FLAG INVESTORS INTERNATIONAL FUND INC, PRES14A, 1999-08-05

FLAG INVESTORS INTERNATIONAL FUND INC
PRES14A, 1999-08-05

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

FLAG INVESTORS INTERNATIONAL FUND, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:

----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:

----------------------------------------------------------------------
5) Total fee paid:

----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:

___________________________________________________________________________
3) Filing Party:

___________________________________________________________________________
4) Date Filed:

___________________________________________________________________________

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<PAGE>

FLAG INVESTORS INTERNATIONAL FUND, INC.
One South Street
Baltimore, Maryland 21202

[August 23], 1999

Dear Shareholder:

On June 4, 1999, Bankers Trust merged with Deutsche Bank AG. Bankers
Trust is the parent of Investment Company Capital Corp., the investment advisor
to the Flag Investors International Fund, Inc. (the "Fund"). As a result of the
merger, we are asking shareholders of the Fund to approve new advisory and
sub-advisory agreements. Enclosed is further information relating to these
changes, including a Questions & Answers section, proxy statement and proxy
card(s).

Important information about the changes:

o The merger has no effect on the number of shares you own or the value
of those shares.

o The advisory and sub-advisory fees payable under the new advisory and
sub-advisory agreements have not increased.

o The Fund's investment objective has not changed.

In addition to the change in advisory agreements, shareholders are
being asked to approve other changes outlined in the enclosed Proxy Statement,
including a change in the Fund's organizational structure.

For the past six years, Glenmede Trust Company has managed your Fund.
We have been pleased with their results and the consistency they have
demonstrated. However, the combination of Deutsche Bank, AG and Bankers Trust
greatly enhances our investment management capabilities. One particular strength
this new combined entity possesses is an expertise in international investing.
We are recommending that the Fund invest in a Bankers Trust managed Fund that
has an excellent long-term performance record and is larger than your fund
alone. The change not only allows shareholders to continue to receive
outstanding management, but also provides opportunities for added
diversification and, in the long run, the potential for reduced overall
expenses.

The Board of Directors of the Fund believes that the proposals are important and
recommends that you read the enclosed materials carefully and then vote for all
proposals.

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What you need to do:

o Read all enclosed materials including the Questions & Answers
section.

o Choose one of the following options to vote:

1. By Mail: Complete the enclosed proxy card and return it in
the postage-paid envelope provided.

2. By Telephone: Call the Toll-Free # on your proxy card.

3. By Internet: Logon to www.proxyvote.com.

4. Attend the Shareholder Meeting (details enclosed).

Sincerely,

[INSERT MR. SEMANS' SIGNATURE]

Truman T. Semans
Chairman
Flag Investors International Fund, Inc.

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<PAGE>

[August 23], 1999
IMPORTANT NEWS
FOR SHAREHOLDERS OF
FLAG INVESTORS INTERNATIONAL FUND, INC.

While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of some matters affecting the Fund which
require a shareholder vote.

Q & A: QUESTIONS AND ANSWERS

Q. What has happened to require a shareholder vote?

A. On June 4, 1999, Bankers Trust became a subsidiary of Deutsche Bank AG.
Bankers Trust is the parent of Investment Company Capital Corp., ("ICC")
investment advisor to the Flag Investors International Fund, Inc. (the "Fund").
Deutsche Bank, a banking company organized under the laws of the Federal
Republic of Germany, provides a comprehensive range of global banking and
financial services.

Deutsche Bank now ranks as the fourth largest investment manager in the
world with $670 billion in assets in a full range of active and index
strategies. Deutsche Asset Management handles the investment management
activities of Deutsche Bank in the Americas, United Kingdom and Asia and will
manage $454 billion in assets globally.

To ensure that ICC may continue to serve as investment advisor and
Glenmede Trust Company as sub-advisor to the Fund, we are seeking shareholder
approval of new advisory and sub-advisory agreements. In addition, you are being
asked to elect a Board of Directors of the Fund, to approve the reorganization
of the Fund's structure, and to modify, eliminate or reclassify as
non-fundamental certain of the Fund's investment policies in response to changes
in the law.

THE BOARD MEMBERS OF YOUR FUND, INCLUDING THOSE WHO ARE NOT AFFILIATED WITH THE
ADVOSOR, RECOMMEND THAT YOU VOTE FOR THESE PROPOSALS.

Q. Why am I being asked to vote on the new advisory and sub-advisory agreements?

A. The Investment Company Act of 1940, which regulates investment companies in
the United States such as the Fund, requires a shareholder vote to approve new
investment advisory agreements following certain types of business combinations.
The new advisory and sub-advisory agreements became effective immediately upon
consummation of the merger but will continue in effect only upon shareholder
approval.

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<PAGE>

Q. How does the merger affect the Fund?

A. The Fund and its respective investment objectives have not changed as a
result of the merger. You still own the same shares in the same Fund as you did
prior to the merger. The new advisory and sub-advisory agreements contain
substantially the same terms and conditions as the investment advisory and
sub-advisory agreements in effect prior to the merger, except for the dates of
execution, effectiveness and initial term. If shareholders do not approve the
new advisory and sub-advisory agreements, these agreements will no longer
continue and the Board of Directors will take such action as it deems to be in
the best interests of the Fund, and its shareholders.

Q. Have the investment advisory and sub-advisory fees remained the same?

A. Yes.

Q. What are the benefits of the merger?

A. There are several potential positive aspects of the merger you may be
interested in. Most notably, the combined institution will be one of the largest
financial institutions in the world, as well as a leader in a number of
important categories, including asset management. The financial strength of the
combined institution coupled with the increased breadth and depth of its
resources and capabilities are advantages the acquisition brings. Further, as a
truly global institution, the combined entity will be in a unique position to
provide coverage, services and products.

Q. Why am I being asked to vote on the reorganization of the Fund's structure?

A. The combination of Deutsche Bank, AG and Bankers Trust provides an expertise
in international investing that did not previously exist. As such, we are
recommending that the Fund invest in a larger fund that has an excellent
performance record. The change not only allows shareholders to continue to
receive outstanding management, but also allows shareholders to receive added
diversification and, in the long run, the potential for reduced overall
expenses.

Q. Will ICC and The Glenmede Trust Company continue to provide advisory and
sub-advisory services to the Fund if the reorganization is approved?

A. No. The Fund will not have an investment advisor because all of the Fund's
assets will be invested in the International Equity Portfolio. Bankers Trust
Company is the investment advisor to the International Equity Portfolio. The
Fund will bear only its proportionate share of the International Equity
Portfolio's advisory expenses.

Q. Will the Fund's expenses increase?

A. No, the overall expenses of the Fund will not increase.

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<PAGE>

Q. How does the Board of Directors of the Fund recommend that I vote?

A. After careful consideration, the Board of Directors of the Fund recommends
that you vote in favor of all the proposals on the enclosed proxy card.

Q. Where can I get more information?

A. If you need more information, please call Shareholder Communications
Corporation, the Fund's information agent, at 1-800-732-6168.

Q. How can I vote my shares?

A. You may choose from one of the following options to vote your shares:

o By mail, with the enclosed proxy card(s) and return envelope.

o By telephone, with a toll-free call to the telephone number that appears on
your proxy card.

o Through the Internet, by using the Internet address that appears on your
proxy card and following the instructions on the site.

o In person at the shareholder meeting (see details enclosed in proxy
statement).

Q. Will the Fund pay for the proxy solicitation and legal costs associated with
this transaction?

A. No, ICC will bear these costs.

Please vote all issues on each proxy card that you receive. Thank you for
mailing your proxy card promptly.

[August 23], 1999

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<PAGE>

PRELIMINARY COPY

FLAG INVESTORS INTERNATIONAL FUND, INC.
One South Street
Baltimore, Maryland 21202
-------------------------

Notice of Special Meeting of Shareholders
October 7, 1999

TO THE SHAREHOLDERS OF FLAG INVESTORS INTERNATIONAL FUND, INC.:

You are cordially invited to a special meeting (the "Special Meeting")
of the shareholders of Flag Investors International Fund, Inc. (the "Fund"). The
Special Meeting will be held on Thursday, October 7, 1999, at 1:45 p.m. Eastern
Time at the offices of Investment Company Capital Corp., in the conference room
on the 30th Floor of The Alex. Brown Building, One South Street, Baltimore,
Maryland 21202. The purpose of the Special Meeting is to consider the proposals
set forth below and to transact such other business as may be properly brought
before the Special Meeting:

PROPOSAL 1: To consider and act upon a proposal to elect a Board of Directors
of the Fund.

PROPOSAL 2: To approve the reorganization of the Fund's structure with
modifications to the Fund's investment objective and certain
fundamental investment policies.

PROPOSAL 3: To approve a new Investment Advisory Agreement between the Fund and
Investment Company Capital Corp.

PROPOSAL 4: To approve a new Sub-Advisory Agreement among the Fund, Investment
Company Capital Corp. and The Glenmede Trust Company.

PROPOSAL 5: To eliminate the Fund's fundamental investment policy concerning
short sales.

PROPOSAL 6: To eliminate the Fund's fundamental investment policy concerning
the purchase of securities on margin.

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<PAGE>

PROPOSAL 7: To eliminate the Fund's fundamental investment policy concerning
purchases of oil, gas or mineral interests.

PROPOSAL 8: To eliminate the Fund's fundamental investment policy concerning
restricted securities.

PROPOSAL 9: To modify the Fund's fundamental investment policy concerning the
purchase or sale of commodities or commodity contracts.

PROPOSAL 10: To modify the Fund's fundamental investment policy concerning
borrowing.

PROPOSAL 11: To modify the Fund's fundamental investment policy concerning
loans.

PROPOSAL 12: To reclassify the Fund's fundamental investment policy concerning
illiquid securities from fundamental to non-fundamental.

Only shareholders of the Fund at the close of business on August 6,
1999 are entitled to notice of, and to vote at, this meeting or any adjournment
thereof.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS SOON AS
POSSIBLE. YOU MAY ALSO VOTE EASILY AND QUICKLY BY TELEPHONE OR THROUGH THE
INTERNET. TO DO SO, PLEASE FOLLOW THE INSTRUCTIONS INCLUDED ON YOUR ENCLOSED
PROXY CARD. IT IS MOST IMPORTANT AND IN YOUR INTEREST TO VOTE SO THAT A QUORUM
WILL BE PRESENT AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.

Amy M. Olmert
Secretary

Dated: [August 23], 1999

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PRELIMINARY COPY

FLAG INVESTORS INTERNATIONAL FUND, INC.
One South Street
Baltimore, Maryland 21202

--------------------

PROXY STATEMENT

--------------------

SPECIAL MEETING OF SHAREHOLDERS TO BE HELD

October 7, 1999

This Proxy Statement is furnished by the Board of Directors of Flag
Investors International Fund, Inc. (the "Fund") in connection with the
solicitation of proxies for use at the special meeting of shareholders of the
Fund to be held on Thursday, October 7, 1999, at 1:45 p.m. Eastern Time, or at
any adjournment thereof (the "Special Meeting"), at the offices of Investment
Company Capital Corp., in the conference room on the 30th Floor of The Alex.
Brown Building, One South Street, Baltimore, Maryland 21202. It is expected that
the Notice of Special Meeting, the Proxy Statement and a Proxy Card will be
mailed to shareholders on or about August 23, 1999.

Summary
-------

At the Special Meeting, shareholders will be asked to elect a slate of
Directors, to approve the reorganization of the Fund's structure, to approve a
new Investment Advisory Agreement, to approve a new Sub-Advisory Agreement and
to consider a number of issues relating to the fundamental investment policies
of the Fund.

Proposal 1 asks shareholders of the Fund to elect a Board of Directors.

Proposal 2 asks shareholders of the Fund to reorganize the Fund into a
master/feeder structure (the "Reorganization") with modifications to the Fund's
investment objective and certain fundamental investment policies.

Proposals 3 and 4 ask shareholders to consider a new Investment
Advisory Agreement between the Fund and Investment Company Capital Corp. ("ICC"
or the "Advisor") and a new Sub-Advisory Agreement among the Fund, ICC and The
Glenmede Trust Company ("Glenmede Trust" or the "Sub-Advisor"). This action is
necessary because the merger on June 4, 1999 (the "Merger") between Bankers
Trust Corporation ("Bankers Trust"), the indirect parent of ICC, and

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<PAGE>

a U.S. subsidiary of Deutsche Bank AG ("Deutsche Bank") may have arguably
resulted in an assignment and, therefore, termination of the Fund's prior
Investment Advisory and Sub-Advisory Agreements under the Investment Company
Act of 1940, as amended (the "1940 Act"). The proposed new Investment Advisory
and Sub-Advisory Agreements are identical to the Fund's prior Investment
Advisory and Sub-Advisory Agreements, except for the dates of execution,
effectiveness and initial term.

Proposals 5 through 13 ask shareholders to approve changes in the
fundamental investment policies of the Fund. Shareholders are being asked to
modify, eliminate or to reclassify as non-fundamental certain of the Fund's
investment policies primarily to update these policies to reflect changes in the
law. The changes to the Fund's fundamental policies would become effective upon
shareholder approval or at such later date as the proper officers of the Fund
determine.

If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please vote your proxy (the "Proxy") by mail, telephone or
internet, allowing sufficient time for the Proxy to be received on or before
1:45 p.m. Eastern Standard Time on Thursday, October 7, 1999. If your Proxy is
properly returned, shares represented by it will be voted at the Special Meeting
in accordance with your instructions. However, if no instructions are specified,
on the Proxy with respect to a specific Proposal, the Proxy will be voted FOR
the approval of such Proposal and in accordance with the judgment of the persons
appointed as proxies upon any other matter that may properly come before the
Special Meeting. Shareholders may revoke their Proxies at any time prior to the
time they are voted by giving written notice to the Secretary of the Fund, by
delivering a subsequently dated Proxy or by attending and voting at the Special
Meeting.

The close of business on August 6, 1999, has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of, and to vote at, the Special Meeting and at any adjournment thereof.
On that date, the Fund had ________________ shares outstanding. Each full share
will be entitled to one vote at the Special Meeting and each fraction of a share
will be entitled to the fraction of a vote equal to the proportion of a full
share represented by the fractional share.

The expenses of the Special Meeting will be borne by ICC. The
solicitation of Proxies will be largely by mail, but may include telephonic,
telegraphic, Internet or oral communication by employees and officers of ICC and
Glenmede Trust (collectively, the "Advisors"). Additional solicitation may be
made by Shareholder Communication's Corporation ("Shareholder Communications"),
a solicitation firm located in New York, New York, that has been engaged by the
Fund to assist in proxy solicitation. [Payments to Shareholder Communications by
ICC and the Fund are estimated to be $[_____].

