resolution of the Board of Directors of the Company adequately describing
such transfer, exchange or delivery, declaring such purpose to be proper
corporate purpose, and naming the person or persons to whom delivery of such
Securities shall be made. Any transfer or delivery pursuant to subsection (i) of
this Section 6 will be made in accordance with Section 17 hereof.
7. Custody Account Procedures. With respect to any
transaction involving Securities held in or to be acquired for a Custody
Account, the Bank in its discretion may cause the Deposit Account to be credited
on the actual settlement date with the proceeds of any sale or exchange of
Securities from the particular Custody Account and to be debited on the actual
settlement date for the cost of Securities purchased or acquired for the
particular Custody Agreement.
-12-
<PAGE>
Settlement and payment for Securities received for, and
delivery of Securities out of, a Custody Account may be effected in accordance
with the customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering Securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for such
Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions
from Authorized Persons to the contrary, the Bank will, or will instruct its
sub-custodian, to:
(a) present for payment any Securities in a Custody
Account which are called, redeemed or retired or otherwise become payable and
all coupons and other income items which call for payment upon presentation to
the extent that the Bank or sub-custodian is aware of such opportunities for
payment, and hold cash received upon presentation of such Securities in
accordance with the provisions of Section 2, 3 and 4 hereof;
(b) in respect of Securities in a Custody Account,
execute in the name of the Company such ownership and other certificates as may
be required to obtain payments in respect thereof;
(c) exchange interim receipts or temporary Securities
in a Custody Account for definitive Securities;
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<PAGE>
(d) (if applicable) convert monies received with
respect to Securities or foreign issue into United States dollars or any other
currency necessary to effect any transaction involving the Securities whenever
it is practicable to do so through customary banking channels, using any method
or agency available, including, but not limited to, the facilities of the Bank,
its subsidiaries, affiliates or sub-custodians;
(e) (if applicable) appoint brokers and agents for
any transaction involving the Securities in a Custody Account; and
(f) reclaim taxes withheld by foreign issuers where
reclaim is possible provided that Bank has been provided with all documentation
it may require.
9. Instructions. As used in this Agreement, the term
"Instructions" means instructions of the Company received by the Bank, via
telephone, telex, TWX, facsimile transmission, bank wire or other telephonic or
electronic instruction system acceptable to the Bank which the Bank believes in
good faith to have been given by Authorized Persons or which are transmitted
with proper testing or authentication pursuant to terms and conditions which the
Bank may specify.
Any Instructions delivered to the Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the Company
will hold the Bank harmless for the Company's (i) failure to send such
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<PAGE>
confirmation in writing, or (ii) the failure of such confirmation to conform to
the telephone Instructions received. Unless otherwise expressly provided, all
Instructions shall continue in full force and effect until canceled or
superseded. If the Bank requires test arrangements, authentication methods or
other security devices to be used with respect to Instructions, any Instructions
given by the Company thereafter shall be given and processed in accordance with
such terms and conditions for the use of such arrangements, methods of devices
as the Bank may put into effect and modify from time to time. The Company shall
safeguard any test keys, identification codes or other security devices which
the Bank shall make available to them. The Bank may electronically record any
Instructions given by telephone, and any other telephone discussions, with
respect to a Custody Account.
10. Authorized Persons. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of the Company as have
been designated by a resolution of the Board of Directors of the Company, a
certified copy of which has been provided to the Bank, to act on behalf of the
Company in the performance of any acts which Authorized Persons may do under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from Authorized Persons that any such
officer or agent is no longer an Authorized Person.
-15-
<PAGE>
11. Nominees. Securities in a Custody Account which are
ordinarily held in registered form may be registered in the name of the Bank's
nominee or, as to any Securities in the possession of any entity other than the
Bank, in the name of such entity's nominee. The Company agrees to hold any such
nominee harmless from any liability as a holder of record of such Securities,
but not if such liability is a result of such nominee's negligence. The Bank may
without notice to the Company cause any such Securities to cease to be
registered in the name of any such nominee. In the event that any Securities
registered in the name of the Bank's nominee or held by one of its
sub-custodians and registered in the name of such sub-custodian's nominee are
called for partial redemption by the issuer of such Security, the Bank may
allot, or cause to be allotted, the called portion to the respective beneficial
holders of such class of security in any manner the Bank deems to be fair and
equitable.
12. Standard of Care.
(a) The Bank shall be obligated to perform only such
duties as are set forth in this Agreement or expressly contained in instructions
given to the Bank which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with
respect to its obligations under this
Agreement and the safekeeping of
Property. The Bank shall be liable to
the Company for any loss which shall
occur as the result of the failure of a
sub-custodian or any eligible foreign
securities depository to exercise
reasonable care and without negligence
with respect to the safekeeping of such
-16-
<PAGE>
Property to the same extent that the
Bank would be liable to the Company if
the Bank were holding such Property in
Boston, MA. In the event of any loss to
the Company by reason of the failure or
negligent conduct of the Bank or its
subcustodian or an eligible foreign
securities depository to exercise
reasonable care, the Bank shall be
liable to the Company only to the extent
of the Company's direct damages and
expenses, which damages, for purposes of
Property only shall, be determined based
on the market value of the Property
which is the subject of the loss at the
date of such loss and without reference
to any special conditions or
circumstances.
(ii) The Bank will not be responsible for any
act, omission, default or for the
solvency of any broker or agent (other
than as provided herein) which it or a
sub-custodian appoints and uses unless
such appointment and use were made or
done negligently or in bad faith.
(iii) The Bank shall be indemnified by, and
without liability to the Company for any
action taken or omitted by the Bank
whether pursuant to Instructions or
otherwise within the scope of this
Agreement if such act or omission was in
good faith and without negligence. In
performing its obligations under this
Agreement, the Bank may rely on the
genuineness of any document which it
believes in good faith and without
negligence to have been validly
executed.
(iv) The Company agrees to pay for and hold
the Bank harmless from any liability or
loss resulting from the imposition or
assessment of any taxes or other
governmental charges, and any related
expenses with respect to income from or
Property in such Custody Account and
-17-
<PAGE>
Deposit Account, assuming that the
Company has in good faith determined
that the Bank has properly performed its
duties hereunder.
(v) The Bank shall be entitled to rely, and
may act upon the advice or counsel (who
may be counsel for the Company) on all
matters and shall act reasonably and in
good faith pursuant to such advice.
Notwithstanding the foregoing, the Bank
shall remain liable for the performance
of its duties hereunder and such counsel
shall act reasonably and in good faith.
(vi) The Bank need not maintain any insurance
for the exclusive benefit of the
Company.
(vii) Without limiting the foregoing, the Bank
shall not be liable for any loss which
results from:
1) the general risk of investing, or
2) subject to Section 12(a)(i) hereof
investing or holding Property in a
particular country including, but not
limited to, losses resulting from
nationalization, expropriation or other
governmental actions; regulation of the
banking or securities industry; currency
restrictions, devaluations or
fluctuations; and market conditions
which prevent the orderly execution of
securities transactions or affect the
value of Property.
(viii) No party shall be liable to the other
for any loss due to forces beyond their
control including but not limited to
strikes or work stoppages, acts of war
or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation, or
acts of God.
(b) Consistent with and without limiting the first
-18-
<PAGE>
paragraph of this Section 12, it is specifically acknowledged that the Bank
shall have no duty or responsibility to:
(i) Question Instructions or make any
suggestions to Company or Authorized
Person regarding such Instructions;
(ii) Supervise or make recommendations with
respect to investments or the retention
of Securities;
(iii) Subject to Section 12(a)(ii) hereof,
evaluate or report to the Company or an
Authorized Person regarding the
financial condition of any broker, agent
or other party to which Securities are
delivered or payments are made pursuant
to this Agreement; or
(iv) Review or reconcile trade confirmations
received from brokers.
(c) The Bank shall provide to the Company, on an
annual basis, a report confirming that the arrangements hereunder remain in
compliance with the rules of the Securities and Exchange Commission governing
such arrangements.
13. Corporate Action. Whenever the Bank or its sub-custodian
receives information concerning the Securities which requires discretionary
action by the beneficial owner of the Securities (other than a proxy), such as
subscription rights, bonus, issues, stock repurchase plans and rights offerings,
or legal notices or other material intended to be transmitted to securities
holders ("Corporate Actions"), the Bank will give the Company notice of such
Corporate Actions to the extent that the Bank's central corporate actions
department has actual knowledge of a Corporate Action in time to notify its
-19-
<PAGE>
customers. The Bank shall use its best efforts to ensure that it receives all
available Corporate Action information, interprets such information concerning
the Securities and promptly reports such information to the Company.
When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank or its sub-custodians will
endeavor to obtain Instructions from the Company or its Authorized Person, but
if Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the applicable Deposit Account with the
proceeds and to take any other action it deems, in good faith, to be appropriate
in which case, provided it has met the standard of care in Section 12 hereof, it
shall be held harmless by the Company for any such action.
The Bank will deliver proxies to the Company or its designated
agent pursuant to special arrangements which may have been agreed to in writing
between the parties hereto. Such proxies shall be executed in the appropriate
nominee name relating to Securities in the Custody Account registered in the
name of such nominee but without indicating the manner in which such proxies are
-20-
<PAGE>
to be voted; and where bearer Securities are involved, proxies will be delivered
in accordance with instructions from Authorized Persons.
14. Fees and Expenses.
(a) The Company will compensate the Bank for its
services rendered under this Agreement in accordance with the fees set forth in
the Fee Schedule annexed hereto as Schedule A and incorporated herein. Such Fee
Schedule does not include out-of-pocket disbursements of the Bank for which the
Bank shall be entitled to bill separately. Out-of-pocket disbursements may
include only the items specified in the Schedule of Out-of-Pocket charges
annexed hereto as Schedule B and incorporated herein, which schedule may be
modified by the Bank if the Company consents in writing to the modifications.
(b) The parties hereto will agree upon the
compensation for acting as custodian for any portfolio of the Company hereafter
established and designated, and at the time that the Bank commences serving as
such for said portfolio, such agreement shall be reflected in a Fee Schedule for
that portfolio, dated and signed by an officer of each party hereto, which shall
be attached to Schedule A of this Agreement.
(c) Any compensation agreed to hereunder may be
adjusted from time to time by attaching to Schedule A of this Agreement a
revised Fee Schedule, dated and signed by an Authorized Officer or authorized
representative of each party hereto.
(d) The Bank will bill the Company as soon as
practicable after the end of each calendar month, and said billings will be
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<PAGE>
detailed in accordance with the Fee Schedule for the Company. The Company will
promptly pay to the Bank the amount of such billing.
(e) Subject to the Bank's proper performance of its
duties hereunder, the Company hereby agrees to hold the Bank harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expenses related thereto, which may be imposed, or assessed with respect to
the Custody Account with the Bank and also agrees to hold the Bank, its
sub-custodians, and their respective nominees harmless from any liability as a
record holder of Securities in such Custody Account. The Bank is authorized to
charge the account of the Company for such items and the Bank shall have a lien
on Securities in such Custody Account and on cash in such Deposit Account for
any amount owing to the Bank from time to time under this Agreement.
15. Effectiveness. This Agreement shall be effective on the
date first noted above.
16. Termination. This Agreement may be terminated by the
Company or the Bank by 60 days' written notice to the other, sent by registered
mail, provided that any termination by the Company shall be authorized by a
resolution of the Board of Directors of the Company, a certified copy of which
shall accompany such notice of termination, and provided further, that such
resolution shall specify the names of persons to whom the Bank shall deliver the
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<PAGE>
Securities in each Custody Account and to whom the cash in each Deposit Account
shall be paid. If notice of termination is given by the Bank, the Company shall,
within 60 days following the giving of such notice, deliver to the Bank a
certified copy of a resolution of the Board of Directors of the Company
specifying the names of the persons to whom the Bank shall deliver such
Securities and cash, after deducting therefrom any amounts which the Bank
determines to be owed to it under Section 14 hereof. If within 60 days following
the giving of a notice of termination by the Bank, the Bank does not receive
from the Company a certified copy of a resolution of the Board of Directors of
the Company specifying the names of the persons to whom the cash in each Deposit
Account shall be paid and to whom the Securities in each Custody Account shall
be delivered, the Bank, at its election, may deliver such Securities and pay
such cash to a bank or trust company doing business in the continental United
States and qualified as a custodian under the Investment Company Act of 1940, as
amended, to be held and disposed of pursuant to the provisions of this
Agreement, or to Authorized Persons, or may continue to hold such Securities and
cash until a certified copy of one or more resolutions as aforesaid is delivered
to the Bank. The obligations of the parties hereto regarding the use of
reasonable obligations of the parties hereto regarding the use of reasonable
care, indemnities and payment of fees and expenses shall survive the termination
of this Agreement.
