<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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ 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:
___________________________________________________________________________
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
One South Street
Baltimore, Maryland 21202
---------------------------
August 25, 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.
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. The
Directors have been pleased with their results and the consistency they have
demonstrated. However, the combination of Deutsche Bank and Bankers Trust has
resulted in a greatly enhanced investment management capability. One particular
strength this new combined entity possesses is an expertise in international
investing. The Directors 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.
What you need to do:
o Read all enclosed materials including the Questions & Answers section.
o Choose one of the following options to vote:
<PAGE>
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,
/s/ Truman T. Semans
---------------------------------
Truman T. Semans
Chairman
Flag Investors International Fund, Inc.
<PAGE>
August 25, 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 Americas handles the investment
management activities of Deutsche Bank in the Americas and, as of July 31,
1999, manages $322 billion in assets.
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
ADVISOR, 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.
Q. How does the merger affect the Fund?
A. The Fund and its investment objective 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
<PAGE>
the merger, except for the dates of execution, effectiveness and initial term,
the deletion of provisions relating to state expense limits that have been
pre-empted by federal law, and a proviso to the effect that the obligation of
advisor and sub-advisor to make their respective personnel available to serve
as officers of the Fund is subject to applicable banking regulations. 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 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 indirectly 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.
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.
<PAGE>
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.
<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.
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.
<PAGE>
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.
/s/ Amy M. Olmert
------------------
Amy M. Olmert
Secretary
Dated: August 25, 1999
<PAGE>
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 25, 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 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 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,
1
<PAGE>
except for the dates of execution, effectiveness and initial term, the deletion
of provisions relating to state expense limits that have been pre-empted by
federal law, and a proviso to the effect that the obligation of ICC and
Glenmede Trust to make their respective personnel available to serve as
officers of the Fund is subject to applicable banking regulations.
Proposals 5 through 12 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 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 626,392.407 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.
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 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.
2
<PAGE>
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 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 currently 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 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 shareholder meetings, each Nominee, if elected, may
hold office until his resignation or retirement or until his successor is
elected and qualified.
3
<PAGE>
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 21,870.43 shares, representing 3.49%
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 & 6,075.50 ***
Chairman and Trust Company (formerly, Alex. Brown Capital
Director since 1993 Advisory & Trust Company); Director, Invest-
ment Company Capital Corp. (registered
investment advisor); and Director and Chair-
man, the Executive Committee of Virginia Hot
Springs, Inc. (property management). Formerly,
Managing Director, BT Alex. Brown Incorpo-
rated; and 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 the None ***
Nominee Board, Weirton Steel Corporation; Member of
the Board, Archer Daniels Midland Company
(agribusiness operations), Hollinger Interna-
tional 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 and Deutsche Funds, Inc.; and
Trustee, Deutsche Portfolios (registered invest-
ment companies); and Member, Textron Cor-
poration International Advisory Council. For-
merly, Partner, McKinsey & Company
(consulting), 1991-1994; and U.S. Chief Nego-
tiator in Strategic Arms Reduction Talks
(START) with former Soviet Union and U.S.
Ambassador to the Federal Republic of Ger-
many, 1985-1991. Nominee for Director of 8
funds in the Fund Complex.
</TABLE>
4
<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>
Joseph R. Hardiman 62 Private Equity Investor and Capital Markets 3,323.93 ***
Director since 1999 Consultant; and Director, Wit Capital Group
(registered broker dealer) and The Nevis Fund
(registered investment company). Formerly,
Director, Circon Corp. (medical instruments),
November 1998 - January 1999; President and
Chief Executive Officer, The National Associa-
tion of Securities Dealers, Inc. and The NAS-
DAQ Stock Market, Inc., 1987-1997; Chief
Operating Officer of Alex. Brown & Sons
Incorporated, 1985-1987; and General Partner,
Alex. Brown & Sons Incorporated (now BT
Alex. Brown Incorporated), 1976-1985. Direc-
tor of each fund in the Fund Complex.
