<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FLAG INVESTORS INTERNATIONAL FUND, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
One South Street
Baltimore, Maryland 21202
February __, 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's structure 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 need to do:
o Read all enclosed materials including the Questions & Answers section.
o Choose one of the following options to vote:
1. By Mail: Complete the enclosed proxy card and return it in the
postage-paid envelope provided.
2. By Telephone: Call the Toll-Free # on your proxy card.
3. By Internet: Logon to www.proxyvote.com.
4. Attend the Shareholder Meeting (details enclosed).
Sincerely,
Truman T. Semans
Chairman
Flag Investors International Fund, Inc.
<PAGE>
February , 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, shareholder are voting on the following:
o The reorganization of the Fund's structure 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 the date
of this proxy, the distribution would be approximately [19.5] percent of the
current net asset value. This is equivalent to $[3.97] per share, consisting of
long term capital gains of $[3.90] and short term capital gains of $.[07]. 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?
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 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.
<PAGE>
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 the proposals on the enclosed proxy card.
Q. Where can I get more information?
A. If you need more information, please call [Shareholder Communications
Corporation, the Fund's information agent, at 1-800-732-6168.]
Q. How can I vote my shares?
A. You may choose from one of the following options to vote your shares:
o By mail, with the enclosed proxy card(s) and return envelope.
o By telephone, with a toll-free call to the telephone number that
appears on your proxy card.
o Through the Internet, by using the Internet address that appears
on your proxy card and following the instructions on the site.
o In person at the shareholder meeting (see details enclosed in 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 __, 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 [Thursday, February 17, 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.
Amy M. Olmert
Secretary
Dated: February __, 2000
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND, INC.
One South Street
Baltimore, Maryland 21202
--------------------
PROXY STATEMENT
--------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
February __, 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 [Thursday, February 17, 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 __, 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 Standard Time on [Thursday, February 17, 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.
1
<PAGE>
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 vote at, the Special Meeting and at any adjournment
thereof. On that date, the Fund had ___________ shares outstanding. Each full
share will be entitled to one vote at the Special Meeting and each fraction of a
share will be entitled to the fraction of a vote equal to the proportion of a
full share represented by the fractional share.
The expenses of the Special Meeting will be borne by 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. 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, 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 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 the
Merger. For this reason, the election of Ms. Rimel and Mr. Hale is contingent
upon shareholder approval of Proposal 2.
2
<PAGE>
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 Nominees, contingent upon their approval
by shareholders and, for Ms. Rimel and Mr. Hale, 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.
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.
<PAGE>
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 ________ shares, representing ____%
of the total outstanding shares of the Fund.
<TABLE>
<CAPTION>
Shares Beneficially
Name and Position with Business Experience during the Past Owned as of
the Fund Age Five Years (including all directorships) December 31, 1999** Percentage
---------------------- --- ---------------------------------------- ----------------- ----------
<S> <C> <C> <C> <C>
Truman T. Semans* 72 Vice Chairman, Brown Investment Advisory & _______ shares ***
Chairman and Trust Company (formerly, Alex. Brown
Director since 1993 Capital Advisory & Trust Company);
Director, Investment Company Capital Corp.
(registered investment advisor); and
Director and Chairman, the Executive
Committee of Virginia Hot Springs, Inc.
(property management). Formerly, Managing
Director, BT Alex. Brown Incorporated; and
Vice Chairman, Alex. Brown & Sons
Incorporated (now BT Alex. Brown
Incorporated). Director of 10 funds in the
Fund Complex.****
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Name and Position with Business Experience during the Past Owned as of
the Fund Age Five Years (including all directorships) December 31, 1999** Percentage
---------------------- --- ---------------------------------------- ----------------- ----------
<S> <C> <C> <C> <C>
Richard R. Burt 52 Chairman, IEP Advisors, Inc.; Chairman of None ***
Director since 1999 the Board, Weirton Steel Corporation;
Member of the Board, Archer Daniels Midland
Company (agribusiness operations),
Hollinger International Inc. (publishing),
Homestake Mining Company (mining and
exploration), HCL Technologies (information
technology) and Anchor Technologies (gaming
software and equipment); Director, Mitchell
Hutchins family of funds and Deutsche
Funds, Inc.; Trustee, 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.
Nominee for Director of 8 funds in the Fund
Complex.
Richard T. Hale 54 Managing Director, Deutsche Asset _________ ***
Nominee Management Americas; Managing Director, BT
Alex. Brown Incorporated; Director and
President, Investment Company Capital Corp.
(registered investment advisor). Formerly,
Director, ISI Family of Funds (registered
investment companies). Chartered Financial
Analyst.
Joseph R. Hardiman 62 Private Equity Investor and Capital Markets _________ ***
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 Association of
Securities Dealers, Inc. and The NASDAQ
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. Director of each fund in the
Fund Complex.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Name and Position with Business Experience during the Past Owned as of
the Fund Age Five Years (including all directorships) December 31, 1999** Percentage
---------------------- --- ---------------------------------------- ----------------- ----------
<S> <C> <C> <C> <C>
Louis E. Levy 66 Director, Kimberly-Clark Corporation _________ * ***
Director since 1994 (personal consumer products); and Household _________
International (finance and banking).