-23-
<PAGE>
17. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification
signed by two of the present officers of the Company setting forth the names and
the signatures of the present Authorized Persons. The Company agrees to furnish
to the Bank a new certification in similar form in the event that any such
present Authorized Person ceases to be such an Authorized Person or in the event
that other or additional Authorized Persons are elected or appointed. Until such
new certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification
signed by two of the present officers of the Company setting forth the names and
the signatures of the present officers of the Company. The Company agrees to
furnish to the Bank a new certification in similar form in the event any such
present officer ceases to be an officer of the Trust or in the event that other
or additional officers are elected or appointed. Until such new certification
shall be received, the Bank shall be fully protected in acting under the
provisions of this Agreement upon the signature of the officers as set forth in
the last delivered certification.
(c) Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Bank, shall be
sufficiently given if addressed to the Bank and mailed or delivered to it at its
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<PAGE>
offices at One Boston Place, Boston, Massachusetts 02108 or at such other place
as the Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Company, shall be
sufficiently given if addressed to the Company and mailed or delivered to it at
its offices at its address stated on the first page hereof or at such other
place as the Company may from time to time designate in writing, with a copy to:
Alex Brown
135 East Baltimore Street
Baltimore, Maryland 21202
Attention: Edward J. Veilleux
(e) This Agreement may not be amended or modified in
any manner except by a written agreement executed by both parties with the same
formality as this Agreement, (i) authorized and approved by a vote of the Board
of Directors of the Company, including a majority of the members of the Board of
Directors of the Company who are not "interested persons" of the Company (as
defined in the 1940 Act), or (ii) authorized and approved by such other
procedures as may be permitted or required by the 1940 Act.
(f) This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the Company
without the written consent of the Bank, or by the Bank without the written
consent of the Company authorized or approved by a vote of the Board of
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<PAGE>
Directors of the Company, and any attempted assignment without such written
consent shall be null and void.
(g) This Agreement shall be construed in accordance
with the laws of The Commonwealth of Massachusetts.
(h) The captions of the Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(i) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives duly authorized as
of the day and year first above written.
FLAG INVESTORS INTERNATIONAL,
FUND, INC.
BY: _____________________________________
Name:
Title:
BOSTON SAFE DEPOSIT AND
TRUST COMPANY
By: _____________________________________
Name:
Title:
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<PAGE>
APPENDIX A
We, ___________________, Treasurer and ___________________,
Secretary, of Flag Investors International Fund, Inc., a corporation organized
under the laws of the State of Maryland (the "Company"), do hereby certify that:
The following individuals have been duly authorized as
Authorized Persons to give Oral Instructions and Written Instructions on behalf
of the Company and the signatures set forth opposite their respective names are
their true and correct signatures:
<PAGE>
APPENDIX B
We, ________________, President and _________________________,
Secretary of Flag Investors International Fund, Inc., a corporation organized
under the laws of the State of Maryland (the "Company"), do hereby certify that:
The following individuals serve in the following positions
with the Company and each individual has been duly elected or appointed to each
such position and qualified therefor in conformity with the Company's Articles
of Incorporation and By-Laws and the signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
- ---- -------- ---------
President ______________________________________
Treasurer ______________________________________
Secretary ______________________________________
Investment Officer ______________________________________
Investment Officer ______________________________________
Assistant Treasurer ______________________________________
Assistant Treasurer ______________________________________
Assistant Secretary ______________________________________
Assistant Secretary ______________________________________
Assistant Secretary ______________________________________
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<PAGE>
APPENDIX C - INDIVIDUALS WITH ACCESS
I, Lynne E. Larkin, Secretary of Boston Safe Deposit and Trust
Company, a Massachusetts corporation (the "Custodian"), do hereby certify that:
The following twelve named individuals have been duly
authorized by the Executive Committee of the Board of Directors of the Custodian
to have access to the assets of Flag Investors International Fund, Inc., a
corporation organized under the laws of the State of Maryland, held by the
Custodian in its capacity as such:
Diane Contardo
Marie F. Culleton
Karen D. DeVitto
Joan M. Donahue
Claire J. Lurie
Eleanor L. Millan
Cynthia E. Peluso
Geraldine E. Ryan
Mary A. Sannella
Daniel J. Smith
Merton E. Thompson, III
George H. Whitney, III
_____________________________________
Lynne E. Larkin
Boston Safe Deposit and Trust Company
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<PAGE>
Schedule A
FLAG INVESTORS
FEE SCHEDULE
CUSTODY SERVICES
I. Holding Charges
U.S. Assets
First $200 million of net assets 2.0 Basis Points
Next $300 million of net assets 1.0 Basis Points
Over $500 million of net assets 0.8 Basis Points
Plus a per security holding charge of $5.00 per month.
II. Transaction Charges
DTC and Fed Book Entry $10 per trade
PTC $17.50 per trade
U.S. Physical $30 per trade
Third Party FX $20 per FX
Paydowns $5 per paydown
III. Country Groupings
Fees Transactions
---- ------------
Euroclear/Cedel
Under 500 million 4 basis points $25
Over 500 million 3 basis points $25
Group I Markets
Under 500 million 6 basis points $25
Over 500 million 5 basis points $25
Group II Markets 12 basis points $35
Group III Markets 15 basis points $35
Group IV Market 35 basis points $75
Third Party FX Contracts $20
-30-
<PAGE>
Schedule A - continued
FLAG INVESTORS
FEE SCHEDULE
CUSTODY SERVICES
Group I Group II Group III Group IV
Markets Markets Markets Markets
- ------- ------- ------- -------
Canada Australia Austria Argentina
Germany Belgium Italy Brazil
Japan Denmark Malaysia Chile
United Kingdom Finland Portugal Cyprus
France Singapore Greece
Hong Kong South Korea India
Ireland Spain Indonesia
Mexico Thailand Israel
Netherlands Jordan
New Zealand Luxembourg
Norway Pakistan
Sweden Peru
Switzerland Philippines
Poland
Sri Lanka
Turkey
Venezuela
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<PAGE>
SCHEDULE B
The Company will pay to the Custodian as soon as possible
after the end of each month the out-of-pocket expenses specified on this
Schedule B and reasonably incurred in connection with the assets of the Company:
telephone
wire charges
courier services
stamp duty
registration
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<PAGE>
EX-99.B(8)(b)
================================================================================
BOSTON SAFE DEPOSIT AND TRUST COMPANY
FORM OF
Subcustodian Agreement
================================================================================
AGREEMENT made this ________ day of ________________, 1992,
between BOSTON SAFE DEPOSIT AND TRUST COMPANY (hereinafter referred to as
"Boston Safe"), a trust company having its principal office at One Boston Place,
Boston, Massachusetts, U.S.A., and (hereinafter referred to as the "Bank"), a
_________ organized under the laws of ____________ and having an office at
_________________.
WHEREAS, Boston Safe has been appointed to act as Trustee,
Custodian or Subcustodian of securities and monies on behalf of certain of its
customers including, without limitation, investment companies subject to the
U.S. Investment Company Act of 1940, as amended, and employee benefit plans
subject to the U.S. Employee Retirement Income Security Act of 1974, as amended;
and
WHEREAS, Boston Safety wishes to establish an account with the
bank to hold and maintain certain property which Boston Safe holds as custodian,
subcustodian or trustee; and
WHEREAS, Bank agrees to establish such Account and to hold and
maintain all property in the Account in accordance with the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, Boston Safe and Bank agree as follows:
I. The Account
A. Establishment of the Account
Boston Safe hereby establishes with the Bank an Account
which shall be composed of
(1) a Custody Account (including such sub-accounts as
Boston Safe may request from time to time), for any and all Securities (as
hereinafter defined) from time to time received by Bank therefor, and
(2) a Deposit Account (including such sub-accounts as
Boston Safe may request from time to time) for any and all Cash (as
hereinafter defined) from time to time received by Bank therefor.
-1-
<PAGE>
================================================================================
BOSTON SAFE DEPOSIT AND TRUST COMPANY
FORM OF
Subcustodian Agreement
================================================================================
Sub-accounts shall be established for each
investment company subject to the U.S. Investment Company Act of
1940 and each other customer of Boston Safe as requested by
Boston Safe.
B. Use of the Account
The Account shall be used exclusively to hold,
acquire, transfer or otherwise care for, on behalf of Boston Safe
as Trustee, Custodian or Subcustodian and the customers of Boston
Safe and not for Boston Safe's own interest, Securities and such
cash or cash equivalents as are transferred to Bank or as are
received in payment of any transfer of, or as payment on, or
interest on, or dividend from, any such Securities (herein
collectively called "Cash").
C. Transfer of Property in the Account
Beneficial ownership of the Securities and Cash in
the Account shall be freely transferable without payment of money
or value other than for custody and administration.
D. Ownership and Segregation of Property in the
Account
The ownership of the property in the Account,
whether Securities, Cash or both, and whether any such property
is held by Bank or in an Eligible Depository, shall be clearly
recorded on Bank's books as belonging to Boston Safe on behalf of
Boston Safe's customers, and not for Boston Safe's own interest
and, to the extent that Securities are physically held in the
Account, such Securities shall also be physically segregated from
the general assets of Bank, the assets of Boston Safe in its
individual capacity and the assets of Bank's other customers. In
addition, Bank shall maintain such other records as may be
necessary to identify the property hereunder as belonging to each
sub-account of the Account.
E. Registration of Securities in the Account
Securities which are eligible for deposit in a
depository as provided for in Paragraph III may be maintained
-2-
<PAGE>
================================================================================
BOSTON SAFE DEPOSIT AND TRUST COMPANY
FORM OF
Subcustodian Agreement
================================================================================
with the depository in an account for Bank's customers.
Securities which are not held in a depository and that are
ordinarily held in registered form will be registered in the name
of Bank, or in the name of Bank's nominee, unless alternate
Instructions are furnished by Boston Safe.
II. Services to Be Provided By the Bank
The services Bank will provide to Boston Safe and the
manner in which such services will be performed will be as set
forth below in this Agreement.
A. Services Performed Pursuant to Instructions
All transactions involving the Securities and Cash
in the Account shall be executed solely in accordance with Boston
Safe's Instructions as that term is defined in Paragraph VI
hereof, except those described in paragraph B below.
B. Services to Be Performed Without Instructions
Bank will, unless it receives Instructions from
Boston Safe to the contrary:
(1) Collect Cash
Promptly collect and receive all dividends,
income, principal, proceeds from transfer and other payments with
respect to property held in the Account, and present for payment
all Securities held in the Account which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, and credit
Cash receipts therefrom to the Deposit Account;
(2) Exchange Securities
Promptly exchange Securities where the
exchange is purely ministerial (including, without limitation,
the exchange of temporary Securities for those in definitive form
and the exchange of warrants, or other documents of entitlement
to Securities, for the Securities themselves);
-3-
<PAGE>
================================================================================
BOSTON SAFE DEPOSIT AND TRUST COMPANY
FORM OF
Subcustodian Agreement
================================================================================
(3) Sale of Rights and Fractional Interests
Whenever notification of a rights
entitlement or a fractional interest resulting from a rights issue, stock
dividend or stock split is received for the Account and such rights entitlement
or fractional interest bears an expiration date, Bank will promptly endeavor to
obtain Boston Safe's Instructions, but should these not be received in time for
Bank to take timely action, Bank is authorized to sell such rights entitlement
or fractional interest and to credit the Account;
(4) Execute Certificates
Execute in Boston Safe's name for the
Account, whenever Bank deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income from the
Securities held in the Account;
(5) Pay Taxes and Receive Refunds
To pay or cause to be paid from the Account
any and all taxes and levies in the nature of taxes imposed on the property in
the Account by any governmental authority, and to take all steps necessary to
obtain all tax exemptions, privileges or other benefits, including reclaiming
and recovering any foreign withholding tax, relating to the Account and to
execute any declarations, affidavits, or certificates of ownership which may be
necessary in connection therewith; and
(6) Prevent Losses
Take such steps as may be reasonably
necessary to secure or otherwise prevent the loss of rights
attached to or otherwise relating to property held in the
Account.
C. Additional Services
1. Transmission of Notices of Corporate Action
By such means as will permit Boston Safe to
take timely action with respect thereto, Bank will promptly notify Boston Safe
upon receiving notices or reports, or otherwise becoming aware, of corporate
action affecting Securities held in the Account (including, but not limited to,
-4-
<PAGE>
================================================================================
BOSTON SAFE DEPOSIT AND TRUST COMPANY
FORM OF
Subcustodian Agreement
================================================================================
calls for redemption, mergers, consolidations, reorganizations,
recapitalizations, tender offers, rights offerings,exchanges, subscriptions and
other offerings) and dividend, interest and other income payments relating to
such Securities.