Louis E. Levy 66 Director, Kimberly-Clark Corporation (personal 2,465.00 ***
Director since 1994 consumer products); and Household Interna- 2,073.00+
tional (finance and banking). Formerly, Chair-
man of the Quality Control Inquiry Committee
and American Institute of Certified Public
Accountants, 1992-1998; 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 Trea-
surers Trust (registered investment company)
and DP Mann Holdings (insurance). Director
of each fund in the Fund Complex.
</TABLE>
5
<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 None ***
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 11,864.43 shares representing 1.89% 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 for his children.
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 Deutsche Asset Management Americas 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
6
<PAGE>
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. 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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Total Number
Aggregate Retirement Compensation of Funds in
Compensation Benefits Accrued from the Fund Fund Complex
Payable as Part of Fund and Fund Complex for which
Name and Position from the Fund Expenses Payable to Directors Director 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) Messrs. Hardiman and 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 serves. The
7
<PAGE>
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 as a Director 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 each 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).
Estimated Annual Benefits Payable by Fund Complex Upon Retirement
Chairmen of Audit
Years of Service and Executive Committees Other Participants
- ------------------- -------------------------- -------------------
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
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 all 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 Compliance
Committee met four times during the fiscal year ended October 31, 1998. All
8
<PAGE>
incumbent members attended all of the meetings held during their respective
terms. The Chairman 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.
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 Executive Committee was formed on September 28, 1998 and did not
meet during the fiscal year ended October 31, 1998. The Chairman 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.
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
9
<PAGE>
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 (the "Reorganization") 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 so that it conforms 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 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.
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 the
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 investable
assets will be invested in the International Portfolio. It is currently
anticipated that the Board will be asked to appoint ICC to serve as the Fund's
administrator upon completion of the Reorganization.
10
<PAGE>
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 would 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, advisory and custodial fees will be an obligation of the
International Portfolio and will be paid indirectly by the Fund's shareholders.
Distribution, transfer agency and shareholder servicing fees will be a direct
obligation of the Fund. Although some fees will change, the aggregate fees and
expenses paid by the Fund's shareholders are currently expected to remain the
same due to a contractual fee waiver by ICC in its anticipated capacity as the
Fund's administrator.
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.
Annual Fund Operating Expenses
<TABLE>
<CAPTION>
Actual Estimated
-------------- ----------------
<S> <C> <C>
Management Fee .................................... 0.75 0.65
Administrative Fee ................................ 0.00 0.35
Distribution and/or Service (12b-1) fees .......... 0.25 0.25
Other Expenses .................................... 1.78 1.15
----- -----
Total Annual Fund Operating Expenses .............. 2.78 2.40
----- -----
(1.28)%* (0.90)%**
===== =====
1.50 1.50
</TABLE>
* 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.
11
<PAGE>
** It is currently expected that ICC, in its anticipated capacity as the Fund's
administrator, will continue the contractual fee waiver and expense
reimbursement agreement so that the Fund's Total Annual 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 receive 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 indirectly paid a monthly fee at the effective annual
rate of 0.65% of the Fund's average daily net assets as compensation for its
advisory services. The International Portfolio does not engage an investment
sub-advisor. After the Reorganization, it is anticipated that ICC will be paid
an administrative fee of 0.35% of the Fund's average daily net assets. However,
it is expected that the Reorganization will not result in any increase in
overall fees to shareholders because ICC, in its anticipated capacity as the
Fund's administrator, intends to continue the current contractual expense
limitation of 1.50% until at least February 29, 2000.
Tax Consequences
Although the Reorganization is a taxable event, the proposed transfer of
assets of the Fund is expected to have no tax consequences for the Fund's
shareholders because of the Fund's ability to offset any gains realized with
tax loss carry forwards. 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 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
12
<PAGE>
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, it is anticipated that ICC will provide
administrative services to the Fund.
Modification of the Fund's Investment Objective, Policies and Strategies
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 one of investing in the International
Portfolio rather than investing directly in the securities of foreign issuers.
