FLAG INVESTORS INTERNATIONAL FUND INC, DEFS14A, 2000-01-31

FLAG INVESTORS INTERNATIONAL FUND INC
DEFS14A, 2000-01-31

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

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

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

Check the appropriate box:

/ / 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 240.14a-11(c) or 240.14a-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):

/ / 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
---------------------------
February 1, 2000
Dear Shareholder:

On January 17, 2000, the Board of Directors of Flag Investors
International Fund, Inc. (the "Fund") voted to postpone the scheduled
reorganization (the "Reorganization") of the Fund into a master-feeder
structure so that shareholders could reconsider the Reorganization. Although
shareholders previously approved the Reorganization at a Special Meeting held
on October 7, 1999, the Board of Directors decided that the Reorganization
warranted additional shareholder consideration because of a change in the
expected tax consequences associated with it. Other than the changed tax
consequences, the structure of the Reorganization remains unchanged from the
Fund reorganization that voting shareholders overwhelmingly approved last
October.

Enclosed is further information relating to the Reorganization, including
a Questions and Answers section, proxy statement and proxy card.

The proxy statement discusses the change in the expected tax consequences
associated with the Reorganization in detail. In short, the Reorganization
originally was not expected to have tax consequences for the Fund's
shareholders. This expectation was not met, and now the Reorganization is
expected to result in a taxable capital gains distribution for shareholders.
Although the tax consequences of the Reorganization have changed, the primary
motivation for the Reorganization remains unaffected. The Board of Directors
continues to believe that the Reorganization is in the best interests of the
Fund and its shareholders, and recommends that shareholders once again vote to
approve the Reorganization.

In addition to the Reorganization, shareholders are also being asked to
consider a proposal to elect a Board of Directors of the Fund. The Board of
Directors of the Fund believes that each proposal is important and recommends
that you read the enclosed materials carefully and then vote for both
proposals.

What you should do:

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

o Choose one of the following options to vote:

1. By Mail: Complete the enclosed proxy card and return it in the
postage-paid envelope provided.
2. By Telephone: Call the Toll-Free # on your proxy card.
3. By Internet: Logon to www.proxyvote.com.
4. Attend the Shareholder Meeting (details enclosed).

Sincerely,

[GRAPHIC OMITTED]

Truman T. Semans
Chairman
Flag Investors International Fund, Inc.
<PAGE>

February 1, 2000

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 the primary matter affecting the Fund
that requires a shareholder vote.

Q & A: QUESTIONS AND ANSWERS

Q. What are shareholders being asked to vote on?

A. At the Special Meeting, shareholders are voting on the following:

o The reorganization of the Fund into a master-feeder structure (the
"Reorganization") under which the Fund would invest all of its assets in
the International Equity Portfolio. As a result, the Fund's investments
would be managed by Michael Levy, a portfolio manager with Bankers Trust
Company.

o The election of Directors for the Fund's Board, including the election of
two new Directors contingent upon shareholder approval of the
Reorganization.

Q. Fund shareholders approved the Reorganization of the Fund in October 1999.
Why are Fund shareholders being asked to approve the Reorganization again?

A. Shareholders are being asked to approve the Reorganization again because the
expected tax effects of the Reorganization have changed.

Q. What are the expected tax effects of the reorganization as of now?

A. During calendar year 1999 the Fund's net asset value increased 21.73
percent. If the Reorganization is approved, the Fund expects to
immediately recognize most of its unrealized gains and pay a capital gains
distribution to shareholders. If this Reorganization distribution were
determined as of January 27, 2000, the distribution would be approximately
15.2 percent of the current net asset value. This is equivalent to $3.08
per share, all of which would be long term capital gains. The amount of
the actual distribution per share may vary significantly from this
estimate depending primarily upon the extent of gains actually realized
when Fund portfolio securities are sold, the extent of losses or credits
that offset those gains, and the number of Fund shares outstanding.
International markets can be volatile, and the amount of the actual
distribution per share is likely to fluctuate from the estimated amount as
the value of the Fund's holdings change.

Q. How will the Reorganization distribution affect me? Should I sell my Fund
shares?
<PAGE>

A. If you hold your shares in an IRA or other tax deferred account, the
distribution will not affect your tax liabilities. Otherwise, taxes owed
on the distribution are not payable until such time as you ordinarily pay
your 2000 taxes. You should consult with your tax advisor concerning your
individual situation. Selling your shares will also have tax consequences.
Particularly if you have owned your shares for more than one year, any
capital gains generated when you sell your shares may exceed the
Reorganization distribution. You could end up owing more in taxes by
selling now than by remaining a shareholder.

