<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 / /
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 SHORT-INTERMEDIATE INCOME FUND, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(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:
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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):
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4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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[LETTERHEAD OF FLAG INVESTORS FUNDS]
July 17, 1997
Dear Shareholders:
The enclosed proxy statement relates to a special meeting of the Shareholders of
the Flag Investors Short-Intermediate Income Fund, Inc. (the "Fund").
On April 6, 1997, Alex. Brown Incorporated, the parent corporation of the Fund's
investment advisor, entered into a definitive agreement to merge into a
subsidiary of Bankers Trust New York Corporation. Due to the pending change in
control of Alex. Brown Incorporated, we are asking you to approve a new
investment advisory agreement. The same advisor will continue to provide this
service to your Fund. The new agreement is substantially the same as the current
agreement.
This proposal has been unanimously approved by your Fund's Board of Directors,
who recommend you vote for the proposal. Your vote is important and your
participation in the governance of the Fund does make a difference.
Sincerely,
/s/ Richard T. Hale
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Richard T. Hale
Chairman
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE
INCOME FUND, INC.
One South Street
Baltimore, Maryland 21202
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AUGUST 14, 1997
TO THE SHAREHOLDERS OF FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
You are cordially invited to a special meeting (the "Special Meeting") of
the shareholders of Flag Investors Short-Intermediate Income Fund, Inc.
(formerly, Flag Investors Intermediate-Term Income Fund, Inc.) (the "Fund") on
Thursday, August 14, 1997, at 11:00 a.m. Eastern Standard 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, for
the purpose of considering the proposal set forth below and for the transaction
of such other business as may be properly brought before the Special Meeting:
PROPOSAL: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp.
Only shareholders of the Fund at the close of business on June 25, 1997
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. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN AND DATE
YOUR PROXY CARD AND RETURN IT 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.
Scott J. Liotta
Vice President and Secretary
Dated: July 17, 1997
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
One South Street
Baltimore, Maryland 21202
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
AUGUST 14, 1997
This Proxy Statement is furnished by the Board of Directors of Flag
Investors Short-Intermediate Income Fund, Inc. (formerly, Flag Investors
Intermediate-Term Income 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, August 14, 1997, at 11:00 a.m. Eastern Standard
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 July 17, 1997.
The primary purpose of the Special Meeting is to permit the Fund's
shareholders to consider a new Investment Advisory Agreement to take effect
following the consummation of the transactions contemplated by an Agreement and
Plan of Merger, dated as of April 6, 1997 (the "Merger"), between Bankers Trust
New York Corporation and Alex. Brown Incorporated. This action is necessary to
avoid the possibility that the Merger could result in assignment and,
therefore, termination of the Fund's current Investment Advisory Agreement. It
is contemplated that, after the Merger, Investment Company Capital Corp. ("ICC"
or the "Advisor") will remain the investment advisor to the Fund. The Fund's
new Investment Advisory Agreement is identical to the Fund's current Investment
Advisory Agreement, except for the dates of execution, effectiveness and
initial term; the deletion of provisions relating to state expense limits that
have been preempted by federal law; and a proviso to the effect that the
obligation of ICC to make its personnel available to serve as officers of the
Fund is subject to applicable banking regulations.
If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please date and sign the enclosed Proxy Card ("Proxy") and
mail it in the enclosed reply envelope, allowing sufficient time for the Proxy
to be received on or before 11:00 a.m. Eastern Standard Time on Thursday,
August 14, 1997. No postage is required if the Proxy is mailed in the United
States. If the accompanying Proxy is executed properly and returned, shares
represented by it will be voted at the Special Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted FOR the new Investment Advisory Agreement (the "Proposal"). All
shareholders of the Fund are entitled to vote on the Proposal. 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 June 25, 1997, 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 the
Record Date, the Fund had 7,260,897.840 shares outstanding, consisting of
5,341,461.768 Flag Investors Short-Intermediate Income Fund Class A Shares and
1,919,436.072 Flag Investors Short-Intermediate Income Fund Institutional
Shares. Each full share will be entitled to one vote at the Special Meeting and
each fraction of a share will be entitled to the fraction of a vote equal to
the proportion of a full share represented by the fractional share.
The expenses of the Special Meeting will be borne by ICC and will include
reimbursement to brokerage firms and others for expenses in forwarding Proxy
solicitation materials to beneficial owners. The solicitation of Proxies will
be largely by mail, but may include telephonic, telegraphic or oral
communication by employees and officers of the Advisor.