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 Company None ***
Director since 1993 (investments); Executive Vice President,
Duke University (education, research and
health care); Executive Vice Chairman and
Director, Central Carolina Bank & Trust
(banking); and Director, Victory Funds
(registered investment companies).
Formerly, Director, AMBAC Treasurers Trust
(registered investment company) and DP Mann
Holdings (insurance). Director of each fund
in the Fund Complex.
Rebecca W. Rimel 48 President and Chief Executive Officer, The None ***
Nominee Pew Charitable Trusts (charitable
foundation); Director and Executive Vice
President, The Glenmede Trust Company
(investment trust and wealth management).
Formerly, Executive Director, The Pew
Charitable Trusts and Director, ISI Family
of Funds (registered investment companies).
Robert H. Wadsworth 59 President, The Wadsworth Group (registered None ***
Director since 1999 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.
5
<PAGE>
** 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 _______ shares representing ___% 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 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, 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 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. [Ms. Rimel] and Messrs. Burt, Levy, McDonald, Vogt 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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Retirement
Aggregate Benefits Accrued as Total Compensation Number of Funds
Compensation Part of Fund from the Fund in Fund Complex
Payable Expenses and Fund Complex for which Director
Name and Position from the Fund Payable to Directors Serves
------------------ ------------- -------------------- ------
<S> <C> <C> <C> <C> <C>
Truman T. Semans, Chairman(1) $0 $0 $0 10
Richard R. Burt, Director N/A N/A N/A N/A
James J. Cunnane, Director $___ (3) $39,000 12(4)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Pension or Retirement
Aggregate Benefits Accrued as Total Compensation Number of Funds
Compensation Part of Fund from the Fund in Fund Complex
Payable Expenses and Fund Complex for which Director
Name and Position from the Fund Payable to Directors Serves
------------------ ------------- -------------------- ------
<S> <C> <C> <C> <C> <C>
Joseph R. Hardiman(5) $___ N/A $39,000 12(6)
Louis E. Levy, Director $___ (3) $49,000 12(4)
Eugene J. McDonald, Director $___ (3) $39,000 12(4)
Carl W. Vogt, Esq., Director $___ (3) $39,000 12(4,6)
Robert H. Wadsworth, Director N/A N/A N/A N/A
</TABLE>
-------------------
1 A Director who is an "interested person" as defined in the 1940 Act.
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, 1999 was
approximately $____.
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.
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
Retirement Plan is unfunded and unvested. The Fund has two Participants, 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 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, 1999, are as follows: Messrs. Hardiman (1),
Levy (5), McDonald (7) and Vogt (4).
7
<PAGE>
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, 1999. 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, 1999, were [Messrs. Levy (Chairman), Hardiman, McDonald, 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 Audit and Compliance Committee. The Audit and Compliance
Committee met four times during the fiscal year ended October 31, 1999. All
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.
8
<PAGE>
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, Hardiman, Levy 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 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
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 and Vogt.] If elected,
Messrs. Burt and 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 Executive Committee was formed on September 28,
1998, and [did not meet] 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.
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, 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.
9
<PAGE>
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, insurance company separate accounts,
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 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 only 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 [February [], 2000] (the "Reorganization
Distribution"), contingent upon shareholder approval of the Reorganization.
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 the date of this proxy, the distribution would be
approximately [19.5] percent of the Fund's current net asset value. This is
equivalent to $[3.97] per share, consisting of long term capital gains of
$[3.90] and short term capital gains of $[.07]. 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.
10
<PAGE>
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.
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. 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.
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 a
contractual fee waiver by ICC in its anticipated capacity as the Fund's
administrator.
11
<PAGE>
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.
Annual Fund Operating Expenses
Actual Estimated
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
* 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, 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 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
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 28, 2001.
12
<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 policies parallel to changes approved for the
IEF Portfolio 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.
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.
13
<PAGE>
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.
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.
14
<PAGE>
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 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.
15
<PAGE>
The Fund will not invest in the securities of any single
issuer if, as a result, the Fund would hold more than 10% of
the outstanding voting securities of such issuer.
If the Proposal is approved, these policies would be
eliminated and replaced with the following:
The Fund will not, with respect to 75% of its assets, invest
more than 5% of the Portfolio's (Fund's) total assets in the
securities of any one issuer (excluding cash, cash
equivalents, U.S. government securities and the securities of
other investment companies) or own more than 10% of the voting
securities of any one issuer.
The primary purpose of this modification to the Fund's fundamental
investment policy on diversification is to permit the Fund to invest all of its
assets in the 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
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 IEF 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 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.
16
<PAGE>
C. Illiquid Securities
Currently, the Fund's fundamental investment policy on
illiquid securities states:
The Fund will not invest more than 10% of the value of its net
assets in illiquid securities (as defined under federal
securities and state securities laws), including repurchase
agreements with remaining maturities in excess of seven days.