2. Communications Regarding the Exercise of
Rights
Upon request by Boston Safe, Bank will
promptly deliver, or cause any Eligible Depository authorized and acting
hereunder to deliver, to Boston Safe all notices, provides, proxy soliciting
materials and other communications that call for voting or the exercise of
rights or other specific action (including material relative to legal
proceedings intended to be transmitted to security holders) relating to
Securities held in the Account to the extent received by Bank or said Eligible
Depository, such proxies or any voting instruments to be executed by the
registered holder of the Securities, but without indicating the manner in which
such Securities are to be voted.
3. Monitor Financial Service
In furtherance of its obligations under this
Agreement, Bank will monitor with respect to announcements and other information
respecting property held in the Account, including announcements and other
information with respect to corporate actions and dividend, interest and other
income payments.
III. Use of Securities Depository
Bank may, with the prior written approval of Boston Safe,
maintain all or any part of the Securities in the Account with a securities
depository or clearing agency which is incorporated or organized under the laws
of a country other than the United States of America and is supervised or
regulated by a government agency or regulatory authority in the foreign
jurisdiction having authority over such depositories or agencies, and which
operates (a) the central system for handling of securities or equivalent book
entries in ________, (b) a transnational system for the central handling of
securities or equivalent book entries, or (c) is the subject of an exemptive
order issued by the U.S. Securities and Exchange Commission with respect to the
requirements for a securities depository under Rule 17f-5 of the U.S. Investment
Company Act of 1940 (herein called "Eligible Depository"), provided, however,
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that while so maintained such Securities shall be subject only to the directions
of Bank, and that Bank's duties, obligations and responsibilities with regard to
such Securities shall be the same as if such Securities were held by Bank. In
seeking Boston Safe's approval with respect to an Eligible Depository, Bank
shall submit a copy of its agreement with such Eligible Depository to Boston
Safe.
IV. Claims Against Property in the Account
The property in the Account shall not be subject to any right,
charge, security interest, lien or claim of any kind (collectively "Charges") in
favor of Bank or any Eligible Depository or any creditor of Bank or of any
Eligible Depository, except a claim for payment for such property's safe custody
or administration in accordance with the terms of this Agreement. Bank will
immediately notify Boston Safe of any attempt by any party to assert any Charge
against the property held in the Account and shall take all lawful actions to
protect such property from such Charges until Boston Safe has had a reasonable
time to respond to such notice.
V. Qualification of Bank as Subcustodian
Bank represents and warrants that:
(A) it is a branch of a "qualified U.S. bank" or an "eligible
foreign custodian" as those terms are defined in Rule 17f-5 of the U.S.
Investment Company Act of 1940, a copy of which is attached hereto as Attachment
A (the "Rule"), and Bank shall immediately notify Boston Safe, in writing or by
other authorized means, in the event that there appears to be a substantial
likelihood that Bank will cease to qualify under the Rule as currently in effect
or as hereafter amended, or if in fact it does cease to qualify for any reason,
or
(B) it is the subject of an exemptive order issued by the U.S.
Securities and Exchange Commission, which order permits Boston Safe to employ
Bank notwithstanding the fact that Bank fails to qualify under the terms of the
Rule, and Bank shall immediately notify Boston Safe, in writing or by other
authorized means, if for any reason it is no longer covered by such exemptive
order.
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Upon receipt of any such notification required under
(A) or (B) of this Paragraph, Boston Safe may terminate this Agreement
immediately without prior notice to Bank.
VI. Definitions
A. Instructions
The term "Instructions" means (1) instructions in
writing signed by authorized individuals designated as such by Boston Safe, (2)
telex or tested telex instructions of Boston Safe, (3) other forms of
instructions in computer readable form as shall customarily be used for the
transmission of like information, and (4) such other forms of communication as
from time to time may be agreed upon by Boston Safe and Bank; which Bank
believes in good faith to have been given by Boston Safe or which are
transmitted with proper testing or authentication pursuant to terms and
conditions which Boston Safe may specify.
Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until cancelled or superseded. Bank
shall act in accordance with Instructions and shall not be liable for any act or
omission in respect of any Instruction except in the case of willful default,
negligence, fraud, bad faith, willful misconduct, or reckless disregard of
duties on the part of Bank. Bank in executing all Instructions will take
relevant action in accordance with accepted industry practice.
B. Account
The term "Account" means collectively the Custody
Account and its sub-accounts, and the Deposit Account and its sub-accounts.
C. Securities
The term "Securities" includes, without limitation,
stocks, shares, bonds, debentures, debt securities (convertible or
non-convertible), bullion, notes, or other obligations or securities and any
certificates, receipts, futures contracts, foreign exchange contracts, options,
warrants, script or other instruments representing rights to receive, purchase,
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
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VII. Miscellaneous Provisions
A. Statements Regarding the Account
Bank will supply Boston Safe with such statements
regarding the Account as Boston Safe may request, including the identity and
location of any Eligible Depository authorized and acting hereunder. In
addition, Bank will supply to Boston Safe an advice or notification of any
transfers of Securities to or from the Account indicating, as to Securities
acquired for the Account, if applicable, the Eligible Depository having physical
possession of such Securities.
B. Examination of Books and Records
Bank agrees that its books and records relating to
the Account and Bank's actions under this Agreement shall be open to the
physical, on-premises inspection and audit at reasonable times by officers of,
auditors employed by, or other representatives of Boston Safe (including to the
extent permitted under ________ law the independent public accountants for any
customer of Boston Safe whose property is being held hereunder) and such books
and records shall be retained for such period as shall be agreed upon by Boston
Safe and Bank. As Boston Safe may reasonably request from time to time, Bank
will furnish its auditor's reports on its system of internal controls, and Bank
will use its best efforts to obtain and furnish similar reports of any Eligible
Depository authorized and acting hereunder.
C. Standard of Care
Bank shall exercise reasonable care in holding,
maintaining, servicing and disposing of property under this Agreement, and in
fulfilling any other obligations hereunder, provided that Bank shall exercise at
least the same standard of care as it exercises over its own assets and the
degree of care expected of a prudent professional subcustodian for hire and
shall assume the burden of proving that it has exercised such care in its
maintenance of property held by Bank in the Account and Securities held in an
Eligible Depository shall not affect Bank's standard of care, and Bank will
remain as fully responsible for any loss or damage to such Securities as if it
itself had retained physical possession of them. Bank shall indemnify and hold
harmless Boston Safe, the Account and each of Boston Safe's customers to the
extent of each such customer's interest in the account from and against
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any loss, damage, cost, expense, liability or claim (including reasonable
attorneys' fees) arising out of or in connection with the improper or negligent
performance or the nonperformance of the duties of the Bank. Bank shall maintain
adequate policies of insurance with recognized insurance carriers in support of
Bank's indemnification and otherwise covering any loss of the property held
under this Agreement.
Subject to the foregoing, Bank shall be responsible
for complying with all provisions of the law of _______, or any other law,
applicable to Bank in connection with its duties hereunder, including (but not
limited to) the payment of all transfer or similar taxes and compliance with any
currency restrictions and securities laws.
D. Loss of Cash or Securities
Bank agrees that, in the event of any loss of
Securities or Cash in the Account, Bank will use its best efforts to ascertain
the circumstances relating to such loss and will promptly report the same to
Boston Safe.
E. Compensation of Bank
Boston Safe agrees to pay to Bank from time to time
such compensation for its services and such out-of-pocket or incidental expenses
of Bank pursuant to this Agreement as may be mutually agreed upon in writing
from time to time.
F. Termination
Except as otherwise provided herein, this Agreement
may be terminated by Bank or Boston Safe on 60 days' written notice to the other
party, sent by registered mail, provided that any such notice, whether given by
Bank or Boston Safe, shall be followed within 60 days by Instructions specifying
the names of the persons to whom Bank shall deliver the Securities in the
Account and to whom the Cash in the Account shall be paid. If within 60 days
following the giving of such notice of termination, Bank does not receive such
Instructions, Bank shall continue to hold such Securities and Cash subject to
this Agreement until such Instructions are given. The obligations of the parties
under Paragraphs VIIC and VIIE of this Agreement shall survive the termination
of this Agreement.
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G. Notices
Unless otherwise specified in this Agreement, all
notices and communications with respect to matters contemplated by this
Agreement shall be in writing, and delivered by mail, postage prepaid, or
confirmed telex, to the following addresses (or to such other address as either
party hereto may from time to time designate by notice duly given in accordance
with this Paragraph):
To Bank:
To Boston Safe:
H. Confidentiality
Bank and Boston Safe shall each use its best efforts
to maintain the confidentiality of the property in the Account and the
beneficial owners thereof, subject, however, to the provisions of any laws
requiring disclosure. In addition, Bank shall safeguard any test keys,
identification codes or other security devices which Boston Safe shall make
available to it.
I. Assignment
This Agreement shall not be assignable by either
party but shall bind any successor in interest of Boston Safe and Bank,
respectively.
J. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of Massachusetts except to the extent that such laws
are preempted by the laws of the United States of America. To the extent
inconsistent with this Agreement, Bank's rules and conditions regarding accounts
generally or custody accounts specifically shall not apply.
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IN WITNESS WHEREOF, the parties have hereto caused
this Agreement to be executed by their respective officers thereunto duly
authorized.
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By:
Title:
[NAME OF BANK]
By:
Title:
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EX-99.B(9)
MASTER SERVICES AGREEMENT
THIS AGREEMENT is made as of the first day of January, 1994 by
and between FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland corporation
(the "Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation
("ICC").
W I T N E S E T H:
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain ICC to provide certain
services on behalf of the Fund, as set forth in the Appendices to this
Agreement, and ICC is willing so to serve.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ICC to perform such
services and to serve such functions on behalf of the Fund as set forth in the
Appendices to this Agreement, on the terms set forth in this Agreement and the
Appendices hereto. ICC accepts such appointment and agrees to furnish such
services and serve such functions. The Fund may have currently outstanding one
or more series or classes of its shares of common stock, par value $.001 per
share ("Shares") and may from time to time hereafter issue separate series or
classes of its Shares or classify and reclassify Shares of any series or class,
and the appointment effected hereby shall constitute appointment for the
provision of services with respect to all existing series and classes and any
additional series and classes unless the parties shall otherwise agree in
writing.
2. Delivery of Documents. The Fund has furnished ICC with
copies properly certified or authenticated of the following documents and will
furnish ICC from time to time with copies, properly certified or authenticated,
of all amendments of or supplements thereto, if any:
(a) Resolutions of the Fund's Board of Directors
authorizing the appointment of ICC to act in such capacities on behalf of the
Fund as set forth in the Appendices to this Agreement, and the entering into of
this Agreement by the Fund;
(b) The Fund's Articles of Incorporation and all
amendments thereto (the "Charter") and the Fund's By-Laws and all amendments
thereto (the "By-Laws");
(c) The Fund's most recent Registration Statement on
Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") and
under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") relating to the Shares; and
(d) Copies of the Fund's most recent prospectus or
prospectuses, including amendments and supplements thereto (collectively, the
"Prospectus").
3. Services to be Provided; Fees. During the term of this
Agreement, ICC shall perform the services and act in such capacities on behalf
of the Fund as set forth herein and in the Appendices to this Agreement. For the
services performed by ICC for the Fund, the Fund will compensate ICC in such
amounts as may be agreed to from time to time by the parties in writing.
<PAGE>
4. Records. The books and records pertaining to the Fund which
are in the possession of ICC shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during ICC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by ICC to the Fund
or the Fund's authorized representative at the Fund's expense.
5. Cooperation With Accountants. In addition to any
obligations set forth in an Appendix hereto, ICC shall cooperate with the Fund's
independent accountants and shall take all reasonable actions in the performance
of its obligations under this Agreement to ensure that the necessary information
is made available to such accountants for the expression of such accountants'
opinion of the Fund's financial statements or otherwise, as such may be required
by the Fund from time to time.
6. Compliance with Governmental Rules and Regulations. The
Fund assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act, and any laws, rules and regulations of
governmental authorities having jurisdiction. ICC undertakes to comply with all
applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, the
Commodities Exchange Act (if applicable), and all laws, rules and regulations of
governmental authorities having jurisdiction with respect to the performance by
ICC of its duties under this Agreement, including the Appendices hereto.
7. Expenses.
(a) ICC shall bear all expenses of its employees and
overhead incurred in connection with its duties under this Agreement and shall
pay all salaries and fees of the Fund's directors and officers who are employees
of ICC.
