<PAGE>
As Filed with the Securities and Exchange Commission on February 25, 1998
Registration No. 33-08479
811-4827
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 18 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 19 [X]
FLAG INVESTORS INTERNATIONAL FUND, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, MD 21202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (410) 727-1700
----------------
Edward J. Veilleux
One South 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
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It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
x on March 1, 1998 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)
---
75 days after filing pursuant to paragraph (a)
---
on [date] pursuant to paragraph (a)(2) of Rule 485.
---
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<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
(Class A Shares)
Cross Reference Sheet
February 25, 1998
<TABLE>
<CAPTION>
Items Required by Form N-1A Registration
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 and 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............................ **
Part B - Information Required in a Statement
of Additional Information
Item 10. Cover Page........................................... Cover Page
Item 11. Table of Contents.................................... Table of Contents
Item 12. General Information and History...................... General Information and
History
Item 13. Investment Objectives and Policies................... Investment Objective and
Policies
Item 14. Management of the Fund............................... Management of the Fund
</TABLE>
- --------
* Information required by Item 5A is contained in Registrant's 1997 Annual
Report to Shareholders.
**Omitted since the answer is negative or the item is not applicable.
<PAGE>
<TABLE>
<S> <C> <C>
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; Semi-
Annual 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>
[GRAPHIC OMITTED]
Flag Investors
INTERNATIONAL FUND, INC.
(Class A Shares)
Prospectus & Application -- March 1, 1998
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") seeks long-term growth of capital primarily
through investment in a diversified portfolio of common stocks and other equity
securities of issuers located outside of the United States.
Class A Shares of the Fund ("Class A Shares") are available through your
securities dealer or the Fund's transfer agent. (See "How to Invest in the
Fund.")
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated March 1, 1998 has been filed with the
Securities and Exchange Commission (the "SEC") and is hereby incorporated by
reference. It is available upon request and without charge by calling the Fund
at (800) 767-FLAG.
TABLE OF CONTENTS
Fee Table .................................. 1
Financial Highlights ....................... 2
Investment Program ......................... 4
Investment Restrictions .................... 5
How to Invest in the Fund .................. 5
How to Redeem Shares ....................... 7
Telephone Transactions ..................... 8
Dividends and Taxes ........................ 8
Management of the Fund ..................... 9
Investment Advisor and Sub-Advisor ......... 9
Distributor ................................ 10
Custodian, Transfer Agent and
Accounting Services ..................... 10
Performance Information .................... 11
General Information ........................ 11
Application ................................ A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends ......................... None
Maximum Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ........................... 0.50%*
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees (net of fee waivers) ......................................... 0.00%**
12b-1 Fees ................................................................... 0.25%
Other Expenses (net of fee waivers and reimbursements) ....................... 1.25%
-----
Total Fund Operating Expenses (net of fee waivers and reimbursements) ........ 1.50%**
=====
</TABLE>
- -----------
* If you purchase $1 million or more of Class A Shares, you will not have to
pay an initial sales charge. You may, however, be required to pay a
contingent deferred sales charge when you redeem your shares. (See "How to
Invest in the Fund -- Offering Price.")
** The Fund's investment advisor has agreed to voluntarily waive its fees and
to reimburse expenses to the extent required so that Total Fund Operating
Expenses do not exceed 1.50% of the Class A Shares' average daily net
assets. Absent fee waivers and reimbursements, Management Fees would be
0.75%, Other Expenses would be 1.24% and Total Fund Operating Expenses
would be 2.24% of the Class A Shares' average daily net assets.
<TABLE>
<S> <C> <C> <C> <C>
Example: 1 year 3 years 5 years 10 years
- -------------------------------------------------------- -------- --------- --------- ---------
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period:* ...................... $60 $90 $123 $216
</TABLE>
- -----------
* Absent fee waivers and reimbursements, expenses would be higher.
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and
expenses that you will bear directly and indirectly when you invest in the
Fund. If you purchase Class A Shares through a financial institution, you may be
charged separate fees by the financial institution.
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, you may qualify for reduced sales charges or no sales charge at all.
(See "How to Invest in the Fund -- Offering Price.") Due to the continuous
nature of Rule 12b-1 fees, you may pay more than the equivalent of the maximum
front-end sales charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. if you hold your shares for a long
time. The above table has not been audited by Deloitte & Touche LLP, the Fund's
independent auditors.
1
<PAGE>
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, 1997 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, 1997, which can
be obtained at no charge by calling the Fund at (800) 767-FLAG.
(For a Class A Share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- -------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year ............... $ 14.20 $ 12.69 $ 13.97
--------- --------- --------
Income from Investment Operations:
Net investment income .............................. 0.11 0.26 0.09
Net realized and unrealized gain/(loss)
on investments(2) ................................ 2.34 1.28 (1.37)
--------- --------- --------
Total from Investment Operations ................... 2.45 1.54 (1.28)
--------- --------- --------
Less Distributions:
Distributions from net investment income and
short-term gains ................................. (0.18) (0.03) --
Distributions in excess of net investment income and
short-term gains ................................. (0.11) -- --
--------- --------- --------
Total distributions ................................ (0.29) (0.03) --
--------- --------- --------
Net asset value at end of year ..................... $ 16.36 $ 14.20 $ 12.69
========= ========= ========
Total Return(3) ..................................... 17.48% 12.13% (9.16)%
Ratios to Average Daily Net Assets:
Expenses(4) ........................................ 1.50% 1.50% 1.50%
Net investment income(5) ........................... 1.18% 1.91% 0.68%
Supplemental Data:
Net assets at end of year (000) .................... $13,982 $12,930 $12,483
Portfolio turnover rate ............................ 21% 13% 35%
Average commissions per share(6) ................... $0.0405 $0.0201 --
</TABLE>
- -----------
(1) Investment Company Capital Corp. and The Glenmede Trust Company became
the Fund's investment advisor and sub-advisor, respectively, on August
23, 1993.
(2) The years ended October 31, 1997, 1996, 1995 and 1994 include net
realized currency gain/(loss). Realized currency gain/(loss) is included
in net investment income for the years ended October 31, 1993, 1992 and
1991.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees, the ratio of expenses to average
daily net assets would have been 2.24%, 2.30%, 2.17%, 1.97%, 2.13%, 1.92%,
1.90%, 1.75%, 1.82% and 1.79% during the periods ended October 31, 1997,
1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and 1988, respectively.
(5) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.44%, 1.10%, 0.02%, 0.28%,
1.28%, 0.31%, 0.77%, 1.21%, 0.29% and 0.54% for the years ended October
31, 1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and 1988,
respectively.
(6) Disclosure of average commissions per share is effective beginning in
fiscal year 1996.
2
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended October 31,
- -------------------------------------------------------------------------------------------
1994 1993(1) 1992 1991 1990 1989 1988
- ------- ------- ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
$13.05 $9.11 $10.63 $11.80 $13.71 $11.78 $10.81
------ ------ ------ ------ ------- ------ ------
0.18 0.49 0.16 0.15 0.60 0.10 0.11
1.58 3.45 (1.62) (0.55) (1.33) 1.92 1.57
------ ------ ------- ------ ------- ------ ------
1.76 3.94 (1.46) (0.40) (0.73) 2.02 1.68
------ ------ ------- ------ ------- ------ ------
(0.84) -- (0.06) -- (0.57) (0.09) (0.16)
-- -- -- (0.77) (0.61) -- (0.55)
------ ------ ------- ------ ------ ------ ------
(0.84) -- (0.06) (0.77) (1.18) (0.09) (0.71)
------ ------ ------- ------ ------ ------ ------
$13.97 $13.05 $9.11 $10.63 $11.80 $13.71 $ 11.78
====== ====== ======= ====== ====== ====== ======
13.98% 43.25% (13.80)% (3.15)% (6.63)% 17.25% 16.21%
1.50% 1.50% 1.50% 1.50% 1.50% 1.49% 1.46%
0.75% 1.91% 0.73% 1.17% 1.48% 0.62% 0.87%
$15,487 $15,008 $19,780 $38,830 $44,406 $32,325 $35,259
43% 48% 63% 73% 62% 95% 96%
-- -- -- -- -- -- --
</TABLE>
3
<PAGE>
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk
Considerations
The investment objective of the Fund is long-term growth of capital. 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.
The Fund's investment advisor (the "Advisor") and sub-advisor (the
"Sub-Advisor") (collectively, the "Advisors") are responsible for managing the
Fund's investments. (See "Investment Advisor and Sub-Advisor.") The Sub-Advisor
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 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.
<PAGE>
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.
In addition, the Fund may invest up to 5% of its total assets in
restricted securities, including Rule 144A Securities.
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.
4
<PAGE>
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.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions recited below are matters of fundamental
policy and may not be changed without shareholder approval. Accordingly, the
Fund will not:
1) Invest more than 5% of its total assets in the securities of any single
issuer;
2) Invest in the securities of any single issuer if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of such
issuer; and
3) 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.
HOW TO INVEST IN THE FUND
- --------------------------------------------------------------------------------
You may purchase Class A Shares through your securities dealer or through
any financial institution that is authorized to service shareholder accounts
("Shareholder Servicing Agents"). You may also purchase Class A Shares by
completing the Application Form attached to this Prospectus and returning it,
together with payment of the purchase price, to the address shown on the
Application Form.
<PAGE>
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment may be
as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your initial
investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be as low as $250. Subsequent investments may be
as low as $100 if made monthly, but must be $250 if done quarterly. (See
"Purchases Through Automatic Investing Plan" below.)
o There is no minimum investment requirement for qualified retirement
plans (i.e., 401(k) plans or pension and profit sharing plans.)
You may purchase Class A Shares on any day on which the New York Stock
Exchange is open for business (a "Business Day"). Your purchase order will be
executed at a per share purchase price equal to the net asset value next
determined after it is received plus any applicable front-end sales charge (the
"Offering Price"). If your purchase is made by mail, it must be accompanied by
payment of the Offering Price. Purchases made through your securities dealer or
Shareholder Servicing Agent must be in accordance with their payment
procedures.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
The net asset value per share is determined daily as of the close of the
New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on each
Business Day. Net asset value per share is calculated by valuing all assets
held by the Fund, deducting liabilities, and dividing the resulting amount by
the number of then outstanding shares of the Fund. For this purpose, portfolio
securities will be given their market value which is normally based on current
prices but which may be determined according to "fair value" procedures
approved by the Fund's Board of Directors.
5
<PAGE>
Offering Price
Your share purchase is made 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 in the following table:
<TABLE>
<CAPTION>
Sales Charge
as Percentage of Dealer
------------------------- Compensation
Offering Net Amount as Percentage of
Amount of Purchase Price Invested Offering Price
- ------------------------------ ---------- ------------ -----------------
<S> <C> <C> <C>
Less than $ 50,000......... 4.50% 4.71% 4.00%
$ 50,000 - $ 99,999......... 3.50% 3.63% 3.00%
$ 100,000 - $249,999......... 2.50% 2.56% 2.00%
$ 250,000 - $499,999......... 2.00% 2.04% 1.50%
$ 500,000 - $999,999......... 1.50% 1.52% 1.25%
$1,000,000 and over........... None* None* None*
</TABLE>
- ------------------------
* If you purchase $1 million or more of Class A Shares, you will not have to
pay an initial sales charge. You may, however, be subject to a contingent
deferred sales charge when you redeem your shares. (See below.) The Fund's
distributor may make payments to your securities dealer or Shareholder
Servicing Agent in the amount up to 0.50% of the Offering Price.
You may obtain reduced sales charges as set forth in the table above by
accumulating purchase orders for, and existing investments in, Class A Shares
of this Fund and Class A or Class D shares of any other Flag Investors fund.
The applicable sales charge will be determined based on the total value of your
current purchases plus the value of your existing investments. (For this
purpose, existing investments will be valued at the higher of cost or current
value.) You may combine your purchases and investments with those of your
spouse and your children under the age of 21 for this purpose.
To obtain the reduced sales charge through this right of accumulation,
you must provide your securities dealer or Shareholder Servicing Agent with
sufficient information to verify that you have such a right. The Fund may amend
or terminate this right of accumulation at any time as to subsequent purchases.
You may also obtain the reduced sales charges shown above by executing a
written Letter of Intent, that states your 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 does not require that you purchase the full amount indicated.
The minimum initial investment under a Letter of Intent is 5% of the full
amount. Shares purchased with the first 5% of the full amount will be held in
escrow (while remaining registered in your name) to secure payment of the
higher sales charge applicable to the Class A Shares actually purchased if you
do not purchase the full amount. Such escrowed shares will be redeemed to pay
the additional sales charge, if necessary. When the full amount indicated has
been purchased, the escrowed shares will be released. If you wish to enter into
a Letter of Intent in conjunction with an investment in Class A Shares, you may
do so by completing the appropriate section of the Application Form attached to
this Prospectus.
<PAGE>
You will not be charged a sales charge on purchases of $1 million or more
of Class A Shares. You may, however, be required to pay a contingent deferred
sales charge if you redeem the purchased shares within 24 months. The charge
will be made at the rate of 0.50% 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 if your securities
dealer has agreed to return to the Fund's distributor (the "Distributor") 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.
You may purchase Class A Shares at net asset value (without sales charge)
under any of the following circumstances:
1) If you are purchasing shares in any of the following types of accounts:
(i) A fiduciary or advisory account with a bank, bank trust department,
registered investment advisory company, financial planner or
securities dealer purchasing shares on your behalf. To qualify for this
provision you must be paying an account management fee for the
fiduciary or advisory services. You may be charged an additional fee
by your broker or agent if you purchase shares in this manner;
(ii) A qualified retirement plan;
(iii) A Flag Investors fund payroll savings plan program.
2) If you are reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the last 90 days.
3) If you are exchanging an investment in another Flag Investors fund for an
investment in this Fund (see "Purchases by
Exchange" for a full description of the conditions).
4) If you are a current or retired Director of the Fund, a director, an
employee or a member of the immediate family of an employee of any of the
following or their respective affiliates: the Distributor, the Advisors and
any broker-dealer authorized to sell Class A Shares.
6
<PAGE>
You may also purchase Class A Shares through a Systematic Purchase Plan.
Contact your securities dealer or Shareholder Servicing Agent for details.