Q. In light of the expected capital gains distribution, is the Reorganization
still a good idea?

A. Yes. Although the tax impact of the Reorganization has changed, the primary
motivation for the Reorganization remains unchanged - the ability for the
Fund to invest in a larger fund with an excellent performance record, and
for the Fund's shareholders to receive added diversification and, in the
long run, the potential for reduced overall expenses.

Q. What will happen if shareholders do not approve the Reorganization?

A. The Fund is relatively small in size. The Fund's advisor has informed the
Board of Directors that if the Reorganization is not approved, the advisor
will likely recommend liquidating the Fund. A complete liquidation of the
Fund will have tax consequences similar to those expected if the
Reorganization is approved.

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 both proposals on the enclosed proxy card.

Q. Where can I get more information?

A. If you need more information, please call 1-800-553-8080.

Q. How can I vote my shares?

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

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

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

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

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

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

A. No, the Fund's advisor will bear these costs.

Please vote on both issues on each proxy card that you receive. Thank you for
mailing your proxy card promptly.
<PAGE>

FLAG INVESTORS INTERNATIONAL FUND, INC.

One South Street
Baltimore, Maryland 21202

---------------------------
Notice of Special Meeting of Shareholders
February 16, 2000

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 Wednesday, February 16, 2000, 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.

Only shareholders of the Fund at the close of business on January 24, 2000
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.

[GRAPHIC OMITTED]

Amy M. Olmert
Secretary

Dated: February 1, 2000
<PAGE>

FLAG INVESTORS INTERNATIONAL FUND, INC.

One South Street
Baltimore, Maryland 21202

---------------------------
PROXY STATEMENT
---------------------------

SPECIAL MEETING OF SHAREHOLDERS TO BE HELD

February 1, 2000

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 Wednesday, February 16, 2000, 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 February 1, 2000.

Summary

At the Special Meeting, shareholders will be asked to vote on two
proposals:

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.

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 Wednesday, February 16, 2000. 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 January 24, 2000, has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of, and to

1
<PAGE>

vote at, the Special Meeting and at any adjournment thereof. On that date, the
Fund had 661,436.155 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 Investment Company
Capital Corp. ("ICC"), the Fund's advisor. The solicitation of Proxies will be
largely by mail, but may include telephonic, telegraphic, Internet or oral
communication by employees and officers of ICC.

Upon request, the Fund will furnish to shareholders, without charge, a
copy of the Annual Report for its fiscal year ended October 31, 1999. The
Annual Report of the Fund may be obtained by written request to the Fund, One
South Street, Baltimore, Maryland 21202, or by calling (800) 553-8080.

The Fund is registered as an open-end, diversified management investment
company under the Investment Company Act of 1940, as amended ("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 eight 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, Richard T. Hale, Joseph R. Hardiman, Louis E.
Levy, Eugene J. McDonald, Rebecca W. Rimel, Truman T. Semans and Robert H.
Wadsworth (each, a "Nominee" and collectively, the "Nominees"). Two Nominees,
Ms. Rimel and Mr. Hale, are not currently members of the Board of Directors.
Messrs. Richard R. Burt, Joseph R. Hardiman, Louis E. Levy, Eugene J. McDonald,
Truman T. Semans and Robert H. Wadsworth were last elected by a vote of
shareholders on October 7, 1999. 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 June 4, 1999, the date of the merger between Bankers
Trust Corporation and a U.S. subsidiary of Deutsche Bank AG. For this reason,
the election of Ms. Rimel and Mr. Hale is contingent upon shareholder approval
of Proposal 2.

At a meeting held on January 17, 2000, the nominating committee of the
Board of Directors, a committee comprised of independent directors, recommended
to the full Board the nomination of all current Directors, and the nomination
of Ms. Rimel and Mr. Hale, contingent upon shareholder approval of Proposal 2.
The Board of Directors approved all Nominees, subject to the conditions
specified. If all conditions are met, the Nominees will serve as directors of
the Fund.

2
<PAGE>

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 or her resignation or retirement or until his or her
successor is elected and qualified.

Information Regarding Nominees

The following information is provided for each Nominee. As of December 31,
1999, the Nominees as a group and the Directors and officers of the Fund as a
group beneficially owned an aggregate of 9,623 shares, representing 1.49% of
the total outstanding shares of the Fund.