A comparison of the investment objectives, policies, strategies and risks of
the Fund and the International Portfolio is presented below.
General. The current investment objective, policies and risks of the Fund
are, in many respects, similar to those of the International Portfolio. There
are, however, certain differences. In addition, the Fund and the International
Portfolio use different strategies to select portfolio securities. The
following discussion summarizes some of the similarities and differences
between the investment objective, policies, strategies and risks of the Fund
and the International Portfolio. This discussion is qualified by reference to
the Prospectuses and Statements of Additional Information of the Fund and the
International Portfolio.
Investment Objectives. The investment objective of both the Fund and the
International Portfolio are similar. The investment objective of the Fund is
long-term growth of capital. The investment objective of the International
Portfolio is long-term capital appreciation.
Investment Policies. The investment policies of the Fund and the
International Portfolio are similar. Each Fund seeks to invest primarily in
common stocks of companies located in developed countries outside of the United
States. Both Funds intend to invest at least 65% of their total assets in
securities traded outside the United States.
13
<PAGE>
The Fund allocates its assets among geographic regions and individual
countries. While the Fund does not have any specific geographic limitations, it
has traditionally invested in the developed countries of Western Europe and
Asia. The International Portfolio invests in the developed countries that make
up the MSCI EAFE Index, plus Canada. The EAFE Index includes developed
countries in Europe, Asia and the 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.
In certain instances, the Fund and the International Portfolio have
different fundamental investment policies. See "Changes to the Fund's
Fundamental Investment Policies" below for a discussion of these differences.
Investment Strategies. The investment advisors to the Fund and the
International Portfolio have different approaches in selecting individual
securities for their respective investment portfolios. The Fund's advisor and
sub-advisor use a disciplined, value-based approach, that is, they seek stocks
that are undervalued in the marketplace. Using this approach, they compare
foreign securities markets and individual securities within each market on the
basis of value, quality and prospective earnings potential. In selecting
investments for the Fund, they allocate the Fund's assets among geographic
regions and countries.
The International Portfolio's investment advisor employs a strategy of
growth at a reasonable price in managing the International Portfolio. Using
this approach it seeks to identify companies outside of the United States that
combine 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.
Risks. The following discussion highlights the principal risks associated
with an investment in the Fund and the International Portfolio. Because of the
similarities in the investment objectives and policies of the Fund and the
Portfolio, ICC believes that an investment in the International Portfolio
involves similar risks to an investment in the Fund. These investment risks
involve those typically associated with investing in a portfolio of common
stocks of foreign issuers. However, due to the differences in the investment
policies of the Fund and the International Portfolio, there may be different
risks in investing in the International Portfolio. To the extent that the
International Portfolio invests in emerging markets, it may face additional
risks. Emerging markets countries may be more likely to experience political
turmoil or rapid changes in economic conditions than more developed countries
and the financial conditions of issuers in emerging markets countries may be
more precarious than in other countries. These characteristics may result in
greater risk of price volatility in emerging markets countries. In addition,
the Fund and the International Portfolio may have different
14
<PAGE>
risks because they are managed using different investment strategies. Because
the International Portfolio is managed using a "growth" style, it may
underperform when another investment style (e.g., a value style) is in favor in
markets around the world.
Consequences of Approving the Proposal. 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 capital 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 investment
policies and strategies 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. 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 investment policies 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.
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.
15
<PAGE>
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 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. The
International Portfolio has no present intention to borrow more than 10% of its
assets for temporary or emergency purposes and cannot currently borrow for
investment purposes. The Directors are asking shareholders to approve this
modification at this time in order to permit the Reorganization.
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.
16
<PAGE>
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 fundamental
investment 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. The
International Portfolio has no present intention to invest more than 10% of its
net assets in illiquid securities. The Directors are asking shareholders to
approve this modification at this time in order to permit the Reorganization.
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)
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 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. The International Portfolio may, from time to time,
17
<PAGE>
purchase securities of companies that invest in real estate in accordance with
its investment objective and policies. The Directors are asking shareholders to
approve this modification at this time primarily to permit the Reorganization.