Purchases by Exchange
You may exchange Class A shares of any other Flag Investors fund with the
same sales charge structure for an equal dollar amount of Class A Shares without
payment of the sales charges described above or any other charge. In addition,
you may exchange Class A shares of any Flag Investors fund with a lower sales
charge (with the exception of Flag Investors Cash Reserve Prime Class A Shares)
for an equal dollar amount of Class A Shares if you have owned the shares you
are redeeming for at least 24 months. If you have owned them for less than 24
months, you may exchange them for Class A Shares if you pay the difference in
sales charges. You may enter both your redemption and purchase orders on the
same Business Day or, if you have already redeemed the shares of the other fund,
you may enter your purchase order within 90 days of the redemption.
When you acquire Class A Shares through an exchange from another fund in
the Flag Investors family of funds, the period for which the original shares
were held prior to the exchange will be combined 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 when those Shares are
redeemed.
The net asset value of shares purchased and redeemed in an exchange
request received on the same Business Day will be determined on that day,
provided that the exchange request is received prior to 4:00 p.m. (Eastern Time)
or the close of the New York Stock Exchange, whichever is earlier. Exchange
requests received after 4:00 p.m. (Eastern Time) will be effected on the next
Business Day.
You may exercise this exchange privilege by telephone. (See "Telephone
Transactions" below.)
The Fund may modify or terminate this offer of exchange at any time upon
60 days' prior written notice to shareholders.
<PAGE>
Purchases Through Automatic Investing Plan
You may elect to have a specified amount invested monthly or quarterly in
Class A Shares. The amount specified will be withdrawn from your checking
account using a 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 you or the Fund upon 30 days' prior written notice to
the other party. If you wish to enroll in the Automatic Investing Plan or if
you wish to obtain additional information, complete the appropriate section of
the Application Form attached to this Prospectus.
Purchases Through Dividend Reinvestment
Unless you elect otherwise, all income dividends and net capital gains
distributions will be reinvested in additional Class A Shares at net asset
value. You may elect to receive your distributions in cash or to terminate
automatic reinvestment by completing the appropriate section of the attached
Application Form or by giving written notice to the Fund's transfer agent (the
"Transfer Agent") at the address listed on the inside back cover of this
Prospectus, either directly or through your securities dealer or Shareholder
Servicing Agent, at least five days before the next date on which dividends or
distributions will be paid.
You may also have your distributions invested in Class A shares of other
funds in the Flag Investors family of funds. Call the Transfer Agent for
additional information.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem all or part of your investment on any Business Day through
your securities dealer, your Shareholder Servicing Agent or the Transfer Agent.
You may also redeem up to $50,000 worth of Class A Shares by telephone. (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 your order (or, if stock certificates
have been issued for the Class A Shares to be redeemed, after you tender the
stock certificates for redemption). Redemption orders received after 4:00 p.m.
(Eastern Time) or the close of the New York Stock Exchange, whichever is
earlier, will be effected at the net asset value next determined on the
following Business Day. You will be paid for redeemed Class A Shares by check
which will be mailed within seven days after your redemption order is received
in proper form.
The Transfer Agent, your Securities dealer or your Shareholder Servicing
Agent may require the following documents in order to redeem your Class A
Shares.
7
<PAGE>
1) A letter of instructions, specifying your account number 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 the account is maintained;
2) For redemptions in excess of $50,000, a guarantee of your signature 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 your
account have been redeemed on a dividend payable date, the dividend will be
remitted to you by check.
The Fund has the power under its Articles of Incorporation to redeem your
account upon 60 days' written notice if its value falls below $500 due to your
redemptions.
Systematic Withdrawal Plan
If you hold Class A Shares having a value of $10,000 or more you may
arrange to have a portion of your 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, your account may eventually be exhausted. Because share
purchases include a sales charge that you will not recover at the time of
redemption, you should not have a withdrawal plan in effect at the same time
you are making recurring purchases. If you wish to participate in the Fund's
Systematic Withdrawal Plan, complete the appropriate section of the Application
Form attached to this Prospectus.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
You may redeem Class A Shares in amounts up to $50,000 or exchange Class A
Shares in any amount, by notifying the Transfer Agent by telephone on any
Business Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time).
Telephone transaction privileges are automatic unless you specifically request
that no telephone redemptions or exchanges be accepted for your account. 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) next determined on the following Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring you to provide certain personal identification
information at the time your account is opened and prior to effecting each
transaction requested by telephone. You may be required to provide additional
telecopied instructions. 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. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in effecting telephone transactions. In such event, requests should
be made by 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.")
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.
8
<PAGE>
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences
affecting the Fund and its shareholders is based on current tax laws and
regulations, which may be changed by legislative, judicial or administrative
action. No attempt has been made to present a detailed explanation of the
federal, state or local tax treatment of the Fund or the shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Accordingly, you are urged to consult with your tax advisor regarding any
specific questions.
The Statement of Additional Information sets forth further information
concerning taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As long as the Fund qualifies for this tax treatment, it will be
relieved of federal income tax on amounts distributed to shareholders. Unless
you are otherwise exempt, you will be generally subject to 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.
You will be taxed on 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, as gains from the sale or exchange of a capital asset held for more
than one year regardless of the length of time you have held the shares. You
will be taxed on all other income distributions as ordinary income. You will be
advised annually as to the tax status of all distributions.
Ordinarily, you should include all dividends 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 you and paid by the Fund in the year
in which the dividends were declared.
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 you
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.
<PAGE>
If you are a non-resident alien individual, foreign trust or estate,
foreign corporation or foreign partnership, distributions by the Fund to you
may be subject to federal income tax treatment that differs from the treatment
described above. (See the Statement of Additional Information.)
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.
The sale, exchange, or redemption of Class A Shares is a taxable event
for you.
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 executive officers, to the Distributor and to
the Advisors. A majority of the Directors of the Fund have no affiliation with
the Distributor or the Advisors.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and The Glenmede Trust Company ("Glenmede" or the "Sub-
Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to other
mutual funds in the Flag Investors family of funds and BT Alex. Brown Cash
Reserve Fund, Inc., which funds together with the Fund had approximately $7.3
billion of net assets as of December 31, 1997. Glenmede provides fiduciary and
investment services to endowment funds, foundations, employee benefit plans and
other institutions and individuals. At December 31, 1997, Glenmede had over
$12.8 billion in assets in the accounts for which it serves in various
capacities including as executor, trustee, or investment advisor.
Pursuant to the terms of the Investment Advisory Agreement, ICC
supervises and manages all of the
9
<PAGE>
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.
ICC has voluntarily agreed to waive a portion of the advisory fee to
which it is contractually entitled 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.") For the fiscal year ended October 31, 1997, ICC received a fee (net of
fee waivers) equal to 0.01% of the Fund's average daily net assets. In
addition, from its own resources, ICC paid Glenmede a fee equal to 0.55% of the
Fund's average daily net assets.
ICC is an indirect subsidiary of Bankers Trust New York Corporation. ICC
also serves as the Fund's transfer and dividend disbursing agent and provides
accounting services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.") Glenmede, a limited purpose trust company, is a wholly-owned
subsidiary of The Glenmede Corporation.
Portfolio Manager
Mr. Andrew B. Williams, CFA, the Fund's Executive Vice President, has
primary responsibility for managing the Fund's assets. From April, 1993 through
December, 1997 Mr. Williams shared primary responsibility with Mr. John W.
Church, Jr., the Fund's President.
Mr. Williams is executive 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.
<PAGE>
DISTRIBUTOR
- --------------------------------------------------------------------------------
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has
served as distributor of the Class A Shares since August 31, 1997. ICC
Distributors is a registered broker-dealer that offers distribution services to
a variety of registered investment companies including other funds in the Flag
Investors family of funds and BT Alex. Brown Cash Reserve Fund, Inc. ICC
Distributors is not affiliated with the Advisor.
The Fund has adopted a Distribution Plan for the Class A Shares (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended.
In addition, the Fund may enter into Shareholder Servicing Agreements with
certain financial institutions, including certain banks and BT Alex. Brown
Incorporated, to provide shareholder services, pursuant to which the Distributor
may allocate on a proportional basis up to all of its distribution fee as
compensation for such financial institutions' ongoing shareholder services. Such
financial institutions may charge you separately for these services.
As compensation for providing distribution services for the period from
August 31, 1997 through October 31, 1997, the Distributor received a fee equal
to 0.25% (annualized) of the Class A Shares' average daily net assets.
Payments under the Plan are made as described above, regardless of the
Distributor's actual cost of providing distribution services and may be used to
pay the Distributor's overhead expenses. If the cost of providing distribution
services is less than the payments received, the Distributor may retain the
unexpended portion of the distribution fee. The Distributor or the Advisors, and
their respective affiliates, may make payments from their own resources to
securities dealers or Shareholder Servicing Agents. Payments by the Distributor
will include additional discounts or promotional incentives in the form of cash
or other compensation (including merchandise or travel).
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services for the fiscal year ended
10
<PAGE>
October 31, 1997, ICC received a fee equal to 0.20% of the Fund's average daily
net assets. (See the Statement of Additional Information.)
Boston Safe Deposit and Trust Company acts as custodian of the Fund's
assets.
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, 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.
<PAGE>
Performance will fluctuate and any statement of performance should not be
considered as representative of the future performance of the Fund. Performance
is generally a function of the type and quality of instruments held by the
Fund, operating expenses and market conditions. Any fees charged by your bank
with respect to the account through which Class A Shares may be purchased,
although not included in calculations of performance, will reduce your
performance results.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Capital Shares
The Fund is an open-end, diversified management investment company. It
was reorganized as a Maryland corporation on August 16, 1993, pursuant to an
Agreement and Plan of Reorganization and Liquidation approved by 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 by 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.
11
<PAGE>
Reports
You will be furnished with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent auditors, Deloitte & Touche LLP.
Shareholder Inquiries
If you have questions concerning your shares, you should contact the
Transfer Agent at (800) 553-8080, the Fund at (800) 767-FLAG, or your
securities dealer or Shareholder Servicing Agent.
12
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Make check payable to For assistance
Investors International Fund, Inc." in completing this Application please call:
and mail with this Application to: 1-800-553-8080, Monday through Friday,
Flag Investors Funds 8:30 a.m. to 5:30 p.m. (Eastern Time).
P.O. Box 419663
Kansas City, MO 64141-6663 To open an IRA account, please call
Attn: Flag Investors International 1-800-767-3524 to request an IRA Information
Fund, Inc. kit.
</TABLE>
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)
List the account numbers of other Flag Investors Funds that you or your
immediate family already own that qualify for this purchase.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional shares of the Fund at no sales
charge.
Income Dividends Capital Gains
/ / Reinvested in additional shares / / Reinvested in additional shares
/ / Paid in Cash / / Paid in Cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
A-1
<PAGE>
Automatic Investing Plan (Optional)
[ ] I authorize you as Agent for the Automatic Investing Plan to automatically
invest $----------- 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.)
<TABLE>
<CAPTION>
<S> <C> <C>
Minimum Initial Investment: $250
Subsequent Investments (check one): [ ] Monthly ($100 minimum) [ ] Quarterly ($250 minimum)
</TABLE>
<TABLE>
<CAPTION>
Please attach a voided check.
<S> <C>
- ------------------------------------------------ -----------------------------------------
Bank Name Depositor's Signature Date
- ------------------------------------------------ -----------------------------------------
Existing Flag Investors Fund Account No., if any Depositor's Signature Date
(if joint acct., both must sign)
</TABLE>
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)
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.
<TABLE>
<CAPTION>
<S> <C> <C>
No, I/We do not want: [ ] Telephone redemption privileges [ ] Telephone exchange privileges
</TABLE>
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
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as required
by federal law: (Please check applicable boxes)
/ / U.S. Citizen/Taxpayer:
/ / I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
/ / If no Tax ID Number or Social Security Number has been provided above, I
have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish
my correct Social Security Number or Tax ID Number, I may be subject to
a penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-553-8080.)
/ / Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes: ___________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
<PAGE>
I have received a copy of the Fund's prospectus. I acknowledge that the
telephone redemption and exchange privileges are automatic and will be effected
as described in the Fund's current prospectus (see "Telephone Transactions"). I
also acknowledge that I may bear the risk of loss in the event of fraudulent use
of such privileges. If I do not want telephone redemption or exchange
privileges, I have so indicated on this Application.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- ------------------------------------------------------------------------------
Signature Date
- ------------------------------------------------------------------------------
Signature (if joint account, both must sign) Date
- ----------------------
For Dealer Use Only
- ----------------------
<TABLE>
<CAPTION>
<S> <C>
Dealer's Name: ---------------------------------- Dealer Code: -------------------------------
Dealer's Address: -------------------------------- Branch Code: -------------------------------
--------------------------------
Representative: --------------------------------- Rep. No. -------------------------------
</TABLE>
A-2
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
(Class A Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
THE GLENMEDE TRUST COMPANY ICC DISTRIBUTORS, INC.
One Liberty Place P.O. Box 7558
1650 Market Street Portland, Maine 04101
Philadelphia, Pennsylvania 19103
Transfer Agent Independent Auditors
INVESTMENT COMPANY CAPITAL CORP. DELOITTE & TOUCHE LLP
One South Street 117 Campus Drive
Baltimore, Maryland 21202 Princeton, New Jersey 08540
1-800-553-8080
Custodian Fund Counsel
BOSTON SAFE DEPOSIT AND TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
One Boston Place 2000 One Logan Square
Boston, Massachusetts 02108 Philadelphia, Pennsylvania 19103
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------
FLAG INVESTORS INTERNATIONAL FUND, INC.
One South 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 THE FUND, ONE SOUTH
STREET, BALTIMORE, MARYLAND 21202, (800) 767-FLAG.
Statement of Additional Information Dated: March 1, 1998
Relating to the Prospectus Dated: March 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. General Information and History................................. 1
2. Investment Objective and Policies............................... 1
3. Valuation of Shares and Redemption.............................. 2
4. Federal Tax Treatment of Dividends and Distributions............ 3
5. Management of the Fund.......................................... 8
6. Investment Advisory and Other Services.......................... 12
7. Distribution of Fund Shares..................................... 13
8. Brokerage....................................................... 16
9. Capital Shares.................................................. 18
10. Semi-Annual Reports............................................. 18
11. Custodian, Accounting Services and Transfer Agent............... 18
12. Independent Auditors............................................ 19
13. Performance Information......................................... 19
14. Control Persons and Principal Holders of Securities............. 21
15. Financial Statements............................................ 21
<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 the Fund's distributor
(the "Distributor") 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 (now BT Alex Brown Incorporated), BT 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
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. 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
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the Fund equaling 5% or more of the Fund's total assets are outstanding, the
Fund will not purchase securities;
2. 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);
3. Invest in real estate or mortgages on real estate;
4. Purchase or sell commodities or commodities contracts, except that
the Fund may enter into forward currency exchange contracts;
5. 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");
6. 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;
7. Issue senior securities;
8. 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;
9. Effect short sales of securities;
10. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions); or
11. Purchase participations or other direct interests in oil, gas or
other mineral exploration or development programs.