(b) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor, administrator and distributor; the charges and
expenses of any registrar, any custodian or depositary appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
stock transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and corporate fees payable by the Fund
to federal, state or other governmental agencies; the cost and expense of
engraving or printing of stock certificates representing Shares; all costs and
expenses in connection with maintenance of registration of the Fund and its
Shares with the SEC and various states and other jurisdictions (including filing
fees and legal fees and disbursements of counsel); the expenses of printing,
including typesetting, and distributing prospectuses of the Fund and supplements
thereto to the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of directors or members of any
advisory board or committee other than such directors or members who are
"interested persons" of the Fund (as defined in the 1940 Act); all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in Shares or in cash; charges and expenses of any outside service used
for pricing of the Shares; charges and expenses of legal counsel, including
counsel to the directors of the Fund who are not "interested persons" of the
Fund (as defined in the 1940 Act), and of independent accountants, in connection
with any matter relating to the Fund; a portion of membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
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8. Liability; Indemnification. Neither ICC nor any of its
officers, directors or employees shall be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which this
Agreement, including the Appendices hereto, relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its or their part in
the performance of, or from reckless disregard by it or them of, its or their
obligations and duties under this Agreement. The Fund agrees to indemnify and
hold harmless ICC and its nominees from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the 1933 Act, the 1934 Act, the 1940 Act, and any state and
foreign securities and blue sky laws, all as currently in existence or as
amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which ICC takes or does or omits to take or do at the request or
on the direction of or in reliance on the advice of the Fund; provided, that
neither ICC nor any of its nominees shall be indemnified against any liability
to the Fund or to its shareholders (or any expenses incident to such liability)
arising out of ICC's own willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under this Agreement.
Notwithstanding anything else in this Agreement or any Appendix hereto to the
contrary, ICC shall have no liability to the Fund for any consequential, special
or indirect losses or damages which the Fund may incur or suffer as a
consequence of ICC's performance of the services provided in this Agreement or
any Appendix hereto.
9. Responsibility of ICC. ICC shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by ICC in writing. In the performance of its
duties hereunder, ICC shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits in
performing services provided for under this Agreement, but ICC shall not be
liable for any act or omission which does not constitute willful misfeasance,
bad faith or gross negligence on the part of ICC or reckless disregard by ICC of
its duties under this Agreement. Notwithstanding anything in this Agreement to
the contrary, ICC shall have no liability to the Fund for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of ICC's performance of the services provided hereunder.
10. Non-Exclusivity. The services of ICC to the Fund are not
to be deemed exclusive and ICC shall be free to render accounting or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that directors, officers or employees of
ICC may serve as directors or officers of the Fund, and that directors or
officers of the Fund may serve as directors, officers and employees of ICC to
the extent permitted by law; and that directors, officers and employees of I CC
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, directors
or officers of any other firm or corporation, including other investment
companies.
11. Notice. Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, to the Fund at
_______________________________________, Attention: ____________, or to ICC at
135 E. Baltimore Street, Baltimore, Maryland 21202, Attention: Mr. Edward J.
Veilleux.
12. Miscellaneous.
(a) This Agreement shall become effective as of the
date first above written and shall remain in force until terminated. This
Agreement, or any Appendix hereto, may be terminated at any time without the
payment of any penalty, by either party hereto on sixty (60) days' written
notice to the other party.
(b) This Agreement shall be construed in accordance
with the laws of the State of Maryland.
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(c) If any provisions of this Agreement shall be held
or made invalid in whole or in part, the other provisions of this Agreement
shall remain in force. Invalid provisions shall, in accordance with the intent
and purpose of this Agreement, be replaced by mutual consent of the parties with
such valid provisions which in their economic effect come as close as legally
possible to such invalid provisions.
(d) Except as otherwise specified in the Appendices
hereto, ICC shall be entitled to rely on any notice or communication believed by
it to be genuine and correct and to have been sent to it by or on behalf of the
Fund.
(e) ICC agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present, or potential shareholders, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where ICC may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund.
(f) Any part of this Agreement or any Appendix
attached hereto may be changed or waived only by an instrument in writing signed
by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
FLAG INVESTORS INTERNATIONAL FUND, INC.
By: /s/ Brian C. Nelson
____________________________________
Title: Vice President & Secretary
INVESTMENT COMPANY CAPITAL CORP.
By: /s/ Edward J. Veilleux
____________________________________
Title: President
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Appendix I
TRANSFER AGENCY SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
FLAG INVESTORS INTERNATIONAL FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is dated as of March 1, 1994 and is hereby incorporated
into and made a part of the Master Services Agreement (the "Master Services
Agreement") between FLAG INVESTORS INTERNATIONAL FUND, INC. and INVESTMENT
COMPANY CAPITAL CORP. Defined terms not otherwise defined herein shall have the
meaning set forth in the Master Services Agreement.
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall
mean any officer of the Fund and any other person, who is fully authorized by
the Fund's Board of Directors, to give Oral and Written Instructions on behalf
of the Fund. Such persons are listed in the Certificate attached hereto.
(b) "Oral Instructions". The term "Oral Instructions" shall
mean oral instructions received by ICC from an Authorized Person or from a
person reasonably believed by ICC to be an Authorized Person.
(c) "Written Instructions". The term "Written Instructions"
shall mean written instructions signed by two Authorized Persons and received by
ICC. The instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
2. Instructions. Unless otherwise provided in this Appendix, ICC shall
act only upon Oral and Written Instructions. ICC shall be entitled to rely upon
any Oral and Written Instruction it receives from an Authorized Person (or from
a person reasonably believed by ICC to be an Authorized Person) pursuant to this
Agreement. ICC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of the Fund's
Articles of Incorporation, the Master Services Agreement, or any Appendix
attached thereto, or of any vote, resolution or proceeding of the Fund's Board
of Directors or shareholders.
The Fund agrees to forward to ICC Written Instructions
confirming Oral Instructions so that ICC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by ICC shall
in no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. The Fund further agrees that ICC shall
incur no liability to the Fund in acting upon Oral or Written Instructions
provided such instructions reasonably appear to have been received from an
Authorized Person.
If ICC is in doubt as to any action it should or should not
take, ICC may request directions or advice, including Oral or Written
Instructions, from the Fund. ICC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which ICC believes,
in good faith, to be consistent with those directions, advice or Oral of Written
Instructions. Notwithstanding the foregoing, ICC shall have no obligation (i) to
seek such directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions unless,
under the terms of other provisions of this Appendix, the same is a condition of
ICC's properly taking or not taking such action.
<PAGE>
3. Description of Services.
(a) General Services To be Provided. ICC shall provide to the
Fund the following services on an ongoing basis:
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with
shareholders, if necessary, to complete or
correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in
conjunction with proxy solicitations; solicit
and tabulate proxies; receive and tabulate
proxy cards for meetings of the Fund's
shareholders;
(vi) Countersign securities;
(vii) Direct shareholder confirmation of activity;
(viii) Provide toll-free lines for direct shareholder
use, plus customer liaison staff for on-line
inquiry response;
(ix) Mail duplicate confirmation to broker-dealers
of their clients' activity, whether executed
through the broker-dealer or directly with ICC;
(x) Provide periodic shareholder lists and
statistics to the Fund;
(xi) Provide detail for underwriter/broker
confirmations;
(xii) Mail periodic year-end tax and statement
information;
(xiii) Provide timely notification to investment
advisor, accounting agent, and custodian of
Fund activity; and
(xiv) Perform other participating broker-dealer
shareholder services as may be agreed upon from
time to time.
(b) Purchase of Shares. ICC shall issue and credit an account
of an investor, in the manner described in the Prospectus, once it receives: (i)
a purchase order; (ii) proper information to establish a shareholder account;
and (iii) confirmation of receipt by, or crediting of funds for such order to,
the Fund's custodian.
(d) Redemption of Shares. ICC shall redeem the Fund's shares
only in accordance with the provisions of the Prospectus and each shareholder's
individual directions. Shares shall be redeemed at such time as the shareholder
tenders his or her shares and directs the method of redemption in accordance
with the terms set forth in the Prospectus. If securities are received in proper
form, Shares shall be redeemed before the funds are provided to ICC. When the
Fund provides ICC with funds, redemption proceeds will be wired (if requested)
or a redemption check issued. All redemption checks shall be drawn to
<PAGE>
the recordholder unless third party payment authorizations have been signed by
the recordholder and delivered to ICC.
(e) Dividends and Distributions. Upon receipt of certified
resolutions of the Fund's Board of Directors authorizing the declaration and
payment of dividends and distributions, ICC shall issue the dividends and
distributions in shares, or, upon shareholder election, pay such dividends and
distributions in cash. Such issuance or payment shall be made after deduction
and payment of the required amount of funds to be withheld in accordance with
any applicable tax laws or other laws, rules or regulations. The Fund's
shareholders shall receive tax forms and other information, or permissible
substitute notice, relating to dividends and distributions, paid by the Fund as
are required to be filed and mailed by applicable law, rule or regulation. ICC
shall maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends and distributions paid by the Fund to its
shareholders as required by tax or other law, rule or regulation.
(f) Shareholder Account Services. If authorized in the
Prospectus, ICC shall arrange for the following services, in accordance with the
applicable terms set forth in the Prospectus: (i) the issuance of Shares
obtained through any pre-authorized check plan and direct purchases through
broker wire orders, checks and applications; (ii) exchanges of shares of any
fund for Shares of the Fund with which the Fund has exchange privileges; (iii)
automatic redemption from an account where that shareholder participates in an
automatic redemption plan; and (iv) redemption of Shares from an account with a
check writing privilege.
(g) Communications to Shareholders. Upon timely Written
Instructions, ICC shall mail all communications by the Fund to its shareholders,
including, reports to shareholders, confirmations of purchases and sales of
Shares, monthly or quarterly statements, dividend and distribution notices, and
proxy material.
(h) Records. ICC shall maintain records of the accounts for
each shareholder showing the following information: (i) name, address and U.S.
Tax Identification or Social Security number; (ii) number and class of Shares
held and number and class of Shares for which certificates, if any, have been
issued, including certificate numbers and denominations; (iii) historical
information regarding the account of each shareholder, including dividends and
distributions paid and the date and price for all transactions on a
shareholder's account; (iv) any stop or restraining order placed against a
shareholder's account; (v) any correspondence relating to the current
maintenance of a shareholder's account; (vi) information with respect to
withholdings; and (vii) any information required in order for ICC to perform any
calculations contemplated or required by this Appendix or the Master Services
Agreement.
(i) Lost or Stolen Certificates. ICC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued upon: (i) the
shareholder's pledge of a lost instrument bond or such other appropriate
indemnity bond issued by a surety company approved by ICC; and (ii) completion
of a release and indemnification agreement signed by the shareholder to protect
ICC.
(j) Shareholder Inspection of Stock Records. Upon requests
from Fund shareholders to inspect stock records, ICC will notify the Fund and
the Fund shall deliver Oral or Written Instructions granting or denying each
such request. Unless ICC has acted contrary to the Fund's Instructions, the Fund
agrees to release ICC from any liability for refusal or permission for a
particular shareholder to inspect the Fund's shareholder records.
<PAGE>
(k) Withdrawal of Shares and Cancellation of Certificates.
Upon receipt of Written Instructions, ICC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
(l) Telephone Transactions. In accordance with the terms of
the Prospectus, ICC shall act upon shareholder requests made by telephone for
redemption or exchange of ISI shares; provided that (i) the shareholder has
authorized telephone transactions on the Fund's Account Application or otherwise
in writing, (ii) if the request is a redemption, the amount to be redeemed does
not exceed $50,000 and (iii) ICC has complied with the identification and other
security procedures required by the Fund in connection with telephone
transactions.
4. Fees. As compensation for the services performed by ICC for the Fund
pursuant to this Appendix, the Fund will pay to ICC such amounts as may be
agreed to from time to time by the parties in writing.
5. Delegation of Responsibilities. ICC may subcontract to any third
party all or any part of its obligations under this Appendix; provided that any
such subcontracting shall not relieve ICC of any of its obligations under this
Appendix. All subcontractors shall be paid by ICC.
<PAGE>
Appendix II
ACCOUNTING SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
FLAG INVESTORS INTERNATIONAL FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is dated as of April 10, 1995 and is hereby incorporated
into and made a part of the Master Services Agreement (the "Master Services
Agreement") between FLAG INVESTORS INTERNATIONAL FUND, INC. and INVESTMENT
COMPANY CAPITAL CORP. Defined terms not otherwise defined herein shall have the
meaning set forth in the Master Services Agreement.