Upon request, the Fund will furnish to shareholders, without charge, a
copy of the Annual Report for its fiscal year ended October 31, 1998 and the
Semi-Annual Report for

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<PAGE>

the period ended April 30, 1999. The Annual and Semi-Annual Reports of the Fund
may be obtained by written request to the Fund, One South Street, Baltimore,
Maryland 21202, or by calling (800) 553-8080.

The Fund is registered as an open-end, diversified management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended.

PROPOSAL 1: To consider and act upon a proposal to elect a Board of Directors of
the Fund.

At the Special Meeting, it is proposed that six Directors be elected to
hold office until their successors are duly elected and qualified. The persons
named in the accompanying Proxy intend, in the absence of contrary instructions,
to vote all Proxies on behalf of the shareholders for the election of Richard R.
Burt, Joseph R. Hardiman, Louis E. Levy, Eugene J. McDonald, Truman T. Semans
and Robert H. Wadsworth (each, a "Nominee" and collectively, the "Nominees").
All of the Nominees are currently members of the Board of Directors except for
Messrs. Burt and Wadsworth. Messrs. Hardiman, Levy, McDonald and Semans were
last elected by a vote of shareholders on January 22, 1999. Messrs. James J.
Cunnane and Carl W. Vogt, who are current members of the Board, are not seeking
reelection and will resign from the Board effective upon the election of their
successors. It is the intention of the Board that at least 75% of its members
will be disinterested persons within the contemplation of Section 15(f) of the
1940 Act and will remain disinterested persons for at least three years after
the Merger.

At a meeting held on July 28, 1999, the nominating committees (with
each committee comprised of four independent directors) of the Boards of
Directors of the Deutsche Funds, Inc. ("Deutsche Funds") and the Deutsche
Portfolios recommended to the full Boards the nomination of Messrs. Hardiman,
Levy, McDonald and Semans to each Board. If approved by the full Boards of the
Deutsche Funds and the Deutsche Portfolios, and if subsequently approved by
shareholders, they will serve as directors of the Deutsche Funds and Deutsche
Portfolios. The Deutsche Funds and the Deutsche Portfolios are advised or
administered by a subsidiary of Deutsche Bank.

The proposal to elect the Board of Directors is being presented for
shareholder approval pursuant to requirements under the 1940 Act. Under the 1940
Act, Directors may not fill vacancies unless at least two-thirds of the
Directors holding office after such vacancies are filled have been elected by
the shareholders. The Special Meeting will provide the Board with operating
flexibility by providing greater assurance that the Board of Directors will be
able to fill vacancies that may occur in the future.

Each of the Nominees has consented to being named in this Proxy
Statement and to serving as a Director if elected. The Fund knows of no reason
why any Nominee would be unable or unwilling to serve if elected. Because the
Fund does not hold regular annual

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<PAGE>

shareholder meetings, each Nominee, if elected, may hold office until his
resignation or retirement or until his successor is elected and qualified.

Information Regarding Nominees

The following information is provided for each Nominee. As of May 31,
1999, the Nominees as a group and the Directors and officers of the Fund as a
group beneficially owned an aggregate of _______ shares, representing ____% of
the total outstanding shares of the Fund.
<TABLE>
<CAPTION>
Shares Beneficially
Name and Position Business Experience during the Past Owned as of
with the Fund Age Five Years (including all directorships) May 31, 1999** Percentage
------------- --- ---------------------------------------- -------------- ----------
<S> <C> <C> <C> <C>
Truman T. Semans* 72 Vice Chairman, Brown Investment Advisory ________ shares ***
Chairman and & Trust Company (formerly, Alex. Brown
Director since 1993 Capital Advisory & Trust Company);
Director, Investment Company Capital Corp.
(registered investment advisor); and Director
and Chairman, Executive Committee of
Virginia Hot Springs Inc. (property
management). Formerly, Managing
Director, BT Alex. Brown Incorporated;
Vice Chairman, Alex. Brown & Sons
Incorporated (now BT Alex. Brown
Incorporated). Director of 10 funds in the
Fund Complex.****

Richard R. Burt 52 Chairman, IEP Advisors, Inc.; Chairman of ________ ***
Nominee the Board, Weirton Steel Corporation;
Member of the Board, Archer Daniels Midland
Company (agribusiness operations),
Hollinger International Inc. (publishing),
Homestake Mining Company (mining and
exploration), HCL Technologies (information
technology) and Anchor Technologies (gaming
software and equipment); Director, Mitchell
Hutchins family of funds (registered
investment companies); Member, Textron
Corporation International, Advisory
Council; and Partner, McKinsey & Company
(consulting), 1991-1994. Formerly, U.S.
Chief Negotiator in Strategic Arms
Reduction Talks (START) with former Soviet
Union and U.S. Ambassador to the Federal
Republic of Germany, 1985-1991. Nominee for
Director of 8 funds in the Fund Complex.
</TABLE>

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Louis E. Levy 66 Director, Kimberly-Clark Corporation ________ shares [+] ***
Director since 1994 (personal consumer products); Director,
Household International (finance and
banking). Formerly, Chairman of the Quality
Control Inquiry Committee, American
Institute of Certified Public Accountants,
___-___; 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. Director of each
fund in the Fund Complex.

Eugene J. McDonald 67 President, Duke Management Company None ***
Director since 1993 (investments); Executive Vice President,
Duke University (education, research and
health care); Executive Vice Chairman and
Director, Central Carolina Bank & Trust
(banking); and Director, Victory Funds
(registered investment companies).
Formerly, Director, AMBAC Treasurers Trust
(registered investment company) and DP Mann
Holdings (insurance). Director of each fund
in the Fund Complex.

</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Name and Position Business Experience during the Past Owned as of
with the Fund Age Five Years (including all directorships) May 31, 1999** Percentage
------------- --- ---------------------------------------- -------------- ----------
<S> <C> <C> <C> <C>
Robert H. Wadsworth 59 President, The Wadsworth Group (registered ______ ***
Nominee investment advisor), First Fund Distributors,
Inc. and Guinness Flight Investments Funds,
Inc. (registered broker dealer); Director, The
Germany Fund, Inc., The New Germany
Fund, Inc., The Central European Equity
Fund, Inc., and Deutsche Funds, Inc.;
Trustee, Deutsche Portfolios; and Vice
President, Professionally Managed Portfolios
and Advisors Series Trust (registered
investment companies). Nominee for
Director of 8 funds in the Fund Complex.
</TABLE>
- ------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** This information has been provided by each Nominee for Director of the
Fund.
*** As of May 31, 1999, the Nominees as a group beneficially owned an
aggregate of ______ shares representing ____% of the total outstanding
shares of the Fund.
**** The "Fund Complex" consists of 12 registered investment companies which
hold themselves out to investors as related companies for purposes of
investment and investors services for which ICC provides investment
advisory or administrative services.
[+ Mr. Levy disclaims beneficial ownership of these shares, as they are held
by his wife in trust.]

Compensation of Directors

Each Director who is not an "interested person" within the meaning of
the 1940 Act, as well as the Fund's President, 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 the Fund and all of
the funds in the Fund Complex for which he serves. Payment of such fees and
expenses is allocated among all such funds described above in proportion to
their relative net assets. For the fiscal year ended October 31, 1998,
Independent Directors' fees (including fees paid to the Fund's President)
attributable to the assets of the Fund totaled $369. Officers of the Fund,
except the Fund's President, receive no direct remuneration from the Fund.
Officers of the Fund who are employees of BT Alex. Brown Incorporated ("BT Alex.
Brown") or its affiliates may be considered to have received remuneration
indirectly.

Any Director who receives fees from the Fund is permitted to defer
between 50% and 100% of his annual compensation pursuant to a Deferred
Compensation Plan. Messrs. Cunnane, Levy, McDonald and Vogt have each executed a
Deferred Compensation Agreement and may defer a portion of their compensation
from the Fund and the Fund Complex. Currently, the deferring Directors may
select from various funds in the Fund Complex and BT International Equity Fund
in which all or part of their deferral account shall be deemed to be invested.

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<PAGE>

Distributions from the deferring Directors' deferral accounts will be paid in
cash, in quarterly installments over a period of ten years.

The aggregate compensation payable by the Fund to each of the Fund's
Directors serving during the fiscal year ended October 31, 1998 is set forth in
the compensation table below. The aggregate compensation payable to such
Directors during the fiscal year ended October 31, 1998 by the Fund Complex is
also set forth in the compensation table below.
<TABLE>
<CAPTION>
COMPENSATION TABLE

Pension or
Aggregate Retirement Total Compensation Number of Funds
Compensation Benefits Accrued as from the Fund in Fund Complex
Payable Part of Fund and Fund Complex for which Director
Name and Position from the Fund Expenses Payable to Directors Serves
------------------ ------------- -------- -------------------- ------
<S> <C> <C> <C> <C>
Truman T. Semans, Chairman(1) $0 $0 $0 10

Richard T. Hale, Director(1,2) $0 $0 $0 10

James J. Cunnane, Director $69 (3) $39,000 13(4)

Joseph R. Hardiman(5) N/A N/A $9,750 11(6)

John F. Kroeger, Director(7) $87 (3) $49,000 13(4)

Louis E. Levy, Director $73 (3) $49,000 13(4)

Eugene J. McDonald, Director $69 (3) $39,000 13(4)

Carl W. Vogt, Esq., Director $71 (3) $39,000 13(4,6)
</TABLE>
-------------------
(1) A Director who is an "interested person" as defined in the 1940 Act.
(2) Resigned effective November 26, 1998.
(3) The Fund Complex has adopted a Retirement Plan for eligible Directors and
the Fund's President as described below. The actuarially computed pension
expense for the Fund for the fiscal year ended October 31, 1998 was
approximately $982.
(4) One of these funds ceased operations on July 29, 1998.
(5) Elected to the Fund's Board on January 22, 1999.
(6) Mr. Hardiman receives and Mr. Vogt received (prior to their appointment or
election as Directors to all the Funds in the Fund Complex) proportionately
higher compensation from each fund for which they served.
(7) Deceased, November 26, 1998.

The Fund Complex has adopted a retirement plan (the "Retirement Plan")
for the Fund's President and for Directors who are not employees of the Fund,
the Fund's investment advisor or their respective affiliates (each, a
"Participant" and collectively, 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 fees earned 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 in his last year of service. The
fee will be paid quarterly, for life, by each fund for which he

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<PAGE>

serves. The Retirement Plan is unfunded and unvested. The Fund has two
Participants, a Director who retired effective December 31, 1994, and Harry
Woolf the Fund's President, who retired effective December 31, 1996. These
Participants qualified for the Retirement Plan by serving thirteen years and
fourteen years, respectively, as Directors in the Fund Complex and will be paid
a quarterly fee of $4,875 by the Fund 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. The approximate credited years of service, shown in parentheses, for
each Participant at December 31, 1998, are as follows: Messrs. Cunnane (4),
Hardiman (0), Levy (4), McDonald (6) and Vogt (3).
<TABLE>
<CAPTION>
Estimated Annual Benefits Payable by Fund Complex Upon Retirement

Years of Service Chairmen of Audit and Executive Committees 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>
Meetings and Committees of the Board of Directors

There were four regular meetings of the Board of Directors held during
the fiscal year ended October 31, 1998. All Directors attended at least 75% of
the meetings held during their respective terms.

The Board of Directors has an Audit and Compliance Committee. The Audit
and Compliance Committee makes recommendations to the full Board of Directors
with respect to the engagement of independent accountants. The Committee
reviews, with the independent accountants, the results of the audit engagement
and matters having a material effect on the Fund's financial operations. The
members of the Audit and Compliance Committee during the fiscal year ended
October 31, 1998, were Messrs. Levy (Chairman), Cunnane, McDonald and Vogt, each
of whom is not an "interested person" within the meaning of the 1940 Act. Mr.
Kroeger was Chairman of the Audit and Compliance Committee until his resignation
from the Committee on October 1, 1998. Since his election on January 22, 1999,
Mr. Hardiman has served as a member of the Audit and Compliance Committee. If
elected, Messrs. Burt and Wadsworth will become members of the Audit and
Compliance Committee The Audit and

-17-

<PAGE>

Compliance Committee met four times during the fiscal year ended October 31,
1998. All incumbent members attended all of the meetings held during their
respective terms. The Chairman of the Audit and Compliance Committee receives an
aggregate annual fee of $10,000 from the Fund Complex. Payment of the fee is
allocated among all funds in the Fund Complex in proportion to their relative
net assets.

The Board of Directors has a Nominating Committee. The Nominating
Committee makes recommendations to the full Board of Directors with respect to
candidates for the Board of Directors. The members of the Nominating Committee
during the fiscal year ended October 31, 1998, were, Messrs. McDonald
(Chairman), Cunnane, Levy and Vogt, each of whom is not an "interested person"
within the meaning of the 1940 Act. Mr. Kroeger was a member of the Nominating
Committee until his resignation from the Committee on October 1, 1998. Since his
election on January 22, 1999, Mr. Hardiman has served as a member of the
Nominating Committee. If elected, Messrs. Burt and Wadsworth will become members
of the Nominating Committee. The Nominating Committee met once during the fiscal
year ended October 31, 1998 and all incumbent members attended the Meeting held
during its respective term.

The Board of Directors has a Compensation Committee. The Compensation
Committee makes recommendations to the full Board of Directors with respect to
the compensation of Directors. The members of the Compensation Committee during
the fiscal year ended October 31, 1998, were, Messrs. Cunnane (Chairman), Levy,
McDonald and Vogt, each of whom is not an "interested person" within the meaning
of the 1940 Act. Mr. Kroeger was a member of the Compensation Committee until
his resignation from the Committee on October 1, 1998. Since his election on
January 22, 1999, Mr. Hardiman has served as a member of the Compensation
Committee. If elected, Messrs. Burt and Wadsworth will become members of the
Compensation Committee. The Compensation Committee did not meet during the
fiscal year ended October 31, 1998.

The Board of Directors has an Executive Committee. The Executive
Committee makes recommendations to the full Board of Directors with respect to
the renewal of the Fund's agreements with its service providers. The members of
the Executive Committee during the fiscal year ended October 31, 1998 were,
Messrs. McDonald (Chairman), Cunnane, Levy and Vogt. Since his election on
January 22, 1999, Mr. Hardiman has served as a member of the Executive
Committee. If elected, Messrs. Burt and Wadsworth will become members of the
Executive Committee. The Chairman of the Executive Committee receives an
aggregate annual fee of $10,000 from the Fund Complex. Payment of such fee is
allocated among all funds in the Fund Complex in proportion to their relative
net assets. The Executive Committee was formed on September 28, 1998, and did
not meet during the fiscal year ended October 31, 1998.