<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
Name and Position during the Past Five Years Owned as of
with the Fund Age (including all directorships) December 31, 1999** Percentage
- ------------------------- ----- ------------------------------------- --------------------- -----------
<S> <C> <C> <C> <C>
Truman T. Semans* 73 Vice Chairman, Brown Investment 6,147 shares 0.95%
Chairman and Director Advisory & Trust Company
since 1993 (formerly, Alex. Brown Capital
Advisory & Trust Company);
Director, Investment Company
Capital Corp. (registered investment
advisor); and Director and President
of Virginia Hot Springs Inc.
(property management). Formerly,
Managing Director, BT Alex.
Brown Incorporated (now DB Alex.
Brown LLC); Vice Chairman, Alex.
Brown & Sons Incorporated (now
DB Alex. Brown LLC); and
Director, ISI Family of Funds
(registered investment companies).
Director of each fund in the Fund
Complex.****
</TABLE>

3
<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) December 31, 1999** Percentage
- ----------------------- ----- ------------------------------------- --------------------- -----------
<S> <C> <C> <C> <C>
Richard R. Burt 52 Chairman, IEP Advisors, Inc.; None ***
Director since 1999 Chairman of the Board, Weirton
Steel Corporation; Member of the
Board, Archer Daniels Midland
Company (agribusiness operations),
Hollinger International Inc.
(publishing), Homestake Mining
Company (mining and exploration),
HCL Technologies (information
technology) and Anchor Gaming
(gaming software and equipment);
Director, Mitchell Hutchins family
of funds and Flag Investors Funds,
Inc. (formerly, Deutsche Funds,
Inc.); Trustee, Flag Investors
Portfolios Trust (formerly, Deutsche
Portfolios) (registered investment
companies); and Member, Textron
Corporation International Advisory
Council; Formerly, Partner,
McKinsey & Company (consulting),
1991-1994; and Formerly, U.S.
Chief Negotiator in Strategic Arms
Reduction Talks (START) with
former Soviet Union and U.S.
Ambassador to the Federal Republic
of Germany, 1985-1991. Director of
each fund in the Fund Complex.

Richard T. Hale* 54 Managing Director, Deutsche Asset None ***
Nominee Management; Managing Director,
Director from DB Alex. Brown LLC (formerly BT
1989-1999 Alex. Brown Incorporated); Director
and President, Investment Company
Capital Corp. (registered investment
advisor). Chartered Financial
Analyst. Formerly, Director, ISI
Family of Funds (registered
investment companies). Director of
7 funds in the Fund Complex.
</TABLE>

4
<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) December 31, 1999** Percentage
- ----------------------- ----- ------------------------------------- --------------------- -----------
<S> <C> <C> <C> <C>
Joseph R. Hardiman 62 Private Equity Investor and Capital 3,476 shares 0.54%
Director since 1999 Markets Consultant; and Director,
Wit Capital Group (registered
broker dealer), The Nevis Fund and
ISI Family of Funds (registered
investment companies). Formerly,
Director, Circon Corp. (medical
instruments), November 1998 -
January, 1999; President and Chief
Executive Officer, The National
Association of Securities Dealers,
Inc. and The NASDAQ Stock
Market, Inc., 1987-1997; Chief
Operating Officer of Alex. Brown &
Sons Incorporated (now DB Alex.
Brown LLC) 1985-1987; and
General Partner, Alex. Brown &
Sons (now DB Alex. Brown LLC),
1976-1985. Director of each fund in
the Fund Complex.

Louis E. Levy 67 Director, Kimberly-Clark None ***
Director since 1994 Corporation (personal consumer
products); Household International
(finance and banking) and ISI
Family of Funds (registered
investment companies). Formerly,
Chairman 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 None ***
Director since 1993 Company (investments); Executive
Vice President, Duke University
(education, research and health
care); Executive Vice Chairman and
Director, Central Carolina Bank &
Trust (banking); and Director,
Victory Funds (registered
investment companies). Formerly,
Director, AMBAC Treasurers Trust
(registered investment company);
DP Mann Holdings (insurance) and
ISI Family of Funds (registered
investment companies). Director of
each fund in the Fund Complex.
</TABLE>

5
<PAGE>

Robert H. Wadsworth 60 President, Investment Company None ***
Director since 1999 Administration, LLC, and President,
Director, First Fund Distributors,
Inc. (registered broker dealer);
Director, The Germany Fund, Inc.,
The New Germany Fund, Inc., The
Central European Equity Fund, Inc.,
and Flag Investors Funds, Inc.
(formerly, Deutsche Funds, Inc.);
Trustee, Flag Investors Portfolios
Trust (formerly, Deutsche
Portfolios); and Vice President,
Professionally Managed Portfolios
and Advisors Series Trust
(registered investment companies).
Formerly, Director, Guiness Flight
Investment Funds, Inc. (registered
broker dealer), and President, The
Wadsworth Group (registered
investment advisor). Director of
each fund 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 December 31, 1999, the Nominees as a group beneficially owned an
aggregate of 9,623 shares representing 1.49% of the total outstanding
shares of the Fund.