The following investment restriction may be changed by a vote of the
majority of the Board of Directors. The Fund will not:
1. Invest in shares of any other open-end investment company
registered under the Investment Company Act, except as permitted by federal
law.
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 daily as of the close of
the New York Stock Exchange, which is ordinarily 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, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
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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 Shares may
be significantly affected on days when shareholders do not have access to the
Fund.
The Fund may enter into agreements that allow a third party, as agent
for the Fund, to accept orders from its customers up until the Fund's close of
business which is ordinarily 4:00 p.m. (Eastern Time). So long as a third
party receives an order prior to the Fund's close of business, the order is
deemed to have been received by the Fund and, accordingly, may receive the net
asset value computed at the close of business that day. These "late day"
agreements are intended to permit shareholders placing orders with a third
party to place orders up to the same time as other shareholders.
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" above and in the Prospectus under "How to Invest
in the Fund," 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 90-day period for any one
shareholder. A corporate shareholder requesting a redemption must have on file
with the Fund's Transfer Agent, the Distributor, 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.
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Qualification as Regulated Investment Company
The Fund has been and expects to continue 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 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").
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 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 Internal Revenue Service that income from such currency transactions
may be considered "qualifying income" for purposes of the Income Requirement.
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%
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<PAGE>
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.
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 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 gain from the sale or exchange of a capital asset held for
more than twelve months, 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.
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<PAGE>
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 generally 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
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 he 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.
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
eighteen months, mid-term if such Shares have been held for more than twelve,
but not more than eighteen months, and otherwise will be short-term. 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). This loss
disallowance rule will apply to Shares received through the reinvestment of
dividends during the 61-day period.
Foreign Income Taxes
The dividends and interest payable on certain of the Fund's foreign
portfolio securities received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source, thus
reducing the net amount available for distribution to the Fund's shareholders.
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.
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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.
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.
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<PAGE>
5. MANAGEMENT OF THE FUND
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 One South Street, Baltimore, Maryland 21202.
*TRUMAN T. SEMANS, Chairman and Director (10/27/26)
Managing Director Emeritus, BT Alex. Brown Incorporated; Formerly,
Vice Chairman, Alex. Brown & Sons Incorporated (now BT Alex. Brown
Incorporated); Vice Chairman, Alex. Brown Capital Advisory & Trust
Company and Director, Investment Company Capital Corp. (registered
investment advisor).
*RICHARD T. HALE, Director (7/17/45)
Managing Director, BT Alex. Brown Incorporated; Director and
President, Investment Company Capital Corp. (registered investment
advisor) and 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 (registered investment company).
JOHN F. KROEGER, Director (8/11/24) 37 Pippins Way, Morristown, New Jersey
07960. Director/Trustee, AIM Funds (registered investment companies);
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; and Partner, KPMG
Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
President, Duke Management Company (investments), Erwin Square, Suite
1000, 2200 West Main Street, Durham, North Carolina 27705; Executive
Vice President, Duke University (education, research and healthcare);
Director, Central Carolina Bank & Trust (banking), Key Funds
(registered investment companies) and DP Mann Holdings (insurance);
Formerly, Director, AMBAC Treasures Trust (registered investment
company).
CARL W. VOGT, Esq., 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); Director, Yellow
Corporation (trucking) and American Science & Engineering (x-ray
detection equipment); Formerly, Chairman and Member,
- --------
* 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.
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National Transportation Safety Board; Director, National Railroad
Passenger Corporation (Amtrak); and Member, Aviation System Capacity
Advisory Committee (Federal Aviation Administration).
JOHN W. CHURCH, JR., President (11/25/32) Formerly, Executive Vice
President and Chief Investment Officer, The Glenmede Trust Company,
One Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania
19103.
ANDREW B. WILLIAMS, Executive Vice President (4/28/54) Senior, Vice
President, The Glenmede Trust Company, One Liberty Place, 1650 Market
Street, Philadelphia, Pennsylvania 19103.
JOSEPH A. FINELLI, Treasurer (1/24/57) Vice President, BT Alex. Brown
Incorporated and Vice President, Investment Company Capital Corp.
(registered investment advisor), September 1995-Present; Formerly,
Vice President and Treasurer, The Delaware Group of Funds (registered
investment companies) and Vice President, Delaware Management Company
Inc. (investments), 1980-August 1995.
AMY M. OLMERT, Secretary (5/14/63)
Vice President, BT Alex. Brown Incorporated, June 1997-Present.
Formerly, Senior Manager, Coopers & Lybrand L.L.P., September 1988 -
June 1997.
SCOTT J. LIOTTA, Assistant Secretary (3/18/65)
Assistant Vice President, BT Alex. Brown Incorporated, July
1996-Present; Formerly, Manager and Foreign Markets Specialist,
Putnam Investments Inc. (registered investment companies), April
1994-July 1996; and Supervisor, Brown Brothers Harriman & Co.
(domestic and global custody), August 1991-April 1994.
Directors and officers of the Fund are also directors and officers of
some or all of the other investment companies managed, administered or advised
by BT Alex. Brown Incorporated ("BT Alex. Brown") or its affiliates. There are
currently 13 funds in the Flag Investors/ISI Funds and BT Alex. Brown Cash
Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as
Chairman of five funds and as a Director of six other funds in the Fund
Complex. Mr. Hale serves as Chairman of four funds and as a Director of eight
of the other funds in the Fund Complex. Messrs. Cunnane, Kroeger, Levy and
McDonald serve as Directors of each fund in the Fund Complex. Mr. Vogt serves
as a director of 11 funds in the Fund Complex. Ms. Olmert serves as Secretary,
Mr. Finelli serves as Treasurer and Mr. Liotta serves as Assistant Secretary,
respectively, for each of the funds in the Fund Complex.
Some of the Directors of the Fund are customers of, and have had
normal brokerage transactions with, BT 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 the Advisors 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) (an "Independent 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 BT 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
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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,
1997, Independent Directors' fees attributable to the assets of the Fund
totaled approximately $518. The following table shows aggregate compensation
payable to each of the Fund's Directors by the Fund and the Fund Complex,
respectively, and pension or retirement benefits accrued as part of Fund
expenses in the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
Aggregate Compensation Pension or Total Compensation From
From the Fund for the Retirement the Fund and Fund Complex
Fiscal Year Ended Benefits Accrued Payable to Directors for the
Name of Person, October 31, 1997 as Part of Fiscal Year Ended October
Position Fund Expenses 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truman T. Semans(1) $ 0 $0 $0
Chairman
Richard T. Hale(1) $ 0 $0 $0
Director
James J. Cunnane $ 88(3) (4) $39,000 for service on 13
Director Boards in the Fund Complex
John F. Kroeger $111(3) (4) $49,000 for service on 13
Director Boards in the Fund Complex
Louis E. Levy $ 88(3) (4) $39,000 for service on 13
Director Boards in the Fund Complex
Eugene J. McDonald $ 88(3) (4) $39,000 for service on 13
Director Boards in the Fund Complex
Carl W. Vogt, Esq. $ 95(3) (4) $39,000 for service on 11(5)
Director Boards in the Fund Complex
Harry Woolf(2) $ 46(3) (4) $9,750 for service on 12
Director Boards in the Fund Complex
</TABLE>
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(1) A Director who is an "interested person" as defined in the Investment
Company Act.
(2) Retired effective December 31, 1996. Mr. Woolf was appointed
President of certain funds in the Fund Complex. For serving as
President, Mr. Woolf receives compensation from such Funds in
addition to his retirement benefits.
(3) Of the amounts payable to Messrs. Cunnane, Kroeger, Levy, McDonald,
Woolf and Vogt, nothing was deferred pursuant to the Fund's deferred
compensation plan in the year ended October 31, 1996.
(4) The Fund Complex has adopted a Retirement Plan for eligible
Directors, as described below. The actuarially computed pension
expense for the Fund for the year ended October 31, 1997 was
approximately $705.
(5) Mr. Vogt receives proportionately higher compensation from each fund
for which he serves.
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 six
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. Mr. Kroeger
has qualified but has not received benefits. The Fund has two Participants, a
Director who retired effective December 31, 1994 and a Director who retired
effective December 31, 1996, each of whom has qualified for the Retirement
Plan by serving thirteen years and fourteen years, respectively, as Directors
in the Fund Complex and who will be paid a quarterly fee of $4,875 by the Fund
-10-
<PAGE>
Complex for the rest of his life. Such fees are allocated to each fund in the
Fund Complex based upon the relative net assets of such fund to the Fund
Complex.
Set forth in the table below are the estimated annual benefits
payable to a Participant upon retirement assuming various years of service and
payment of a percentage of the fee earned by such Participant in his last year
of service, as described above. The approximate credited years of service at
December 31, 1997 are as follows: for Mr. Cunnane, 3 years; for Mr. Kroeger,
15 years; for Mr. Levy, 3 years; for Mr. McDonald, 5 years; and for Mr. Vogt,
2 years.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- -----------------------------------------------------------------
Chairman of Audit Committee Other Participants
--------------------------- ------------------
<S> <C> <C>
6 years $4,900 $3,900
7 years $9,800 $7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>
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. Messrs. Cunnane, Levy, McDonald and Vogt have each executed a
Deferred Compensation Agreement. Currently, the deferring Directors may select
from among various Flag Investors funds and BT Alex. Brown Cash Reserve Fund,
Inc. in which all or part of their deferral account shall be deemed to be
invested. Distributions from the deferring Directors deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of ten
years.
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
applies to the personal investing activities of directors and officers of the
Fund, as well as to designated officers, directors and employees of the
Advisors and the Distributor. As described below, the Code of Ethics imposes
additional restrictions on the Advisors' 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 any officer, director, or employee
of the Fund, or the Advisors or, if they are access persons in the case of the
Distributor, preclear any personal securities investments (with certain
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 special 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. Trading by investment personnel and certain other employees of the
Advisor would be exempt from this "blackout period" provided that (1) the
market
-11-
<PAGE>
capitalization of a particular security exceeds $2 billion; and (2) orders of
the Advisor do not exceed ten percent of the daily average trading volume of
the security for the prior 15 days. Officers, directors and employees of the
Advisors and the Distributor may comply with codes of ethics instituted by
those entities so long as they contain similar requirements and restrictions.
6. INVESTMENT ADVISORY AND OTHER SERVICES
Investment Company Capital Corp. ("ICC" or the "Advisor") serves as
the Fund's investment advisor and The Glenmede Trust Company ("Glenmede," or
the "Sub-Advisor") serves as the Fund's sub-advisor pursuant to agreements
approved by shareholders of the Fund on June 16, 1993 and effective on August
16, 1993. ICC is an indirect subsidiary of Bankers Trust New York Corporation.
ICC is also investment advisor to other Funds in the Flag Investors family of
funds and BT Alex. Brown Cash Reserve Fund Inc. Glenmede, a limited purpose
trust company, provides fiduciary and investment services to individuals,
endowment funds, foundations, employee benefit plans and other institutions.
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.
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
Independent Directors who
-12-
<PAGE>
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
16, 1997. 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.
Advisory fees paid by the Fund to ICC and sub-advisory fees paid by
ICC to Glenmede for the last three fiscal years were as follows:
- ------------------------------------------------------------------------------
Year Ended October 31,
- ------------------------------------------------------------------------------
Fees Paid to: 1997 1996 1995
- ------------------------------------------------------------------------------
ICC $ 1,461(1) $ 0(2) $29,894(4)
- ------------------------------------------------------------------------------
Glenmede $77,150 $6,149(3) $26,600(5)
- ------------------------------------------------------------------------------
- ----------------
(1) Net of fee waivers of $103,734.
(2) Net of fee waivers of $98,672. During this period, ICC also
reimbursed expenses of $7,066.
(3) Net of fee waivers of $66,211.
(4) Net of fee waivers of $68,946.
(5) Net of fee waivers of $19,020
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
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor")
serves as Distributor of the Fund's Shares pursuant to a Distribution
Agreement (the "Distribution Agreement") effective August 31, 1997. Prior to
August 31, 1997, Alex. Brown & Sons Incorporated ("Alex. Brown") served as the
distributor of the Fund's Shares for the same rate of compensation and on
substantially the same terms as ICC Distributors.
The Distribution Agreement provides that ICC Distributors shall; (i)
use reasonable efforts to sell Shares upon the terms and conditions contained
in the Distribution Agreement and the Fund's then current Prospectus; (ii) use
its best efforts to conform with the requirements of all federal and state
laws relating to the sale of the Shares; (iii) adopt and follow procedures as
may be necessary to comply with the requirements of the National Association
of Securities Dealers, Inc. and any other applicable self-regulatory
organization; (iv) perform its duties under the supervision of and in
accordance with the directives of the Fund's Board of Directors and the Fund's
Articles of Incorporation and By-Laws; and (v) provide the Fund's Board of
Directors with a written report of the amounts expended in connection with the
Distribution Agreement. ICC Distributors shall devote reasonable time and
effort to effect sales of Shares but shall not be obligated to sell any
specific number of Shares. The services of ICC Distributors are not exclusive
and ICC Distributors shall not be liable to the Fund or its shareholders for
any error of judgment or mistake of law, for any losses arising out of any
investment, or for any action or inaction of ICC Distributors in the absence
of bad faith, willful misfeasance or gross negligence in the performance of
ICC Distributors' duties or obligations under the Distribution Agreement or by
reason of ICC Distributors' reckless disregard of its duties and obligations
under the Distribution Agreement. The Distribution
-13-
<PAGE>
Agreement further provides that the Fund and ICC Distributors will mutually
indemnify each other for losses relating to disclosures in the Fund's
registration statement.
The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the Fund (as defined under "Capital Stock") or upon 60
days' written notice by the Distributor and shall automatically terminate in
the event of an assignment. The Distribution Agreement has an initial term of
one year from the date of effectiveness. It shall continue in effect
thereafter with respect to the Fund provided that it is approved at least
annually by (i) a vote of a majority of the outstanding voting securities of
the Fund or (ii) a vote of a majority of the Fund's Board of Directors
including a majority of the Independent Directors and so long as the Fund's
Plan of Distribution is approved at least annually by the Independent
Directors in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement, including the form of Sub-Distribution
Agreement, was initially approved by the Board of Directors, including a
majority of the Independent Directors, on August 4, 1997.
ICC Distributors 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. Any Sub-Distribution Agreement may be terminated at any
time, without penalty in the same manner as the Distribution Agreement and will
automatically terminate in the event of an assignment.