1
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The Fund will furnish to shareholders, without charge, a copy of the
Annual Report for its fiscal year ended December 31, 1996, upon request. 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) 767-FLAG.
The Fund is registered as an open-end, diversified management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended.
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 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.
PROPOSAL: To approve or disapprove a new Investment Advisory Agreement between
the Fund and Investment Company Capital Corp.
Investment Company Capital Corp. is the Fund's investment advisor. ICC is
an indirect subsidiary of Alex. Brown Incorporated. Alex. Brown Incorporated
(together with its affiliates, "Alex. Brown") has entered into an Agreement and
Plan of Merger with Bankers Trust New York Corporation (together with its
affiliates "Bankers Trust") under which Alex. Brown Incorporated would merge
with and into a subsidiary of Bankers Trust New York Corporation. Under the
terms of the Merger, shares of Alex. Brown Incorporated to be exchanged had an
aggregate value of approximately $1.7 billion at the time the Merger was
announced. As of December 31, 1996, Bankers Trust New York Corporation was the
seventh largest bank holding company in the United States with total assets of
approximately $120 billion. Its subsidiary, Bankers Trust Company, is a
worldwide merchant bank dedicated to serving the needs of corporations,
governments, financial institutions and private clients through a global
network of over 120 offices in more than 40 countries. Investment management is
a core business of Bankers Trust, built from its roots as a trust bank founded
in 1903. Bankers Trust Company is one of the nation's largest and most
experienced investment managers with approximately $227 billion in assets under
management globally.
Bankers Trust is a registered bank holding company subject to the Bank
Holding Company Act of 1956, as amended ("BHCA"), and the rules and regulations
thereunder. The Board of Governors of the Federal Reserve System has
promulgated rules and regulations pursuant to its authority under the BHCA (and
taking into consideration certain provisions of the National Banking Act of
1933 generally referred to as the Glass-Steagall Act) that govern the
relationship between bank holding company affiliates and mutual funds, such as
the Fund, under which certain regulatory approvals will be necessary. However,
after the Merger, it is expected that ICC will continue to serve as the
Advisor.
The Advisor does not anticipate any reduction in the quality of services
now provided the Fund and does not expect that the Merger will result in any
material changes in the business of the Advisor or in the manner in which the
Advisor renders services to the Fund. Nor does the Advisor anticipate that the
Merger or any ancillary transactions will have any adverse effect on its
ability to fulfill its obligations under the new Investment Advisory Agreement
or to operate its business in a manner consistent with past business practice.
The Investment Advisory Agreements
In anticipation of the Merger, the Directors of the Fund, including the
Directors who are not (i) parties to the new Investment Advisory Agreement
between the Fund and ICC (the "New Advisory Agreement") or (ii) interested
persons of any such party (the "Disinterested Directors"), unanimously approved
the New Advisory
2
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Agreement. The form of the New Advisory Agreement is identical to the Current
Advisory Agreement, except for the dates of execution, effectiveness and
initial term; the deletion of provisions relating to state expense limits that
have been preempted by federal law; and a proviso to the effect that the
obligation of ICC to make its personnel available to serve as officers of the
Fund is subject to applicable banking regulations. The holders of a majority of
the outstanding voting securities (within the meaning of the 1940 Act) of the
Fund are being asked to approve the New Advisory Agreement. See "The New
Advisory Agreement" below.
The Current Advisory Agreement
The current Investment Advisory Agreement between ICC and the Fund, dated
May 10, 1991 (the "Current Advisory Agreement"), was last approved by the
shareholders of the Fund on July 31, 1992. The Current Advisory Agreement was
most recently approved by the Fund's Board of Directors, including a majority of
the Disinterested Directors, on October 1, 1996.
The Current Advisory Agreement provides that ICC, in return for its fee,
will (a) supervise and manage all aspects of the Fund's operations, except for
distribution services; (b) formulate and implement continuing programs for the
purchase and sale of securities, consistent with the investment objective and
policies of the Fund; (c) provide the Fund with such executive, administrative
and clerical services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Fund with, or obtain for it, adequate office space and all
necessary office equipment and services; (e) obtain and evaluate pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign and otherwise, whether affecting the economy
generally or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in which they
engage, or with respect to securities which ICC considers desirable for
inclusion in the Fund's portfolio; (f) determine which issuers and securities
shall be represented in the Fund's portfolio and regularly report thereon to
the Fund's Board of Directors; (g) take all actions necessary to carry into
effect the Fund's purchase and sale programs; (h) supervise the operations of
the Fund's transfer and dividend disbursing agent; (i) provide the Fund with
such administrative and clerical services for the maintenance of certain
shareholder records as are deemed advisable by the Fund's Board of Directors;
and (j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy materials, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and state Blue Sky
authorities.