**** The "Fund Complex" consists of 8 registered investment companies which hold
themselves out to investors as related companies for purposes of investment
and investor services for which ICC provides investment advisory services.

6
<PAGE>

On June 4, 1999, Bankers Trust became an indirect, wholly owned subsidiary
of Deutsche Bank AG. On that date, to the Fund management's knowledge as
provided by the Directors of the Fund, the following Nominees/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.

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 or her attendance at Board and committee meetings) from the
Fund and all of the funds in the Fund Complex for which he or she 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, 1999, Independent Directors' fees (including fees paid to the
Fund's President) attributable to the assets of the Fund totaled $1,603.
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 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 or her annual compensation pursuant to a Deferred
Compensation Plan. Messrs. Burt, Levy, McDonald and Wadsworth have each
executed a Deferred Compensation Agreement and may defer a portion of their
compensation from the Fund and the Fund Complex. Currently, the deferring
Directors may select from various funds in the Fund Complex and BT
International Equity Fund in which all or part of their deferral account shall
be deemed to be invested. 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, 1999 is set forth in
the compensation table below. The aggregate compensation payable to such
Directors during the fiscal year ended October 31, 1999 by the Fund Complex is
also set forth in the compensation table below.

7
<PAGE>

COMPENSATION TABLE

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Pension or From the Fund and Fund
the Fund for the Retirement Benefits Complex payable to Directors
Fiscal Year Ended Accrued as Part of for the Fiscal Year Ended
Name of Person, Position October 31, 1999 Fund Expenses October 31, 1999(9)
- -------------------------- ------------------- --------------------- --------------------------------------
<S> <C> <C> <C>
Truman T. Semans(1) $ 0 $0 $0
Chairman
Richard R. Burt(2) $ 0 $0 $0
Director
James J. Cunnane(3) $ 49.90(4) (5) $39,000 for service on 12 Boards in
Director the Fund Complex
Joseph R. Hardiman(6)(8) $ 23.19(4) (5) $39,000 for service on 12 Boards in
Director the Fund Complex
Louis E. Levy $ 62.69(4) (5) $49,000 for service on 12 Boards in
Director the Fund Complex
Eugene J. McDonald $ 62.69(4) (5) $49,000 for service on 12 Boards in
Director the Fund Complex
Carl W. Vogt, Esq.(7) $ 50.43(4) (5) $39,000 for service on 12 Boards in
Director the Fund Complex
Robert H. Wadsworth(2) $ 0 $0 $0
Director
</TABLE>

- ----------------
(1) A director who is an "interested person" as defined in the Investment
Company Act.
(2) Elected to the Fund's Board, and each Board of the other funds in the Fund
Complex, effective October 7, 1999.
(3) Retired effective October 7, 1999.
(4) Of the amounts payable to Messrs. Cunnane, Hardiman, Levy, McDonald and
Vogt, nothing was deferred pursuant to the Fund's deferred compensation
plan in the year ended October 31, 1999.
(5) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund for
the year ended October 31, 1999 was approximately $559.
(6) Elected to the Fund's Board on January 22, 1999.
(7) Retired as Fund Director effective October 7, 1999. He is currently
President of the Fund.
(8) Prior to his election as Director to all Funds in the Fund Complex, Mr.
Hardiman received proportionately higher compensation from each Fund for
which he served.
(9) Prior to September 1999, the Fund Complex included four funds in the ISI
Family of Funds.

The Fund Complex has adopted a retirement plan for Directors who are not
employees of the Fund, the Fund's investment advisor or their respective
affiliates (the "Directors Retirement Plan"), and a retirement plan for a
former Director serving as the Fund's President (collectively, the "Retirement
Plans"). After completion of six years of service, each participant in the
Retirement Plans will be entitled to receive an annual retirement benefit equal
to a percentage of the fees earned in his or her last year of service. Upon
retirement, each participant will receive annually 10% of such fee for each
year that he or she served after completion of the first five years, up to a
maximum annual benefit of 50% of the fee earned in his or her last year of
service. The fee will be paid quarterly, for life, by each fund for which he or
she serves. The Retirement Plans are unfunded and unvested. The Fund currently
has two participants in the Directors Retirement Plan, a Director who retired
effective December 31, 1994, and another Director, who retired effective
December 31, 1996. These participants qualified for the Retirement Plan by
serving thirteen years and fourteen years, respectively, as Directors in the
Fund Complex and 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. Mr. McDonald has qualified for, but has not received benefits under,
the Directors Retirement Plan.