In addition, the Fund may enter into Shareholder Servicing Agreements
with certain financial institutions, such BT Alex. Brown and certain banks, to
act as Shareholder Servicing Agents, pursuant to which ICC Distributors will
allocate a portion of its distribution fee as compensation for such financial
institutions' ongoing shareholder services. The Fund may also enter into
Shareholder Servicing Agreements pursuant to which the Advisor or its affiliates
will provide compensation out of its own resources for 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. Any
Shareholder Servicing Agreement may be terminated at any time, without penalty,
upon ten days' notice and will terminate automatically in the event of an
assignment.
As compensation for providing distribution services for the Shares as
described above, ICC Distributors receives an annual fee, paid monthly, equal
to .25% of the average daily net assets of the Class A Shares. ICC
Distributors expects to allocate up to all of its fee to Participating Dealers
and Shareholder Servicing Agents. In return for such fees, ICC Distributors
pays the distribution-related expenses of the Fund including one or more of
the following: advertising expenses; printing and mailing of prospectuses to
other than current shareholders; compensation to dealers and sale personnel;
and interest, carrying or other financing charges.
As compensation for providing distribution and shareholder services to
the Fund for the last three fiscal years, the Fund's distributor received fees
in the following amounts:
-14-
<PAGE>
- ------------------------------------------------------------------------------
Fiscal Year Ended October 31,
---------------------------------------------------
Class 1997 1996 1995
- ------------------------------------------------------------------------------
Class A 12b-1 Fee $ 36,065(1) $ 32,891(2) $ 32,947(2)
- ------------------------------------------------------------------------------
- ------------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $29,898 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $6,167.
(2) Fees received by Alex. Brown, the Fund's distributor for the fiscal
years ended October 31, 1996 and October 31, 1995.
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 ICC
Distributors 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. ICC Distributors
is authorized to make payments out of its fee to Participating Dealers and
Shareholder Servicing Agents. Payments to Participating Dealers and
Shareholder Servicing Agents may not exceed fees payable to ICC Distributors
under the Plan. The Plan was most recently approved by the Fund's Board of
Directors, including a majority of the Independent Directors, on September 16,
1997. 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 Independent 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 upon 60 days' notice, without
penalty, by a vote of a majority of the Fund's Independent Directors or by a
vote of a majority of the Fund's outstanding Shares (as defined under "Capital
Shares").
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 ICC Distributors 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 Independent Directors shall
be committed to the discretion of the Independent Directors then in office.
The Fund's distributor received commissions on the sale of Class A
Shares (of which only a portion was retained) in the following amounts:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended October 31,
- ---------------------------------------------------------------------------------------------------------------------
Class 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
Received Retained Received Retained Received Retained
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A $ _____(1) $ (2) $11,908(3) $11,878(3) $41,462(3) $27,986(3)
Commissions
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- 15 -
<PAGE>
- -------------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August
31, 1997, received ________ and ICC Distributors, the Fund's
distributor effective August 31, 1997 received _________.
(2) Of commissions received, Alex. Brown retained _____________ and ICC
Distributors retained ______, respectively.
(3) By Alex. Brown, the Fund's distributor for the fiscal years ended
October 31, 1996 and October 31, 1995.
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 Independent Directors and independent 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
Independent 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 ICC Distributors.
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, the Advisors or their affiliates or ICC
Distributors.
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 the
Advisors or their affiliates in any transaction in which the Advisors or their
affiliates act as a principal.
If the Advisors or their affiliates are 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.
- 16 -
<PAGE>
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 the Advisors or their affiliates
higher commissions than another broker might have charged on brokerage
transactions for the Fund for brokerage or research services. The allocation
of orders among broker-dealers and the commission rates paid by the Fund will
be reviewed periodically by the Board.
ICC directed transactions to broker-dealers and paid related
commissions because of research services in the following amounts:
---------------------------------------
Fiscal Year Ended October 31,
---------------------------------------
1997 1996
- ------------------------------------------------------------------------------
Transactions Directed $6,272,458 $ 3,779,330
- ------------------------------------------------------------------------------
Commissions Paid $ 16,973 $ 10,872
- ------------------------------------------------------------------------------
Subject to the above considerations, the Board of Directors has
authorized the Fund to effect portfolio transactions, on an agency basis,
through the Advisors or their affiliates 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 the Advisor or
its affiliates must be "reasonable and fair compared to the commission, fee or
other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities during a comparable
period of time." Rule 17e-1 also contains requirements for the review of such
transactions by the Board of Directors and requires ICC and Glenmede to
furnish reports and to maintain records in connection with such reviews. For
the period from September 1 through December 31, 1997 the Fund did not pay any
brokerage commissions to BT Alex. Brown or its affiliates. For the period from
January 1, 1997 through August 31, 1997 and for the fiscal years ended October
31, 1996 and October 31, 1995, the Fund paid no brokerage commissions to Alex.
Brown.
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
- 17 -
<PAGE>
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 (formerly known as the Flag Investors International Fund 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 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. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of investments
held in the Fund's portfolio and financial statements. The annual financial
statements are audited by the Fund's independent auditors.
11. CUSTODIAN, ACCOUNTING SERVICES AND TRANSFER AGENT
Boston Safe Deposit and Trust Company ("Boston Safe Deposit") 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.
- 18 -
<PAGE>
Investment Company Capital Corp. 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, 1997, such fees totaled $18,380.
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.
Average Daily Net Assets Incremental Annual Accounting Fee
- ------------------------ ---------------------------------
0 - $10,000,000 $25,000 (fixed fee)
$10,000,000 - $25,000,000 0.080%
$25,000,000 - $50,000,000 0.060%
$50,000,000 - $75,000,000 0.040%
$75,000,000 - $100,000,000 0.035%
$100,000,000 - $500,000,000 0.017%
$500,000,000 - $1,000,000,000 0.006%
over $1,000,000,000 0.002%
In addition, the Fund will reimburse ICC for the following out of
pocket expenses incurred in connection with ICC's performance of its services
under the Master Services Agreement: express delivery service, independent
pricing and storage. For the fiscal year ended October 31, 1997, ICC received
accounting fees of $28,220.
12. INDEPENDENT AUDITORS
The annual financial statements of the Fund are audited by Deloitte &
Touche LLP. Deloitte & Touche LLP has offices at University Square, 117 Campus
Drive, Princeton, New Jersey 08540.
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
- 19 -
<PAGE>
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.
Calculated according to SEC rules, the ending redeemable value and
average annual total return of a hypothetical $1,000 investment for the
periods ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
One-Year Period Ended Five-Year Period Ended Ten-Year Period Ended
October 31, 1997 October 31, 1997 October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Ending Annual Ending Annual Ending Annual
Class Redeemable Total Redeemable Total Redeemable Total
Value Return Value Return Value Return
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
*November 18, 1986 $1,121.95 12.19% $1,865.93 13.29% $1,981.81 7.08%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Inception Date
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.
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 year 1997 was 21% and in fiscal year 1996 was 13%.
14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- 20 -
<PAGE>
To Fund management's knowledge, the following persons owned of record
or beneficially 5% or more of the Fund's outstanding Shares, as of February 2,
1998.
Name and Address Percentage of Ownership
- ---------------- -----------------------
Mercantile Safe Deposit & Trust Company 6.55%
Riggs Councilman Michaels & Downes
Thrift & PLS PL
Attn: David Santelle
2 Hopkins Plaza
Baltimore, MD 21201
BT Alex. Brown Incorporated 5.03%
FBO 201-70188-19
P.O. Box 1346
Baltimore, MD 21203
The Directors and executive officers as a group owned less than 1% of
the Fund's total outstanding Shares, as of February 2, 1998.
15. FINANCIAL STATEMENTS
See next page.
- 21 -
<PAGE>
Alex. Brown Flag Investors International Fund
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS OCTOBER 31, 1997
No. of Value Percent of
Shares Security (Note 1) Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- 97.1%
AUSTRALIA -- 5.3%
100,000 Foster's Brewing Group $ 189,081 1.4%
26,634 Lend Lease Corp., Ltd. 543,140 3.9
--------- ----
732,221 5.3
CANADA -- 1.4%
3,000 Magna International Inc. - Class A 197,625 1.4
--------- ----
FINLAND -- 3.8%
6,000 Oy Nokia AB - Series A ADR 529,500 3.8
--------- ----
FRANCE -- 6.6%
2,258 Elf Aquitaine SA* 278,785 2.0
4,356 Lafarge SA* 271,469 1.9
3,872 Lagardere Groupe 111,078 0.8
5,600 SCOR SA 264,361 1.9
--------- ----
925,693 6.6
GERMANY -- 6.4%
5,000 Deutsche Bank AG 329,591 2.4
3,600 Deutsche Telecom AG 67,296 0.5
4,000 Hoechst AG 153,365 1.1
6,000 Veba AG 336,825 2.4
--------- ----
887,077 6.4
ITALY -- 7.8%
9,631 Assicurazioni Generali* 215,001 1.6
22,152 Benetton Group SpA 322,057 2.3
18,800 Instituto Bancario SpA 142,428 1.0
66,665 Telecom Italia SpA 417,172 2.9
--------- ----
1,096,658 7.8
JAPAN -- 25.1%
6,600 Acom Co., Ltd. 362,306 2.6
5,000 Amway Japan Ltd. 131,415 0.9
2,000 Aoyama Trading Co., Ltd. 53,730 0.4
10,000 Canon, Inc. 242,868 1.7
50 East Japan Railway Co. 243,284 1.7
25,000 Hitachi Ltd. 192,340 1.4
12,000 Honda Motor Co. 404,225 2.9
- 22 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
No. of Value Percent of
Shares Security (Note 1) Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- continued
JAPAN -- CONCLUDED
20,000 Kao Corp. $ 279,464 2.0%
1,500 Kyocera Corp. ADR 174,938 1.3
2,000 Nintendo Corp. Ltd. 173,002 1.2
26,000 Nishimatsu Construction Co. 127,589 0.9
4,000 Rohm Company 395,908 2.8
25,000 Sekisui Chemicals Corp. 196,914 1.4
7,000 Sharp Corp. 54,437 0.4
20,000 Toda Construction Co. 100,973 0.7
28,000 Toshiba Corp. 126,923 0.9
10,000 Yamanouchi Pharmaceutical 246,195 1.9
---------- ----
3,506,511 25.1
MALAYSIA -- 1.1%
94,666 Malaysian International
Shipping Corp. Berhad `F' 158,295 1.1
---------- ----
MEXICO -- 2.2%
33,750 Cemex. S.A. de C.V. - Series `B'* 147,757 1.1
8,000 TV Azteca S.A. 153,000 1.1
---------- ----
300,757 2.2
NETHERLANDS -- 1.4%
9,456 ABN-AMRO Holding N.V. 189,917 1.4
---------- ----
NEW ZEALAND -- 0.5%
5,000 Tranz Rail Holdings ADR 67,500 0.5
---------- ----
NORWAY -- 3.3%
4,300 Kvaerner AS 220,536 1.6
4,300 Norsk Hydro 235,830 1.7
---------- ----
456,366 3.3
PORTUGAL -- 0.6%
5,000 Electricidade de Portugal 86,075 0.6
---------- ----
SINGAPORE -- 0.4%
10,000 Singapore Airlines Ltd. F 74,968 0.4
---------- ----
- 23 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED) OCTOBER 31, 1997
No. of Value Percent of
Shares Security (Note 1) Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- concluded
SPAIN -- 5.4%
25,000 Dragados & Construcciones SA $ 506,003 3.6%
6,000 Repsol SA 251,115 1.8
---------- ----
757,118 5.4
SWEDEN -- 3.1%
11,000 Astra AB 170,054 1.2
5,000 SKF AB-- B Shares 115,946 0.8
6,000 Volvo AB-- B Shares 156,727 1.1
---------- ----
442,727 3.1
UNITED KINGDOM -- 22.7%
25,000 B.A.T. Industries PLC 219,137 1.6
16,149 The Boots Co. PLC 235,923 1.7
45,000 BTR PLC 153,145 1.1
25,000 Dalgety PLC 102,766 0.7
14,000 De La Rue PLC 99,861 0.7
43,750 Iceland Group PLC 87,906 0.6
84,000 Mirror Group Newspapers PLC 277,783 2.0
25,000 National Power PLC 207,416 1.5
25,000 Reed International PLC 245,718 1.8
10,000 RTZ Corp. PLC 129,599 0.9
22,967 Safeway PLC 149,786 1.1
55,100 Scottish Power PLC 410,093 2.9
40,000 Smith (WH) Group PLC - Class A 253,169 1.8
25,000 Tate & Lyle PLC 190,254 1.4
80,000 Tomkins PLC 408,218 2.9
---------- ----
3,170,774 22.7
Total Common Stock
(Cost $11,326,242) 13,579,782 97.1
---------- ----
- 24 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Value Percent of
Par (000) Security (Note 1) Net Assets
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.1%
HONG KONG -- 0.1%
$16 Dairy Farm International
Holdings Ltd., Cvt.
(Cost $16,000) $ 13,039 0.1%
----------- -----
TOTAL INVESTMENT IN SECURITIES
(Cost $11,342,242)** 13,592,821 97.2
OTHER ASSETS IN EXCESS OF LIABILITIES, NET 388,818 2.8
----------- -----
NET ASSETS $13,981,639 100.0%
=========== =====
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($13,981,639 / 854,564 shares outstanding) $16.36
======
MAXIMUM OFFERING PRICE PER SHARE
($16.36 / 0.955) $17.13
======
- ----------
* Non-income producing security.
** Aggregate cost for federal tax purposes was $11,550,031.
See Notes to Financial Statements.
- 25 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the
Year Ended
October 31,
- --------------------------------------------------------------------------------
1997
Investment Income (Note 1):
Dividends $ 398,934
Interest 22,372
Less:Foreign taxes withheld (45,153)
----------
Total income 376,153
----------
Expenses:
Investment advisory fee (Note 2) 105,195
Legal 43,115
Distribution fee (Note 2) 35,065
Audit 28,499
Accounting fee (Note 2) 28,220
Custodian fee 24,853
Transfer agent fee (Note 2) 18,380
Printing and postage 12,544
Registration fees 11,651
Miscellaneous 5,950
Directors' fees 657
----------
Total expenses 314,129
Less: Fees waived (Note 2) (103,734)
----------
Net expenses 210,395
----------
Net investment income 165,758
----------
Net realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 1,797,921
Net realized foreign exchange loss (67,080)
Change in unrealized appreciation or depreciation
of investments 348,203
Change in unrealized appreciation or depreciation on translation
of assets and liabilities, excluding investments, denominated in
foreign currencies (438)
----------
Net gain on investments 2,078,606
----------
Net increase in net assets resulting from operations $2,244,364
==========
See Notes to Financial Statements.