-18-

<PAGE>

Board Approval of the Election of Directors

At meetings of the Board of Directors held on March 30, 1999 and July
28, 1999, the Board of Directors recommended that shareholders vote FOR each of
the Nominees for Director named herein. In recommending that shareholders elect
the Nominees as Directors of the Fund, the Board of Directors considered the
Nominees' experience and qualifications.

Shareholder Approval of the Election of Directors

The Election of the Directors requires the affirmative vote of a
plurality of all votes cast at the Special Meeting, provided that a majority of
the shares entitled to vote are present in person or by Proxy at the Special
Meeting. If you give no voting instructions, your shares will be voted FOR all
Nominees named herein. If the Directors are not approved by shareholders of the
Fund, the Board of Directors will consider alternative nominations.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
ELECTION OF THE DIRECTORS.

PROPOSAL 2: To approve the reorganization of the Fund's structure, with
modifications to the Fund's investment objective and certain
fundamental investment policies.

Shareholders are being asked to (1) approve reorganizing the Fund into
a master/feeder structure under which the Fund would invest all of its assets in
the International Equity Portfolio (the "International Portfolio"); (2) approve
modifying the Fund's investment objective and policies so that they conform with
the investment objective of the International Portfolio; and (3) approve
modifying certain of the Fund's fundamental investment policies so that the Fund
may invest all of its assets in other open-end investment companies, such as the
International Portfolio.

The International Portfolio is an open-end management investment
company organized as a New York Business Trust. The International Portfolio is
managed by Bankers Trust Company ("Bankers Trust"), a corporate affiliate of the
Fund's current adviser, ICC. The International Portfolio has been established to
serve as the investment portfolio for various investment companies, insurance
company separate accounts, and common and co-mingled trust funds. Other entities
that invest in the International Portfolio have their own expense structure and,
to the extent their expenses are different from the Fund's, their returns will
be different as well. Shares of the International Portfolio are not offered for
sale directly to the public.

-19-

<PAGE>

Reorganizing the Fund into a Master-Feeder Structure

Shareholders of the Fund are being asked to authorize the liquidation
of the Fund's investable assets (securities and cash) and to exchange the
proceeds for a beneficial interest in the International Portfolio. After this
Reorganization, the only securities owned by the Fund will be the interest in
the International Portfolio. The Fund will no longer engage an investment
advisor and sub-advisor to manage its assets because all of its investible
assets will be invested in the International Portfolio.

Under this proposed structure, which is known as a master/feeder
structure (the Fund being the "feeder" and the International Portfolio being the
"master), the Fund will pursue its investment objective through investment in
the International Portfolio rather than through direct investments in
securities. The International Portfolio, in turn, invests directly in
securities. Shareholders will continue to hold shares of the Fund and the Fund
will hold interests in the International Portfolio. The value of the
shareholder's investment in the Fund will be the same immediately after the
Fund's investment in the International Portfolio as it was before that
investment. The value of a shareholder's investment thereafter will be based
directly upon the investment experience of the International Portfolio. After
the Reorganization, fees and expenses will be reallocated between the Fund and
the International Portfolio, with advisory and custodial fees and expense
obligations being an obligation of the International Portfolio and distribution,
transfer agency and shareholder servicing fees an obligation of the Fund.
Although some fees will change, the aggregate fees and expenses paid by the
Fund's shareholders will remain the same.

The Fund would be able to withdraw its investment in the International
Portfolio at any time if the Fund's Board of Directors were to determine that to
do so would be in the best interests of the Fund and the Fund's shareholders.
Upon any such withdrawal, the Board of Directors would consider what action
might be taken, including the investment of all of the investable assets of the
Fund in another pooled investment vehicle.

Comparative Expenses

Following are tables showing the actual fees and expenses of the Fund
for the fiscal year ended December 31, 1998 and estimates assuming that the Fund
had invested all of its investible assets in the International Portfolio for the
entire fiscal year.

-20-

<PAGE>

Annual Fund Operating Expenses Actual Estimated
------ ---------
Management Fee 0.75 0.80
Distribution and/or Service (12b-1) fees 0.25 0.25
Other Expenses 1.78 [ ]
---- ---
Total Annual Fund Operating Expenses 2.78 [1.50]
----
(1.28)%*
====
1.50

* The Fund's advisor has contractually agreed to limit its fees and reimburse
expenses to the extent necessary so that the Fund's Total Annual Fund Operating
Expenses do not exceed 1.50% of the Fund's average daily net assets. This
agreement will continue until at least February 29, 2000 and may be extended.

The current fees and expenses are described more fully in the
Prospectus for the Fund. The investment advisory fee for the Fund is an
effective fee based on the Fund's total net assets at the time of calculation.
ICC is entitled to a monthly fee at the annual rate of 0.75% of the Fund's
average daily net assets as compensation for its advisory services. Currently,
ICC is waiving its advisory fee and reimbursing certain expenses. Glenmede Trust
currently serves as sub-advisor to the Fund and is entitled to receive from ICC
an amount equal to 0.55% of the average daily net assets of the Fund as
compensation for its sub-advisory services. After the Reorganization, Bankers
Trust will be paid a monthly fee at the annual rate of 0.__% of the Fund's
average daily net assets as compensation for its advisory services. The master
Portfolio will not engage an investment sub-advisor. After the Reorganization,
ICC will be paid an administrative fee of __% of the Fund's average daily net
assets. The Reorganization will involve reallocating certain fees and expenses,
such as advisory fees and expenses, to the master portfolio level and changes to
certain specific fee levels. However, the Reorganization will not result in any
increase in overall fees.

Tax Consequences

The proposed transfer of assets of the Fund is expected to have no tax
consequences for the Fund's shareholders. Distributions from the Fund will
continue to be taxable to Fund shareholders as ordinary income or capital gain,
as the case may be.

Risks of a Master-Feeder Structure

There are certain potential risks to the Fund related to investment of
all of its assets in the International Portfolio. Large-scale redemptions by
other investors of their interests in the International Portfolio could have
adverse effects on the Fund, such as requiring the liquidation of a significant
portion of the International Portfolio's holdings at a time when it could be
disadvantageous to do so. Other interest-holders in the International Portfolio
may have a greater

-21-

<PAGE>

ownership interest in the International Portfolio than the Fund's interest and,
therefore, could have effective voting control over the operation of the
International Portfolio.

In the event the Fund is required to redeem its interests in the
International Portfolio for any reason (for instance, because its shareholders
did not approve changes in the Fund's investment policies parallel to changes
approved for the International Portfolio by a majority of its interestholders),
the Fund's Board of Directors would attempt to find an appropriate substitute
investment vehicle for the Fund's assets. The Board's inability to find a
suitable substitute investment vehicle could have a significant effect on the
Fund's shareholders.

Management of the Fund

Under the proposed master/feeder structure, investment advisory
services will be provided to the Fund at the master fund (i.e, the International
Portfolio) level. Accordingly, if shareholder's approve the Proposal, the Fund
will terminate its investment advisory agreement with ICC and its sub-advisory
agreement with Glenmede Trust. The International Portfolio is managed by Bankers
Trust. Thus, the effect of the Proposal is that shareholders of the Fund will
have their investments managed by Bankers Trust, rather than ICC and Glenmede.
After the Reorganization, ICC will continue to provide certain administrative
services to the Fund.

Modification of the Fund's Investment Objective and Policies

Under a master/feeder structure, the feeder fund has the same
investment objective as the master fund. Accordingly, to implement the
Reorganization, the Fund will need to modify its investment objective to conform
it to the investment objective of the International Portfolio. In addition, the
Fund's investment policies will be changed to invest in the master fund. The
investment objectives and policies of the Fund and the International Portfolio
are summarized below.

The current investment objective of the Fund is long-term growth of
capital. The Fund seeks to achieve this objective through investment in a
diversified portfolio of common stocks of issuers located outside of the United
States. The Fund is currently advised by ICC and sub-advised by Glenmede Trust
(collectively, the "Advisors"). In managing the Fund's assets, the Advisors use
a disciplined, value-based approach in allocating the Fund's assets among
geographic regions and countries and in selecting individual securities. Using
this approach, they compare foreign securities markets and individual securities
within each market on the basis of value, quality, and prospective earnings
potential.

The investment objective of the International Portfolio is long-term
capital appreciation. The International Portfolio seeks to achieve this
investment objective by investing primarily in the stocks and other equity
securities of companies in developed countries outside of the United States. The
Fund is advised by Bankers Trust, a corporate affiliate of ICC. Bankers Trust
employs a strategy of growth at a reasonable price in managing the International
Portfolio.

-22-

<PAGE>

Bankers Trust seeks to identify companies outside of the United States that
combines strong potential for earnings growth with reasonable investment value.
The companies that the International Portfolio attempts to purchase typically
exhibit increasing rates of profitability and cash flow. However, their prices
compare to other stocks in a given market measured by earnings, cash flow and
replacement value. Almost all of the companies in which the Fund invests are
based in the developed countries that make up the MSCI EAFE Index, plus Canada.
The EAFE Index includes developed countries in Europe, Asia and Far East. The
International Portfolio may also invest a portion of its assets in companies
based in the emerging markets of Latin America, the Middle East, Russia, Eastern
Europe, and Asia. Typically, the International Portfolio does not invest more
than 15% of its assets in emerging markets.

The Fund's investment objective is a fundamental policy that cannot be
changed without the vote of shareholders. If the Proposal is approved, the
Fund's investment objective will be changed from long-term growth of capital to
long-term appreciation. In addition, if the Proposal is approved, the Fund's
investment policy will be to invest all of its assets in the International
Portfolio. As a result, shareholders would have their investment managed
according to the policies of the International Portfolio.

Changes to the Fund's Fundamental Investment Policies

In conjunction with the Reorganization, the Board of Directors approved
changes to the Fund's fundamental investment policies necessary for the
Reorganization. In this regard, the Board of Directors approved the addition of
a fundamental investment policy making it clear that the Fund may invest all of
its assets in open-end investment companies such as the International Portfolio.
In addition, certain fundamental investment policies of the Fund currently
prohibit the Fund from pursuing its investment objective by investing in the
International Portfolio. As a result, the Board of Directors approved modifying
these policies to permit the Fund to invest all of its assets in the
International Portfolio. Also, in a master/feeder structure, the investment
policies of the feeder fund must permit the same types of investments as those
of the master fund. Accordingly, some of the Fund's fundamental investment
policies need to be modified so that the Fund's fundamental investment policies
are in alignment with those of the International Portfolio. Amendments to
fundamental restrictions may be made only with the approval of shareholders.
Therefore, in approving the Reorganization, shareholders are being asked to
approve, in effect, the following changes to the Fund's fundamental investment
policies to permit the Reorganization.

A. Diversification

Currently the Fund's fundamental policies regarding diversification
state that:

The Fund will not invest more than 5% of its assets in the
securities of any single issuer.

-23-

<PAGE>

The Fund will not 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.

If the Proposal is approved, these policies would be eliminated and
replaced with the following:

The Fund will not, with respect to 75% of its assets, invest
more than 5% of the Portfolio's (Fund's) total assets in the
securities of any one issuer (excluding cash, cash
equivalents, U.S. government securities and the securities of
other investment companies) or own more than 10% of the voting
securities of any one issuer.

The primary purpose of this modification to the Fund's fundamental
investment policy on diversification is to permit the Fund to invest
all of its assets in the International Portfolio. Under the current
policy, the Fund can invest only 5% of its assets in any one investment
company. The modified policy makes clear that investment companies are
not included for the purposes of the 5% test. In addition, if the
Proposal is approved, the Fund's diversification policy will be
conformed with the diversification limitations of the International
Portfolio.

B. Borrowing

Currently, the Fund's fundamental investment policy on borrowing
states:

The Fund will not borrow money, except as a temporary measure
to facilitate settlements or emergency purposes and then only
from banks in an amount not exceeding 10% of the total assets
of the Fund at the time of such borrowing, provided that,
while borrowings by the Fund equal 5% or more of the Fund's
total assets are outstanding, the Fund will not purchase
securities for investment.

If the Proposal is approved, the Fund's fundamental investment policy
on borrowing would state:

The Fund may lend or borrow money to the extent permitted by
the Investment Company Act of 1940, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules
or regulations may be amended from time to time.

The primary purpose of this modification of the Fund's fundamental
investment policy on borrowing is to permit the Fund to borrow to the
same extent as permitted by the International Portfolio's fundamental
policy on borrowing. Under the Fund's current policy, the Fund may
borrow up to 10% of its assets to facilitate settlements or for
emergency purposes. The International Portfolio may borrow up to one
third of its assets for temporary or emergency purposes. If
shareholders approve the Proposal, the Fund would be permitted to

-24-

<PAGE>

borrow to the extent allowed by the International Portfolio's borrowing
limitation. In addition, the modified policy would provide the Fund
with the flexibility to borrow to the extent permitted by law and
regulatory interpretation, including borrowing for investment purposes,
should the International Portfolio's borrowing policy be changed in the
future.

C. Illiquid Securities

Currently, the Fund's fundamental investment policy on illiquid
securities states:

The Fund will not invest more than 10% of the value of its net
assets in illiquid securities (as defined under federal
securities and state securities laws), including repurchase
agreements with remaining maturities in excess of seven days.

If the Proposal is approved, the Fund's fundamental investment policy
on illiquid securities will be reclassified as non-fundamental and
state:

The Fund will not, as a matter of operating policy, invest
more than 15% of the Portfolio's (Fund's) net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not currently marketable (excluding Rule 144A
securities deemed by the Board of Trustees of the Portfolio
(Board of Directors of the Fund) to be liquid).

The primary purpose of this modification to the Fund's policy on
illiquid securities is to conform it to the International Portfolio's
policy on illiquid securities. Currently, the Fund may invest up to 10%
of its net assets in illiquid securities as a matter of fundamental
policy. The International Portfolio may invest up to 15% of its net
assets in illiquid securities. If the Proposal is approved, the Fund's
policy on illiquid securities would be conformed to the International
Portfolio's policy on illiquid securities. In addition, the policy is
being reclassified as non-fundamental because the policy is not legally
required to be fundamental.

D. Real Estate

Currently, the Fund has a fundamental investment policy regarding real
estate that states:

The Fund will not invest in real estate or mortgages on real
estate.