8
<PAGE>

Set forth in the table below are the estimated annual benefits payable to
a participant in the Retirement Plans upon retirement assuming various years of
service and payment of a percentage of the fee earned by such participant in
his or her last year of service. The approximate credited years of service,
shown in parentheses, for each Participant at December 31, 1999, are as
follows: Messrs. Hardiman (1), Levy (5), McDonald (7) and Vogt (4).

Estimated Annual Benefits Payable by Fund Complex Upon Retirement

Chairmen of Audit and
Years of Service 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 and two special meetings of the Board of Directors
held during the fiscal year ended October 31, 1999. All Directors attended at
least 75% of the meetings held during their respective terms.

The Board of Directors has an Audit and Compliance Committee. The Audit
and Compliance Committee makes recommendations to the full Board of Directors
with respect to the engagement of independent accountants. The Committee
reviews, with the independent accountants, the results of the audit engagement
and matters having a material effect on the Fund's financial operations. The
members of the Audit and Compliance Committee during the fiscal year ended
October 31, 1999, were Messrs. Levy (Chairman), Cunnane, Hardiman, McDonald,
Burt, Wadsworth and Vogt, each of whom is not an "interested person" within the
meaning of the 1940 Act. Messrs. Burt and Wadsworth became members of the Audit
and Compliance Committee upon their election to the Board on October 7, 1999.
If elected, Ms. Rimel will become a member of the Audit and Compliance
Committee. The Audit and Compliance Committee met four times during the fiscal
year ended October 31, 1999. All incumbent members attended at least 75% 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, 1999, were, Messrs. McDonald
(Chairman), Cunnane,

9
<PAGE>

Hardiman, Levy, Burt, Wadsworth and Vogt, each of whom is not an "interested
person" within the meaning of the 1940 Act. Messrs. Burt and Wadsworth became
members of the Nominating Committee upon their election to the Board on October
7, 1999. If elected, Ms. Rimel will become a member of the Nominating
Committee. The Nominating Committee met once during the fiscal year ended
October 31, 1999 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, 1999, were Messrs. Cunnane (Chairman),
Hardiman, Levy, McDonald, Burt, Wadsworth and Vogt, each of whom is not an
"interested person" within the meaning of the 1940 Act. Mr. Hardiman became
Chairman of the Compensation Committee upon Mr. Cunnane's retirement. Messrs.
Burt and Wadsworth became members of the Compensation Committee upon their
election to the Board on October 7, 1999. If elected, Ms. Rimel will become a
member of the Compensation Committee. The Compensation Committee did not meet
during the fiscal year ended October 31, 1999.

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, 1999 were, Messrs.
McDonald (Chairman), Cunnane, Hardiman, Levy, Burt, Wadsworth and Vogt. Messrs.
Burt and Wadsworth became members of the Executive Committee upon their
election to the Board on October 7, 1999. If elected, Ms. Rimel will become a
member of the Executive Committee. The Executive Committee met four times
during the fiscal year ended October 31, 1999. 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.

10
<PAGE>

Board Approval of the Election of Directors

At a meeting of the Board of Directors held on January 17, 2000, the Board
of Directors recommended that shareholders vote FOR each of the Nominees for
Director named herein. In recommending that shareholders elect the Nominees as
Directors of the Fund, the Board of Directors considered the Nominees'
experience and qualifications.

Shareholder Approval of the Election of Directors

The Election of the Directors requires the affirmative vote of a plurality
of all votes cast at the Special Meeting, provided that a majority of the
shares entitled to vote are present in person or by Proxy at the Special
Meeting. If you give no voting instructions on your executed proxy, 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 "IEF
Portfolio"); (2) approve modifying the Fund's investment objective so that it
conforms with the investment objective of the IEF 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 IEF Portfolio.

The IEF Portfolio is an open-end management investment company organized
as a New York Business Trust. The IEF Portfolio is managed by Bankers Trust
Company ("Bankers Trust"), a corporate affiliate of the Fund's current advisor,
ICC. The IEF Portfolio has been established to serve as the investment
portfolio for various investment companies and common and co-mingled trust
funds. Other entities that invest in the IEF 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 IEF Portfolio are not
offered for sale directly to the public.