- 26 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended October 31,
- --------------------------------------------------------------------------------
1997 1996
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 165,758 $ 250,800
Net realized gain from security transactions and
foreign exchange transactions 1,730,841 571,223
Change in unrealized appreciation or depreciation
of investments 348,203 656,848
Change in unrealized appreciation or depreciation
on translation of other assets and liabilities
denominated in foreign currencies (438) (3,773)
---------- ----------
Net increase in net assets resulting
from operations 2,244,364 1,475,098
---------- ----------
Dividends to Shareholders from:
Net investment income and short-term gains (165,758) (28,072)
Distributions in excess of net investment
income and short-term gains (94,471) --
---------- ----------
Total distributions (260,229) (28,072)
Capital Share Transactions (Note 3):
Proceeds from sale of 83,957 and
107,997 shares, respectively 1,258,732 1,494,406
Value of 15,155 and 1,596 shares issued in
reinvestment of dividends, respectively 223,079 22,601
Cost of 155,119 and 182,530 shares
repurchased, respectively (2,414,563) (2,516,921)
---------- ----------
Total decrease in net assets derived
from capital share transactions (932,752) (999,914)
---------- ----------
Total increase in net assets 1,051,383 447,112
Net Assets:
Beginning of year 12,930,256 12,483,144
----------- -----------
End of year $13,981,639 $12,930,256
=========== ===========
Undistributed net investment income $ 437 $ 625,259
=========== ===========
See Notes to Financial Statements.
- 27 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
For the
Year Ended
October 31,
- --------------------------------------------------------------------------------
1997
Per Share Operating Performance:
Net asset value at beginning of year $ 14.20
-------
Income from Investment Operations:
Net investment income 0.11
Net realized and unrealized gain/(loss) on investments(1) 2.34
-------
Total from Investment Operations 2.45
Less Distributions:
Distributions from net investment income and short-term gains (0.18)
Distributions in excess of net investment income
and short-term gains (0.11)
-------
Total distributions (0.29)
-------
Net asset value at end of year $ 16.36
=======
Total Return(2) 17.48%
Ratios to Average Daily Net Assets:
Expenses(3) 1.50%
Net investment income(4) 1.18%
Supplemental Data:
Net assets at end of year (000) $13,982
Portfolio turnover rate 21%
Average commissions per share(5) $0.0405
- ----------
(1) The years ended October 31, 1997, 1996, 1995 and 1994 include net realized
currency gain/(loss). Realized currency gain/(loss) is included in net
investment income for the year ended October 31, 1993.
(2) Total return excludes the effect of sales charge.
(3) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 2.24%, 2.30%, 2.17%, 1.97% and
2.13% for the years ended October 31, 1997, 1996, 1995, 1994 and 1993,
respectively.
(4) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 0.44%, 1.10%, 0.02%,
0.28% and 1.28% for the years ended October 31, 1997, 1996, 1995, 1994 and
1993, respectively.
(5) Disclosure of average commissions per share is effective beginning in fiscal
year 1996.
- 28 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended October 31,
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of year $ 12.69 $ 13.97 $ 13.05 $ 9.11
------- ------- ------- ------
Income from Investment Operations:
Net investment income 0.26 0.09 0.18 0.49
Net realized and unrealized gain/(loss) on investments(1) 1.28 (1.37) 1.58 3.45
------- ------- ------- ------
Total from Investment Operations 1.54 (1.28) 1.76 3.94
Less Distributions:
Distributions from net investment income and short-term gains (0.03) -- (0.84) --
Distributions in excess of net investment income
and short-term gains -- -- -- --
------- ------- ------- -------
Total distributions (0.03) -- (0.84) --
------- ------- ------- -------
Net asset value at end of year $ 14.20 $ 12.69 $ 13.97 $ 13.05
======= ======= ======= =======
Total Return(2) 12.13% (9.16)% 13.98% 43.25%
Ratios to Average Daily Net Assets:
Expenses(3) 1.50% 1.50% 1.50% 1.50%
Net investment income(4) 1.91% 0.68% 0.75% 1.91%
Supplemental Data:
Net assets at end of year (000) $12,930 $12,483 $15,487 $15,008
Portfolio turnover rate 13% 35% 43% 48%
Average commissions per share(5) $0.0201 -- -- --
</TABLE>
See Notes to Financial Statements.
- 29 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies
Flag Investors International Fund, Inc. (the "Fund"), which was organized
as a Massachusetts business trust September 3, 1986 and reorganized as a
Maryland Corporation on August 16, 1993, commenced operations November 18, 1986.
The Fund is registered under the Investment Company Act of 1940 as a
diversified, open-end investment management company. Its objective is to seek
long-term growth of capital primarily through investment in a diversified
portfolio of marketable equity securities of issuers located outside of the
United States.
The Fund consists of one share class, Class A Shares, which is subject to a
4.50% maximum front-end sales charge and a 0.25% distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. The Fund's significant accounting policies are:
A. SECURITY VALUATION--The Fund values a portfolio security that is
primarily traded on a national exchange by using the last price
reported for the day. When the security is listed on more than one
exchange, the Fund uses the last price on the exchange where the
security is primarily traded. If there are no sales or the security is
not traded on a listed exchange, the Fund values the security at the
last bid price in the over-the-counter market. When a market quotation
is unavailable, the Investment Advisor determines a fair value using
procedures that the Board of Directors establishes and monitors. The
Fund values short-term obligations with maturities of 60 days or less
at amortized cost.
B. REPURCHASE AGREEMENTS--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the broker defaults.
The Fund's access to the collateral may be delayed or limited if the
broker defaults and the value of the collateral declines or if the
broker enters into an insolvency proceeding.
- 30 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTE 1--concluded
C. FOREIGN CURRENCY TRANSLATION--The Fund's books and records are
maintained in U.S. dollars. Transactions denominated in foreign
currencies are recorded in the Fund's records at the effective
exchange rate 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 that are a result
of 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. These contracts are not reflected in the Fund's financial
statements. However, the net income or loss from these contracts is
recorded from the contract's inception date. Premiums or discounts are
amortized over the life of the contracts.
D. FEDERAL INCOME TAXES--The Fund determines its distributions according
to income tax regulations, which may be different from generally
accepted accounting principles. As a result, the Fund occasionally
makes reclassifications within its capital accounts to reflect income
and gains that are available for distribution under income tax
regulations.
The Fund is organized as a regulated investment company. As long
as it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net
realized capital gains, it will be exempt from most, if not all,
federal income and excise taxes. As a result, the Fund has made no
provisions for federal income taxes.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER--The
Fund uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed.
Interest income is recorded on an accrual basis and includes the pro
rata scientific method for amortization of premiums and accretion of
discounts when appropriate. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
- 31 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust New York Corporation, is the Fund's investment advisor and The Glenmede
Trust Company ("Glenmede") is the Fund's subadvisor. As compensation for
advisory services, the Fund pays ICC an annual fee based on the Fund's average
daily net assets. This fee is calculated daily and paid monthly at the annual
rate of 0.75%. As compensation for subadvisory services, ICC pays Glenmede an
annual fee based on the Fund's average daily net assets. This fee is calculated
monthly and paid quarterly at the annual rate of 0.55%.
ICC has agreed to waive up to all of its fees if necessary so that the
Fund's total operating expenses are no more than 1.50% of the Fund's average
daily net assets. For the year ended October 31, 1997, ICC waived fees of
$103,734. ICC paid Glenmede $77,150 for subadvisory services for the year ended
October 31, 1997.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisor or subadvisor.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $28,220 for accounting services for the year ended
October 31, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $18,380 for
transfer agent services for the year ended October 31, 1997.
As compensation for providing distribution services, the Fund pays ICC
Distributors, Inc. ("ICC Distributors"), a member of the Forum Financial Group
of companies, an annual fee that is calculated daily and paid monthly at an
annual rate equal to 0.25% of the Fund's average daily net assets. Prior to
September 1, 1997, Alex. Brown & Sons Incorporated served as the Fund's
distributor for the same compensation and on substantially the same terms as ICC
Distributors. The Fund paid $35,065 for distribution services for the year ended
October 31, 1997.
- 32 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTE 2--concluded
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
October 31, 1997 was $705, and the accrued liability was $2,011.
NOTE 3--CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 10 million shares of $.001 par value
capital stock.
NOTE 4--Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $2,820,683 and sales of investment securities
aggregated $4,153,426 for the year ended October 31, 1997.
On October 31, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $3,044,446 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $1,001,656.
NOTE 5--Federal Income Tax Information
Generally accepted accounting principles require that certain components of
net assets be reclassified to reflect permanent differences between financial
reporting and tax purposes. Accordingly, permanent book/tax differences related
to foreign exchange losses of $530,352 have been reclassified from the
accumulated net realized loss from security and foreign exchange transactions to
undistributed net investment income. These reclassifications have no effect on
net assets or net asset values per share.
On October 31, 1997, there was a tax capital loss carryforward of
approximately $2,588,000, of which $1,999,000 expires in 2000 and $589,000 in
2001. This carryforward will be used to offset future net capital gains.
- 33 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 6--Net Assets
On October 31, 1997, net assets consisted of:
Paid-in capital $14,321,020
Undistributed net investment income 437
Accumulated net realized loss from security and
foreign exchange transactions (2,591,157)
Unrealized appreciation of investments 2,250,579
Unrealized translation gain 760
-----------
$13,981,639
===========
NOTE 7--Personal Income Tax Information for the Shareholder (Unaudited)
The following information summarizes all per share distributions paid by
the Fund during the taxable period ending October 31, 1997.
Total Foreign
Record Payable Ordinary Taxes Paid Long-Term
Date Date Income or Withheld Capital Gains
---- ---- ------ ----------- -------------
12/20/96 12/30/96 $0.29 $0.05 None
All of the foreign taxes paid or withheld represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources.
- 34 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Flag Investors International Fund, Inc.:
We have audited the statement of net assets of the Flag Investors
International Fund, Inc. as of October 31, 1997, and 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, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Flag Investors
InternationalFund, Inc. as of October 31, 1997, 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
Princeton, New Jersey
November 21, 1997
- 35 -
<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, 1997, October 31, 1996, 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
(2) Included in Part B of the Registration Statement:
- Statement of Net Assets as of October 31, 1997
- Statement of Operations for the fiscal year
ended October 31, 1997
- Statements of Changes in Net Assets for the
fiscal years ended October 31, 1997 and October
31, 1996
- Financial Highlights for the fiscal years ended
October 31, 1997, October 31, 1996, October 31,
1995, October 31, 1994 and October
31, 1993
- Notes to Financial Statements
(3) All required financial statements are included in
Parts A and B hereof. All other financial
statements and schedules are inapplicable.
(b) Exhibits:
Description
(1) (a) Articles of Incorporation.(1)
(b) Articles Supplementary.(1)
(c) Articles Supplementary.(1)
(2) By-Laws as amended through December 18, 1996.(2)
(3) None
(4) Specimen Security with respect to Flag Investors
Shares.(3)
(5) (a) Investment Advisory Agreement between
Registrant and Investment Company Capital
Corp.(1)
(b) Sub-Advisory Agreement among Registrant,
Investment Company Capital Corp. and The
Glenmede Trust Company.(1)
(6) (a) Distribution Agreement dated August 31,
1997 between Registrant and ICC
Distributors, Inc., filed herewith.
(b) Form of Sub-Distribution Agreement between
ICC Distributors, Inc. and Participating
Dealers, filed herewith.
(c) Form of Shareholder Servicing Agreement
between Registrant and Shareholder
Servicing Agents, filed herewith.
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<PAGE>
(7) None.
(8) (a) Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company.(4)
(b) Sub-Custody Agreement between Boston Safe
Deposit and Trust Company and
Sub-Custodians.(4)
(9) (a) Master Services Agreement between
Registrant and Investment Company Capital
Corp., with Appendices for the provision
of Transfer Agency and Accounting
Services.(1)
(10) Opinion of Counsel.(1)
(11) Consent of Deloitte & Touche LLP, filed herewith.
(12) None.
(13) Form of Subscription Agreement between Registrant
and Investors.(1)
(14) None.
(15) (a) Distribution Plan with respect to Flag
Investors International Fund Class A
Shares.(1)
(b) Amended Distribution Plan with respect to
Flag Investors International Fund Class A
Shares, filed herewith.
(16) Schedule of Computation of Performance Quotations
(unaudited).(1)
(18) (a) Rule 18f-3 Plan.(1)
(b) Rule 18f-3 Plan,amended through March 26,
1997.(2)
(c) Amended 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. 16 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479), filed with the Securities and Exchange Commission via
EDGAR on February 27, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479), filed with the Securities and Exchange Commission via
EDGAR on February 25, 1997.
(3) Incorporated by reference to Exhibit 1 (Articles of Incorporation),
as amended to date, to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479) filed with the Securities and Exchange Commission via EDGAR
on February 27, 1996 and Exhibit 2 (By-Laws) as amended to date, to
Post-Effective Amendment No. 17 to such Registration Statement, filed
with the Securities and Exchange commission via EDGAR on February 25,
1997.
(4) Incorporated by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479), filed with the Securities and Exchange Commission via EDGAR
on February 24, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant.
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other
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<PAGE>
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 February 2, 1998:
Number of
Title of Class Record Holders
Common Stock Class A 1,019
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.
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
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<PAGE>
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.
(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.
James L. Kermes - Director, President President and Chief Executive Officer, The
and Chief Executive Officer Glenmede Corporation
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.
Arthur E. Pew, III - 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 3rd - 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.
Rebecca W. Rimel - Director, President and Executive Vice President, The Glenmede
CEO, The Pew Charitable Trusts (Division of Corporation.
Glenmede)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Robert G. Williams - Director Director, The Glenmede Corporation
Ethel Benson Wister - Director Director, The Glenmede Corporation
John W. Church, Jr.- Executive Vice President, Executive Vice President, The Glenmede
Chief Investment Officer Corporation
J. Thomas Dunlevy - Executive Vice President, Executive Vice President, The Glenmede
Director of Client Services Corporation
A.E. Piscopo - Executive Vice President, Chief Executive Vice President, The Glenmede
Operating Officer Corporation.
William H. Pope, Jr. - Senior Vice President Senior Vice President, The Glenmede
Corporation
Warren A. Reintzel - Senior Vice President Senior Vice President, The Glenmede
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>
Item 29. Principal Underwriters.