If the Proposal is approved, the Fund's fundamental investment
policy on illiquid securities will be reclassified as non-fundamental
and state:
The Fund will not, as a matter of operating policy, invest
more than 15% of the Portfolio's (Fund's) net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not currently marketable (excluding Rule 144A
securities deemed by the Board of Trustees of the Portfolio
(Board of Directors of the Fund) to be liquid).
The primary purpose of this modification to the Fund's fundamental
investment policy on illiquid securities is to conform it to the IEF 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 IEF
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 IEF 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 IEF 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:
17
<PAGE>
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 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 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.
18
<PAGE>
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 DB Alex. Brown or its
affiliates.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Shares
Beneficially
Business Experience Owned as of
Name and Position During the Past Five Years, December 31, 1999 Percentage
With the Fund Age including all Directorships
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Truman T. Semans* 72 See "Information Regarding _______ **
Chairman and Nominees"
Director since 1993
----------------------------------------------------------------------------------------------------------
Richard R. Burt 52 See "Information Regarding None **
Director since 1999 Nominees"
----------------------------------------------------------------------------------------------------------
Joseph R. Hardiman 62 See "Information Regarding ______ **
Director since 1999 Nominees"
----------------------------------------------------------------------------------------------------------
Louis E. Levy 66 See "Information Regarding _____* **
Director since 1994 Nominees" _____
----------------------------------------------------------------------------------------------------------
Eugene J. McDonald 67 See "Information Regarding None **
Director since 1993 Nominees"
----------------------------------------------------------------------------------------------------------
Robert H. Wadsworth 59 See "Information Regarding None **
Director since 1999 Nominees"
----------------------------------------------------------------------------------------------------------
Amy M. Olmert 36 Vice President, Deutsche Asset None **
Secretary since 1997 Management Americas since 1999;
and Vice 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.
----------------------------------------------------------------------------------------------------------
Charles A. Rizzo 42 Vice President and Department None **
Treasurer since 1999 Head, Deutsche Asset Management
Americas 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.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Shares
Beneficially
Business Experience Owned as of
Name and Position During the Past Five Years, December 31, 1999 Percentage
With the Fund Age including all Directorships
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel O. Hirsch 45 Principal, Deutsche Asset None **
Assistant Secretary Management Americas since 1999;
Since 1999 and Principal, DB Alex. Brown LLC
(formerly BT Alex. Brown
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 December 31, 1999 the Directors and officers of the Fund as a group
(__ persons) beneficially owned an aggregate of ______ shares representing
___% 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
ICC, the Fund's Advisor, is located at One South Street, Baltimore,
Maryland, 21202. 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.
Portfolio Transactions
In the fiscal year ended October 31, 1999, the Fund [did not pay any
brokerage commissions] to DB Alex. Brown or its affiliates.
Independent Accountants
A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected PricewaterhouseCoopers LLP as the independent
accountants of the Fund for the fiscal year ending October 31, 1999. A
representative of PricewaterhouseCoopers LLP will be available by telephone
during the Special Meeting, if needed, to make a statement if desired and to
respond to appropriate questions from shareholders.
20
<PAGE>
[Beneficial Owners] TO BE UPDATED
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.
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.
21
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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 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.
22
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SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO VOTE BY MAIL, TELEPHONE OR
INTERNET AS EXPLAINED IN THE INSTRUCTIONS INCLUDED ON YOUR PROXY CARD.
By Order of the Directors,
Amy M. Olmert
Secretary
Dated: February __, 2000
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[FLAG INVESTORS]
DEUTSCHE BANC ALEX, BROWN
MUTUAL FUND SERVICES
MS 1-18-8
ONE SOUTH STREET
BALTIMORE, MD 21202-3220
AUTO DATA PROCESSING
INVESTOR COMM SERVICES
ATTENTION:
TEST PRINT
51 MERCEDES WAY
EDGEWOOD, NY
11717
FLAG INVESTORS INTERNATIONAL FUND, INC.
INTERNATIONAL FUND -- CLASS A
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
February __, 2000
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 Daniel O. Hirsch 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 February __, 2000 (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 1-800-690-8903
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.
SHARES 123,456,789,012,00000
CONTROL NUMBER 101010101010
ACCOUNT NUMBER 1234567890123456789
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
<PAGE>
INTERNATIONAL FUND -- CLASS A
Vote on Directors
1. To consider and act upon a proposal to elect a Board of Directors.
01) Truman T. Semans 02) Richard R. Burt
03) Richard T. Hale 04) Joseph R. Hardiman
05) Louis E. Levy 06) Eugene J. McDonald
07) Rebecca W. Rimel 08) Robert H. Wadsworth
[ ] FOR ALL To withhold authority to vote mark "FOR ALL EXCEPT"
and write the nominee's name on the line below.
[ ] WITHHOLD ALL
[ ] FOR ALL EXCEPT: ---------------------------------------------------
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
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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 date. For joint accounts, --------------------------------------- --------------
each joint owner must sign. Signature (Joint Owners) Date
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