Recommendation of the Board of Directors
The Board of Directors has carefully considered Proposal 2, which will
authorize the Reorganization of the Fund, 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 in 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 an
anticipated contractual fee waiver between the Fund and ICC.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF 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.
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, it is anticipated
that ICC would continue providing certain administration, recordkeeping and
transfer agency service pursuant to an administration services agreement.
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
18
<PAGE>
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, the deletion of provisions relating to state
expense limits that have been pre-empted by federal law, and a proviso to the
effect that the obligation of ICC to make its respective personnel available to
serve as officers of the Fund is subject to applicable banking regulations.
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
19
<PAGE>
Agreement is not 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
July 31, 1999, the amount escrowed totaled $28,018.34.
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
deletion of provisions relating to state expense limits that have been
pre-empted by federal law, and a proviso to the effect that the obligation of
ICC to make its respective personnel available to serve as officers of the Fund
is subject to applicable banking regulations, 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,
20
<PAGE>
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 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. These
expenses include, but are not limited to, 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; and
broker's commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party. Additional information
regarding other Fund expenses is included in the New Advisory Agreement
attached as Exhibit A.
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.
21
<PAGE>
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:
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
22
<PAGE>
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.
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.
23
<PAGE>
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 $63.5 million fine to federal authorities. On July
26, 1999, the federal criminal proceedings were concluded with Bankers Trust
Company's formal sentencing. 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 1940 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 1940 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 1940 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 Incorporated ("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.
Deutsche Asset Management Americas 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.
24
<PAGE>
Directors and Principal Executive Officer of ICC
<TABLE>
<CAPTION>
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 Americas
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 of the Fund, the following Directors 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, formerly
a Director of the Fund and President and a Director of ICC, beneficially owned
74,190 shares of Bankers Trust. Mr. Semans, Chairman and a Director of the Fund
and a Director of ICC, beneficially owned 329 shares of Bankers Trust.
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.
<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) 0.79%(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) 0.75%(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.
25
<PAGE>
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 (as defined in the
1940 Act). 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 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 18.
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,
the deletion of provisions relating to state expense
26
<PAGE>
limits that have been pre-empted by federal law, and a proviso to the effect
that the obligation of Glenmede Trust to make its respective personnel
available to serve as officers of the Fund is subject to applicable banking
regulations.
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 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
deletion of provisions relating to state expense limits that have been
pre-empted by federal law, and a proviso to the effect that the obligation of
Glenmede Trust to make its respective personnel available to serve as officers
of the Fund is subject to applicable banking regulations, 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.
27
<PAGE>
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 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. 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 all
other expenses of the Fund. These expenses include, but are not limited to,
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, dividend or accounting agent or agents appointed by the Fund; and
broker's commissions chargeable to the Fund in connection with portfolio
securities transaction to which the Fund is a party. Additional information
regarding other Fund expenses is included in the New Sub-Advisory Agreement
attached as Exhibit B.
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
28
<PAGE>
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 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
$15.48 billion 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.
29
<PAGE>
<TABLE>
<CAPTION>
Name and Position
with Glenmede Address Principal Occupation
- --------------------------------- ------------------------ -------------------------------------------
<S> <C> <C>
Susan W. Catherwood One Liberty Place Director, The Glenmede Corporation;
Director 1650 Market Street Board Member, Philadelphia Electric
Philadelphia, PA 19103 Company
James L. Kermes One Liberty Place President and Chief Executive Officer, The
Director, President and Chief 1650 Market Street Glenmede Corporation
Executive Officer Philadelphia, PA 19103
Thomas W. Langfitt, M.D. One Liberty Place Chairman and Chief Executive Officer, The
Director Chairman, Chief 1650 Market Street Glenmede Corporation; Board Member,
Executive Officer Philadelphia, PA 19103 New York Life Insurance Company,
SmithKline Beechman Corporation and Sun
Company, Inc.