1. Accounting Services to be Provided. ICC will perform the following
accounting functions if required:
(a) Journalize investment, capital share and income and expense;
(b) Verify investment buy/sell trade tickets when received from the
Fund's investment advisor and transmit trades to the Fund's custodian for proper
settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain tax lots for each security;
(e) Reconcile cash and investment balances with the custodian, and
provide the Fund's investment advisor with the beginning cash balance available
for investment purposes;
(f) Update the cash availability throughout the day as required by the
Fund's investment advisor;
(g) Post to and prepare the Fund's Statement of Net Assets and
Liabilities and the Statement of Operations;
(h) Calculate various contractual expenses (e.g., advisor and custody
fees);
(i) Monitor the expense accruals and notify Fund management of any
proposed adjustments;
(j) Control all disbursements from the Fund and authorize such
disbursements upon written instructions from the President or any other officer
of the Fund or the investment advisor;
(k) Calculate capital gains and losses;
(l) Determine the Fund's net income;
(m) Obtain security market quotes from independent pricing services
approved by the investment advisor, or if such quotes are unavailable, then
obtain such prices from the investment advisor, and in either case calculate the
market value of portfolio investments;
<PAGE>
(n) Transmit or mail a copy of the daily portfolio valuation to the
Fund's investment advisor;
(o) Compute the Fund's net asset value;
(p) As appropriate, compute the yields, total return, expense ratios,
portfolio turnover rate;
(q) Prepare a monthly financial statement, which will include the
following items:
* Schedule of Investments;
* Statement of Net Assets and Liabilities;
* Statement of Operations;
* Statement of Changes in Net Assets;
* Cash Statement;
* Schedule of Capital Gains and Losses;
(r) Assist in the preparation of:
* Federal and State Tax Returns;
* Excise Tax Returns;
* Annual, Semi-Annual and Quarterly Shareholder Reports;
* Rules 24 (e)-2 and 24 (f)-2 Notices;
* Annual and Semi-Annual Reports on Form N-SAR;
* Monthly and Quarterly Statistical Data Information Reports Sent
to Performance Tracking Companies;
(s) Assist in the Blue Sky and Federal registration and compliance
process;
(t) Assist in the review of registration statements; and
(u) Assist in monitoring compliance with Sub-Chapter M of the Internal
Revenue Code.
2. Records. ICC shall keep the following records: (a) all books and records with
respect to the Fund's books of account; and (b) records of the Fund's
securities transactions.
3. Liaison With Accountants. In addition to ICC's obligations relating to the
Fund's independent accountants set forth in the Master Services Agreement,
ICC shall act as liaison with the Fund's independent accountants and shall
provide account analyses, fiscal year summaries, and other audit related
schedules.
4. Compensation. For services performed by ICC pursuant to this Appendix, the
Fund will pay to ICC compensation for such services as the parties may agree
to from time to time in writing.
<PAGE>
EX-99.B(10)
[Letterhead of Morgan, Lewis & Bockius]
April 30, 1993
Flag Investors International Fund, Inc.
135 East Baltimore Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
We have acted as counsel for Flag Investors International
Fund, Inc. (the "Fund") in connection with the organization of the Fund. We have
examined and participated in the preparation of the Fund's Articles of
Incorporation, its By-Laws, its minutes of meetings and forms of unanimous
consent of its Board of Directors and Shareholders, and Post-Effective Amendment
No. 10 under the Securities Act of 1933 and Amendment No. 11 under the
Investment Company Act of 1940 to the Registration Statement on Form N-1A (No.
33-8479) (the "Registration Statement") filed with the Securities and Exchange
Commission on April 30, 1993 pursuant to which the Fund expressly adopted the
registration statement of Flag Investors International Trust as its own.
Based upon the foregoing and our consideration of such other
matters as we have deemed necessary, we are of the opinion that, assuming that
the Registration Statement is declared effective sixty days after filing, upon
such effectiveness, the shares of common stock of the Fund (the "Shares"), when
issued and paid for pursuant to the terms of the offering as described in the
Fund's Prospectus filed as part of such Registration Statement, will be legally
issued, fully paid and non-assessable.
We hereby consent to the inclusion of this opinion as Exhibit
10(b) to the Registration Statement.
Very truly yours,
/s/ Morgan, Lewis & Bockius
-------------------------------
<PAGE>
EX-99.B(11)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Flag Investors International Fund, Inc.
We hereby consent to the use in Post-Effective Amendment No. 16 to Registration
No. 33-28479 of our report dated December 6, 1995 appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the references to us under the captions "Financial Highlights" and "General
Information - Reports" appearing in the Prospectus, which also is a part of such
Registration Statement, and under the caption "Independent Auditors" appearing
in the Statement of Additional Information.
Deloitte & Touche LLP
Parsippany, New Jersey
February 23, 1996
<PAGE>
EX-99.B(13)
FLAG INVESTORS INTERNATIONAL TRUST
SUBSCRIPTION AGREEMENT
For and in consideration of the mutual agreements herein contained,
Alex. Brown Incorporated ("Alex. Brown") hereby agrees to purchase from Flag
Investors International Trust, a Massachusetts business trust, (the "Fund")
and the Fund agrees to sell 10,000 shares of the Fund's common shares,
without par value at a price of $10.00 per share, (the "Shares") upon the
terms and conditions set forth herein and as part of a public offering
pursuant to the terms and conditions of the Fund's Registration Statement
dated ___________, 1986.
Alex. Brown agrees to purchase such Shares and to pay the full
consideration therefor to the Fund upon demand.
Alex. Brown hereby confirms to the Fund its representations that it
is purchasing such Shares for investment purposes, with no present intention
of redeeming or reselling any portion thereof, and its agreement that in the
event it should dispose of any of such Shares, such transaction will be
effected by redeeming such Shares through the Fund.
ALEX. BROWN INCORPORATED
By: ________________________
Dated: As of _____________, 1986
Subscription Accepted:
FLAG INVESTORS INTERNATIONAL TRUST
By: ____________________________
Chairman
<PAGE>
EX-99.B(15)
FLAG INVESTORS INTERNATIONAL FUND, INC.
FORM OF DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of Flag Investors Bond Fund, Inc. (the "Fund").
Other capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) Alex. Brown may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to Alex.
Brown under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily net
assets of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown and
the Fund's Advisor are authorized to pay or cause to be paid on its behalf and
such payments shall not be included in the limitations contained in this Plan.
These expenses include: the fees of the Fund's Advisor and Alex. Brown; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
<PAGE>
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not interested persons (as defined in the
1940 Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. Alex. Brown will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and the
Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined in
the 1940 Act), cast in person at a meeting called for the purpose of voting on
this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually by
the vote of the Fund's Board of Directors and by the vote of a majority of the
Directors of the Fund who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Directors who are not interested persons (as defined in the 1940 Act) or by
the vote of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). This Plan may not be amended to
increase materially the amount of payments to be made without shareholder
approval, as set forth in (ii) above, and all amendments must be approved in the
manner set forth under (i) above.
<PAGE>
EX-99.B(16)
Schedule of Computation of Performance Quotations
(unaudited)
This Schedule is included to illustrate how total return will be calculated.
The examples presented use actual data for the Fund.
1. Total Return
(a) Average Annual Total Return Pursuant to SEC Rules
(i) One Year ERV
n
P(1+T) = one year ERV
P = initial payment = $1,000
ERV = $830
n = number of years = 1
T = total return = -17.04%
(ii) Five Year ERV
n
P(1+T) = Five Year ERV
P = initial payment = $1,000
ERV = $775
n = number of years = 5
T = average annual total return = -4.97%
(iii) ERV since effectiveness
n
P(1+T) = ERV since 11/18/86
P = initial payment = $1,000
ERV = $1,121
10.5
----
n = number of years = 5 12
T = average annual total return = 1.96%
<PAGE>
(b) Average Annual Total Return Pursuant to Non-
Standardized Computation
(i) One Year ERV
n
P(1+T) = one year ERV
P = initial investment = $10,000
One Year ERV = $8,620
n = number of years = 1
T = total return = -13.8%
(ii) Five Year ERV
n
P(1+T) = Five Year ERV
P = initial investment = $10,000
Five Year ERV = $10,621
n = number of years = 5
T = average annual total return = 1.21%
(iii) ERV since effectiveness
n
P(1+T) = ERV since 11/18/86
P = initial investment = $10,000
ERV = $11,481
11.5
----
n = number of years = 5 12
T = average annual total return = 2.35%
<PAGE>
Flag Investor International Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A and Flag Investors Class B
Adopted December 13, 1995
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of Flag Investors International
Fund, Inc. (the "Fund"), including a majority of the Directors of the Fund who
are not "interested persons" of the Fund (the "Independent Directors") pursuant
to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"),
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC-20813, IC-14695 and IC-15592, respectively) (collectively, the
"Order"). On December 13, 1995, the Fund elected to rely on Rule 18f-3 rather
than the Order, as permitted by Rule 18f-3 subject to certain conditions, and
created a multiple class distribution arrangement for two classes of shares of
the common stock of the Fund's one existing series (the "Series"). The multiple
class distribution arrangement will be effective on the date of effectiveness of
the post-effective amendment to the Fund's registration statement that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing (Flag Investors Class A and Flag Investors Class B) and
future classes of Fund shares. The Flag Investors Class A Shares have been
offered since the Fund's inception on November 18, 1986. The Flag Investors
Class B Shares have not yet been offered.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant to
Rule 18f-3, the Fund is required to create a written plan specifying all of the
differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors after the date hereof. Before any
material amendment of the Plan, the Fund is required to obtain a finding by a
majority of the Board, and a majority of the Independent Directors, that the
Plan as proposed to be amended, including the expense allocations, is in the
best interests of each class individually and the Fund as a whole.
<PAGE>
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly attributable to such class ("Class
Expenses")(1); and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
- ---------------------------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares,
(ii) stationery, printing, postage, and delivery expenses related to preparing
and distributing matrials such as shareholder reports, prospectuses, and
proxy statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to
a class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses
relating solely to a class of shares, and (ix) expenses incurred in connection
with shareholder meetings as a result of issues relating solely to a class
of shares.
<PAGE>
III. Expense Allocations
Expenses of each class created after the date hereof
must be allocated as follows: (i) distribution and shareholder
servicing payments associated with any Rule 12b-1 Plan or
servicing agreement, if any, relating to each respective class of
shares (including any costs relating to implementing such plans
or any amendment thereto) will be borne exclusively by that
class; (ii) any incremental transfer agency fees relating to a
particular class will be borne exclusively by that class; and
(iii) Class Expenses relating to a particular class will be borne
exclusively by that class.
The methodology and procedures for calculating the net
asset value and dividends and distributions of the various
classes of shares of the Fund and the proper allocation of income
and expenses among the various classes of shares of the Fund are
required to comply with the Fund's internal control structure
pursuant to applicable auditing standards, including Statement on
Auditing Standards No. 55, and to be reviewed as part of the
independent accountants' review of such internal control
structure. The independent accountants' report on the Fund's
system of internal controls required by Form N-SAR, Item 77B, is
not required to refer expressly to the procedures for calculating
the classes' net asset values.
<PAGE>
Date Approved: March 1993
Resolutions Renaming Flag Investors Shares
------------------------------------------
WHEREAS, the Board of Directors of Flag Investors International Trust,
Inc. has previously designated one class of the Fund's shares: "Flag
Investors International Trust Shares";
NOW THEREFORE BE IT RESOLVED, that such Shares be, and they hereby are,
further designated and classified as the Fund's Class A Shares.
Date Approved: March 1993
Resolutions Approving Flag Distribution Agreement and Plan
----------------------------------------------------------
RESOLVED, that the proposed Distribution Agreement, between the Fund
and Alex. Brown & Sons Incorporated for distribution of the Fund's shares be,
and the same hereby is, approved, in substantially the form presented to this
meeting, and that the appropriate officers of the Fund be, and they hereby are,
authorized and directed to enter into and execute such Distribution Agreement
with such modifications as said officers shall deem necessary or appropriate or
as may be requried to conform with the requirements of any applicable statute,
regulation or regulatory body;
FURTHER RESOLVED, that the proposed Plan of Distribution (the "Plan")
is determined to be reasonably likely to benefit the Fund and its shareholders;
FURTHER RESOLVED, that the expenditures contemplated by the Plan are
comparable to other expenditures for similar funds;
FURTHER RESOLVED, that the Plan be, and the same hereby is, approved;
FURTHER RESOLVED, that the proposed form of Sub-Distribution Agreement
be, and the same hereby is, approved.
<PAGE>
Date Approved: September 1994
Resolutions of Board Creating Flag Investors Class B Shares
-----------------------------------------------------------
FURTHER RESOLVED, that an additional class of shares of Flag Investors
International Fund, Inc. (the "Fund") be, and hereby is, classified and
designated as the "Flag Investors Class B Shares" (the "Class B Shares") and
that unissued shares of common stock, par value $.001 per share of the Fund be,
and the same hereby are, reclassified as follows:
TOTAL # OF SHARES CLASS A CLASS B UNCLASSIFIED
- ----------------- ------- ------- ------------
10,000,000 8,000,000 1,000,000 1,000,000
FURTHER RESOLVED, that the proper officers of the Fund be, and each of
them hereby is, authorized and directed to file articles supplementary to the
Fund's Articles of Incorporation and to take such other action as may be
necessary to designate and reclassify shares in the foregoing manner.
RESOLVED, that the Distribution Agreement between the Fund and Alex.
Brown & Sons Incorporated for the Class B shares be, and the same hereby is,
approved;
FURTHER RESOLVED, that at such time as the Fund offers the Class B
Shares, the Plan of Distribution presented at this meeting shall govern the
payment of 12b-1 fees by that class;
FURTHER RESOLVED, that the Plan of Distribution for the Class B Shares
of the Fund is determined to be reasonably likely to benefit the Fund and its
shareholders; and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to
expenditures for similar plans;
FURTHER RESOLVED, that said Plan be, and the same hereby is, approved.