Prior Shareholder Approval of the Reorganization and Related Events

At a special meeting of shareholders held on October 7, 1999, shareholders
of the Fund voted to approve the Reorganization, which was scheduled to take
place on

11
<PAGE>

January 18, 2000. Almost 90% of the shares represented at that meeting voted to
approve that transaction. On January 17, 2000, however, the Board met and
decided that the Reorganization warranted additional shareholder consideration
because of a change in the expected tax consequences associated with it.
Accordingly, the Board authorized another special meeting, so that shareholders
could consider the revised expected tax consequences of the Reorganization and
vote again. Other than the change in the expected tax consequences, the
structure of the Reorganization remains unaltered from the transaction that
voting shareholders overwhelmingly approved last October.

The Expected Tax Consequences of the Reorganization

If the Reorganization is approved, the Fund will invest its assets in
shares of the IEF Portfolio. The Fund is expected to liquidate all of its
securities holdings, unless the IEF Portfolio also holds these same types of
securities. In this event, the Fund will retain its securities holdings in the
same proportion in which the IEF Portfolio holds them. After the restructuring
of the Fund's holdings, the Fund will exchange its cash and remaining portfolio
securities for shares in the IEF Portfolio. The Reorganization itself is not a
taxable event. The anticipated sale of Fund holdings, however, will cause the
Fund to recognize capital gains.

The Board of Directors authorized a capital gains distribution to Fund
shareholders of record as of a date on or about the fifth day after the
shareholder vote on the Reorganization (the "Reorganization Distribution"),
contingent upon shareholder approval. The Fund anticipates that the ex-dividend
date of the Reorganization Distribution will be on or about the next business
day following the record date. During calendar year 1999 the Fund's net asset
value increased 21.73 percent, and, in connection with the Reorganization, the
Fund expects to recognize most of its unrealized capital gains. If the Fund
determined the Reorganization Distribution as of January 27, 2000, the
distribution would be approximately 15.2 percent of the Fund's current net
asset value. This is equivalent to $3.08 per share, all of which would be long
term capital gains. The amount of the actual distribution per share may vary
significantly from this estimate depending primarily upon the extent of gains
actually realized when Fund portfolio securities are sold, the extent of losses
or credits that offset those gains, and the number of Fund shares outstanding.
International markets can be volatile, and the amount of the actual
distribution per share is likely to fluctuate from the above estimated amount
as the value of the Fund's holdings change.

If the Fund transfers securities to the IEF Portfolio as part of the
Reorganization, and these securities have unrealized capital gains associated
with them, shareholders may have future capital gains tax liability (1) if and
when the sale of these securities produces capital gains and (2) to the extent
that any such gains realized are not offset by future losses or credits.

12
<PAGE>

You should consult with your tax advisor if you have specific questions
about the federal, state, or local tax implications of the Reorganization.

Reorganizing the Fund into a Master-Feeder Structure

Shareholders of the Fund are being asked to authorize the liquidation of
up to all of the Fund's investable assets (securities and cash) and to exchange
the proceeds and remaining securities for a beneficial interest in the IEF
Portfolio. After the Reorganization, the only securities owned by the Fund will
be the interest in the IEF 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 IEF Portfolio. The Board has
appointed ICC to serve as the Fund's administrator upon completion of the
Reorganization.

Under this proposed structure, which is known as a master-feeder structure
(the Fund being the "feeder" and the IEF Portfolio being the "master"), the
Fund would pursue its investment objective through investment in the IEF
Portfolio rather than through direct investments in securities. The IEF
Portfolio, in turn, invests directly in securities. Shareholders will continue
to hold shares of the Fund and the Fund will hold interests in the IEF
Portfolio. The value of the shareholder's investment in the Fund will be the
same immediately after the Fund's investment in the IEF 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 IEF Portfolio. After
the Reorganization, advisory and custodial fees will be an obligation of the
IEF 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 contractual fee waivers and reimbursements by ICC in its
anticipated capacity as the Fund's administrator and Bankers Trust in its
capacity as advisor to the IEF Portfolio.

The Fund would be able to withdraw its investment in the IEF 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 October 31, 1999 and estimates assuming that the Fund had
invested all of its investable assets in the IEF Portfolio for the entire
fiscal year.

13
<PAGE>

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 .................................... 2.10% 1.65%
----- -----
Total Annual Fund Operating Expenses .............. 3.10% 2.90%
----- -----
(1.60)%* (1.40)%**
------- -------
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 28, 2001 and
may be extended.

** It is currently expected that ICC, in its anticipated capacity as the
Fund's administrator, and Bankers Trust, in its capacity as advisor to the
IEF Portfolio, will contractually agree to limit their fees and reimburse
expenses to the extent necessary 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 28, 2001 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 Company ("Glenmede") 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 IEF Portfolio does not engage an
investment sub-advisor. After the Reorganization, it is anticipated that ICC
and Bankers Trust will be paid administrative fees of 0.20% and 0.15%,
respectively 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 and Bankers Trust, in its capacity as advisor to the IEF
Portfolio, intends to continue the current contractual expense limitation of
1.50% until at least February 28, 2001.