If the Proposal is approved, the Fund's fundamental investment policy
on real estate would state:

The Fund may not purchase or sell real estate (including
limited partnership interests but excluding securities secured
by real estate or interests therein) in the ordinary course of
business (except that the Portfolio (Fund) may hold and sell,
for the Portfolio's (Fund's)

-25-

<PAGE>

portfolio, real estate acquired as a result of the Portfolio's
(Fund's) ownership of securities)

The primary purpose of modifying this fundamental investment policy is
to permit the Fund to make the same types of investments in real estate
as the International Portfolio's fundamental policy on real estate
allows. Currently, the Fund's policy prohibits direct ownership in real
estate and could be interpreted to prevent investments in companies
that own real estate. The International Portfolio's investment policy
makes clear that the Portfolio may invest in companies that own real
estate in the ordinary course of business and may hold real estate
acquired as a result of ownership of securities. If the Proposal is
approved, the Fund's policy on real estate would be conformed to the
International Portfolio's policy on real estate.

Recommendation of the Board of Directors

The Board of Directors has carefully considered Proposal 2, which will
authorize the Reorganization of the Fund to a master-feeder structure, including
necessary amendments to the Fund's investment objective, investment policies and
fundamental investment restrictions. At a meeting held on July 28, 1999, the
Board approved this proposal and determined to seek shareholder authorization of
the actions necessary for the Fund to invest all its investable assets into the
International Portfolio. In approving this Proposal, the Board considered the
experience and performance record of Bankers Trust's international equity team.
The Board was also informed of the international investing capabilities of
Deutsche Bank and its affiliates. In addition, the Board considered the fact
that the Fund's fees and expenses are expected to remain the same after the
Reorganization due to a contractual fee waiver between the Fund and ICC.

PROPOSAL 3: To approve a new Investment Advisory Agreement between the Fund and
Investment Company Capital Corp.

Shareholders of the Fund are being asked to approve a new Investment
Advisory Agreement between ICC and the Fund (the "New Advisory Agreement") that
has been in place since the Fund's prior investment advisory agreement was
arguably assigned and, therefore terminated, on June 4, 1999. Shareholders are
being asked to approve this New Advisory Agreement so that ICC may be paid for
the period from June 4, 1999 through the date of shareholder approval. In
addition, shareholders are being asked to approve the New Advisory Agreement in
the event that they do not approve of the Reorganization discussed in Proposal
2. If shareholders approve Proposal 2, the New Advisory Agreement will be
terminated upon completion of the Reorganization. Thereafter, ICC would continue
providing certain administration, recordkeeping and transfer agency service
pursuant to an administration services agreement.

-26-

<PAGE>

General Information

ICC is the Fund's investment advisor and Glenmede Trust is the Fund's
sub-advisor. ICC is an indirect wholly owned subsidiary of Bankers Trust. On
November 30, 1998, Bankers Trust, Deutsche Bank and Circle Acquisition
Corporation entered into an Agreement and Plan of Merger (the "Merger
Agreement"). Pursuant to the terms of the Merger Agreement, Circle Acquisition
Corporation, a wholly owned, New York subsidiary of Deutsche Bank, merged with
and into Bankers Trust on June 4, 1999, with Bankers Trust continuing as the
surviving entity. Under the terms of the Merger, each outstanding share of
Bankers Trust common stock was converted into the right to receive $93 in cash,
without interest.

As a result of the Merger, Bankers Trust became an indirect, wholly
owned subsidiary of Deutsche Bank. Deutsche Bank is a banking company with
limited liability organized under the laws of the Federal Republic of Germany.
Deutsche Bank is the parent company of a group consisting of banks, capital
markets companies, mutual fund management companies, mortgage banks, a property
finance company, installment financing and leasing companies, insurance
companies, research and consultancy companies and other domestic and foreign
companies. At March 31, 1999, the Deutsche Bank Group had total assets of $727
billion. The Deutsche Bank Group's capital and reserves at March 31, 1999, were
U.S. $19.6 billion. Since the Merger, Bankers Trust, ICC and their affiliates,
have continued to offer the same range of financial products and services,
including investment advisory services, that they offered prior to the Merger.

The Merger on June 4, 1999 may have resulted in an assignment and
therefore a termination of the Fund's prior Investment Advisory Agreement under
the 1940 Act. In anticipation of the Merger, the Directors of the Fund,
including the Directors who are not (i) parties to the New Investment Advisory
Agreement or (ii) interested persons of any such party (the "Independent
Directors"), unanimously approved the New Advisory Agreement (attached as
Exhibit A) on March 30, 1999. The New Advisory Agreement is identical to the
Fund's prior Investment Advisory Agreement, except for the dates of execution,
effectiveness and initial term.

On May 25, 1999, ICC was granted an exemptive order (the "Exemptive
Order") by the Securities and Exchange Commission ("SEC") permitting
implementation, without obtaining prior shareholder approval, of the New
Advisory Agreement during an interim period commencing on the date of the
closing of the Merger and continuing, for a period of up to 150 days, through
the date on which the New Advisory Agreement is approved by the shareholders of
the Fund (the "Interim Period"). Under the terms of the Exemptive Order, ICC is
allowed to receive advisory fees during the Interim Period pursuant to the New
Advisory Agreement. In accordance with the Exemptive Order, the advisory fees
charged to the Fund and paid to ICC under the New Advisory Agreement have been
held in an interest-bearing escrow account and the Fund expects to continue to
deposit these fees in such account until shareholder approval of the New
Advisory Agreement has been obtained. If the New Advisory Agreement is not

-27-

<PAGE>

approved by the shareholders of the Fund by the expiration of the Interim
Period, the fees held in escrow will be remitted to the Fund. As of [____],
1999, the amount escrowed totaled $[____].

ICC does not anticipate that the Merger will result in any reduction in
the quality of services now provided to the Fund. Nor does ICC anticipate that
the Merger will have any adverse effect on its ability to fulfill its
obligations under the New Advisory Agreement or to operate its business in a
manner consistent with past business practice.

The Prior Advisory Agreement

Prior to June 4, 1999, ICC served as investment advisor to the Fund
pursuant to an Investment Advisory Agreement between Flag Investors Management
Corp. (now known as ICC) and the Fund, dated as of August 16, 1993 (the "Prior
Advisory Agreement"). The Prior Advisory Agreement was initially approved by the
shareholders of the Fund on June 15, 1993. The Prior Advisory Agreement was last
approved by the Fund's Board of Directors, including a majority of the
Independent Directors, on September 29, 1998.

The New Advisory Agreement

Other than the dates of execution, effectiveness and initial term, the
New Advisory Agreement is identical to the Prior Advisory Agreement. The terms
of the New Advisory Agreement are summarized below and are qualified by
reference to Exhibit A.

Advisory Fees. The investment advisory fee as a percentage of net
assets payable by the Fund will be the same under the New Advisory Agreement as
under the Prior Advisory Agreement. If the investment advisory fee under the New
Advisory Agreement had been in effect for the Fund's most recently completed
fiscal year, ICC would have received the same compensation as it received under
the Prior Advisory Agreement.

The New Advisory Agreement. The New Advisory Agreement provides that
the Advisor, in return for its fee, will (a) supervise and manage all aspects of
the Fund's operations, except for distribution services; (b) formulate and
implement continuing programs for the purchases and sales of securities,
consistent with the investment objective and policies of the Fund; (c) provide
the Fund with such executive, administrative and clerical services as are deemed
advisable by the Fund's Board of Directors; (d) provide the Fund with, or obtain
for it, adequate office space and all necessary office equipment and services,
including telephone service, utilities, stationery, supplies and similar items
for the Fund's principal office; (e) obtain and evaluate pertinent information
about significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally or the
Fund, and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion in the
Fund's portfolio; (f) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the Fund's

-28-

<PAGE>

Board of Directors; (g) take all actions necessary to carry into effect the
Fund's purchase and sale programs; (h) supervise the operations of the Fund's
custodian, transfer and dividend disbursing agent and accounting services agent;
(i) provide the Fund with such administrative and clerical services for the
maintenance of certain shareholder records, as are deemed advisable by the
Fund's Board of Directors; and (j) arrange, but not pay for, the periodic
updating of prospectuses and supplements thereto, proxy materials, tax returns,
reports to the Fund's shareholders and reports to and filings with the SEC and
state Blue Sky authorities. Subject to the approval of the Board and the Fund's
shareholders, the Advisor may delegate certain of its duties enumerated above to
a sub-advisor.

Under the New Advisory Agreement, the Fund pays ICC an annual fee based
on the Fund's average daily net assets. This fee is calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly, at the annual rate
of 0.75% of the Fund's average daily net assets. The Advisor may, from time to
time, voluntarily waive a portion of its advisory fee to preserve or enhance the
performance of the Fund.

The New Advisory Agreement provides that the Advisor will furnish,
subject to compliance with applicable banking regulations, at its expense and
without cost to the Fund, the services of one or more officers of the Fund, to
the extent that such officers may be required by the Fund for the proper conduct
of its affairs. The Fund assumes and pays all other expenses of the Fund,
including, without limitation: the fees of the Advisor, any Sub-Advisor and the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent 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

-29-

<PAGE>

indemnification related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.

The services of the Advisor are not to be deemed exclusive, and the
Advisor is free to render investment advisory and corporate administrative or
other services to others (including other investment companies), and to engage
in other activities, so long as its services under the agreement are not
impaired thereby. The Advisor's officers or directors may serve as officers or
directors of the Fund, and the Fund's officers or directors may serve as
officers or directors of the Advisor, to the extent permitted by law.

Following the expiration of its initial two-year term, the New Advisory
Agreement continues in full force and effect from year to year, provided that
such continuance is approved at least annually by the Fund's Board or by the
vote of a majority of the Fund's outstanding voting securities, and by the
affirmative vote of a majority of the Directors who are not parties to the
agreement or "interested persons" of a party to the agreement (other than as
Directors of the Fund) by votes cast in person at a meeting specifically called
for such purpose.

The New Advisory Agreement may be terminated at any time, on waivable
written notice within 60 days and without any penalty, by vote of the Fund's
Board of Directors, by vote of a majority of the Fund's outstanding voting
securities or by the Advisor. The agreement automatically terminates in the
event of its assignment.

The New Advisory Agreement obligates the Advisor to exercise care and
diligence and to act in good faith and to use its best efforts within reasonable
limits to ensure the accuracy of all services performed under the agreement, but
the Advisor is not liable for any act or omission which does not constitute
willful misfeasance, bad faith or gross negligence on the part of the Advisor or
its officers, directors or employees, or reckless disregard by the Advisor of
its duties under the agreement.

Board Considerations. The Board held a meeting on March 30, 1999, at
which the Board, including the Independent Directors, unanimously approved the
New Advisory Agreement and recommended the New Advisory Agreement for approval
by the shareholders of the Fund. In evaluating the New Advisory Agreement, the
Board based its determination primarily on its conclusion that there would be a
high degree of continuity of services to the Fund and took into account that the
Prior Advisory Agreement and the New Advisory Agreement, including their terms
relating to the services to be provided thereunder by ICC and the fees and
expenses payable by the Fund, are substantially identical.

The Board was assured on behalf of Bankers Trust and Deutsche Bank that
they intend to comply with the requirements of Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment advisor to
an investment company or any of its affiliated persons to receive any amount or
benefit in connection with a change in control of the investment advisor that
results in an assignment so long as two conditions are met:

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<PAGE>

1. For a period of three years after the change of control, at least
75% of the board members of the investment company must not be interested
persons of the acquired advisor or the acquiror (Bankers Trust and Deutsche
Bank, respectively, in this case). The Fund would be in compliance with this
provision of Section 15(f).

2. An "unfair burden" must not be imposed upon the investment company
as a result of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
Merger whereby the investment advisor, or any interested person of any such
advisor, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees for
bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company (other than bona fide ordinary compensation
as principal underwriter for such investment company). Bankers Trust and
Deutsche Bank are not aware of any express or implied term, condition,
arrangement or understanding that would impose an "unfair burden" on the Fund as
a result of the Merger. Bankers Trust and Deutsche Bank have agreed that they,
and their affiliates, will take no action that would have the effect of imposing
an "unfair burden" on the Fund as a result of the Merger.

The Board also considered the terms of the Merger and the possible
effects of the Merger upon ICC's organization and upon the ability of ICC to
provide advisory services to the Fund. The Board considered the skills and
capabilities of ICC in this regard and the representations of Bankers Trust and
Deutsche Bank that no material change was planned in the current management or
facilities of ICC.

The Board was also informed of the resources of Deutsche Bank that
could be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Deutsche Bank's experience as advisor and service provider to two families of
U.S. mutual funds as well as numerous non-U.S. mutual funds.

The Board also considered other effects on the Fund of ICC becoming an
affiliated person of Deutsche Bank. Following the Merger, the 1940 Act will
prohibit or impose certain conditions on the ability of the Fund to engage in
certain transactions with Deutsche Bank. For example, absent exemptive relief,
the Fund will be prohibited from entering into securities transactions in which
Deutsche Bank acts as a principal. Currently the Fund is prohibited from
entering into only those transactions in which Bankers Trust acts as principal.
The Fund will also have to satisfy certain conditions in order to engage in
securities transactions in which Deutsche Bank is acting as an underwriter. The
Fund is already required to satisfy such conditions when engaging in
transactions in which Bankers Trust is acting as an underwriter. In this
connection, management of the Advisor represented to the Board that it does not
believe these prohibitions or conditions will have a material effect on the
management or performance of the Fund.

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<PAGE>

The Board also considered that the costs of the Special Meeting,
insofar as they apply to approval of the New Advisory Agreement, would be borne
by the Advisor.

After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the Independent
Directors, unanimously approved the New Advisory Agreement and voted to
recommend its approval to the shareholders of the Fund.

Additional Information. On March 11, 1999, Bankers Trust Company, a
separate subsidiary of Bankers Trust, announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related record-keeping problems that occurred between 1994 and early 1996.
ICC became a subsidiary of Bankers Trust after these events took place. Pursuant
to its agreement with the U.S. Attorney's office, Bankers Trust Company pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
$60 million fine to federal authorities. Separately, Bankers Trust Company
agreed to pay a $3.5 million fine to the State of New York. The events leading
up to the guilty plea did not arise out of the investment advisory and
management activities provided by ICC to the Fund.