Arthur E. Pew, III One Liberty Place Director, The Glenmede Corporation
Director 1650 Market Street
Philadelphia, PA 19103
G. Thompson Pew, Jr., One Liberty Place Principal, Philadelphia Investment Banking
Director 1650 Market Street Company
Philadelphia, PA 19103
J. Howard Pew II One Liberty Place Director, The Glenmede Corporation
Director 1650 Market Street
Philadelphia, PA 19103
J.N. Pew 3rd One Liberty Place Director, The Glenmede Corporation
Director 1650 Market Street
Philadelphia, PA 19103
J.N. Pew IV, M.D. One Liberty Place Internal Medicine, Private Practice;
Director 1650 Market Street Director The Glenmede Corporation
Philadelphia, PA 19103
R. Anderson Pew One Liberty Place Chief Executive Officer, Radnor
Director 1650 Market Street Corporation; Director, The Glenmede
Philadelphia, PA 19103 Corporation
Richard F. Pew One Liberty Place Businessman/Rancher; Director, The
Director 1650 Market Street Glenmede Corporation
Philadelphia, PA 19103
</TABLE>
For the fiscal year ended October 31, 1998, ICC paid Glenmede Trust an
aggregate fee of $73,399 for sub-advisory services.
30
<PAGE>
Other Funds with Similar Investment Objectives Advised by Glenmede Trust
Glenmede Trust acts as advisor to seven 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. In
addition, fees paid to Glenmede Trust by these funds are not fully comparable
to the fees paid by the Fund because Glenmede Trust acts as investment advisor
to these funds. The following table provides comparative information on fees
paid to Glenmede Trust pursuant to advisory agreements in effect for such
funds.
<TABLE>
<CAPTION>
Advisory Fee
Size of Fund (as a percentage of Fund
Fund (000s) average daily net assets)
- ----------------------------------------------- ------------------- --------------------------
<S> <C> <C>
International Portfolio ....................... $ 1,135,192(1) 0.00%(1)
Large Cap Value Portfolio ..................... $ 66,620(1) 0.00%(1)
Small Capitalization Equity Portfolio ......... $ 307,596(1) 0.55%(1)
Tax Managed Equity Portfolio .................. $ 152,601(1) 0.00%(1)
Institutional International Portfolio ......... $ 98,727(1) 0.75%(1)
Global Equity Portfolio ....................... $ 25,311(1) 0.70%(1)
Emerging Markets Portfolio .................... $ 55,789(1) 1.25%(1)
</TABLE>
- ----------------
(1)Information given for the fiscal year ended October 31, 1998.
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 (as defined in
the 1940 Act). 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.
31
<PAGE>
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, the Directors are
requesting approval of the Proposal in order to eliminate an unnecessary policy
and are doing so 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, 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.
32
<PAGE>
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.
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 direct 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 eliminate 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.
Cur rently, the Fund has a fundamental investment policy stating that:
33
<PAGE>
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 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:
34
<PAGE>
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 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, the 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.
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:
35
<PAGE>
The Fund will not borrow money, except as a temporary measure to
facilitate settlements and for extraordinary or emergency purposes and
then only from banks and in an amount not exceeding 10% of the value of
the total assets of the Fund at the time of such borrowing, provided that,
while borrowings by the Fund equaling 5% or more of the Fund's total
assets are outstanding, the Fund will not purchase securities.
If shareholders approve, the Fund's fundamental policy would state that:
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 POLICY
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:
36
<PAGE>
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 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:
37
<PAGE>
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, including time deposits of over seven days' duration.
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).
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 POLICY
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.
38
<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 Nominees" 6,075.50 **
Chairman and Director
since 1993
James J. Cunnane 61 Managing Director, CBC Capital (merchant 10,006.00 **
Director since 1994 banking); and Director, Net.World (telecommu-
nications). Director of each fund in the Fund
Complex.