14
<PAGE>

Risks of a Master-Feeder Structure

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

In the event the Fund is required to redeem its interests in the IEF
Portfolio for any reason (for instance, because its shareholders did not
approve changes in the Fund's investment objective or policies parallel to
changes approved for the IEF Portfolio by its Board of Trustees or by a
majority of its interest holders), 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 IEF Portfolio)
level. Accordingly, if shareholders approve the Proposal, the Fund will
terminate its investment advisory agreement with ICC and its sub-advisory
agreement with Glenmede. The IEF 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.

On March 11, 1999, 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. Bankers Trust pleaded guilty to misstating entries in the
bank's books and records and agreed to pay a $63.5 million fine to state and
federal authorities. On July 26, 1999, the federal criminal proceedings were
concluded with Bankers Trust's formal sentencing. The events leading up to the
guilty pleas did not arise out of the investment advisory or mutual fund
management activities of Bankers Trust or its affiliates.

As a result of the plea, absent an order from the SEC, Bankers Trust would
not be able to continue to provide investment advisory services to the Fund.
The SEC has granted a temporary order to permit Bankers Trust and its
affiliates to continue to provide investment advisory services to registered
investment companies. There is no assurance that the SEC will grant a permanent
order.

15
<PAGE>

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 IEF Portfolio. In addition, the Fund's investment
policies will be changed to one of investing in the IEF 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 IEF
Portfolio is presented below.

General. The current investment objective, policies and risks of the Fund
are, in many respects, similar to those of the IEF Portfolio. There are,
however, certain differences. In addition, the Fund and the IEF 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 IEF Portfolio.
This discussion is qualified by reference to the Prospectuses and Statements of
Additional Information of the Fund and the IEF Portfolio.

Investment Objectives. The investment objective of both the Fund and the
IEF Portfolio are similar. The investment objective of the Fund is long-term
growth of capital. The investment objective of the IEF Portfolio is long-term
capital appreciation.

Investment Policies. The investment policies of the Fund and the IEF
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. 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 IEF 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 IEF
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 IEF Portfolio does not invest more than 15% of its assets
in emerging markets. In certain instances, the Fund and the IEF 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 IEF
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.

16
<PAGE>

The IEF Portfolio's investment advisor employs a strategy of growth at a
reasonable price in managing the IEF 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
IEF 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 IEF Portfolio. Because of the
similarities in the investment objectives and policies of the Fund and the
Portfolio, ICC believes that an investment in the IEF 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 IEF Portfolio, there may be different risks in investing in
the IEF Portfolio. To the extent that the IEF 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 IEF Portfolio may
have different risks because they are managed using different investment
strategies. Because the IEF Portfolio is managed using a "growth" style, it may
under-perform 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 IEF Portfolio. As a result, shareholders would
have their investment managed according to the investment policies and
strategies of the IEF 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
IEF Portfolio. As a result, the Board of Directors approved modifying these
policies to permit the Fund to invest all of its assets in the IEF 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 IEF Portfolio. Amendments to fundamental investment policies
may

17
<PAGE>

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 (excluding securities of other
investment companies).

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 IEF 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 IEF Portfolio.

B. Borrowing

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

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

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

The Fund may 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

18
<PAGE>

by the IEF Portfolio's fundamental policy on borrowing. Under the Fund's
current policy, the Fund may borrow up to 10% of its assets as a temporary
measure for extraordinary or emergency purposes. The IEF 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 IEF 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 IEF Portfolio's borrowing policy be changed in
the future. The IEF 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. 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 IEF
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 IEF 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 IEF Portfolio's policy on real estate. The IEF Portfolio
may, from time to time, 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

19
<PAGE>

a meeting held on January 17, 2000, 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 IEF Portfolio. In approving
this Proposal, the Board considered the tax consequences of the Reorganization
for the Fund's shareholders. The Board also heard a report from ICC, the Fund's
advisor, noting that if the Reorganization is not approved, the advisor will
likely recommend liquidating the Fund, and that a complete liquidation of the
Fund will have tax consequences similar to those expected if the Reorganization
is approved. The Board also considered the experience and performance record of
Bankers Trust's international equity team. Moreover, the Board was 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 waivers by ICC and Bankers Trust.

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.

20
<PAGE>

ADDITIONAL INFORMATION

Directors and Executive Officers

Information about each of the Fund's current Directors and principal
executive officers is set forth below. 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 Deutsche Asset Management or its
affiliates.