As a result of the plea, absent an order from the SEC, ICC would not be
able to continue as Advisor. The SEC granted Bankers Trust Company a temporary
order under Section 9(c) of the Act to permit Bankers Trust Company and its
affiliates to continue to provide investment advisory services to registered
investment companies, and Bankers Trust Company, pursuant to Section 9(c) of the
Act, has filed an application for a permanent order. On May 7, 1999, the SEC
extended the temporary order under Section 9(c) of the Act until the SEC takes
final action on the application for a permanent order or, if earlier, November
8, 1999. However, there is no assurance that the SEC will grant a permanent
order. If the SEC refuses to grant a permanent order, shareholders will receive
supplemental proxy materials requesting approval to release any amounts held in
escrow up to the time of the refusal and such other action as deemed appropriate
by the Board.

Investment Company Capital Corp.

ICC is a registered investment advisor that had under management as of
June 30, 1999 approximately $10 billion, including assets of the Fund and the
assets of ICC's other clients. ICC is a wholly owned subsidiary of BT Alex.
Brown and an indirect subsidiary of Bankers Trust. The principal address of ICC
and BT Alex. Brown is One South Street, Baltimore, Maryland, 21202 and the
principal address of Bankers Trust is 130 Liberty Street, New York, New York,
10006. Bankers Trust is a wholly owned subsidiary of Deutsche Bank. The
principal address of Deutsche Bank is Deutsche Bank Aktiengesellschaft,
Taunusalage 12, D-60262 Frankfurt am Main, Federal Republic of Germany.

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<PAGE>
Deutsche Asset Management (Americas) ("Deutsche Asset Management") is
an operating unit of Deutsche Bank consisting of ICC and other asset management
affiliates of Deutsche Bank.

The following information is provided for each Director and the
principal executive officer of ICC.
<TABLE>
<CAPTION>
Directors and Principal Executive Officer of ICC

Name and Position
with the Advisor Address Principal Occupation
- ---------------- ------- --------------------
<S> <C> <C>
Richard T. Hale One South Street Managing Director,
Director and President Baltimore, Maryland 21202 Deutsche Asset Management

Margaret-Mary V. Preston One South Street Managing Director,
Director Baltimore, Maryland 21202 BT Alex. Brown Incorporated

Mayo A. Shattuck III One South Street President, Chief Operating Officer
Director Baltimore, Maryland 21202 and Director,
BT Alex. Brown Incorporated

Truman T. Semans Furness House Vice Chairman,
Director 19 South Street Brown Investment Advisory &
Baltimore, Maryland 21202 Trust Company
</TABLE>
For the fiscal year ended October 31, 1998, the Fund paid ICC waived
its advisory fees of $98,993 and reimbursed fund expenses of $73,256. For such
fiscal year, the Fund also paid ICC aggregate fees of $19,096 for transfer
agency services provided to the Fund and $27,558 for accounting services
provided to the Fund. For the period from June 16, 1998 to October 31, 1998, the
Fund paid $8,008 to Bankers Trust Company for custody services provided to the
Fund.

As of June 4, 1999, to the Fund management's knowledge as provided by
the Directors and officers of the Fund, the following Directors and officers of
the Fund beneficially owned shares of Bankers Trust that were converted to the
right to receive $93 in cash, without interest, pursuant to the terms of the
Merger. [Mr. Hale, Chairman and a Director of the Fund and President and a
Director of ICC, beneficially owned [74,195] shares of Bankers Trust. Mr.
Semans, a Director of the Fund and a Director of ICC, beneficially owned ______
shares of Bankers Trust. Charles A. Rizzo, Treasurer of the Fund and a Vice
President of ICC, beneficially owned ___ shares of Bankers Trust.] [Disclose any
substantial interest of officers/Directors/Nominees in Deutsche Bank.]

Other Funds Advised by ICC with Similar Investment Objectives

A number of funds in the Fund Complex invest primarily in equity
securities and accordingly seek capital appreciation, either in and of itself,
or along with income. However, each of these funds employs widely differing
investment policies and styles in seeking these objectives. The following table
provides comparative information on fees paid to ICC pursuant to advisory
agreements in effect for such funds.

-33-

<PAGE>
<TABLE>
<CAPTION>
Management Fee
Assets (as a percentage of
Fund (000's) average daily net assets)
- ---- ------- -------------------------
<S> <C> <C>
Flag Investors Emerging Growth Fund, Inc. ......................... $ 123,273(1) 0.85%(1)
Flag Investors Equity Partners Fund, Inc. ......................... $ 465,382(2) [____%](2)
Flag Investors Communications Fund, Inc. .......................... $1,445,143(3) 0.68%(3)
Flag Investors Real Estate Securities Fund, Inc. .................. $ 41,462(4) 0.35% (net of fee waivers)(4)
Flag Investors Value Builder Fund, Inc. ........................... $ 922,789(5) 0.68%(5)
</TABLE>
- ----------------------
(1) Information given for the fiscal year ended October 31, 1998.
(2) Information given for the fiscal year ended May 31, 1999.
(3) Information given for the fiscal year ended December 31, 1998.
(4) Information given for the fiscal year ended December 31, 1998. Absent fee
waivers, Management Fees would be 0.65% of the fund's average daily net
assets.
(5) Information given for the fiscal year ended March 31, 1999.

Shareholder Approval of the New Advisory Agreement

Approval of the New Advisory Agreement requires the affirmative vote of
a majority of the outstanding voting securities of the Fund. In the event that
shareholders of the Fund do not approve the New Advisory Agreement, the Board
will take such action as it deems in the best interest of the Fund and its
shareholders which may include proposing that shareholders approve an agreement
in lieu of the New Advisory Agreement.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE NEW ADVISORY AGREEMENT.

PROPOSAL 4: To approve a new Sub-Advisory Agreement among the Fund, Investment
Company Capital Corp. and The Glenmede Trust Company.

Shareholders of the Fund are being asked to approve a new Sub-Advisory
Agreement between Glenmede Trust and the Fund (the "New Sub-Advisory Agreement")
that has been in place since the Fund's prior sub-advisory agreement was
arguably assigned and, therefore terminated, on June 4, 1999. Shareholders are
being asked to approve this New Sub-Advisory Agreement so that Glenmede Trust
may be paid for the period from June 4, 1999 through the date of shareholder
approval. In addition, shareholders are being asked to approve the Sub- Advisory
Agreement in the event that they do not approve of the Reorganization discussed
in Proposal 2. If shareholders approve Proposal 2, the New Sub-Advisory
Agreement will be

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<PAGE>

terminated upon completion of the Reorganization. Thereafter, Glenmede Trust
would no longer provide portfolio management services to the Fund.

General Information

The Glenmede Trust Company is the Fund's sub-advisor. Shareholders are
being asked to approve a new Sub-Advisory Agreement among ICC, Glenmede Trust
and the Fund which has been in effect since the closing of the Merger on June 4,
1999. For a description of the Merger, together with the factors considered by
the Board in its review and analysis of such Merger, please see Proposal 3
beginning on page __.

The Merger may have resulted in an assignment and, therefore a
termination, of the Fund's prior Sub-Advisory Agreement under the 1940 Act. In
anticipation of the Merger, the Directors of the Fund, including the Directors
who are not (i) parties to the new Sub-Advisory Agreement among the Fund, ICC
and Glenmede Trust (the "New Sub-Advisory Agreement") or (ii) interested persons
of any such party (the "Independent Directors"), unanimously approved the New
Sub-Advisory Agreement (attached as Exhibit B) on March 30, 1999. The New Sub-
Advisory Agreement is identical to the Fund's prior Sub-Advisory Agreement,
except for the dates of execution, effectiveness and initial term.

On May 25, 1999, ICC was granted an Exemptive Order by the SEC
permitting implementation, without obtaining prior shareholder approval, of the
New Sub- Advisory Agreement during an interim period commencing on the date of
the closing of the Merger and continuing, for a period of up to 150 days,
through the date on which the New Sub-Advisory Agreement is approved by the
shareholders of the Fund (the "Interim Period"). Under the terms of the
Exemptive Order, Glenmede Trust is allowed to receive advisory fees during the
Interim Period pursuant to the New Sub-Advisory Agreement. In accordance with
the Exemptive Order, the sub-advisory fees paid to Glenmede Trust by ICC under
the New Sub-Advisory Agreement have been held and will continue to be held in an
interest-bearing escrow account until approval of the New Sub-Advisory Agreement
by shareholders of the Fund has been obtained. If the New Sub-Advisory Agreement
is not approved by the shareholders of the Fund by the expiration of the Interim
Period, Glenmede Trust will not be entitled to accrued fees and interest paid to
ICC.

Glenmede Trust does not anticipate that the Merger will result in any
reduction in the quality of services now provided to the Fund. Nor does Glenmede
Trust anticipate that the Merger will have any adverse effect on its ability to
fulfill its obligations under the New Sub- Advisory Agreement or to operate its
business in a manner consistent with past business practice.

The Prior Sub-Advisory Agreement

Prior to June 4, 1999, Glenmede Trust served as sub-advisor to the Fund
pursuant to a Sub-Advisory Agreement among the Fund and Glenmede Trust, dated as
of August 16, 1993 (the "Prior Sub-Advisory Agreement"). The Prior Sub-Advisory
Agreement was initially approved

-35-

<PAGE>

by the shareholders of the Fund on June 15, 1993. The Prior Sub-Advisory
Agreement was last approved by the Fund's Board of Directors, including a
majority of the Independent Directors, on September 29, 1998.

The New Sub-Advisory Agreement

Other than the dates of execution, effectiveness and initial term, the
New Sub-Advisory Agreement which has been in effect since June 4, 1999 is
identical to the Prior Sub-Advisory Agreement. The terms of the New Sub-Advisory
Agreement are summarized below and are qualified by reference to Exhibit B.

Advisory Fees. The sub-advisory fee as a percentage of net assets
payable to the sub- advisor will be the same under the New Sub-Advisory
Agreement as under the Prior Sub- Advisory Agreement. If the sub-advisory fee
under the New Sub-Advisory Agreement had been in effect for the Fund's most
recently completed fiscal year, Glenmede Trust would have received the same
compensation as it received under the Prior Sub-Advisory Agreement.

The New Sub-Advisory Agreement. The New Sub-Advisory Agreement provides
that Glenmede Trust, in return for its fee, will (a) determine which issuers and
securities shall be represented in the Fund's portfolio and regularly report
thereon to the Fund's Board of Directors; (b) take all actions necessary to
carry into effect the Fund's purchase and sale programs; (c) formulate and
implement continuing programs for the purchases and sales of the securities of
such issuers and regularly report thereon to the Fund's Advisor and Board of
Directors; and (d) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign and
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 ICC considers desirable for inclusion in the Fund's portfolio.

Under the New Sub-Advisory Agreement ICC pays Glenmede Trust 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 0.55% of the Fund's average daily net
assets.

The New Sub-Advisory Agreement provides that Glenmede Trust will
furnish, subject to compliance with applicable banking regulations, at its
expense and without cost to the Fund, the services of the President and certain
Vice Presidents of the Fund, to the extent that such officers may be required by
the Fund for the proper conduct of its affairs. Glenmede Trust will maintain, at
its expense and without cost to the Fund, a trading function in order to place
orders for the purchase and sale of portfolio securities of the Fund. The Fund
assumes and pays or causes to be paid all other expenses of the Fund, including,
without limitation: payments to ICC under the New Advisory Agreement; payments
to the Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer,

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<PAGE>

dividend or accounting agent or agents appointed by the Fund; broker's
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 the registration and the maintenance of registration of the Fund
and its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Directors or Director members of any
advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
Directors of the Fund who are not interested persons (as defined in the 1940
Act) of the Fund and of independent certified public accountants, in connection
with any matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.

The services of Glenmede Trust are not to be deemed exclusive, and
Glenmede Trust is free to render investment advisory or other services to others
(including other investment companies), and to engage in other activities, so
long as its services under the agreement are not impaired thereby. Partners of
Glenmede Trust may serve as officers or Directors of the Fund, the Fund's
officers or Directors may serve as officers or partners of Glenmede Trust, to
the extent permitted by law, and partners of Glenmede Trust are not prohibited
from engaging in any other business activity or from rendering services to any
other person, or from serving as partners, officers, trustees or directors of
any other firm, trust or corporation, including other investment companies.

Following the expiration of its initial two-year term, the New
Sub-Advisory Agreement continues in full force and effect from year to year,
provided that such continuance is approved at least annually by the Fund's Board
or by the vote of a majority of the Fund's outstanding voting securities, and by
the affirmative vote of a majority of the Directors who are not parties to the
agreement or "interested parties" of a party to the agreement (other than as
Directors of the Fund) by votes cast in person at a meeting specifically called
for such purpose.

The New Sub-Advisory Agreement may be terminated, without the payment
of any penalty, by the Fund upon a vote of the Fund's Board of Directors, by a
vote of a majority of the

-37-

<PAGE>

Fund's outstanding voting securities or by ICC or Glenmede Trust, upon 60 days'
written notice to the other parties. The agreement automatically terminates in
the event of its assignment.

The New Sub-Advisory Agreement obligates Glenmede Trust to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under the
agreement, but Glenmede Trust is not liable for any act or omission which does
not constitute willful misfeasance, bad faith or gross negligence on the part of
Glenmede Trust or its officers, directors or employees or reckless disregard by
Glenmede Trust of its duties under the agreement.

Board Considerations. The Board held a meeting on March 30, 1999, at
which the Board, including the Independent Directors, approved the New
Sub-Advisory Agreement for the Fund and recommended the New Sub-Advisory
Agreement for approval by the shareholders of the Fund. In evaluating the New
Sub-Advisory Agreement, the Board considered substantially the same factors that
led it to approve the New Advisory Agreement, particularly the continuity of
services. In this regard, the Board took into account that the Prior
Sub-Advisory Agreement and the New Sub-Advisory Agreement, including their terms
relating to the services to be provided thereunder by Glenmede Trust and the
fees and expenses, are substantially identical.

The Glenmede Trust Company

Glenmede Trust is a limited purpose trust company with approximately
$_________ under management as of June 30, 1999. Glenmede Trust is a
wholly-owned subsidiary of The Glenmede Corporation.

The following information is provided for each Director and the
principal executive officer of Glenmede Trust.
<TABLE>
<CAPTION>
Name and Position with Address Principal Occupation
---------------------- ------- --------------------
<S> <C> <C>

[To be provided by Glenmede]
</TABLE>
For the fiscal year ended October 31, 1998, ICC paid Glenmede Trust an
aggregate fee of $73,399 for sub-advisory services.