Joseph R. Hardiman 62 See "Information Regarding Nominees" 3,323.93 **
Director since 1999
Louis E. Levy 66 See "Information Regarding Nominees" 2,465.00 **
Director since 1994 2,073.00+
Eugene J. McDonald 67 See "Information Regarding Nominees" None **
Director since 1993
Carl W. Vogt, Esq. 63 Senior Partner, Fulbright & Jaworski L.L.P. None **
Director since 1996 (law); and Director, Yellow Corporation (truck-
ing) and American Science & Engineering
(x-ray detection equipment). Formerly, Chair-
man and Member, National Transportation
Safety Board; Director, National Railroad Pas-
senger 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 for None **
President since 1998 Advanced Study; and Director, Family Health
International (non-profit research and education)
and Research America (non-profit medical
research). Formerly, Director ATL and
Spacelabs Medical Corp. (medicial equipment);
Trustee, Reed College (education) and Rock-
efeller Foundation; and Director, Merrill Lynch
Cluster C Funds and Flag Investors/ISI and
Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc. Fund Complex (registered invest-
ment companies).
Amy M. Olmert 36 Vice President, Deutsche Asset Management None **
Secretary since 1997 Americas since 1999; and Vice President, BT
Alex. Brown Incorporated, 1997-1999. For-
merly, Senior Manager, Coopers & Lybrand
L.L.P. (now PricewaterhouseCoopers LLP),
1988-1997.
</TABLE>
39
<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>
Charles A. Rizzo 42 Vice President and Department Head, Deutsche None **
Treasurer since 1999 Asset Management Americas since 1999; and
Vice President and Department Head, BT Alex.
Brown Incorporated, 1998-1999. Formerly,
Senior Manager, PricewaterhouseCoopers LLP,
1993-1998.
Tracie E. Richter 31 Vice President, Deutsche Asset Management None **
Assistant Secretary Americas since 1999; and Treasurer and Chief
since 1999 Financial Officer, Morgan Grenfell Investment
Trust, 1998-Present; and Vice President, Mor-
gan Grenfell, Inc., 1998-1999. Formerly, Vice
President, Bankers Trust Company, 1996-1998
and Tax Associate, Goldman Sachs Asset Man-
agement, 1993-1996.
Daniel O. Hirsch 45 Principal, Deutsche Asset Management Ameri- None **
Assistant Secretary cas since 1999; and Principal, BT Alex. Brown
since 1999 Incorporated, 1998-1999. Formerly, Assistant
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 18,870.43 shares representing
3.01% of the total outstanding shares of the Fund.
+ Mr. Levy disclaims beneficial ownership of these shares, as they are held by
his wife in trust for his children.
Investment Advisor and Sub-Advisor
See "Investment Company Capital Corp." on page 24 and "Glenmede Trust
Company" on page 29 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.
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
40
<PAGE>
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>
BT Alex. Brown, Inc. 41,148.853 6.57%
FBO 250-10788-19 shares
P.O. Box 1346
Baltimore, MD 21203
BT Alex. Brown, Inc. 32,413.906 5.17%
FBO 250-10788-18 shares
P.O. Box 1346
Baltimore, MD 21203
John J. Higgins Jr. 36,205.424 5.78%
U/A 06/24/96 shares
Fairfield Jesuit Community Corp.
c/o Fairfield University
St. Ignatius Hall
Fairfield, CT 06430
</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.
41
<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.
42
<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,
/s/ Amy M. Olmert
------------------
Amy M. Olmert
Secretary
Dated: August 25, 1999
43
<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");
A-1
<PAGE>
(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
(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;
A-2
<PAGE>
(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.
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
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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) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund under the
1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
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<PAGE>
(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
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<PAGE>
Act) of the Fund, and of the shareholders of the Fund, the Advisor may
delegate to a sub-advisor its duties enumerated in Section 3 hereof. The
Advisor shall continue to supervise the performance of any such
sub-advisor and shall report regularly thereon to the Fund's Board of
Directors, but shall not be responsible for the sub-advisor's performance
under the sub-advisory agreement.