(a) ICC Distributors, Inc. acts as distributor for BT Alex. Brown Cash
Reserve Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., the Flag Investors Total Return U.S. Treasury Fund
Shares of Total Return U.S. Treasury Fund, Inc., the Flag Investors Managed
Municipal Fund Shares of Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc. (formerly known as Flag Investors
Intermediate-Term Income Fund, Inc.), Flag Investors Value Builder Fund, Inc.,
Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc., Flag
Investors Real Estate Securities Fund, Inc. and Flag Investors Equity Partners
Fund, Inc., all registered open-end management investment companies.
(b)
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriters with Registrant
John Y. Keefer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Richard C. Butt Vice President None
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
- ---------
* Two Portland Square
Portland, Maine 04101
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<PAGE>
(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. ("ICC"), One South Street, Baltimore,
Maryland 21202, the Registrant's investment advisor, transfer agent, dividend
disbursing agent and accounting services provider, 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 ICC
Distributors, Inc., Two Portland Square, Portland, Maine 04101 relating to its
functions as the Registrant's distributor, or the records maintained by Boston
Safe Deposit and Trust Company ("Boston Safe"), One Boston Place, Boston,
Massachusetts 02108 relating to its functions as the Registrant's custodian.
In particular, with respect to the records required by Rule 31a-1(b)(1),
ICC and Glenmede each maintains physical possession of all journals containing
itemized daily records of all purchases and sales of securities, including
sales and redemptions of Fund securities and Boston Safe maintains physical
possession of all receipts and deliveries of securities (including certificate
numbers if such detail is not recorded by the transfer agent), all receipts and
disbursements of cash, and all other debts and credits.
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.
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<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 amendment 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 25th day of February, 1998.
FLAG INVESTORS INTERNATIONAL
FUND, INC.
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:
* Chairman and Director February 25, 1998
- -------------------------- -----------------
Truman T. Semans Date
* Director February 25, 1998
- -------------------------- -----------------
James J. Cunnane Date
* Director February 25, 1998
- -------------------------- -----------------
Richard T. Hale Date
* Director February 25, 1998
- -------------------------- -----------------
John F. Kroeger Date
* Director February 25, 1998
- -------------------------- -----------------
Louis E. Levy Date
* Director February 25, 1998
- -------------------------- -----------------
Eugene J. McDonald Date
* Director February 25, 1998
- -------------------------- -----------------
Carl W. Vogt Date
/s/ John W. Church, Jr. President Feburary 25, 1998
- -------------------------- -----------------
John W. Church, Jr. Date
/s/ Joseph A. Finelli Chief Financial February 25, 1998
- -------------------------- and Accounting -----------------
Joseph A. Finelli Officer Date
*By: /s/Amy M. Olmert
- --------------------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
EDGAR
Exhibit
Number Description
- ------ -----------
(1) (a) Articles of Incorporation.(1)
(b) Articles Supplementary.(1)
(c) Articles Supplementary.(1)
(2) By-Laws as amended through December 18, 1996.(2)
(3) None
(4) Specimen Security with respect to Flag Investors
Shares.(3)
(5) (a) Investment Advisory Agreement between
Registrant and Investment Company Capital
Corp.(1)
(b) Sub-Advisory Agreement among Registrant,
Investment Company Capital Corp. and The
Glenmede Trust Company.(1)
EX-99.B (6) (a) Distribution Agreement dated August 31, 1997
between Registrant and ICC Distributors,
Inc., filed herewith.
EX-99.B (6) (b) Form of Sub-Distribution Agreement between
ICC Distributors, Inc. and Participating
Dealers, filed herewith.
EX-99.B (6) (c) Form of 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.(4)
(b) Sub-Custody Agreement between Boston Safe
Deposit and Trust Company and Sub-
Custodians.(4)
(9) (a) Master Services Agreement between Registrant
and Investment Company Capital Corp., with
Appendices for the provision of Transfer
Agency and Accounting Services.(1)
(10) Opinion of Counsel.(1)
EX-99.B (11) Consent of Deloitte & Touche LLP, filed herewith.
(12) None.
(13) Form of Subscription Agreement between Registrant and
Investors.(1)
(14) None.
<PAGE>
EDGAR
Exhibit
Number Description
- ------ -----------
(15) (a) Distribution Plan with respect to Flag
Investors International Fund Class A
Shares.(1)
EX-99.B (15) (b) Amended Distribution Plan with respect to
Flag Investors International Fund Class A
Shares, filed herewith.
(16) Schedule of Computation of Performance Quotations
(unaudited).(1)
(18) (a) Rule 18f-3 Plan.(1)
(b) Rule 18f-3 Plan, as amended through
March 26, 1997.(2)
EX-99.B (b) Amended Rule 18f-3 Plan, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith.
EX-27 (27) Financial Data Schedule, filed herewith.
- ---------
(1) Incorporated by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479), filed with the Securities and Exchange Commission via
EDGAR on February 27, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479), filed with the Securities and Exchange Commission via
EDGAR on February 25, 1997.
(3) Incorporated by reference to Exhibit 1 (Articles of Incorporation),
as amended to date, to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479) filed with the Securities and Exchange Commission via EDGAR
on February 27, 1996 and Exhibit 2 (By-Laws) as amended to date, to
Post-Effective Amendment No. 17 to such Registration Statement, filed
with the Securities and Exchange Commission via EDGAR on February 25,
1997.
(4) Incorporated by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-08479), filed with the Securities and Exchange Commission via EDGAR
on February 24, 1994.
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 31st day of August, 1997, by and between Flag
Investors International Fund, Inc., with its principal office and place of
business at One South Street, Baltimore, Maryland 21202 (the "Fund"), and ICC
Distributors, Inc., a Delaware corporation with its principal office and place
of business at Two Portland Square, Portland, Maine 04101 (the "Distributor").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company, may
issue its shares of common stock (the "Shares") in separate series and classes
and continuously offers for sale its Shares to the public; and
WHEREAS, the Distributor is registered under the Securities Exchange Act
of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the
business of selling shares of registered investment companies either directly
to purchasers or through other securities dealers;
WHEREAS, the Fund offers Shares in one or more series as listed in
Appendix A hereto (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Section 16, being herein referred to as a "Series," and
collectively as the "Series") and the Fund offers shares of one or more
classes (each such class together with all other classes subsequently
established by a Series being herein referred to as a "Class," and
collectively as the "Classes");
WHEREAS, the Fund desires that the Distributor offer the Shares of each
Series and Class thereof to the public and the Distributor is willing to
provide those services on the terms and conditions set forth in this Agreement
in order to promote the growth of the Fund and facilitate the distribution of
the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and the Distributor hereby agree as
follows:
SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT
(a) The Fund has delivered to the Distributor properly certified or
authenticated copies of its Articles of Incorporation and Bylaws
(collectively, as amended from time to time, "Organic Documents"), the Fund's
Notification of Registration filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to Section 8(a) of the 1940 Act on Form N-8A under
the 1940 Act, the Fund's Registration Statement and all amendments thereto
filed with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the 1940 Act (the "Registration Statement") and its
current Prospectuses and Statements of Additional Information (collectively,
as currently in effect and as amended or supplemented, the "Prospectus") and
shall promptly furnish the Distributor with all amendments of or supplements
to the foregoing, each properly certified or
<PAGE>
authenticated. In addition, the Fund shall furnish the Distributor with
properly certified or authenticated copies of all documents, notices and
reports filed with the SEC.
(b) The Fund has delivered to the Distributor certified copies of the
resolutions of the Board of Directors (the "Board") authorizing the
appointment of the Distributor as distributor and approving this Agreement.
(c) The Fund hereby appoints the Distributor as its principal underwriter
and distributor to sell its Shares to the public and hereby agrees during the
term of this Agreement to sell its Shares to the Distributor upon the terms
and conditions herein set forth.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Fund to act
as its principal underwriter and distributor except that the rights given
under this Agreement to the Distributor shall not apply to Shares issued in
connection with the merger, consolidation or reorganization of any other
investment company with the Fund; the Fund's acquisition by purchase or
otherwise of all or substantially all of the assets or stock of any other
investment company; or the reinvestment in Shares by the Fund's shareholders
of dividends or other distributions or any other offering by the Fund of
securities to its shareholders.
SECTION 3. PURCHASE OF SHARES; OFFERING OF SHARES
(a) The Distributor shall have the right to buy from the Fund the Shares
needed to fill unconditional orders for unsold Shares of the Fund as shall
then be effectively registered under the Securities Act placed with the
Distributor by investors or securities dealers or depository institutions or
other financial intermediaries acting as agent for their customers or on their
own behalf. Alternatively, the Distributor may act as the Fund's agent, to
offer, and to solicit offers to subscribe to, unsold Shares of the Fund as
shall then be effectively registered under the Securities Act. The Distributor
will promptly forward all orders and subscriptions for Shares of the Fund. The
price which the Distributor shall pay for Shares purchased by it from the Fund
shall be the net asset value, determined as set forth in Section 3(c) hereof,
used in determining the public offering price on which the orders are based.
The price at which the Distributor shall offer and sell Shares to investors
shall be the public offering price, as set forth in Section 3(b) hereof. The
Distributor may sell Shares to securities dealers, depository institutions or
other financial intermediaries acting as agent for their customers that have
entered into agreements with the Distributor pursuant to Section 9 hereof or
acting on their own behalf. The Fund reserves the right to sell its Shares
directly to investors through subscriptions received by the Fund, but no such
direct sales shall affect the sales charges due to the Distributor hereunder.
(b) The public offering price of the Shares of the Fund, i.e., the price
per Share at which the Distributor or selected dealers or selected agents
(each as defined in Section 11 hereof) may sell Shares to the public or to
those persons eligible to invest in Shares as described in the Fund's
Prospectus, shall be the public offering price determined in accordance with
the then currently effective Prospectus of the Fund or Class thereof under the
Securities Act, relating to such Shares,
-2-
<PAGE>
but not to exceed the net asset value at which the Distributor, when acting as
principal, is to purchase such Shares, plus, in the case of Shares for which
an initial sales charge is assessed, an initial charge equal to a specified
percentage or percentages of the public offering price of the Shares as set
forth in the current Prospectus relating to the Shares. In the case of Shares
for which an initial sales charge may be assessed, Shares may be sold to
certain classes of persons at reduced sales charges or without any sales
charge as from time to time set forth in the current Prospectus relating to
the Shares. The Fund will advise the Distributor of the net asset value per
Share at each time as the net asset value per Share shall have been determined
by the Fund.
(c) The net asset value per Share of each Series or Class thereof shall
be determined by the Fund, or an agent of the Fund, as of the close of the New
York Stock Exchange or such other time as set forth in the applicable
Prospectus on the Fund business day in accordance with the method set forth in
the Prospectus and guidelines established by the Board.
(d) The Fund reserves the right to suspend the offering of Shares of any
Class at any time in the absolute discretion of the Board, and upon notice of
such suspension the Distributor shall cease to offer Shares of the Fund or
Classes thereof specified in the notice.
(e) The Fund, or any agent of the Fund designated in writing to the
Distributor by the Fund, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions
for Shares obtained by the Distributor as agent shall be directed to the Fund
for acceptance and shall not be binding until accepted by the Fund. Any order
or subscription may be rejected by the Fund; provided, however, that the Fund
will not arbitrarily or without reasonable cause refuse to accept or confirm
orders or subscriptions for the purchase of Shares. The Fund (or its agent)
will confirm orders and subscriptions upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of
payment thereof, will issue such Shares in certificated or uncertificated form
pursuant to the instructions of the Distributor. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Fund
(or its agent).
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES
(a) Any of the outstanding Shares of the Fund may be tendered for
redemption at any time, and the Fund agrees to redeem or repurchase the Shares
so tendered in accordance with its obligations as set forth in the Fund's
Organic Documents and the Prospectus relating to the Shares. The price to be
paid to redeem or repurchase the Shares of the Fund shall be equal to the net
asset value calculated in accordance with the provisions of Section 3(b)
hereof less, in the case of Shares for which a deferred sales charge is
assessed, a deferred sales charge equal to a specified percentage or
percentages of the net asset value of those Shares as from time to time set
forth in the Prospectus relating to those Shares or their cost, whichever is
less. Shares for which a deferred sales charge may be assessed and that have
been outstanding for a specified period of time may be redeemed without
payment of a deferred sales charge as from time to time set forth in the
Prospectus relating to those Shares.
-3-
<PAGE>
(b) The Fund or its designated agent shall pay (i) the total amount of
the redemption price consisting of the redemption price less any applicable
deferred sales charge to the redeeming shareholder or its agent and (ii)
except as may be otherwise required by the Conduct Rules (the "Rules") of the
National Association of Securities Dealers, Inc. (the "NASD") and any
interpretations thereof, any applicable deferred sales charges to the
Distributor in accordance with the Distributor's instructions on or before the
third business day subsequent to each calendar month-end.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than its
customary weekend or holiday closings, when trading thereon is restricted,
when an emergency exists as a result of which disposal by the Fund of
securities owned by the Fund is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the SEC so permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the
Fund upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Fund hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long
as the performance of its obligations hereunder is not impaired thereby.
(b) In selling Shares of the Fund, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by the Fund to give any information or to make any representations
other than as is contained in the Fund's Prospectus or any advertising
materials or sales literature specifically approved in writing by the Fund or
its agents.
(c) The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers or selected agents,
the collection of amounts payable by investors and selected dealers or
selected agents on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the NASD and any other
applicable self-regulatory organization.
(d) The Distributor will perform its duties hereunder under the
supervision of and in accordance with the directives of the Board. The
Distributor will perform its duties hereunder in accordance with the Fund's
Organic Documents and Prospectuses and with the instructions and directions of
the Board and will conform to and comply with the requirements of the 1940
Act, the Securities Act and other applicable laws.
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<PAGE>
(e) The Distributor shall provide the Board with a written report of the
amounts expended in connection with this Agreement as requested by the Board.
(f) The Distributor represents and warrants to the Fund that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) It is empowered under applicable laws and by its
Articles of Incorporation to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement;
(v) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Distributor,
enforceable against the Distributor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies
of creditors and secured parties;
(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify
the Fund if its membership in the NASD is terminated or suspended;
and
(vii) The performance by the Distributor of its obligations
hereunder does not and will not contravene any provision of its
Articles of Incorporation.