Other Funds with Similar Investment Objectives [Advised] or [Sub-Advised] by
Glenmede Trust

Glenmede Trust acts as [advisor] or [sub-advisor] to ____ other funds
which invest primarily in equity securities and accordingly seek capital
appreciation, either in and of itself, or along with income. However, each of
these funds employs widely differing investment policies and styles in seeking
these objectives. The following table provides comparative information on

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<PAGE>

fees paid to Glenmede Trust pursuant to [advisory] or [sub-advisory] agreements
in effect for such funds.
<TABLE>
<CAPTION>
[Advisory] or [Sub-
Advisory] Fee
Size of Fund (as a percentage of
Fund (000s) average daily net assets)
- ---- ------ -------------------------
<S> <C> <C>
............................................................. $________________ ____%
............................................................. $________________ ____%
</TABLE>
Shareholder Approval of the New Sub-Advisory Agreement

Approval of the New Sub-Advisory Agreement requires the affirmative
vote of a majority of the outstanding voting securities of the Fund. In the
event that shareholders of the Fund do not approve the New Sub-Advisory
Agreement, the Board will take such action as it deems in the best interest of
the Fund and its shareholders, which may include proposing that shareholders
approve an agreement in lieu of the New Sub-Advisory Agreement.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.

PROPOSAL 5: To eliminate the Fund's fundamental investment policy concerning
short sales.

At the Special Meeting, the shareholders of the Fund will vote
regarding the elimination of the Fund's fundamental investment policy with
respect to short sales. Currently, the Fund has a fundamental investment policy
stating that:

The Fund will not effect short sales of securities.

If shareholders approve, this policy will be eliminated.

The primary purpose of this Proposal is to eliminate the Fund's
fundamental investment policy on short sales. This policy was initially adopted
primarily to comply with state regulatory requirements, which have been
eliminated as a result of federal legislation. If the proposal is approved, the
Fund, subject to the approval of the Board of Directors and upon proper
disclosure in the Fund's registration statement, would be able to make short
sales in conformity with Section 18 of the 1940 Act. In a short sale, an
investor sells a borrowed security and has a corresponding obligation to the
lender to return the identical security. Approval of the Proposal is not
expected to significantly affect the way the Fund is managed because the Fund
has no present intention to engage in short sales. However, Directors are
requesting approval of the Proposal in order to eliminate an unnecessary policy
and are doing so

-39-

<PAGE>

at this time in order to take advantage of the fact that the Fund is holding a
shareholder meeting. If shareholders approve the Proposal, it will take effect
whether or not shareholders approve the Reorganization.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY CONCERNING SHORT SALES.

PROPOSAL 6: To eliminate the Fund's fundamental investment policy concerning the
purchase of securities on margin.

At the Special Meeting, the shareholders of the Fund will vote
regarding the elimination of the Fund's fundamental investment policy with
respect to purchasing securities on margin. Currently, the Fund has a
fundamental investment policy stating that:

The Fund will not purchase securities on margin (but the Fund may
obtain such short-term credits as may be necessary for the clearance of
transactions).

If shareholders approve, this policy will be eliminated.

The primary purpose of this Proposal is to eliminate the Fund's
fundamental policy on purchasing securities on margin. This policy was initially
adopted primarily to comply with state regulatory requirements, which have been
eliminated as a result of federal legislation. If the proposal is approved, the
Fund would be able to purchase securities on margin. Margin purchases involve
the purchase of securities with money borrowed from a broker. "Margin" is the
cash or eligible securities that the borrower places with a broker as collateral
against the loan. Approval of the Proposal is not expected to significantly
affect the way the Fund is managed because the Fund has no present intention to
purchase securities on margin. However, Directors are requesting approval of the
Proposal in order to eliminate an unnecessary policy and are doing so at this
time to take advantage of the fact that the Fund is holding a shareholder
meeting. If shareholders approve the Proposal, it will take effect whether or
not shareholders approve the Reorganization.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY CONCERNING THE PURCHASE
OF SECURITIES ON MARGIN.

PROPOSAL 7: To eliminate the Fund's fundamental investment policy concerning
purchases of oil, gas, or mineral interests.

-40-

<PAGE>

At the Special Meeting, the shareholders of the Fund will vote
regarding the elimination of the Fund's fundamental investment policy with
respect to purchasing oil, gas or mineral interests. Currently, the Fund has a
fundamental investment policy stating that:

The Fund will not purchase participations or other interests in oil,
gas or other mineral exploration or development programs.

If shareholders approve, this policy will be eliminated.

The primary purpose of this Proposal is to remove the Fund's
fundamental investment policy regarding purchases of oil, gas or mineral
interests. This policy was initially adopted to comply with state regulatory
requirements, which have been eliminated as a result of federal legislation. If
the Proposal is approved, the Fund would be permitted to invest directly in oil,
gas or mineral interests. These investments are subject to certain risks
including substantial price fluctuations, unpredictable economic and political
circumstances, the existence of cartels in certain industries, and the
development of new technologies for finding and producing such materials.
Approval of the Proposal is not expected to significantly affect the way the
Fund is managed because the Fund has no present intention to invest directly in
oil, gas or mineral interests. However, the Directors are requesting approval of
the Proposal in order to eliminate an unnecessary policy and are doing so at
this time to take advantage of the fact that the Fund is holding a shareholder
meeting. If shareholders approve the Proposal, it will take effect whether or
not shareholders approve the Reorganization.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY CONCERNING PURCHASES OF
OIL, GAS, OR MINERAL INTERESTS.

PROPOSAL 8: To approve eliminating the Fund's fundamental investment policy
concerning restricted securities.

At the Special Meeting, the shareholders of the Fund will vote
regarding the modification of the Fund's fundamental investment policy on
borrowing. Currently, the Fund has a fundamental investment policy stating that:

The Fund will not 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").

If the Proposal is approved, this policy will be eliminated.

The primary purpose of this Proposal is to eliminate the Fund's
fundamental investment policy on purchasing restricted securities. This policy
was initially adopted primarily to comply

-41-

<PAGE>

with state regulatory requirements, which have been eliminated as a result of
federal legislation. If the proposal is approved, the Fund would be able to
invest in restricted securities to the extent permitted under current federal
laws or regulations and interpretations thereof. Restricted securities are
securities that are restricted from sale to the public without registration
under the Securities Act of 1933 and are deemed to be illiquid. However, some
restricted securities (e.g., Rule 144A securities and Section 4(2) commercial
paper) may be deemed to be liquid by the Fund's Board of Directors. Investing
more than 5% of the Fund's total assets in restricted securities may be
considered a speculative activity and may involve greater expense to the Fund.

Approval of the Proposal is not expected to significantly affect the
way the Fund is managed because the Fund has no present intention to invest more
than 5% of the Fund's assets in restricted securities. However, the Directors
are requesting approval of this policy to eliminate an unnecessary investment
limitation and they are doing so at this time to take advantage of the fact that
the Fund is holding a shareholder meeting. If shareholders approve the Proposal,
it will take effect whether or not shareholders approve the Reorganization.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY CONCERNING RESTRICTED
SECURITIES.

PROPOSAL 9: To modify Fund's fundamental investment policy concerning the
purchase or sale of commodities or commodity contracts.

At the Special Meeting, the shareholders of the Fund will vote
regarding the amendment of the Fund's fundamental investment policy concerning
the purchase or sale of commodities or commodity contracts. Currently, the Fund
has a fundamental investment policy stating that:

The Fund will not purchase or sell commodities or commodities
contracts, except that the Fund may enter into forward currency
exchange contracts.

If shareholders approve, the Fund's fundamental investment policy would
state that:

The Fund will not purchase or sell commodities or commodity contracts
provided that the Fund may invest in financial futures and options on
such futures.

The primary purpose of this Proposal is to modify the Fund's
fundamental investment policy on commodities to permit the Fund, subject to
Board approval and proper disclosure in the Fund's registration statement, to
invest in all types of financial futures and options on such futures. Under its
current policy, the Fund may invest only in forward currency exchange contracts,
one type of financial futures contract. Revising the policy will provide the
Fund with increased flexibility in making investment decisions and allow the
Fund to respond to rapidly changing market conditions. Further, revision of this
fundamental investment policy may

-42-

<PAGE>

provide increased investment opportunities which may enable the Fund to enhance
its performance.

Financial futures contracts provide for a future sale by one party and
purchase by another party of a specified amount of a specified security at a
specified price. An option on a futures contract gives the purchaser the right,
in exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. If the Proposal is
approved, to the extent authorized by the Board of Directors, the Fund would be
able to use futures and options for bona fide hedging purposes, to offset
changes in the value of securities held or expected to be acquired or be
disposed of, to minimize fluctuations in foreign currencies, or to gain exposure
to a particular market or instrument. Similarly, the Fund would be able to buy
and sell futures contracts and options to manage its exposure to changing
interest rates and securities prices.

Approval of the Proposal is not expected to significantly affect the
way the Fund is managed because the Fund has no present intention to invest in
financial futures or options to an extent greater than currently disclosed in
its registration statement. However, Directors are requesting approval of the
Proposal in order to provide the Fund with increased investment flexibility and
are doing so at this time to take advantage of the fact that the Fund is holding
a shareholder meeting. If shareholders approve the Proposal, it will take effect
whether or not shareholders approve the Reorganization.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
MODIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY CONCERNING THE PURCHASE
OR SALE OF COMMODITIES OR COMMODITY CONTRACTS.

PROPOSAL 10: To modify the Fund's fundamental investment policy concerning
borrowing.

The Fund will not borrow money, except as a temporary measure to
facilitate settlements or emergency purposes and then only from banks
in an amount not exceeding 10% of the total assets of the Fund at the
time of such borrowing, provided that, while borrowings by the Fund
equal to 5% or more of the Fund's total assets are outstanding, the
Fund will not purchase securities for investment.

If shareholders approve, the Fund's fundamental policy would state
that:

-43-

<PAGE>

The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes in an amount not exceeding 10% of
the value of the total assets of the Fund at the time of such
borrowing.

The primary purpose of this proposal is to modify the Fund's policy on
borrowing to provide the Fund with increased investment flexibility. The 1940
Act requires all funds to adopt a fundamental policy regarding borrowing. The
Proposal will permit the Fund to meet its regulatory requirements under the 1940
Act, while allowing the Fund increased flexibility in making investment
decisions. Under its current policy, the Fund may borrow only from banks. If the
Proposal is approved, the Fund could borrow from institutions other than banks,
to the extent permitted by law. Approval of the Proposal is not expected to
significantly affect the way the Fund is managed because the Fund has no present
intention to borrow from institutions other than banks. However, the Directors
are requesting approval of this policy to provide the Fund with increased
investment flexibility and they are doing so at this time to take advantage of
the fact that the Fund is holding a shareholder meeting. If shareholders approve
Proposal 2, the fundamental investment limitation contained therein will go into
effect upon completion of the Reorganization instead of the one contained in
this Proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
MODIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
BORROWING.

PROPOSAL 11: To modify the Fund's fundamental investment policy concerning
loans.

At the Special Meeting, the shareholders of the Fund will vote
regarding the modification of the Fund's fundamental investment policy on loans.
Currently, the Fund has a fundamental investment policy stating that:

The Fund will not 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.

If the Proposal is approved, the Fund's fundamental investment policy
would state that:

The Fund will not make loans, except that the Fund may purchase or hold
debt instruments in accordance with its investment objectives and
policies, and may loan portfolio securities and enter into repurchase
agreements.

The primary purpose of this Proposal is to modify the Fund's investment
policy concerning loans to permit the Fund to engage in securities lending. The
1940 Act requires all funds to adopt a fundamental investment policy regarding
loans. The Proposal will permit the

-44-

<PAGE>

Fund to meet its regulatory requirements under the 1940 Act, while permitting
the Fund increased investment flexibility to loan its portfolio securities to
others. If the proposal is approved, the Fund would be able to lend its
securities to brokers, dealers, domestic and foreign banks or other financial
institutions for the purposes of increasing its investment income. Any such loan
would be secured by cash or equivalent collateral, or by a letter of credit at
least equal to the market value of the securities loaned plus accrued interest
or income. Securities lending may subject the Fund to the risk of delay in
recovering the loaned securities or a loss of rights in the collateral should
the borrower fail financially.

The Proposal would also make clear that the Fund can enter into
repurchase agreements. Repurchase agreements are transactions in which the Fund
purchases a security and simultaneously commits to resell the security to the
seller (a bank or broker-dealer) at a mutually agreed upon date and time.
Repurchase agreements may be viewed as a fully collateralized loan of money by
the Fund to the seller.

Approval of the Proposal is not expected to significantly affect the
way the Fund is managed because the Fund has no present intention to engage in
securities lending. However, the Directors are requesting approval of this
policy to provide the Fund with increased investment flexibility and they are
doing so at this time to take advantage of the fact that the Fund is holding a
shareholder meeting. If shareholders approve the Proposal, it will take effect
whether or not shareholders approve the Reorganization.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
MODIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY CONCERNING LOANS.

PROPOSAL 12: To reclassify the Fund's fundamental investment policy concerning
illiquid securities from fundamental to non-fundamental.

At the Special Meeting, the shareholders of the Fund will vote to
approve reclassifying the Fund's fundamental investment policy concerning
illiquid securities as non-fundamental. Currently, the Fund has a fundamental
investment policy stating that:

The Fund will not invest more than 10% of the value of its net assets
in illiquid securities (as defined under federal and state securities
laws), including repurchase agreements with remaining maturities in
excess of seven days.

If shareholders approve, the Fund's fundamental investment policy would
be changed to a non-fundamental policy and would state that:

The Fund will not "invest more than 10% of the value of its net assets
in illiquid securities (as defined under federal and state securities
laws).

-45-

<PAGE>

The primary purpose of this proposal is to reclassify the Fund's
fundamental investment policy on illiquid securities as non-fundamental.
Reclassifying the Fund's policy on illiquid securities as non-fundamental would
provide the Board with the flexibility to change the policy in the future as it
deems appropriate in the interest of investors in the Fund. If the Proposal is
approved, the Board would have the flexibility to increase the Fund's limit on
the purchase of illiquid securities to the extent permitted by federal law and
regulations and interpretations, thereof. Investing a larger percentage of the
Fund's assets in illiquid securities may, of course, increase the Fund's
exposure to risks associated with such securities, including, the risk that the
Fund will be unable to sell a security at an opportune time and thus cause the
security to be viewed as speculative. Approval of the Proposal is not expected
to significantly affect the way the Fund is managed because the Fund has no
present intention to request that the Board increase the Fund's limitation on
investment in illiquid securities. However, the Directors are requesting
approval of this policy to provide the Board with increased flexibility and are
doing so at this time to take advantage of the fact that the Fund is holding a
shareholder meeting. If shareholders approve Proposal 2, the investment
limitation contained therein will go into effect upon completion of the
Reorganization instead of the one contained in this Proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR THE
RECLASSIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
ILLIQUID SECURITIES FROM FUNDAMENTAL TO NON-FUNDAMENTAL.