Richard R. Burt 52 See "Information Regarding None **
Director since Nominees"
1999

Joseph R. Hardiman 62 See "Information Regarding 3,476 0.54%
Director since Nominees"
1999

Louis E. Levy 67 See "Information Regarding None **
Director since Nominees"
1994

Eugene J. McDonald 67 See "Information Regarding None **
Director since Nominees"
1993

Robert H. Wadsworth 60 See "Information Regarding None **
Director since Nominees"
1999

Carl W. Vogt 63 Senior Partner, Fulbright & None **
President since Jaworski L.L.P. (law); President
1999 (interim), Williams College;
Director, ISI Family of Funds
(registered investment companies),
Yellow Corporation (trucking) and
American Science & Engineering
(x-ray detection equipment);
Formerly, Chairman and Member,
National Transportation Safety
Board; Director, National Railroad
Passenger Corporation (Amtrak);
and Member, Aviation System
Capacity Advisory Committee
(Federal Aviation Administration).
Formerly, Director of Flag
Investors/ISI Fund Complexes
(registered investment companies).
</TABLE>

21
<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 December 31, 1999 Percentage
- ----------------------- ----- ------------------------------------ ------------------- -----------
<S> <C> <C> <C> <C>
Amy M. Olmert 36 Vice President, Deutsche Asset None **
Secretary since Management since 1999; and Vice
1997 President, DB Alex. Brown LLC
(formerly BT Alex. Brown
Incorporated), 1997-1999. Formerly,
Senior Manager, Coopers &
Lybrand L.L.P. (now
PricewaterhouseCoopers LLP),
1988-1997. Certified Public
Accountant

Charles A. Rizzo 42 Vice President and Department None **
Treasurer since Head, Deutsche Asset Management
1999 since 1999; and Vice President and
Department Head, DB Alex. Brown
LLC (formerly BT Alex. Brown
Incorporated), 1998-1999. Formerly,
Senior Manager,
PricewaterhouseCoopers LLP,
1993-1998. Certified Public
Accountant

Daniel O. Hirsch 45 Principal, Deutsche Asset None **
Assistant Secretary Management since 1999; and
Since 1999 Director, DB Alex. Brown LLC
(formerly BT Alex. Brown
Incorporated) since July 1998.
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 December 31, 1999 the Directors and officers of the Fund as a group
(10 persons) beneficially owned an aggregate of 9,623 shares representing
1.49% of the total outstanding shares of the Fund.

Investment Advisor and Sub-Advisor

ICC, the Fund's advisor, is located at One South Street, Baltimore,
Maryland, 21202. ICC is a wholly owned subsidiary of BT Alex Brown Holdings
Incorporated and an indirect, wholly owned subsidiary of Deutsche Bank AG.
Glenmede, the Fund's sub-advisor, is located at One Liberty Place, 1650 Market
Street Philadelphia, Pennsylvania, 19103.

Principal Underwriter

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

22
<PAGE>

Portfolio Transactions

In the fiscal year ended October 31, 1999, the Fund did not pay any
brokerage commissions to DB Alex. Brown LLC or its affiliates.

Independent Accountants

A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected PricewaterhouseCoopers LLP as the
independent accountants of the Fund for the fiscal year ending October 31,
2000. Deloitte & Touche LLP previously served as the Fund's independent
accountants.

On December 15, 1999, the Audit and Compliance Committee and the Board of
Directors of the Fund participated in and approved the decision to change the
Fund's independent accountants from Deloitte & Touche LLP to
PricewaterhouseCoopers LLP.

The reports of Deloitte & Touche LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle. In connection with the Funds' audits for the two most
recent fiscal years and through December 13, 1999, there were no disagreements
with Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Deloitte & Touche LLP
would have caused them to make reference thereto in their report on the
financial statements for such years.

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 January 27, 2000, the following
were beneficial owners 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>
John J. Higgins, Jr. 37,861.536 shares 5.72%
U/A 06/24/96
Fairfield Jesuit Community Corp.
c/o Fairfield University
St. Ignatius Hall
Fairfield, CT 06430

DB Alex Brown, Inc. 33,896.586 shares 5.12%
FBO 201-70130-18
P.O. Box 1346
Baltimore, MD 21203
</TABLE>

23
<PAGE>

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.

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
signatures 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

24
<PAGE>

present in person or by Proxy at the Special Meeting. Approval of Proposal 2
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 Proposal
2. 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 when they have not
received instructions from beneficial owners.

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,

[GRAPHIC OMITTED]

Amy M. Olmert
Secretary

Dated: February 1, 2000