(g) Notwithstanding anything in this Agreement, including the Appendices,
to the contrary, the Distributor makes no warranty or representation as to the
number of selected dealers or selected agents with which it has entered into
agreements in accordance with Section 11 hereof, as to the availability of any
Shares to be sold through any selected dealer, selected agent or other
intermediary or as to any other matter not specifically set forth herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF THE FUND
(a) The Fund shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other
papers or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. The Fund shall make available to
the Distributor the number of copies of its Prospectuses as the Distributor
shall reasonably request.
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<PAGE>
(b) The Fund shall take, from time to time, subject to the approval of
its Board and any required approval of its shareholders, all action necessary
to fix the number of authorized Shares (if such number is not limited) and to
register the Shares under the Securities Act, to the end that there will be
available for sale the number of Shares as reasonably may be expected to be
sold pursuant to this Agreement.
(c) The Fund shall register or qualify its Shares for sale under the
securities laws of the various states of the United States and other
jurisdictions ("States") as the Fund, in its sole discretion shall determine.
Any registration or qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. The Distributor shall furnish such
information and other material relating to its affairs and activities as may
be required by the Fund in connection with such registration or qualification.
(d) The Fund represents and warrants to the Distributor that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Maryland;
(ii) It is empowered under applicable laws and by its
Organic Documents to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have
been taken to authorize it to enter into and perform its duties under
this Agreement;
(iv) It is registered as an open-end management investment
company with the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully
paid and non-assessable;
(vi) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Fund,
enforceable against the Fund in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors
and secured parties;
(vii) The performance by the Fund of its obligations
hereunder does not and will not contravene any provision of its
Articles of Incorporation.
(viii) The Fund's Registration Statement is currently
effective and will remain effective with respect to all Shares of the
Fund's Series and Classes thereof being offered for sale;
(ix) It will use its best efforts to ensure that its
Registration Statement and Prospectuses have been or will be, as the
case may be, carefully prepared in conformity with the requirements
of the Securities Act and the rules and regulations thereunder;
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<PAGE>
(x) It will use its best efforts to ensure that (A) its
Registration Statement and Prospectuses contain or will contain all
statements required to be stated therein in accordance with the
Securities Act and the rules and regulations thereunder, (B) all
statements of fact contained or to be contained in the Registration
Statement or Prospectuses are or will be true and correct at the time
indicated or on the effective date as the case may be and (C) neither
the Registration Statement nor any Prospectus, when they shall become
effective or be authorized for use, will include an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares;
(xi) It will from time to time file such amendment or
amendments to its Registration Statement and Prospectuses as, in the
light of then-current and then-prospective developments, shall, in
the opinion of its counsel, be necessary in order to have the
Registration Statement and Prospectuses at all times contain all
material facts required to be stated therein or necessary to make any
statements therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to its Registration
Statement or Prospectuses without giving the Distributor reasonable
advance notice thereof (which shall be at least three Fund business
days); provided, however, that nothing contained in this Agreement
shall in any way limit the Fund's right to file at any time such
amendments to its Registration Statement or Prospectuses, of whatever
character, as the Fund may deem advisable, such right being in all
respects absolute and unconditional; and
(xiii) It will use its best efforts to ensure that (A) any
amendment to its Registration Statement or Prospectuses hereafter
filed will, when it becomes effective, contain all statements
required to be stated therein in accordance with the 1940 Act and the
rules and regulations thereunder, (B) all statements of fact
contained in the Registration Statement or Prospectuses will, when it
becomes effective, be true and correct at the time indicated or on
the effective date as the case may be and (C) no such amendment, when
it becomes effective, will include an untrue statement of a material
fact or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to
a purchaser of the Shares.
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and efforts in rendering
services to the Fund under this Agreement but shall be under no duty to take
any action except as specifically set forth herein or as may be specifically
agreed to by the Distributor in writing. The Distributor shall not be liable
to the Fund or any of the Fund's shareholders for any error of judgment or
mistake of law, for any loss arising out of any investment, or for any action
or inaction of the Distributor in the absence of bad faith, willful
misfeasance or gross negligence in the performance of the Distributor's duties
or obligations under this Agreement or by reason of the Distributor's reckless
disregard of its duties and obligations under this Agreement.
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<PAGE>
(b) The Distributor shall not be liable to the Fund for any action taken
or failure to act in good faith reliance upon:
(i) the advice of the Fund or of counsel, who may be counsel
to the Fund or counsel to the Distributor;
(ii) any oral instruction which the Distributor receives and
which it reasonably believes in good faith was transmitted by the
person or persons authorized by the Board to give such oral
instruction (the Distributor shall have no duty or obligation to make
any inquiry or effort of certification of such oral instruction);
(iii) any written instruction or certified copy of any
resolution of the Board, and the Distributor may rely upon the
genuineness of any such document or copy thereof reasonably believed
in good faith by the Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement, instrument,
report, notice, consent, order, or other document reasonably believed
in good faith by the Distributor to be genuine and to have been
signed or presented by the Fund or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order,
or any other document or instrument which the Distributor reasonably believes
in good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties (other than those related
to the Distributor's employees), fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply. In addition, to the extent the
Distributor's obligations hereunder are to oversee or monitor the activities
of third parties, the Distributor shall not be liable for any failure or delay
in the performance of the Distributor's duties caused, directly or indirectly,
by the failure or delay of such third parties in performing their respective
duties or cooperating reasonably and in a timely manner with the
Distributor.
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<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Fund will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section 15 of the Securities Act or section
20 of the 1934 Act ("Distributor Indemnitees") free and harmless from and
against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses of
every nature and character (including the cost of investigating or defending
such claims, demands, actions, suits or liabilities and any reasonable counsel
fees incurred in connection therewith) which any Distributor Indemnitee may
incur, under the Securities Act, under the securities laws of the various
States or under common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in the Fund's
Registration Statement or Prospectuses, arising out of or based upon any
alleged omission to state a material fact required to be stated in any one
thereof or necessary to make the statements in any one thereof not misleading,
or arising out of or based upon any filing made with the regulatory
authorities of any State unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Fund in connection with the preparation of the Registration Statement,
exhibits to the Registration Statement or filings made with the regulatory
authorities of any State by or on behalf of the Distributor ("Distributor
Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Fund shall indemnify and hold each Distributor Indemnitee free and
harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor
Claim related to the matters for which the Distributor has requested amendment
to the Fund's Registration Statement and for which the Fund has not filed a
Required Amendment, regardless of with respect to such matters whether any
statement in or omission from the Registration Statement was made in reliance
upon, or in conformity with, information furnished to the Fund by or on behalf
of the Distributor.
(b) The Fund may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Fund
and approved by the Distributor, which approval shall not be withheld
unreasonably. The Fund shall advise the Distributor that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Fund assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Fund does not assume the defense
of any such suit, or if Distributor does not approve of counsel chosen by the
Fund or has been advised that it may have available defenses or claims that
are not available to or conflict with those available to the Fund, the Fund
will reimburse any Distributor Indemnitee named as defendant in such suit for
the reasonable fees and expenses of any counsel that person retains. A
Distributor Indemnitee shall not settle or confess any claim without the prior
written consent of the Fund, which consent shall not be unreasonably withheld
or delayed.
(c) The Distributor will indemnify, defend and hold the Fund and its
several officers and directors (collectively, the "Fund Indemnitees"), free
and harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel
fees and other expenses of every nature and character (including the cost of
investigating
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<PAGE>
or defending such claims, demands, actions, suits or liabilities and any
reasonable counsel fees incurred in connection therewith), but only to the
extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact
contained in the Fund's Registration Statement or Prospectus or any
alleged omission of a material fact required to be stated or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon, and in conformity
with, information furnished to the Fund in writing in connection with
the preparation of the Registration Statement or Prospectus by or on
behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set
forth in Section 7 of this Agreement (collectively, "Fund Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Fund Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Fund, which approval shall not be withheld
unreasonably. The Distributor shall advise the Fund that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit
and retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if the Fund does not approve of counsel chosen by
the Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to the
Distributor, the Distributor will reimburse any Fund Indemnitee named as
defendant in such suit for the reasonable fees and expenses of any counsel
that person retains. A Fund Indemnitee shall not settle or confess any claim
without the prior written consent of the Distributor, which consent shall not
be unreasonably withheld or delayed.
(e) The Fund's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Fund or the
Distributor receiving notice of any action brought against a Distributor
Indemnitee or Fund Indemnitee, respectively, by the person against whom such
action is brought within twenty (20) days after the summons or other first
legal process is served. Such notice shall refer to the person or persons
against whom the action is brought. The failure to provide such notice shall
not relieve the party entitled to such notice of any liability that it may
have to any Distributor Indemnitee or Fund Indemnitee except to the extent
that the ability of the party entitled to such notice to defend such action
has been materially adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations
and warranties in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Fund Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the
benefit of each person that may be a Distributor Indemnitee or Fund Indemnitee
at any time and their respective successors and
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<PAGE>
assigns (it being intended that such persons be deemed to be third party
beneficiaries under this Agreement).
(g) The Distributor agrees promptly to notify the Fund of the
commencement of any litigation or proceeding of which it becomes aware arising
out of or in any way connected with the issuance or sale of Shares. The Fund
agrees promptly to notify the Distributor of the commencement of any
litigation or proceeding of which it becomes aware arising out of or in any
way connected with the issuance or sale of its Shares.
(h) Nothing contained herein shall require the Fund to take any
action contrary to any provision of its Organic Documents or any applicable
statute or regulation or shall require the Distributor to take any action
contrary to any provision of its Articles of Incorporation or Bylaws or any
applicable statute or regulation; provided, however, that neither the Fund nor
the Distributor may amend their Organic Documents or Articles of Incorporation
and Bylaws, respectively, in any manner that would result in a violation of a
representation or warranty made in this Agreement, except if required by any
applicable statute or regulation.
(i) Nothing contained in this section shall be construed to protect
the Distributor against any liability to the Fund or the security holders of
the Fund to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.
SECTION 9. NOTIFICATION TO THE DISTRIBUTOR
The Fund shall advise the Distributor immediately: (i) of any request
by the SEC for amendments to the Fund's Registration Statement or Prospectus
or for additional information; (ii) in the event of the issuance by the SEC of
any stop order suspending the effectiveness of the Fund's Registration
Statement or any Prospectus or the initiation of any proceedings for that
purpose; (iii) of the happening of any material event which makes untrue any
statement made in the Fund's then current Registration Statement or Prospectus
or which requires the making of a change in either thereof in order to make
the statements therein not misleading; and (iv) of all action of the SEC with
respect to any amendments to the Fund's Registration Statement or Prospectus
which may from time to time be filed with the Commission under the 1940 Act or
the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with the
distribution of Shares of the Fund and each Class thereof, the Distributor
shall receive: (i) any applicable sales charge assessed upon investors in
connection with the purchase of Shares; (ii) from the Fund, any applicable
contingent deferred sales charge ("CDSC") assessed upon investors in
connection with the redemption of Shares; (iii) from the Fund, the
distribution service fees with respect to the Shares of those Classes as
designated in Appendix A for which a plan under Rule 12b-1 under the 1940 Act
(a "Plan") is effective (the "Distribution Fee"); and (iv) from the Fund, the
shareholder service fees with respect to the Shares of those Classes as
designated in Appendix A (the "Service Fee"). The Distribution Fee and Service
Fee shall be accrued daily by each applicable Fund or Class thereof and shall
be paid monthly as promptly as possible after the last day of each calendar
month but in any
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<PAGE>
event on or before the fifth (5th) Fund business day after month-end, at the
rate or in the amounts set forth in Appendix A and, as applicable, the
Plan(s). The Fund grants and transfers to the Distributor a general
unperfected lien and security interest in any and all securities and other
assets of the Fund now or hereafter maintained in an account at the Fund's
custodian on behalf of the Fund to secure any Distribution Fees and Service
Fees owed the Distributor by the Fund under this Agreement.
(b) The Fund shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Series
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after each month end.
(c) Except as specified in Sections 8 and 10(a), the Distributor
shall be entitled to no compensation or reimbursement of expenses for the
services provided by the Distributor pursuant to this Agreement. The
Distributor may receive compensation from the Fund's investment advisors,
other service providers or their respective affiliates (collectively, the
"Advisor") for its services hereunder or for additional services all as may be
agreed to between the Advisor and the Distributor. Notwithstanding anything in
this Agreement to the contrary, to the extent the Distributor receives
compensation from the Advisor that is disclosed to the Board, the Fund will
indemnify, defend and hold each Distributor Indemnitees free and harmless from
and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and
other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith) related in
any way to such payment.
(d) The Fund shall be responsible and assumes the obligation for
payment of all its expenses, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing of the
Registration Statement and Prospectuses (including but not limited to the
expense of setting in type the Registration Statement and Prospectuses and
printing sufficient quantities for internal compliance, regulatory purposes
and for distribution to current shareholders).
(e) The Fund shall bear the cost and expenses (i) of the registration
of its Shares for sale under the Securities Act; (ii) of the registration or
qualification of its Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Fund, or its Series or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Fund; and (iv) payable to each State for continuing registration or
qualification therein until the Fund decides to discontinue registration or
qualification. The Distributor shall pay all expenses relating to the
Distributor's broker-dealer qualification.
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<PAGE>
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
(a) The Distributor shall have the right to enter into
sub-distribution agreements with securities dealers of its choice ("selected
dealers") and with depository institutions and other financial intermediaries
of its choice ("selected agents") for the sale of Shares and to fix therein
the portion of the sales charge, if any, that may be allocated to the selected
dealers or selected agents; provided, that all such agreements shall be in
substantially the form of agreement as set forth in Appendix B hereto. Shares
of each Series or Class thereof shall be resold by selected dealers or
selected agents only at the public offering price(s) set forth in the
Prospectus relating to the Shares. The Distributor shall offer and sell Shares
of the Fund only to such selected dealers as are members in good standing of
the NASD. The Distributor shall have the right to enter into shareholder
servicing agreements with financial intermediaries of its choice; provided,
that all such agreements shall be in substantially the form of agreement as
set forth in Appendix C hereto.
(b) The Distributor will supervise the Fund's relationship with
selected dealers and agents and may make payments to those selected dealers
and agents in such amounts as the Distributor may determine from time to time
in its sole discretion. The amount of payments to selected dealers and agents
by the Distributor may be reviewed by the Board from time to time; provided,
however, that no payment by the Distributor to any selected dealer or agent
with respect to a Share shall exceed the amount of payments made to the
Distributor hereunder with respect to that Share.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information
related to the Fund as proprietary information of the Fund and, on behalf of
itself and its employees, to keep confidential all such information, except
that the Distributor may:
(i) prepare or assist in the preparation of periodic reports
to shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the
investment company industry to companies that track or report price,
performance or other information regarding investment companies; and
(iii) release such other information as approved in writing
by the Fund, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding
the Fund without the consent of the Fund if the Distributor reasonably
believes that it may be exposed to civil or criminal legal proceedings for
failure to comply, when requested to release any information by duly
constituted authorities or when so requested by the Fund.