ADDITIONAL INFORMATION

Directors and Executive Officers

Information about the Fund's current Directors and principal executive
officers is set forth below. Each officer of the Fund will hold such office
until a successor has been elected by the Board of Directors. 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 or its
affiliates.

-46-

<PAGE>
<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
Name and Position During the Past Five Years, Owned as of
With the Fund Age including all Directorships May 31, 1999 Percentage
------------- --- --------------------------- ------------ ----------
<S> <C> <C> <C> <C>
Truman T. Semans* 72 See "Information Regarding ______ **
Chairman and Director Nominees"
since 1993

James J. Cunnane 61 Managing Director, CBC Capital ______ **
Director since 1994 (merchant banking), 1993-Present;
Director, NetWorld (telecommunications),
1998-Present. Director of each fund in the
Fund Complex.

Joseph R. Hardiman 62 See "Information Regarding ______ **
Director since 1999 Nominees"

Louis E. Levy 66 See "Information Regarding ______ **
Director since 1994 Nominees"

Eugene J. McDonald 67 See "Information Regarding ______ **
Director since 1993 Nominees"

Carl W. Vogt, Esq. 63 Senior Partner, Fulbright & Jaworski ______ **
Director since 1996 L.L.P. (law); Director, Yellow
Corporation (trucking) and American Science
& Engineering (x-ray detection equipment).
Formerly, Chairman and Member, National
Transportation Safety Board; Director,
National Railroad Passenger Corporation
(Amtrak); and Member, Aviation System
Capacity Advisory Committee (Federal
Aviation Administration). Director of each
fund in the Fund Complex.

Harry Woolf 76 Professor-at-Large Emeritus, Institute ______ **
President since 1998 for Advanced Study; Director, ATL
and Spacelabs Medical Corp.
(medical equipment), Family Health
International (non-profit research and
education) and Research America
(non-profit medical research).
Formerly, Trustee, Reed College
(education) and Rockefeller
Foundation; and Director, Merrill
Lynch Cluster C Funds and Flag
Investors/ISI and Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc.
Fund Complex (registered investment
companies).
</TABLE>
-47-

<PAGE>
<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
Name and Position During the Past Five Years, Owned as of
With the Fund Age including all Directorships May 31, 1999 Percentage
------------- --- --------------------------- ------------ ----------
<S> <C> <C> <C> <C>
Shares
Amy M. Olmert 36 Vice President, BT Alex. Brown ______ **
Secretary since 1997 Incorporated, 1997-Present.
Formerly, Senior Manager, Coopers
& Lybrand L.L.P. (now
PricewaterhouseCoopers LLP), 1988
-1997.

Charles A. Rizzo 42 Vice President and Department Head, ______ **
Treasurer since 1999 Deutsche Asset Management.
Formerly, Senior Manager,
PricewaterhouseCoopers LLP, 1993-
1998.

Tracie E. Richter 31 Vice President, Morgan Grenfell, ______ **
Assistant Secretary Inc.; Treasurer and Chief Financial
since 1999 Officer, Morgan Grenfell Investment
Trust, 1996-Present. Formerly, Vice
President, Bankers Trust Company,
1996-1998 and Tax Associate,
Goldman Sachs Asset Management,
1993-1996.

Daniel O. Hirsch 45 Principal, BT Alex. Brown _____ **
Assistant Secretary Incorporated. Formerly, Assistant
since 1999 General Counsel, United States
Securities and Exchange
Commission, 1993-1998.
</TABLE>
- ----------------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** [As of May 31, 1999 the Directors and officers of the Fund as a group (11
persons) beneficially owned an aggregate of less than 1% the Fund.]

Investment Advisor and Sub-Advisor

See "Investment Company Capital Corp." on page ___ and "Glenmede Trust"
on page for additional information concerning the Advisor and the Sub-Advisor.

Principal Underwriter

ICC Distributors, Inc., located at Two Portland Square, Portland,
Maine, 04104, acts as the Fund's principal underwriter.

-48-

<PAGE>

Portfolio Transactions

In the fiscal year ended October 31, 1998, the Fund did not pay any
brokerage commissions to BT Alex. Brown or its affiliates.

Independent Accountants

A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected PricewaterhouseCoopers LLP as the independent
accountants of the Fund for the fiscal year ending October 31, 1999. A
representative of PricewaterhouseCoopers LLP will be available by telephone
during the Special Meeting, if needed, to make a statement if desired and to
respond to appropriate questions from shareholders.

Beneficial Owners

To the knowledge of fund management, as of the Record Date, the
following [was] a beneficial owner of 5% or more of the outstanding shares of
the Fund.
<TABLE>
<CAPTION>
Amount of Beneficial Percent of Total Shares
Name and Address Ownership Outstanding
---------------- --------- -----------
<S> <C> <C>

[to be provided]
</TABLE>

Submission of Shareholder Proposals

The Fund is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act,
such as the Fund, is not required to hold an annual meeting in any year in which
the election of Directors is not required to be acted upon under the 1940 Act.
The Fund has availed itself of this provision and achieves cost savings by
eliminating printing costs, mailing charges and other expenses involved in
routine annual meetings.

Even with the elimination of routine annual meetings, the Board of
Directors may call special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act, or as required or permitted by the
Articles of Incorporation and By-Laws of the Fund. As described above,
shareholder meetings will be held, in compliance with the 1940 Act, to elect
Directors under certain circumstances. Shareholder meetings may also be held by
the Fund for other purposes, including to approve investment policy changes, a
new investment advisory or sub-advisory agreement or other matters requiring
shareholder action under the 1940 Act. In addition, Maryland General Corporation
Law provides for the calling of a special meeting by the written request of
shareholders holding at least 25% of the shares entitled to vote at the meeting.

-49-

<PAGE>

A meeting may also be called by shareholders holding at least 10% of
the shares entitled to vote at the meeting for the purpose of voting upon the
removal of Directors. Upon written request by ten or more shareholders, who have
been such for at least six months and who hold shares constituting at least 1%
of the outstanding shares, stating that such shareholders wish to communicate
with the other shareholders for the purpose of obtaining the signature necessary
to demand a meeting to consider removal of a Director, the Fund has undertaken
to provide a list of shareholders or to disseminate appropriate materials. In
addition, Maryland General Corporation Law provides for the calling of a special
meeting by the written request of shareholders holding at least 25% of the
shares entitled to vote at the meeting.

Shareholders who wish to present a proposal for action at the next
meeting or suggestions as to nominees for the Board of Directors should submit
the proposal or suggestions to be considered to the Fund 60 days in advance of
any such meeting for inclusion in the Fund's proxy statement and form of proxy
for such meeting as is held. The Nominating Committee of the Board of Directors
will give consideration to shareholder suggestions as to nominees for the Board
of Directors. Shareholders retain the right, under limited circumstances, to
request that a meeting of the 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.

Required Vote

Approval of Proposal 1 requires the affirmative vote of a plurality of
all votes cast at the Special Meeting, provided that a majority of the shares
entitled to vote are present in person or by Proxy at the Special Meeting.
Approval of Proposals 2 through 12 requires the affirmative vote of a majority
of the outstanding voting securities of the Fund. As defined in the 1940 Act,
the vote of a "majority of the outstanding voting securities" of the Fund means
the vote of (i) 67% or more of the Fund's outstanding voting securities present
at a meeting, if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding shares, whichever is less.

Abstentions and "broker non-votes" will not be counted for or against
the Proposals but will be counted for purposes of determining whether a quorum
is present. Abstentions will be counted as votes present for purposes of
determining a "majority of the outstanding voting securities" present at the
Special Meeting and will therefore have the effect of counting against Proposals
2 through 12. The Fund believes that brokers who hold shares as record owners
for beneficial owners have the authority under the rules of the various stock
exchanges to vote those shares with respect to Proposal 1, 3 and 4 when they
have not received instructions from beneficial owners.

-50-

<PAGE>

Other Matters

No business other than the matters described above is expected to come
before the Special Meeting, but should any matter incident to the conduct of the
Special Meeting or any question as to an adjournment of the Special Meeting
arise, the persons named in the enclosed Proxy will vote thereon according to
their best judgment in the interest of the Fund.

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO VOTE BY MAIL, TELEPHONE OR
INTERNET AS EXPLAINED IN THE INSTRUCTIONS INCLUDED ON YOUR PROXY CARD.

By Order of the Directors,

Amy M. Olmert
Secretary

Dated: [August 23], 1999

-51-

<PAGE>
EXHIBIT A

FLAG INVESTORS INTERNATIONAL FUND, INC.

FORM OF INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT is made as of the 4th day
of June, 1999 by and between FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland
corporation (the "Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland
corporation (the "Advisor"), with respect to the following recital of fact:

WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS, the Advisor is registered as an investment advisor
under the Investment Advisors Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and

WHEREAS, the Fund and the Advisor desire to enter into an
agreement under which the Advisor will provide investment advisory and
administrative services for the Fund on the terms and conditions hereinafter set
forth.

NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:

1. Appointment of Investment Advisor. The Fund hereby appoints
the Advisor to act as the Fund's investment advisor. The Advisor shall manage
the Fund's affairs and shall supervise all aspects of the Fund's operations
(except as otherwise set forth herein), including the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
assets, subject at all times to the policies and control of the Fund's Board of
Directors. The Advisor shall give the Fund the benefit of its best judgment,
efforts and facilities in rendering its service as Advisor.

2. Delivery of Documents. The Fund has furnished the Advisor
with copies properly certified or authenticated of each of the following:

(a) The Fund's Articles of Incorporation filed with the
Department of Assessments and Taxation of the State of Maryland on
March 16, 1993 and all amendments thereto (such Articles of
Incorporation, as presently in effect and as shall from time to time be
amended, are herein called the "Articles of Incorporation");

(b) The Fund's Bylaws and all amendments thereto (such
Bylaws, as presently in effect and as they shall from time to time be
amended, are herein called the "Bylaws");

(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Advisor and approving
this Agreement;

(d) The Fund's Notification of Registration filed pursuant
to Section 8(a) of the Investment Company Act of 1940 on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
(the "SEC") on September 3, 1986;

(e) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No.
33-8479) and under the 1940 Act as filed with the SEC on September 3,
1986 relating to the shares of the Fund, and all amendments thereto;
and

A-1
<PAGE>

(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are
herein called "Prospectus").

The Fund will furnish the Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.

3. Duties of Investment Advisor. In carrying out its
obligations under Section 1 hereof, the Advisor shall:

(a) supervise and manage all aspects of the Fund's
operations, except for distribution services;

(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Fund;

(c) provide the Fund with such executive, administrative
and clerical services as are deemed advisable by the Fund's Board of Directors;

(d) provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery, supplies and similar items for the
Fund's principal office;

(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund, and
whether concerning the individual issuers whose securities are included in the
Fund's portfolio or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Fund's
portfolio;

(f) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the Fund's
Board of Directors;

(g) take all actions necessary to carry into effect the
Fund's purchase and sale programs;

(h) supervise the operations of the Fund's Custodian,
transfer and dividend disbursing agent, and accounting services agent;

(i) provide the Fund with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and

(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the Fund's shareholders and reports to and filing with the SEC and state Blue
Sky authorities.

4. Broker-Dealer Relationships. In the event that the Advisor
is responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting securities transactions will be to
obtain the best price and execution on an overall basis. In performing this
function the Advisor shall comply with applicable policies established by the
Board of Directors and shall provide the Board of Directors with such reports as
the Board of Directors may require in order to monitor the Fund's portfolio
transaction activities.

A-2
<PAGE>

In certain instances the Advisor may make purchases of underwritten issues at
prices which include underwriting fees. In selecting a broker-dealer to execute
each particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Directors may determine, the Advisor shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to pay a
broker-dealer that provides brokerage and research services to the Advisor an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker-dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker-dealer, viewed in terms of either
that particular transaction or the Advisor's overall responsibilities with
respect to the Fund. The Advisor is further authorized to allocate the orders
placed by it on behalf of the Fund to such broker-dealers who also provide
research or statistical material or other services to the Fund or the Advisor.
Such allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the broker-dealers to whom such allocations
have been made and the basis therefor.

Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking the most
favorable price and execution available and such other policies as the Directors
may determine, the Advisor may consider services in connection with the sale of
shares of the Fund as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund.

Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other account
of the Advisor is considered at or about the same time, transactions in such
securities will be allocated among the accounts in a manner deemed equitable by
the Advisor. BT Alex. Brown and the Advisor may combine such transactions, in
accordance with applicable laws and regulations, in order to obtain the best net
price and most favorable execution.

The Fund will not deal with the Advisor or BT Alex. Brown in
any transaction in which the Advisor or BT Alex. Brown acts as a principal with
respect to any part of the Fund's order. If BT Alex. Brown is participating in
an underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.

5. Control by Board of Directors. Any management or
supervisory activities undertaken by the Advisor pursuant to this Agreement, as
well as any other activities undertaken by the Advisor on behalf of the Fund
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.

6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Advisor shall at all times conform to:

A-3

<PAGE>

(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;

(b) the provisions of the Registration Statement of the
Fund under the 1933 Act and the 1940 Act;

(d) the provisions of the Bylaws; and

(e) any other applicable provisions of Federal and State
law.

7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:

(a) The Advisor shall, subject to applicable banking
regulations, furnish at its expense and without cost to the Fund, the services
of one or more officers of the Fund, to the extent that such officers may be
required by the Fund for the proper conduct of its affairs.

(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution, the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State or
other governmental agencies; the costs and the expenses of the engraving or
printing of certificates representing shares of the Fund; all costs and expenses
in connection with registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of Fund's shares; charges
and expenses of legal counsel, including counsel to the Directors of the Fund
who are not "interested persons" (as defined in the 1940 Act) of the Fund and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.

8. Delegation of Responsibilities.

(a) Subject to the approval of the Board of Directors,
including a majority of the Fund's Directors who are not "interested persons"
(as defined in the 1940 Act) of the Fund, and of the shareholders of the Fund,
the Advisor may delegate to a sub-advisor its duties enumerated in Section 3
hereof. The Advisor shall continue to supervise the performance of any such
sub-advisor and shall report regularly thereon to the Fund's Board of Directors,
but shall not be responsible for the sub-advisor's performance under the
sub-advisory agreement.

A-4
<PAGE>

(b) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Fund which are not required by this Agreement
upon the request of the Fund's Board of Directors. Such services will be
performed on behalf of the Fund, and the Advisor's charge in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not required to pay or assume under this Agreement
shall not relieve the Advisor of any of its obligations to the Fund nor obligate
the Advisor to pay or assume any similar Fund expense on any subsequent
occasions.