<PAGE>
BY-LAWS
OF
FLAG INVESTORS INTERNATIONAL FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the
Corporation shall be in the city of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive
office of the Corporation shall be in the City of Baltimore, State of Maryland.
Section 3. Other Offices. The Corporation may have such other
offices in such places as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meetings. An annual meeting of the
shareholders of the Corporation shall not be required to be held in any year in
which shareholders are not required to elect directors under the Investment
Company Act of 1940, as amended (the "1940 Act") even if the Corporation is
holding a meeting of the shareholders for a purpose other than the election of
directors. If the Corporation is required by the 1940 Act to hold a meeting to
elect directors, the meeting shall be designated as the Annual Meeting of
shareholders for that year and shall be held within 120 days after the
occurrence of an event requiring the election of directors. The Board of
Directors may, in its discretion, hold a meeting to be designated as the Annual
Meeting of shareholders on a date within the month of March, in any year where
an election of directors by shareholders is not required under the 1940 Act. The
date of an Annual Meeting shall be set by appropriate resolution of the Board of
Directors, and shareholders shall vote on the election of directors and transact
any other business as may properly be brought before the Annual Meeting.
Section 2. Special Meetings. Special meetings of the
shareholders, unless otherwise provided by law or by the Charter of the
Corporation, may be called for any purpose or purposes by a majority of the
Board of Directors or the President, and shall be called by the President or
Secretary on the written request of the shareholders as provided by the Maryland
General Corporation Law. Such request shall state the purpose or purposes of the
proposed meeting and the matters proposed to be acted on at it; provided,
however, that unless requested by shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the shareholders held during the preceding twelve
(12) months.
<PAGE>
Section 3. Place of Meetings. The regular meeting, if any, and
any special meeting of the shareholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice; Shareholder
List. (a) Notice of the place, date and time of the holding of each regular and
special meeting of the shareholders and the purpose or purposes of the meeting
shall be given personally or by mail, not less then ten nor more than ninety
days before the date of such meeting, to each shareholder entitled to vote at
such meeting and to each other shareholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid. The notice of every
meeting of shareholders may be accompanied by a form of proxy approved by the
Board of Directors in favor of such actions or persons as the Board of Directors
may select.
(b) Notice of any meeting of shareholders shall be
deemed waived by any shareholder who shall attend such meeting in person or by
proxy, or who shall, either before or after the meeting, submit a signed waiver
of notice which is filed with the records of the meeting. A meeting of
shareholders convened on the date for which it was called may be adjourned from
time to time without further notice to a date not more than 120 days after the
original record date.
(c) At least five (5) days prior to each meeting of
shareholders, the officer or agent having charge of the share transfer books of
the Corporation shall make a complete list of shareholders entitled to vote at
such meeting, in alphabetical order with the address of and the number of shares
held by each shareholder.
Section 5. Organization. At each meeting of the shareholders,
the Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the shareholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
Section 6. Voting. (a) Except as otherwise provided by statute
or the Charter of the Corporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any meeting
of shareholders may authorize another person or persons to act for him by a
proxy signed by such shareholder or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is permitted by law.
Except as otherwise provided by statute, the Charter or the Corporation or these
By-Laws, any corporate action to be taken by vote of the shareholders shall be
authorized by a majority of the total votes cast at a meeting of shareholders at
which a quorum is present by the holders of shares present in person or
represented by proxy and entitled to vote on such action, except that a
plurality of all the votes cast at a meeting at which a quorum is present is
sufficient to elect a director.
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(c) If a vote shall be taken on any question other
than the election of directors, which shall be by written ballot, then unless
required by statute or these By-Laws, or determined by the chairman of the
meeting to be advisable, any such vote need not be by ballot. On a vote by
ballot, each ballot shall be signed by the shareholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
Section 7. Inspectors. The Board may, in advance of any
meeting of shareholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any shareholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except
as otherwise provided by statute any action required to be taken at any regular
or special meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of shareholders' meetings: (i) a unanimous written consent which sets
forth the action and is signed by each shareholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the
Charter of the Corporation, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the shareholders by law or by the Charter
of the Corporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number of
directors shall in no event be less than three (except for any period during
which shares of the corporation are held by fewer than three shareholders) nor
more than fifteen. Any vacancy created by an increase in directors may be filled
in accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior
<PAGE>
to the expiration of his term unless such director is specifically removed
pursuant to Section 5 of this Article III at the time of such decrease.
Directors need not be shareholders.
Section 3. Election and Term of Directors. Directors shall be
elected by majority vote of a quorum cast by written ballot at the regular
meeting of shareholders, if any, or at a special meeting held for that purpose.
The term of office of each director shall be from the time of his election and
qualification and until his successor shall have been elected and shall have
qualified, or until his death, or until he shall have resigned, or have been
removed as hereinafter provided in these By-Laws, or as otherwise provided by
statute or the Charter of the Corporation.
Section 4. Resignation. A Director of the Corporation may
resign at any time by giving written notice of his resignation to the Board or
the Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the
Corporation may be removed by the shareholders by a vote of a majority of the
votes entitled to be cast for the election of directors.
Section 6. Vacancies. The shareholders may elect a successor
to fill a vacancy on the Board of Directors which results from the removal of a
Director. A majority of the remaining Directors, whether or not sufficient to
constitute a quorum, may fill a vacancy on the Board of Directors which results
from any cause except an increase in the number of directors, and a majority of
the entire Board of Directors may fill a vacancy which results from an increase
in the number of Directors; provided, however, that no vacancies shall be filled
by action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the shareholders of the Corporation. In the event that at any
time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the shareholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of shareholders and until his successor is elected and qualifies. A
Director elected by the shareholders of the Corporation to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 7. Regular Meetings. Regular meetings of the Board may
be held with notice at such times and places as may be determined by the Board
of Directors.
Section 8. Special Meetings. Special meetings of the Board may
be called by the Chairman of the Board, the President, or by a majority of the
directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
Section 9. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter provided, in
which notice shall be stated the time and place of the meeting. Notice of each
such meeting shall be delivered to each director, either personally or by
telephone, telegraph, cable or wireless, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, or by commercial delivery services addressed to him at his residence or
usual place of business, at least three days before the day on which such
meeting is to be held.
Section 10. Waiver of Notice of Special Meetings. Notice of
any special meeting need not be given to any Director who shall, either before
or after the meeting, sign a written waiver of notice which is filed with
<PAGE>
the records of the meeting or who shall attend such meeting. Except as otherwise
specifically required by these By-Laws, a notice or waiver of notice of any
meeting need not state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than
three members, of the members of the entire Board shall be present in person at
any meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter of the Corporation, these By-Laws, the 1940 Act or other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board; provided, however, that the
approval of any contract with an investment adviser or principal underwriter, as
such terms are defined in the 1940 Act, which the Corporation enters into or any
renewal or amendment thereof, the approval of the fidelity bond required by the
1940 Act, and the selection of the Corporation's independent public accountants
shall each require the affirmative vote of a majority of the Directors who are
not interested persons, as defined in the 1940 Act, of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the Directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the Directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other Directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time
appoint one of its members as Chairman of the Board, who shall serve at the
pleasure of the Board and who shall perform and execute such duties and powers
as may be conferred upon or assigned to him by the Board or these By-Laws, but
who shall not by reason of performing and executing these duties and powers be
deemed an officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if one has been selected and is present,
shall preside. In the absence or inability of the Chairman of the Board to
preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside at it. The Secretary (or, in his absence or
inability to act, any person appointed by the Chairman) shall act as secretary
of the meeting and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee; provided, however, that for so long as
the Corporation is registered as an investment company under the 1940 Act, this
Section shall be inapplicable to the approval of any investment advisory
agreement, sub-advisory agreement or any plan (or agreement containing a plan)
pursuant to Rule 12b-1 under the 1940 Act.
Section 15. Meeting by Conference Telephone. Members of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time; provided, however, that for so
long as the Corporation is registered as an investment company under the 1940
Act, this Section shall be inapplicable to the approval of any investment
advisory agreement, sub-advisory agreement or any plan (or agreement containing
a plan) pursuant to Rule 12b-1 under the 1940 Act.
<PAGE>
Section 16. Compensation. Any Director, whether or not he is a
salaried officer, employee or agent of the Corporation, may be compensated for
his services as director or as a member of a committee, or as Chairman of the
Board or chairman of a committee, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the
directors may from time to time determine.
Section 17. Investment Policies. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the shareholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by
resolution adopted by a majority of the entire Board, designate an Executive
Committee, Compensation Committee, Audit Committee and Nomination Committee,
each of which shall consist of two or more of the directors of the Corporation,
which committee shall have and may exercise all the powers and authority of the
Board with respect to all matters other than as set forth in Section 3 of this
Article IV.
Section 2. Other Committees of the Board. The Board of
Directors may from time to time, by resolution adopted by a majority of the
whole Board, designate one or more other committees of the Board, each such
committee to consist of two or more directors and to have such powers and duties
as the Board of Directors may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No committee of the
Board shall have power or authority to:
(a) recommend to shareholders any action requiring
authorization of shareholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an
investment adviser or principal underwriter, as such terms are defined in the
1940 Act, or take any other action required to be taken by the Board of
Directors by the 1940 Act;
(c) amend or repeal these By-Laws or adopt new
By-Laws;
(d) declare dividends or other distributions or issue
capital stock of the Corporation; and
(e) approve any merger or share exchange which does
not require shareholder approval.
<PAGE>
Section 4. General. One-third, but not less than two members,
of the members of any committee shall be present in person at any meeting of
such committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence or disqualification of
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
All committees shall keep written minutes of their proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint such other officers,
agents and employees as it may deem necessary or proper. Any two or more offices
may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. The Board may from time to time elect or appoint, or
delegate to the President the power to appoint, such other officers (including
one or more Assistant Vice Presidents, one or more Assistant Treasurers and one
or more Assistant Secretaries) and such agents, as may be necessary or desirable
for the business of the Corporation. Such other officers and agents shall have
such duties and shall hold their offices for such terms as may be prescribed by
the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board, the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3. Removal of Officer. Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate such power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Such removal shall be without prejudice to such person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
<PAGE>
Section 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
Section 6. Bonds or other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief
executive officer of the Corporation. In the absence of the Chairman of the
Board (or if there be none), he shall preside at all meetings of the
shareholders and of the Board of Directors. He shall have, subject to the
control of the Board of Directors, general charge of the business and affairs of
the Corporation. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers.
Section 8. The Vice Presidents. In the absence or disability
of the President, or when so directed by the President, any Vice President
designated by the Board of Directors may perform any or all of the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of which the
President is a member or chairman by designation of ex-officio, except when
designated by the Board. Each Vice President shall perform such other duties as
from time to time may be conferred upon or assigned to him by the Board or the
President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible
for, all the funds and securities of the Corporation, except those which the
Corporation has placed in the custody of a bank or trust company or member of a
national securities exchange (as that term is defined in the Securities Exchange
Act of 1934) pursuant to a written agreement designating such bank or trust
company or member of a national securities exchange as custodian of the property
of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation;
(c) cause all moneys and other valuables to be
deposited to the credit of the Corporation;
(d) receive, and give receipts for, moneys due and
payable to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or authorized by the Board,
taking proper vouchers therefor; and
(f) in general, perform all the duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability
of the Treasurer, or when so directed by the Treasurer, any Assistant Treasurer
may perform any or all of the duties of the Treasurer, and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
<PAGE>
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings of the Board, the
committees of the Board and the shareholders;
(b) see that all notices are duly given in accordance
with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all ether
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 12. Assistant Secretaries. In the absence or
disability of the Secretary, or when so directed by the Secretary, any Assistant
Secretary may perform any or all of the duties of the Secretary, and, when so
acting, shall have all the powers of, and be subject to all restrictions upon,
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any Director.
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing the
number of shares of stock of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by the President, a
Vice President, or the Chairman of the Board, and countersigned by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 2. Rights of Inspection. There shall be kept at the
principal executive office, which shall be available for inspection during usual
business hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
shareholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months
<PAGE>
have been shareholders of record of at least five percent of the outstanding
stock of any class may inspect and copy during usual business hours the
Corporation's books of account and stock ledger in accordance with the General
Laws of the State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of
the Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of shareholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
Section 4. Transfer Agents and Registrars. The Corporation may
have one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
Section 5. Record Date and Closing of Transfer Books. The
Board of Directors may set a record date for the purpose of making any proper
determination with respect to shareholders, including which shareholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise ether rights. The record date may
not be more than ninety (90) days before the date on which the action requiring
the determination will be taken; and, in the case of a meeting of shareholders,
the record date shall be at least ten (10) days before the date of the meeting.
The Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates.