(b) The Advisor may, but shall not be under any duty to, perform
services on behalf of the Fund which are not required by this Agreement
upon the request of the Fund's Board of Directors. Such services will be
performed on behalf of the Fund, and the Advisor's charge in rendering
such services may be billed monthly to the Fund, subject to examination by
the Fund's independent accountants. Payment or assumption by the Advisor
of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its
obligations to the Fund nor obligate the Advisor to pay or assume any
similar Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the expenses to be
assumed by the Advisor, the Fund shall pay to the Advisor monthly compensation
at an annual rate of 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:
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<PAGE>
(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 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.
A-7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective offices as of the day and year first
above written.
<TABLE>
<S> <C>
[SEAL] FLAG INVESTORS INTERNATIONAL
FUND, INC.
Attest:------------------------- By:----------------------------------------
Name:
Title:
[SEAL] INVESTMENT COMPANY
CAPITAL CORP.
Attest:------------------------- By:----------------------------------------
Name:
Title:
</TABLE>
A-8
<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;
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<PAGE>
(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").
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
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<PAGE>
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.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Sub-Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct 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.
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<PAGE>
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;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the Bylaws; and
(e) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund, the Sub-Advisor and the Advisor as follows:
(a) The Sub-Advisor shall, 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.
(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'
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<PAGE>
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
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<PAGE>
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:
(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.
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<PAGE>
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-7
<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.
<TABLE>
<S> <C>
[SEAL] FLAG INVESTORS
INTERNATIONAL FUND, INC.
Attest:----------------------------- By: -----------------------------------
Name:
Title:
[SEAL] INVESTMENT COMPANY
CAPITAL CORP.
Attest:----------------------------- By: -----------------------------------
Name:
Title:
[SEAL] THE GLENMEDE TRUST COMPANY
Attest:----------------------------- By: -----------------------------------
Name:
Title:
</TABLE>
B-8
<PAGE>
338329105
<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, the World
Wide Web or mail. Voting by telephone or Web may be quicker and more cost
effective than the traditional method of mailing back your proxy card; however,
that option is still available to you.
Your proxy vote is important! Please vote today.
How to Vote:
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 the Web*
Visit 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 Web 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.
[ ] For [ ] Against [ ] Abstain
3. To approve a new Investment Advisory Agreement between the Fund and
Investment Company Capital Corp.
[ ] For [ ] Against [ ] Abstain
4. To approve a new Sub-Advisory Agreement among the Fund, Investment
Company Capital Corp. and The Glenmede Trust Company.
[ ] For [ ] Against [ ] Abstain
5. To eliminate the Fund's fundamental investment policy concerning short
sales.
[ ] For [ ] Against [ ] Abstain
6. To eliminate the Fund's fundamental investment policy concerning the
purchase of securities on margin.
[ ] For [ ] Against [ ] Abstain
7. To eliminate the Fund's fundamental investment policy concerning
purchases of oil, gas or mineral interests.
[ ] For [ ] Against [ ] Abstain
8. To eliminate the Fund's fundamental investment policy concerning
restricted securities.
[ ] For [ ] Against [ ] Abstain
9. To modify the Fund's fundamental investment policy concerning the
purchase or sale of commodities or commodity contracts.
[ ] For [ ] Against [ ] Abstain
10. To modify the Fund's fundamental investment policy concerning
borrowing.
[ ] For [ ] Against [ ] Abstain
11. To modify the Fund's fundamental investment policy concerning loans.
[ ] For [ ] Against [ ] Abstain
<PAGE>
12. To reclassify the Fund's fundamental investment policy concerning
illiquid securities from fundamental to non-fundamental.
[ ] For [ ] Against [ ] Abstain
<TABLE>
<CAPTION>
<S> <C> <C>
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, Signature [PLEASE SIGN WITHIN BOX] Date
partnership, estate, trustor in any other representative
capacity please sign your name and title. For joint accounts, --------------------------------------- --------------
each joint owner must sign. Signature (Joint Owners) Date
</TABLE>
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