9. Compensation. For the services to be rendered and the
expenses to be assumed by the Advisor, the Fund shall pay to the Advisor monthly
compensation at an annual rate of 0.75% of the Fund's average daily net assets.

Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for the part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of Section 10 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by Section 10 hereof.

10. Non-Exclusivity. The services of the Advisor to the Fund
are not to be deemed to be exclusive, and the Advisor shall be free to render
investment advisory or other services to others (including other investment
companies) and to engage in other activities, so long as its services under this
Agreement are not impaired thereby. It is understood and agreed that officers or
directors of the Advisor may serve as officers or Directors of the Fund, and
that officers or Directors of the Fund may serve as officers or directors of the
Advisor to the extent permitted by law; and that the officers and directors of
the Advisor are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, trustees or directors of any other firm, trust or corporation,
including other investment companies.

11. Term and Renewal. This Agreement shall become effective as
of the date hereof and shall continue in force and effect, subject to Section 13
hereof, for two years from the date hereof. Following the expiration of its
initial two-year term, this Agreement shall continue in force and effect from
year to year, provided that such continuance is specifically approved at least
annually:

(a) (i) by the Fund's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund; and

(b) by the affirmative vote of a majority of the Directors
who are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of a party to this Agreement (other than as Directors of the Fund) by
votes cast in person at a meeting specifically called for such purpose.

12. Termination. This Agreement may be terminated, without the
payment of any penalty, by the Fund upon vote of the Fund's Board of Directors
or a vote of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act) or by the Advisor, upon sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).

13. Liability of Advisor. In the performance of its duties
hereunder, the Advisor shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to ensure
the accuracy of all services performed under this Agreement, but the Advisor
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross

A-5

<PAGE>

negligence on the part of the Advisor or its officers, directors or employees,
or reckless disregard by the Advisor of its duties under the Agreement.

14. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Fund and of the Advisor for this purpose shall be One South Street, Baltimore,
Maryland 21202.

15. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective offices as of the day and year first
above written.

[SEAL] FLAG INVESTORS INTERNATIONAL FUND, INC.

Attest:_______________ By:_______________________
Name:
Title:

[SEAL] INVESTMENT COMPANY CAPITAL CORP.

Attest: By:_______________________
Name:
Title:

A-6
<PAGE>
EXHIBIT B

FLAG INVESTORS INTERNATIONAL FUND, INC.

FORM OF SUB-ADVISORY AGREEMENT

THIS AGREEMENT is made as of the 4th day of June, 1999 by and
among FLAG INVESTORS INTERNATIONAL FUND, INC., a Maryland corporation (the
"Fund"), INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), and THE GLENMEDE TRUST COMPANY, a limited purpose trust company
chartered under the laws of the Commonwealth of Pennsylvania (the
"Sub-Advisor").

WHEREAS, the Advisor is the investment advisor to the Fund,
which is an open-end, diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS, the Fund and the Advisor wish to retain the
Sub-Advisor for purposes of rendering advisory services to the Fund and the
Advisor in connection with the Advisor's responsibilities to the Fund on the
terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:

1. Appointment of Sub-Advisor. The Fund hereby appoints the
Sub-Advisor to act as the Fund's Sub-Advisor under the supervision of the Fund's
Board of Directors and the Advisor, and the Sub-Advisor hereby accepts such
appointment, all subject to the terms and conditions contained herein.

2. Delivery of Documents. The Fund has furnished the
Sub-Advisor with copies properly certified or authenticated of each of the
following:

(a) The Fund's Articles of Incorporation, filed with the
Department of Assessments and Taxation of the State of Maryland on
March 16, 1993 and all amendments thereto (such Articles of
Incorporation, as presently in effect as they shall from time to time
be amended, are herein called the "Articles of Incorporation");

(b) The Fund's Bylaws and all amendments thereto (such Bylaws,
as presently in effect as they shall from time to time be amended, are
herein called the "Bylaws");

(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Sub-Advisor and
approving this Agreement;

(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act of 1940 on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on September 3, 1986;

(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-8479)
and under the 1940 Act as filed with the SEC on September 3, 1986
relating to the shares of the Fund, and all amendments thereto; and

(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are
herein called "Prospectus").

B-1
<PAGE>

The Fund will furnish the Sub-Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.

3. Duties of Sub-Advisor. In carrying out its obligations
under Section 1 hereof, the Sub-Advisor shall:

(a) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;

(b) take all actions necessary to carry into effect the
Fund's purchase and sale programs;

(c) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Fund's Advisor and Board of Directors; and

(d) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio.

4. Broker-Dealer Relationships. In circumstances when the
Sub-Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of its brokerage commission
rates, the Sub-Advisor's primary consideration in effecting security
transactions will be to obtain the best price and execution on an overall basis.
In performing this function the Sub-Advisor shall comply with applicable
policies established by the Board of Directors and shall provide the Board of
Directors with such reports as the Board of Directors may require in order to
monitor the Fund's portfolio transaction activities. In certain instances the
Sub-Advisor may make purchases of underwritten issues at prices which include
underwriting fees. In selecting a broker-dealer to execute each particular
transaction, the Sub-Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may determine, the Sub-Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker-dealer that
provides brokerage and research services to the Sub-Advisor an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Sub-Advisor's overall responsibilities with
respect to the Fund. The Sub-Advisor is further authorized to allocate the
orders placed by it on behalf of the Fund to such broker-dealers other than who
also provide research or statistical material or other services to the Fund or
the Sub-Advisor. Such allocation shall be in such amounts and proportions as the
Sub-Advisor shall determine and the Sub-Advisor will report on said allocation
regularly to the Board of Directors of the Fund, indicating the broker-dealers
to whom such allocations have been made and the basis therefor.

B-2
<PAGE>

Directors may determine, the Sub-Advisor may consider services in connection
with the sale of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.

Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Sub-Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Sub-Advisor. BT Alex. Brown and the Sub-Advisor may
combine such transactions, in accordance with applicable laws and regulations,
in order to obtain the best net price and most favorable execution.

The Fund will not deal with the Sub-Advisor or BT Alex. Brown
in any transaction in which the Sub-Advisor or BT Alex. Brown acts as a
principal with respect to any part of the Fund's order. If BT Alex. Brown is
participating in an underwriting or selling group, the Fund may not buy
portfolio securities from the group except in accordance with policies
established by the Board of Directors in compliance with rules of the SEC.

5. Control by Fund's Board of Directors. Any recommendations
concerning the Fund's investment program for the Fund proposed by the
Sub-Advisor to the Fund and the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Sub-Advisor on behalf of the Fund
pursuant hereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.

6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Sub-Advisor shall at all times conform
to:

(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder, as amended;

(b) the provisions of the Registration Statement of the
Fund under the 1933 Act and the 1940 Act;

(d) the provisions of the Bylaws; and

(e) any other applicable provisions of Federal and State
law.

7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund, the Sub-Advisor and the Advisor as follows:

(a) The Sub-Advisor shall, subject to applicable banking
regulations, furnish at its expense and without cost to the Fund, the
services of the President and Executive Vice President of the Fund, to
the extent that such officers may be required by the Fund for the
proper conduct of its affairs.

(b) The Sub-Advisor shall maintain, at its expense and
without cost to the Fund, a trading function in order to carry out its
obligations under Section 3 hereof to place orders for the purchase and
sale of portfolio securities for the Fund.

B-3
<PAGE>

(c) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to
the Advisor under the Investment Advisory Agreement between the Fund
and the Advisor; payments to the Fund's distributor under the Fund's
plan of distribution; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of
its cash, portfolio securities and other property, and any transfer,
dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by
the Fund to Federal, state or other governmental agencies; the costs
and expenses of the engraving or printing of certificates representing
shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and its shares
with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of the preparing, printing
and mailing of proxy statements and reports to shareholders; fees and
travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not "interested persons" (as
defined in the 1940 Act) of the Fund and of independent certified
public accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.

8. Compensation. For the services to be rendered hereunder by
the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly compensation
at the annual rate of 0.55% of the Fund's average daily net assets. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals paid monthly. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculations of the fees as set forth above. Subject to the provisions of
Section 10 hereof, payment of the Sub-Advisor's compensation for the preceding
month shall be made as promptly as possible after completion of the computations
contemplated in Section 10 hereof.

9. Additional Responsibilities. The Sub-Advisor may, but shall
not be under any duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Sub-Advisor's
charges in rendering such services will be billed monthly to the Fund, subject
to examination by the Fund's independent certified public accountants. Payment
or assumption by the Sub-Advisor of any Fund expense that the Sub- Advisor is
not required to pay or assume under this Agreement shall not relieve the
Sub-Advisor of any of its obligations to the Fund nor obligate the Sub-Advisor
to pay or assume any similar Fund expenses on any subsequent occasions.

10. Term. This Agreement shall become effective at 12:01 a.m.
on the date hereof and shall remain in force and effect, subject to Section 12
hereof, for two years from the date hereof.

11. Renewal. Following the expiration of its initial two-year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually:

B-4
<PAGE>

(a) (i) by the Fund's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act); and

(b) by the affirmative vote of a majority of the Directors
who are not parties to this Agreement or "interested persons" of a
party to this Agreement (other than as Directors of the Fund) by votes
cast in person at a meeting specifically called for such purpose.

12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of Directors or
by vote of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days' written notice
to the Advisor and the Sub-Advisor. This Agreement may be terminated at any
time, without the payment of any penalty, by the Advisor or Sub-Advisor on sixty
(60) days' written notice to the Fund and the other party. Upon the termination
of the Investment Advisory Agreement, this Agreement shall automatically
terminate on sixty (60) days' written notice. The notice provided for herein may
be waived by any person to whom such notice is required. This Agreement shall
automatically terminate in the event of its assignment (as defined in Section
2(a)(4) of the 1940 Act).

13. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-Advisor
shall be free to render investment advisory or other services to others
(including other investment companies) and to engage in other activities, so
long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers or Directors of the Sub-Advisor may serve as
officers or directors of the Fund, and that officers or Directors of the Fund
may serve as officers or directors of the Sub-Advisor, to the extent permitted
by law; and that the officers and Directors of the Sub- Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, trustees or
directors of any other firm, trust or corporation, including other investment
companies.

14. Liability of Sub-Advisor. In the performance of its duties
hereunder, the Sub-Advisor shall be obligated to exercise care and diligence and
to act in good faith and to use its best efforts within reasonable limits to
ensure the accuracy of all services performed under this Agreement, but the
Sub-Advisor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of the
Sub-Advisor or its officers, directors or employees, or reckless disregard by
the Sub-Advisor of its duties under this Agreement.

15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Sub-Advisor for this purpose shall be One Liberty Place, 1650 Market Street,
Philadelphia, Pennsylvania 19103 and the address of the Advisor and the Fund
shall be One South Street, Baltimore Street, Baltimore, Maryland 21202.

17. Questions and Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.

B-5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.

Attest: FLAG INVESTORS INTERNATIONAL FUND, INC.

_________________ By:____________________________
Name:
Title:

Attest: INVESTMENT COMPANY CAPITAL CORP.

_________________ By:____________________________
Name:
Title:

Attest: THE GLENMEDE TRUST COMPANY

_________________ By:____________________________
Name:
Title:

B-6

<PAGE>

Three Ways To Vote Your Proxy

Proxy Voting Quick & Easy
The enclosed proxy statement provides details on important issues affecting your
Fund(s). The Board of your Fund(s) recommends that you vote FOR all proposals.

We are offering three ways to vote: by automated touch-tone phone, by internet
and by mail. Voting by telephone or internet may be quicker or more cost
effective than the traditional method of mailing back your proxy card; however,
that option is still available to you. If you vote by telephone or internet,
there is no need to return your proxy card.

Your proxy vote is important! Please vote today.

By Automated Touch-Tone Phone*
Using our automated touch-tone phone system, dial the number provided on your
proxy card and follow the directions given.

By Internet*
Visit the website www.proxyvote.com and enter the 12-digit control number
located on your proxy card.

By Mail
Simply return your executed proxy in the enclosed postage-paid envelope.

* Do not mail the Proxy Card if voting by internet or telephone.
<PAGE>
[FLAG INVESTORS]
[PROXY SERVICES]
[P.O. BOX 9148]
[FARMINGDALE, NY 11735]

FORM OF

FLAG INVESTORS INTERNATIONAL FUND, INC.
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS

October 7, 1999

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FLAG INVESTORS INTERNATIONAL FUND, INC.

This proxy is for your use in voting on various matters relating to Flag
Investors International Fund, Inc. (the "Fund"). The undersigned shareholder(s)
of the Fund, revoking previous proxies, hereby appoint(s) Edward J. Veilleux,
Amy M. Olmert and Kathy L. Churko and each of them (with full power of
substitution) the proxies of the undersigned to attend the Special Meeting of
Shareholders of the Fund to be held on October 7, 1999 (the "Special Meeting")
and any adjournments thereof, to vote all of the shares of the Fund that the
signer would be entitled to vote if personally present at the Special Meeting
and on any matter incident to the conduct of the Special Meeting, all as set
forth in the Notice of Special Meeting of Shareholders and Proxy Statement of
the Board of Directors. Said proxies are directed to vote or refrain from voting
pursuant to the Proxy Statement as indicated upon the matters set forth below.

This proxy will be voted as indicated below. If no indication is made, this
proxy will be voted FOR the proposals set forth below. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.

To Vote by Telephone

1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-000-0003
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.

To Vote by Internet:

1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.

Please print and sign your name in the space provided to authorize the voting of
your shares as indicated and return promptly. When signing on behalf of a
corporation, partnership, estate, trust or in any other representative capacity,
please sign your name and title. For joint accounts, each joint owner must
sign.

UNLESS VOTING BY TELEPHONE OR INTERNET, PLEASE COMPLETE, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.

NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
KEEP THIS PORTION FOR YOUR RECORDS
- -------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS
PORTION ONLY

FLAG INVESTORS INTERNATIONAL FUND, INC.

Vote on Directors

1. To consider and act upon a proposal to elect a Board of Directors.

Truman T. Semans Richard R. Burt
Joseph R. Hardiman Louis E. Levy
Eugene J. McDonald Robert H. Wadsworth

[ ] FOR ALL

[ ] WITHHOLD ALL

[ ] FOR ALL EXCEPT:

<PAGE>

To withhold authority to vote mark "FOR ALL EXCEPT" and write the
nominee's name on the line below.

-------------------------------------------

Vote on Proposals

2. To approve the reorganization of the Fund's structure with
modifications to the Fund's investment objective and certain
fundamental investment policies.