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<PAGE>
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each series
or class listed in Appendix A on the later of (i) August 31, 1997 or (ii) the
date on which the Fund's Registration Statement relating to Shares of the Fund
becomes effective. Upon effectiveness of this Agreement, it shall supersede
all previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Fund.
(b) This Agreement shall continue in effect with respect to a Series
Fund for a period of one year from its effectiveness and thereafter shall
continue in effect with respect to the Series until terminated; provided, that
continuance is specifically approved at least annually (i) by the Board or by
a vote of a majority of the outstanding voting securities of the Fund and (ii)
by a vote of a majority of Directors of the Fund (I) who are not parties to
this Agreement or interested persons of any such party (other than as
Directors of the Fund) and (II) with respect to each Class of a Series for
which there is an effective Plan, who do not have any direct or indirect
financial interest in any such Plan applicable to the Class or in any
agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on such approval.
(c) This Agreement may be terminated at any time with respect to a
Series, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Series or, with respect
to each Class for which there is an effective Plan, a majority of Directors of
the Fund who do not have any direct or indirect financial interest in any such
Plan or in any agreements related to the Plan, on 60 days' written notice to
the Distributor or (ii) by the Distributor on 60 days' written notice to the
Fund.
(d) This Agreement shall automatically terminate upon its assignment
and upon the termination of the Distributor's membership in the NASD.
(e) If the Fund does not file a Required Amendment within fifteen
days following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement immediately.
(f) The obligations of Sections 5(e), 6(d), 8, 9 and 10 shall survive
any termination of this Agreement with respect to a Series or Class thereof.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by the
Distributor to the Fund or the Fund to the Distributor shall be deemed
sufficiently given if personally delivered or sent by telegram, facsimile or
registered, certified or overnight mail, postage prepaid, addressed by the
party giving such notice to the other party at the last address furnished by
the other party to the party giving such notice, and unless and until changed
pursuant to the foregoing provisions hereof each such notice shall be
addressed to the Fund or the Distributor, as the case may be, at their
respective principal places of business.
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<PAGE>
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's
obligations hereunder, nothing herein shall be deemed to limit or restrict the
Distributor's right, or the right of any of the Distributor's employees,
agents, officers or directors who may also be a director, officer or employee
of the Fund, or affiliated persons of the Fund to engage in any other business
or to devote time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, trust, firm, individual or
association.
SECTION 16. ADDITIONAL FUNDS AND CLASSES
In the event that the Fund establishes one or more series of Shares
or one or more classes of Shares after the effectiveness of this Agreement,
such series of Shares or classes of Shares, as the case may be, shall become
Series and Classes under this Agreement upon approval of this Agreement by the
Fund with respect to the series of Shares or class of Shares and the execution
of an amended Appendix A reflecting the applicable names and terms. The
Distributor may elect not to make any such series or classes subject to this
Agreement.
SECTION 17. MISCELLANEOUS
(a) The Distributor shall not be liable to the Fund and the Fund
shall not be liable to the Distributor for consequential damages under any
provision of this Agreement except that Distributor Claims, as that term is
used in Section 8(a), shall include consequential damages related to, arising
out of or based upon any filing made with the regulatory authorities of any
State.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Distributor and the Fund.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Maryland.
(d) This Agreement constitutes the entire agreement between the
Distributor and the Fund and supersedes any prior agreement with respect to
the subject matter hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any
number of counterparts, and all of the counterparts taken together shall be
deemed to constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion
or portions shall be considered severable and not be
-15-
<PAGE>
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(h) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(i) The Fund shall be liable to the Distributor only with respect to
those Series and Classes of the Fund and the Distributor shall look solely to
the Fund to satisfy any liability of a Series or Class thereof to the
Distributor.
(j) Each of the undersigned warrants and represents that they have
full power and authority to sign this Agreement on behalf of the party
indicated and that their signature will bind the party indicated to the terms
hereof.
(k) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
FLAG INVESTORS INTERNATIONAL
FUND, INC.
By:
----------------------
Name:
Secretary
ICC DISTRIBUTORS, INC.
By:
----------------------
John Y. Keffer
President
-16-
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix A
as of August 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Distribution Service
Series Class Fee Fee
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flag Investors International Fund, Inc. Class A 0.25% ----
Class B(1) 0.75% 0.25%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Not currently offered.
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix B
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) 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" as used herein refers to
each 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 the 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.
-B1-
<PAGE>
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 $25,000 in the fund family 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 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 Conduct Rules
(formerly the Rules of Fair Practice) of the NASD, including, without
limitation, the provisions of Rule 2830 (formerly Section 26) of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commission for any purposes whatsoever unless authorized by the then current
Prospectus in respect of a particular class of Shares 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 relevant
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 make appropriate notice filings
in certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund 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.
-B2-
<PAGE>
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any
Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by it hereunder.
In carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions 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 such phrase is 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 other than this agreement and
those pertaining to this agreement should be sent to the address listed below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
__________________________
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
-B3-
<PAGE>
Confirmed and accepted:
Firm Name:__________________________________________________
By:_________________________________________________________
Signature
____________________________________________________________
Printed Name and Title
Date:_______________________________________________________
Address:____________________________________________________
____________________________________________________________
____________________________________________________________
Clears Through:_____________________________________________
Phone No.:__________________________________________________
-B4-
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and 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
- C1 -
<PAGE>
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.
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 your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree 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 and your offices, employees, agents or assigns
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 to pay you, and you will accept
as full payment therefore, 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
- C2 -
<PAGE>
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 Customer's
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 by 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:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
- C3 -
<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,
ICC DISTRIBUTORS, INC.
By: ___________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name:________________________________________
By:_______________________________________________
Name:_____________________________________________
Address:__________________________________________
__________________________________________________
__________________________________________________
Date:_____________________________________________
- C4 -
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix B
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) 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" as used herein refers to
each 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 the 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.
-B1-
<PAGE>
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 $25,000 in the fund family 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 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 Conduct Rules
(formerly the Rules of Fair Practice) of the NASD, including, without
limitation, the provisions of Rule 2830 (formerly Section 26) of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commission for any purposes whatsoever unless authorized by the then current
Prospectus in respect of a particular class of Shares 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 relevant
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 make appropriate notice filings
in certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund 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.
-B2-
<PAGE>
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any
Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by it hereunder.
In carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions 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 such phrase is 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 other than this agreement and
those pertaining to this agreement should be sent to the address listed below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
__________________________
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
-B3-
<PAGE>
Confirmed and accepted:
Firm Name:__________________________________________________
By:_________________________________________________________
Signature
____________________________________________________________
Printed Name and Title
Date:_______________________________________________________
Address:____________________________________________________
____________________________________________________________
____________________________________________________________
Clears Through:_____________________________________________
Phone No.:__________________________________________________
-B4-
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and 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
- C1 -
<PAGE>
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.
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 your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree 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 and your offices, employees, agents or assigns
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 to pay you, and you will accept
as full payment therefore, 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
- C2 -
<PAGE>
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 Customer's
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 by 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:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
- C3 -
<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,
ICC DISTRIBUTORS, INC.
By: ___________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name:________________________________________
By:_______________________________________________
Name:_____________________________________________
Address:__________________________________________
__________________________________________________
__________________________________________________
Date:_____________________________________________
- C4 -
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Flag Investors International Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 18
to the Registration Statement No. 33-08479 of Flag Investors International
Fund, Inc. of our report dated November 21, 1997, appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the reference to us under the caption "Financial Highlights" appearing in the
Prospectus, which also is part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Princeton, NJ
February 23, 1998
<PAGE>
Amended
August 4, 1997
FLAG INVESTORS INTERNATIONAL FUND, INC.
FLAG INVESTORS CLASS A SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Class A 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) The Fund's distributor (the
"Distributor") 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) The Distributor 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 The Distributor 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 Shares of the Fund.
3. Expenses Authorized. The Distributor 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 the
Distributor 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 the
Distributor; 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
<PAGE>
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. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor 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, the Distributor
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.
(a) This Plan has been approved 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. 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.
(b) 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).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
Flag Investor International Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A and Flag Investors Class B Shares
Adopted December 13, 1995
Amended through August 4, 1997
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. 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.
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
<PAGE>
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.
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.
- --------
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 materials 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>
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 Investors 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 required 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 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.
Date Approved: December 1993
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 to designate and classify shares in
accordance with the foregoing resolutions.
Date Approved: September 1994
Resolutions of Board Creating Flag Investors Class B Shares
FURTHER RESOLVED, that an additional class of shares of each 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.
<PAGE>
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.
Date Approved: August 4, 1997
Resolutions of Board Approving New
Distribution Agreement with ICC Distributors, Inc.
RESOLVED, that ICC Distributors, Inc. ("ICC ") be, and it hereby is,
appointed distributor for all classes of Alex. Brown Cash Reserve Fund, Inc.,
Flag Investors Telephone Income Fund, Inc., Flag Investors International Fund,
Inc., Flag Investors Emerging Growth Fund, Inc., Flag Investors
Short-Intermediate 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., and for the Flag Investors classes of each of Managed Municipal
Fund, Inc. and Total Return U.S. Treasury Fund, Inc., such appointment to be
effective upon the consummation of the merger of Alex. Brown Incorporated with
and into a subsidiary of Bankers Trust New York Corporation (the "Merger"), or
at such other time as the proper officers of the Fund shall determine;
FURTHER RESOLVED, that the proposed Distribution Agreement
between Alex. Brown Cash Reserve Fund, Inc. and ICC Distributors, Inc. with
respect to all shares except the Flag Investors 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 negotiate, enter into and execute such Distribution Agreement with
such modifications as said officers in consultation with counsel shall deem
necessary or appropriate or as may be required to conform with the
requirements of any applicable statute, regulation or regulatory body;
FURTHER RESOLVED, that the proposed Distribution Agreement
between Alex. Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income
Fund, Inc., Flag Investors International Fund, Inc., Flag Investors Emerging
Growth Fund, Inc., Total Return U.S. Treasury Fund, Inc. (for Flag Investors
Shares), Managed Municipal Fund, Inc. (for the Flag Investors Shares), Flag
Investors Short-Intermediate 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
Partner Fund, Inc., and ICC Distributors, Inc. be, and the same hereby is,
approved in substantially the form presented to this meeting and that the
appropriate officers of the Funds be, and they hereby are, authorized and
directed to negotiate, enter into and execute such Distribution Agreement with
such modifications as said officers in consultation with counsel shall deem
necessary or appropriate or as may be required to conform with the
requirements of any applicable statute, regulation or regulatory body.
Date Approved: August 4, 1997
<PAGE>
Resolutions of Board Approving New
Plans of Distribution for
Flag Investors Class A and Flag Investors Class B Shares
RESOLVED, that the Plan of Distribution for the Flag Investors Class
A Shares of Flag Investors International Fund, Inc. be, and hereby is, amended
to reflect the change in distributor effected at this meeting, such amendment
to be effective upon the consummation of the Merger, or such other time as the
proper officers of the Fund shall determine;
FURTHER RESOLVED, that the amended Plan 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 other similar plans;
FURTHER RESOLVED, that the continuation of said Plan, as
amended, be, and the same hereby is, approved.
FURTHER RESOLVED, that the Plan of Distribution for the Flag
Investors Class B Shares of said Fund be, and hereby is, amended to reflect
the change in distributor effected at this meeting, such amendment to be
effective upon the consummation of the Merger, or such other time as the
proper officers of the Fund shall determine;
FURTHER RESOLVED, that the amended Plan is determined to be
reasonably likely to benefit such class and its shareholders; and that based
on information reasonably available to the Directors, expenditures
contemplated by such Plan are comparable to expenditures for other similar
plans; and
FURTHER RESOLVED, that the continuation of said Plan, as
amended, be, and the same hereby is, approved; and
FURTHER RESOLVED, that at such time as the Fund offers the
Flag Investors Class B Shares, the amended Plan of Distribution presented at
this meeting shall govern the payment of 12b-1 fees by that class.
<PAGE>
Flag Investors International Fund, Inc.
18f-3 Plan Exhibits
1. Registrant's Articles of Incorporation filed as Exhibit (1)(a) to
Post-Effective Amendment No. 16 to the Registrant's Registration Statement on
Form N-1A (Registration No. 33-28479), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 0000950116-96-000106) on February 27, 1996
is herein incorporated by reference.
2. Registrant's Articles Supplementary to its Articles of Incorporation filed
as Exhibit (1)(c) to Post-Effective Amendment No. 16 to the Registrant's
Registration Statement on Form N-1A (Registration No. 33-28479), filed with
the Securities and Exchange Commission via EDGAR (Accession No.
0000950116-96-000106) on February 27, 1996 is herein incorporated by
reference.
3. Registrant's By-Laws are filed as Exhibit (2) to Post-Effective Amendment
No. 17 to Registrant's Registration Statement on Form N-1A (Registration No.
33-28479) filed with the Securities and Exchange Commission via EDGAR
(Accession No. 0000950116-97-000357) on February 25, 1997 and are herein
incorporated by reference.
4. Registrant's Distribution Agreement dated as of August 31, 1997 with ICC
Distributors Inc. with respect to Flag Investors Shares filed as Exhibit
(6)(a) to this Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A (Registration No. 33-28479), filed
herewith and is herein incorporated by reference.
5. Registrant's Distribution Plan with respect to Flag Investors International
Fund Class A Shares filed as Exhibit (15)(b) to this Post-Effective Amendment
No. 18 to the Registrant's Registration Statement on Form N-1A (Registration
No. 33-28479), filed herewith and is herein incorporated by reference.
6. Registrant's Form of Sub-Distribution Agreement between ICC Distributors
Inc. and Participating Dealers is filed as Exhibit (6)(c) to this
Post-Effective Amendment No. 18 to Registrant's Registration Statement on Form
N-1A (Registration No. 33-28479) filed herewith and is herein incorporated by
reference.
7. Registrant's Prospectus relating to its Class A Shares is filed as part of
this Registration Statement on Form N-1A (Registration No. 33-28479) and, as
amended from time to time, is herein incorporated by reference.
<PAGE>
EX-99.B(24)
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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
<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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
<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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
<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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
<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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
<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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
<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 Amy M. Olmert, 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
February 25, 1998
Date: ______________________
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