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss, theft, destruction or
mutilation of such certificate, and the Corporation may issue a new certificate
of stock in the place of any certificate theretofore issued by it which the
owner thereof shall allege to have been lost, stolen or destroyed or which shall
have been mutilated, and the Board may, in its discretion, require such owner or
his legal representatives to give to the Corporation a bond in such sum, limited
or unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 8. Stock Leaders. The Corporation shall not be
required to keep original or duplicate stock ledgers at its principal office in
the City of Baltimore, Maryland, but stock ledgers shall be kept at the
office(s) of the Transfer Agent(s) of the Corporation's capital stock.
<PAGE>
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing
the name of the Corporation, which shall be in the charge of the secretary. The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of
the Corporation shall end on the last day of October in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments
shall be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Money market
instruments, bonds or other securities at any time owned by the Corporation may
be held on behalf of the Corporation or sold, transferred or otherwise disposed
of subject to any limits imposed by these By-Laws, and pursuant to authorization
by the Board and, when so authorized to be held on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name
<PAGE>
of the Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the Board of Directors or the shareholders in
accordance with the provisions of the 1940 Act.
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the shareholders based upon each such examination shall be mailed to
each shareholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify
its directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify its officers to the same extent as its Directors and to such further
extent as is consistent with law. The Corporation shall indemnify its Directors
and officers who while serving as Directors or officers also serve at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the fullest extent consistent with
law. This Article XIII shall not protect any such person against any liability
to the Corporation or any shareholder thereof to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
<PAGE>
Section 2. Advances. Any current or former director or officer
of the Corporation claiming indemnification within the scope of this Article
XIII shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the Maryland
General Corporation Law, the Securities Act of 1933 (the "1933 Act") and the
1940 Act, as such statutes are now or hereafter in force.
Section 3. Procedure. On the request of any current or former
director or officer requesting indemnification or an advance under this Article
XIII, the Board of Directors shall determine, or cause to be determined, in a
manner consistent with the Maryland General Corporation Law, the 1933 Act and
the 1940 Act, as such statutes are now or hereafter in force, whether the
standards required by this Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this
Article XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested directors or otherwise, both as to action by a Director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Maryland Law. References to the Maryland General
Corporation Law in this Article XIII are to such law as from time to time
amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the shareholders or at any special meeting of the shareholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
<PAGE>
FOR ARTICLES OF INCORPORATION AS AMENDED AND SUPPLEMENTED TO DATE SEE EXHIBITS
EX-99.B(1)(a) THROUGH EX-99.B(1)(c) TO THIS REGISTRATION STATEMENT, AS FILED
HEREWITH
FLAG INVESTORS INTERNATIONAL FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS INTERNATIONAL FUND, INC. (the "Corporation") having
its principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law has adopted a
resolution designating the Corporation's classified ten million (10,000,000)
shares of Common Stock, par value $.001 per share, having an aggregate value of
$10,000.00, as follows: eight million (8,000,000) shares are designated "Flag
Investors International Fund Class A Shares" (the "Class A Shares"), one million
(1,000,000) shares are designated "Flag Investors International Fund Class B
Shares" (the "Class B Shares"), and one million (1,000,000) shares remain
undesignated.
SECOND: Immediately before the designation of the Class B
Shares pursuant to these Articles Supplementary, the Corporation was authorized
to issue ten million (10,000,000) shares of Common Stock, par value $.001 per
share, having an aggregate par value of $10,000.00, of which eight million
(8,000,000) shares were designated "Flag Investors International Fund Class A
Shares" (the "Class A Shares") and two million (2,000,000) shares remained
undesignated.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors International Fund, Inc.
has caused these Articles Supplementary to be executed by one of its Vice
Presidents and its corporate seal to be affixed and attested by its Secretary on
this 31st day of December, 1994.
[CORPORATE SEAL]
FLAG INVESTORS INTERNATIONAL FUND, INC.
By: /s/ Edward J. Veilleux
--------------------------
Vice President
Attest: /s/ Brian C. Nelson
---------------------
Secretary
The undersigned, Vice President of FLAG INVESTORS
INTERNATIONAL FUND, INC., who executed on behalf of said corporation the
foregoing Articles Supplementary to the Articles of Incorporation of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles Supplementary to the Articles of
Incorporation to be the corporate act of said corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Edward J. Veilleux
-------------------------
Edward J. Veilleux
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 16th day of August, 1993, by and
between FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the
exclusive distributor of the shares of Common Stock of the Fund (the "Shares")
and Alex. Brown wishes to become the distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the
payments contemplated by paragraph 5 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor
for the Shares for the period and on the terms set forth in this Agreement. The
Fund may from time to time issue separate series or classes of its shares of
common stock, or classify and reclassify shares of such series as classes, and
the appointment effected hereby shall constitute appointment for the
distribution of such additional series and classes unless the parties shall
otherwise agree in writing. Alex. Brown accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with
the Secretary of State of Maryland on March 16, 1993 and all amendments thereto
(the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
(d) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC") on September 3,
1986;
<PAGE>
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-8479)
and under the 1940 Act as filed with the SEC on September 3, 1986 relating to
the Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares;
(c) provide the Board of Directors of the Fund with
quarterly reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown and securities
dealers who have valid Sub-Distribution Agreements with Alex. Brown.
Notwithstanding the provisions of the foregoing sentence, the Fund may issue its
Shares at their net asset value to any shareholder of the Fund purchasing such
Shares with dividends or other cash distributions received from the Fund
pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund. The Board of Directors may agree, on behalf of the Fund, to amendments to
this Agreement, provided that the Fund must obtain prior approval of the
shareholders of the Fund to any amendment which would result in a material
increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any amendments and supplements
thereto;
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<PAGE>
(c) the provisions of the Articles of Incorporation
of the Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and
State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the extent that such
services are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any
promotional or sales literature used by Alex. Brown or furnished by Alex. Brown
to purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing;
(c) the Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to Federal, State or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and the Shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel) except as provided in subparagraph (a) above, the
expenses of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) or members of any advisory board or committee; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
Shares or in cash; charges and expenses of any outside service used for pricing
of the Shares; charges and expenses of legal counsel, including counsel to the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act), and of independent accountants, in connection with any matter relating to
the Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. Alex. Brown may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
-18-
<PAGE>
Such services will be performed on behalf of the Fund and Alex. Brown's charge
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund or obligate Alex. Brown to pay or assume any similar
Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation
at the annual rate of .25% of the average daily net assets of the Fund. Except
as hereinafter set forth, continuing compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculations of the fees as set forth above. Payment of
Alex. Brown's compensation for the preceding month shall be made as promptly as
possible.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into
Sub-Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that directors,
officers or employees of Alex. Brown may serve as directors or officers of the
Fund, and that directors or officers of the Fund may serve as directors,
officers and employees of Alex. Brown to the extent permitted by law; and that
directors, officers and employees of Alex. Brown are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, directors or officers of any other firm or
corporation, including other investment companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act), and
-19-
<PAGE>
(b) by the affirmative vote of a majority of the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) and do not have a financial interest in the operation of this Agreement, by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the operation
of this Agreement, (iii) by vote of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act) or (iv) by Alex. Brown. The notice
provided for herein may be waived by each party. This Agreement shall
automatically terminate in the event of its assignment (as the term is defined
in the 1940 Act).
15. Liability. In the performance of its duties hereunder,
Alex. Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any act
or omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, it is agreed that the address of both
Alex. Brown and the Fund for this purpose shall be 135 East Baltimore Street,
Baltimore, Maryland 21202.
17. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] FLAG INVESTORS INTERNATIONAL FUND, INC.
Attest: /s/ Brian C. Nelson By /s/ Edward J. Veilleux
-------------------- -----------------------
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest: /s/ Brian C. Nelson By /s/ Richard T. Hale
-------------------- ------------------------
-20-
<PAGE>
Exhibit A
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor (the "Distributor") of the Flag Investors
Funds (collectively, the "Funds", individually a "Fund"). The Funds are open-end
investment companies registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" used herein refers to the
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a
Participating Dealer and as such are authorized (i) to accept orders for the
purchase of Shares and to transmit to the Funds such orders and the payment made
therefore, (ii) to accept orders for the redemption of Shares and to transmit to
the Funds such orders and all additional material, including any certificates
for Shares, as may be required to complete the redemption and (iii) to assist
shareholders with the foregoing and other matters relating to their investments
in each Fund, in each case subject to the terms and conditions set forth in the
Prospectus of each Fund. You are to review each Share purchase or redemption
order submitted through you or with your assistance for completeness and
accuracy. You further agree to undertake from time to time certain shareholder
servicing activities for customers of yours who have purchased Shares and who
use your facilities to communicate with the Funds or to effect redemptions or
additional purchases of Shares.
2. Limitation of Authority. No person is authorized to make
any representations concerning the Funds or the Shares except those contained in
the Prospectus of each Fund and in such printed information as the Distributor
may subsequently prepare. No person is authorized to distribute any sales
material relating to any Fund without the prior written approval of the
Distributor.
3. Compensation. As compensation for such services, you will
look solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and
<PAGE>
service fee (as we may determine from time to time in writing) computed as a
percentage of the average daily net assets maintained with each Fund during the
preceding period by shareholders who purchase their shares through you or with
your assistance, provided that said assets are at least $250,000 for each Fund
for which you are to be compensated, and provided that in all cases your name is
transmitted with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the
provisions contained in the Securities Act governing the distribution of
prospectuses to persons to whom you offer Shares. You further agree to deliver,
upon our request, copies of any amended Prospectus of the relevant Fund to
purchasers whose Shares you are holding as record owner and to deliver to such
persons copies of the annual and interim reports and proxy solicitation
materials of the Funds. We agree to furnish to you as many copies of each
Prospectus, annual and interim reports and proxy solicitation materials as you
may reasonably request.
5. Qualification to Act. You represent that you are a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"). Your expulsion or suspension from the NASD will automatically terminate
this Agreement on the effective date of such expulsion or suspension. You agree
that you will not offer Shares to persons in any jurisdiction in which you may
not lawfully make such offer due to the fact that you have not registered under,
or are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD, including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of
Shares under the Securities Act. The Funds intend to register or qualify in
certain states where registration or qualification is required. We will inform
you as to the states or other jurisdictions in which we believe the Shares have
been qualified for sale under, or are exempt from the requirements of, the
respective securities laws of such states. You agree that you will offer Shares
to your customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full
authority to take such action as it deems advisable in respect of all matters
pertaining to the offering of its Shares, including the right not to accept any
order for the purchase of Shares.
8. Record Keeping. You will (i) maintain all records required
by law to be kept by you relating to transactions in Shares and, upon request by
any Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to
you except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
-2-
<PAGE>
without negligence. Nothing contained in this Agreement is intended to operate
as a waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either
party, without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to
the above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
-----------------------------------
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
-3-
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ___ day of _____________, 1993, by
and between FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland corporation (the
"Fund"), and Alex. Brown & Sons Incorporated, a Maryland corporation ("Alex.
Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as the
exclusive distributor of the class of shares of the Fund known as the Flag
Investors Class B Shares (the "Shares") and Alex. Brown wishes to become the
distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the
payments contemplated by paragraph 9 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises, and of other
good and valuable consideration by each of the parties hereto to the other party
paid, and of the agreements, covenants and obligations herein contained, the
parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as the exclusive
distributor of the Shares for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies, properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with
the Secretary of State of Maryland on March 16, 1993 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of Alex. Brown as the Fund's Distributor of the
Shares and approving this Agreement;
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(d) The Fund's notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC") on September 3,
1986;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-8479)
and under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on September 3, 1986 relating to the Fund and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such prospectus and all
amendments and supplements thereto are herein called "Prospectus").
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown agrees that all
solicitations for subscriptions for Shares shall be made in accordance with
Fund's Articles of Incorporation and By- Laws, and its then current Registration
Statement, Prospectus and Statement of Additional Information, and shall not at
any time or in any manner violate any provisions of the laws of the United
States or of any state or other jurisdiction which solicitations are then being
made. In carrying out its obligations hereunder, Alex. Brown shall undertake the
following actions and responsibilities:
(a) receive orders for purchase of Shares, accept or
reject such orders on behalf of the Fund in accordance with the currently
effective Prospectus for the Shares and the Fund's Statement of Additional
Information and transmit such orders as are so accepted to the Fund's transfer
agent as promptly as possible;
(b) receive requests for redemption from holders of
Shares and transmit such redemption requests to the Fund's transfer agent as
promptly as possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least
quarterly, a written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including an
explanation of the purposes for which such expenditures were made; and
(e) take, on behalf of the Fund, all actions which
appear to the Fund necessary to carry into effect the distribution of the Shares
and perform such other administrative duties with respect to the Shares as the
Fund's Board of Directors may require.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown and securities
dealers who have valid Sub-Distribution Agreements with Alex. Brown.
Notwithstanding the provisions of the foregoing sentence the Fund may issue its
Shares at their net asset value to any shareholder of the Fund purchasing such
Shares with dividends or other cash distributions received from the Fund
pursuant to an offer made to all shareholders.
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<PAGE>
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund. The Board of Directors may agree, on behalf of the Fund, to amendments to
this Agreement, provided that any such amendment that would provide for a
material increase in the amount expended by the Fund must be approved by the
shareholders of the Fund before becoming effective.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation
of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of state and
federal law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the extent that such
services are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any
promotional or sales literature used by Alex. Brown or furnished by Alex. Brown
to purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering;
(c) the Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor; the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and its shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); the expenses of printing, including typesetting, and
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<PAGE>
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or members of any advisory board or
committee other than such directors or member who are "interested persons" of
the Fund (as defined in Section 2(a)(19) of the 1940 Act); all expenses incident
to the payment of any dividend, distribution, withdrawal or redemption, whether
in Shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's Shares; charges and expenses of legal counsel, including
counsel to the directors of the Fund who are not "interested persons" of the
Fund (as defined in Section 2(a)(19) of the 1940 Act), and of independent
accountants, in connection with any matter relating to the Fund; a portion of
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. Alex. Brown may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and Alex. Brown's charges
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund or obligate Alex. Brown to pay or assume any similar
Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation
at the annual rate of .60% of the average daily net assets of the Shares of the
Fund. Except as hereinafter set forth, continuing compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month
compensation for the part of the month during which this Agreement is in effect
shall be prorated in a manner consistent with the calculations of the fees as
set forth above.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
11. Sub-Distribution Agreements. Alex. Brown may enter into
sub-distribution agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
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<PAGE>
12. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of
Alex. Brown to the extent permitted by law; and that officers or directors of
Alex. Brown are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers or directors of any other firm or corporation, including other
investment companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the
directors who are not "interested persons" of the Fund (as defined in Section
2(a)(19) of the 1940 Act) and who do not have a financial interest in the
operation of this Agreement, by votes cast in person at a meeting specifically
called for such purpose.
14. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in Section 2(a)(19) of the 1940 Act) and who do not have a financial
interest in the operation of this Agreement, (iii) by vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the 1940
Act) or (iv) by Alex. Brown. The notice provided for herein may be waived by
each party. This Agreement shall automatically terminate in the event of its
assignment as defined in Section 2(a)(4) of the 1940 Act.
15. Liability. In the performance of its duties hereunder,
Alex. Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any act
or omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other parties at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, the addresses of the Fund and Alex.
Brown are as follows:
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If to Alex. Brown:
Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, MD 21202
If to the Fund:
Flag Investors International Fund, Inc.
135 E. Baltimore Avenue
Baltimore, Maryland 21202
17. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof if any, by the United States courts or in the absence of
any controlling decision of any such court, by rules, regulations or orders of
the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] FLAG INVESTORS INTERNATIONAL
FUND, INC.
Attest:__________________ By _____________________________
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest:__________________ By _____________________________
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<PAGE>
EXHIBIT "A"
FLAG INVESTORS FAMILY OF FUNDS - CLASS B SHARES
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor (the "Distributor") of the Flag Investors
Funds - Class B Shares (collectively, the "Funds", individually a "Fund"). The
Funds are open-end investment companies registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"). The Funds offer their
Flag Investors Class B Shares ("Shares") to the public in accordance with the
terms and conditions contained in the Prospectus of each Fund. The term
"Prospectus" used herein refers to the prospectus on file with the Securities
and Exchange Commission which is part of the registration statement of each Fund
under the Securities Act of 1933 (the "Securities Act"). In connection with the
foregoing you may serve as a participating dealer (and, therefore, accept orders
for the purchase or redemption of Shares, respond to shareholder inquiries and
perform other related functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a
Participating Dealer and as such are authorized (i) to accept orders for the
purchase of Shares and to transmit to the Funds such orders and the payment made
therefore, (ii) to accept orders for the redemption of Shares and to transmit to
the Funds such orders and all additional material, including any certificates
for Shares, as may be required to complete the redemption and (iii) to assist
shareholders with the foregoing and other matters relating to their investments
in each Fund, in each case subject to the terms and conditions set forth in the
Prospectus of each Fund. You are to review each Share purchase or redemption
order submitted through you or with your assistance for completeness and
accuracy. You further agree to undertake from time to time certain shareholder
servicing activities for customers of yours who have purchased Shares and who
use your facilities to communicate with the Funds or to effect redemptions or
additional purchases of Shares.
2. Limitation of Authority. No person is authorized to make
any representations concerning the Funds or the Shares except those contained in
the Prospectus of each Fund and in such printed information as the Distributor
may subsequently prepare. No person is authorized to distribute any sales
material relating to any Fund without the prior written approval of the
Distributor.
3. Compensation. As compensation for such services, you will
look solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $250,000 for each Fund for which you are
to be compensated, and provided that in all cases your name is transmitted with
each shareholder's purchase order.
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<PAGE>
4. Prospectus and Reports. You agree to comply with the
provisions contained in the Securities Act governing the distribution of
prospectuses to persons to whom you offer Shares. You further agree to deliver,
upon our request, copies of any amended Prospectus of the relevant Fund to
purchasers whose Shares you are holding as record owner and to deliver to such
persons copies of the annual and interim reports and proxy solicitation
materials of the Funds. We agree to furnish to you as many copies of each
Prospectus, annual and interim reports and proxy solicitation materials as you
may reasonably request.
5. Qualification to Act. You represent that you
are a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"). Your expulsion or suspension from the NASD will automatically
terminate this Agreement on the effective date of such expulsion or suspension.
You agree that you will not offer Shares to persons in any jurisdiction in which
you may not lawfully make such offer due to the fact that you have not
registered under, or are not exempt from, the applicable registration or
licensing requirements of such jurisdiction. You agree that in performing the
services under this Agreement, you at all times will comply with the Rules of
Fair Practice of the NASD, including, without limitation, the provisions of
Section 26 of such Rules. You agree that you will not combine customer orders to
reach breakpoints in commissions for any purposes whatsoever unless authorized
by the then current Prospectus in respect of Shares of a particular class or by
us in writing. You also agree that you will place orders immediately upon their
receipt and will not withhold any order so as to profit therefrom. In
determining the amount payable to you hereunder, we reserve the right to exclude
any sales which we reasonably determine are not made in accordance with the
terms of the Prospectus and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of
Shares under the Securities Act. The Funds intend to register or qualify in
certain states where registration or qualification is required. We will inform
you as to the states or other jurisdictions in which we believe the Shares have
been qualified for sale under, or are exempt from the requirements of, the
respective securities laws of such states. You agree that you will offer Shares
to your customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full
authority to take such action as it deems advisable in respect of all matters
pertaining to the offering of its Shares, including the right not to accept any
order for the purchase of Shares.
8. Record Keeping. You will (i) maintain all records required
by law to be kept by you relating to transactions in Shares and, upon request by
any Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to
you except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this Agreement is intended to operate
as a waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either
party, without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any
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<PAGE>
time for any particular Fund without penalty by the vote of a majority of the
members of the Board of Directors or Trustees of such Fund who are not
"interested persons" (as defined in the Investment Company Act) and who have no
direct or indirect financial interest in the operation of the Distribution
Agreement between such Fund and the Distributor or by the vote of a majority of
the outstanding voting securities of the Fund.
11. Communications. All communications to us should be sent to
the above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
---------------------------------
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
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<PAGE>
(Class A Shares)
FLAG INVESTORS INTERNATIONAL FUND, INC.
FORM OF DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of Flag Investors International Fund, Inc. (the
"Fund"). Other capitalized terms herein have the meaning given to them in the
Fund's prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub- Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) Alex. Brown may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to Alex.
Brown under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily net
assets of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown and
the Fund's Advisor are authorized to pay or cause to be paid on its behalf and
such payments shall not be included in the limitations contained in this Plan.
These expenses include: the fees of the Fund's Advisor and Alex. Brown; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for
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<PAGE>
pricing of the Fund's shares; charges and expenses of legal counsel, including
counsel to the Directors of the Fund who are not interested persons (as defined
in the 1940 Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. Alex. Brown will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and the
Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined in
the 1940 Act), cast in person at a meeting called for the purpose of voting on
this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually by
the vote of the Fund's Board of Directors and by the vote of a majority of the
Directors of the Fund who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Directors who are not interested persons (as defined in the 1940 Act) or by
the vote of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). This Plan may not be amended to
increase materially the amount of payments to be made without shareholder
approval, as set forth in (ii) above, and all amendments must be approved in the
manner set forth under (i) above.
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<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
FLAG INVESTORS CLASS B SHARES
FORM OF
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of the Flag Investors Class B Shares (the "Shares") of Flag
Investors International Fund, Inc. (the "Fund"). Other capitalized terms herein
have the meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated ("Alex.
Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) Alex. Brown may make payments in any amount, provided that
the total amount of all payments made during a fiscal year of the Fund do not
exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown under the
Distribution Agreement with respect to distribution of the Shares which is an
annual fee, calculated on an average daily net basis and paid monthly, equal to
.75% of the average daily net assets of the Shares of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which Alex. Brown as distributor
for the Shares is authorized to pay or cause to be paid on its behalf and such
payments shall not be included in the limitations contained in this Plan. These
expenses include: the fees of the Fund's investment advisor and Alex. Brown; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
<PAGE>
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not interested persons (as defined in the
1940 Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
5. Other Distribution Resources. Alex. Brown and Participating Dealers
may expend their own resources separate and apart from amounts payable under the
Plan to support the Fund's distribution effort. Alex. Brown will report to the
Board of Directors on any such expenditures as part of its regular reports
pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall report in
writing at least quarterly to the Fund's Board of Directors, and the Board shall
review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii) the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on this Plan;
and (ii) by a vote of holders of at least a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act). This Plan shall, unless
terminated as hereinafter provided, continue in effect from year to year only so
long as such continuance is specifically approved at least annually by the vote
of the Fund's Board of Directors and by the vote of a majority of the Directors
of the Fund who are not interested persons (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may be terminated at any time by a vote of a majority of the Directors who
are not interested persons (as defined in the 1940 Act) or by the vote of the
holders of a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act). This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above.
<PAGE>
EX-99.B(24)
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John B. Church, Jr., whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as President of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ John W. Church, Jr.
------------------------
John W. Church, Jr.
Date: February 22, 1994
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ James J. Cunnane
---------------------
James J. Cunnane
Date: February 24, 1995
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph A. Finelli, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chief Financial and
Accounting Officer of the Fund such Registration Statement and any and all such
pre- and post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney-in-fact and agent, or either of them or their substitute
or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Joseph A. Finelli
---------------------
Joseph A. Finelli
Date: February 26, 1996
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard T. Hale
--------------------
Richard T. Hale
Date: February 22, 1994
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ John F. Kroeger
--------------------
John F. Kroeger
Date: February 22, 1994
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis E. Levy
------------------
Louis E. Levy
Date: February 24, 1995
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Eugene J. McDonald
-----------------------
Eugene J. McDonald
Date: February 22, 1994
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
---------------------
Carl W. Vogt
Date: February 26, 1996
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors International
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chairman and a director of
the Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Truman T. Semans
---------------------
Truman T. Semans
Date: February 22, 1994
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Brian
C. Nelson, and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Flag Investors International Fund, Inc. (the "Fund")
to comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Harry Woolf
----------------
Harry Woolf
Date: February 22, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000800074
<NAME> FLAG INVESTORS INTERNATIONAL
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,129,426
<INVESTMENTS-AT-VALUE> 12,374,954
<RECEIVABLES> 90,624
<ASSETS-OTHER> 77,529
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,543,107
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59,963
<TOTAL-LIABILITIES> 59,963
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,552,986
<SHARES-COMMON-STOCK> 983,508
<SHARES-COMMON-PRIOR> 1,108,246
<ACCUMULATED-NII-CURRENT> 103,231
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,423,572)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,250,499
<NET-ASSETS> 12,483,144
<DIVIDEND-INCOME> 266,431
<INTEREST-INCOME> 21,951
<OTHER-INCOME> 0
<EXPENSES-NET> 198,115
<NET-INVESTMENT-INCOME> 90,267
<REALIZED-GAINS-CURRENT> 666,979
<APPREC-INCREASE-CURRENT> (2,190,015)
<NET-CHANGE-FROM-OPS> (1,432,769)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99,262
<NUMBER-OF-SHARES-REDEEMED> 224,000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3,004,120)
<ACCUMULATED-NII-PRIOR> 12,964
<ACCUMULATED-GAINS-PRIOR> (6,090,551)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 98,840
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 286,081
<AVERAGE-NET-ASSETS> 13,267,865
<PER-SHARE-NAV-BEGIN> 13.97
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> (1.37)
<PER-SHARE-DIVIDEND> 0.00
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