The Current Advisory Agreement provides for compensation to ICC calculated
daily and paid at the end of each calendar month at the annual rate of .35% of
the first $1 billion of the Fund's average daily net assets, .30% of the next
$500 million of the Fund's average daily net assets, and .25% of the Fund's
average daily net assets in excess of $1.5 billion.
The Current Advisory Agreement provides that ICC will furnish, at its
expense and without cost to the Fund, the services of one or more officers of
the Fund to the extent that such officers may be required by the Fund for the
proper conduct of its affairs. The Fund assumes and pays or causes to be paid
all other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safe-keeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including
3
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officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly provided
herein.
The services of ICC are not to be deemed exclusive, and ICC is free to
render investment advisory and other services to others, including other
investment companies, and to engage in other activities, so long as its
services under the Agreement are not impaired thereby. ICC's officers or
directors may serve as officers or Directors of the Fund, the Fund's officers
or Directors may serve as officers or directors of ICC, to the extent permitted
by law, and officers and directors of ICC are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
Following the expiration of its initial two-year term, the Current
Advisory Agreement continues in force and effect from year to year, provided
that such continuance is approved at least annually by the Fund's Board of
Directors or by the vote of a majority of the outstanding voting securities of
the Fund, and by the affirmative vote of a majority of the Directors who are
not parties to the Agreement or "interested persons" of a party to the
Agreement (other than as Directors of the Fund) by votes cast in person at a
meeting specifically called for such purpose.
The Current Advisory Agreement may be terminated, without the payment of
any penalty, by the Fund upon a vote of the Fund's Board of Directors, by a
vote of a majority of the Fund's outstanding voting securities or by ICC, upon
60 days' written notice to the other party. The Agreement automatically
terminates in the event of its assignment.
The Current Advisory Agreement obligates ICC, in the performance of its
duties under the Agreement, to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under the Agreement, but ICC is not liable
for any act or omission which does not constitute willful misfeasance, bad
faith or gross negligence on the part of ICC or its officers, directors or
employees, or reckless disregard by ICC of its duties under the Agreement.
The New Advisory Agreement
The Board of Directors approved the proposed New Advisory Agreement
between the Fund and ICC on June 17, 1997, the form of which is attached as
Exhibit A. The form of the proposed New Advisory Agreement is identical to the
Current Advisory Agreement, except for the dates of execution, effectiveness
and initial term; the deletion of provisions relating to state expense limits
that have been preempted by federal law; and a proviso to the effect that the
obligation of ICC to make its personnel available to serve as officers of the
Fund is subject to applicable banking regulations.
The investment advisory fee as a percentage of net assets payable by the
Fund will be the same under the New Advisory Agreement as under the Current
Advisory Agreement. If the investment advisory fee under the New Advisory
Agreement had been in effect for the Fund's most recently completed fiscal
year, the advisory fee to which ICC would have been entitled would have been
identical to that to which it was entitled under the Current Advisory
Agreement.
The Board held a meeting on June 17, 1997, at which the Board, including
the Disinterested Directors, unanimously approved the New Advisory Agreement
for the Fund and recommended the New Advisory Agreement for approval by the
shareholders of the Fund. The New Advisory Agreement would take effect upon the
later to occur of (i) the obtaining of shareholder approval or (ii) the closing
of the Merger. The New Advisory Agreement will continue in effect for an
initial two-year term and thereafter for successive annual periods as long as
such continuance is approved in accordance with the 1940 Act.
In evaluating the New Advisory Agreement, the Board based its
determination primarily on its conclusion that there would be a high degree of
continuity of services to the Fund and took into account that the Fund's
Current Advisory Agreement and the New Advisory Agreement, including their
terms relating to the services to be provided thereunder by ICC and the fees
and expenses payable by the Fund, are substantially identical.
4
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The Board was assured on behalf of Alex. Brown and Bankers Trust that they
intend to comply with the requirements of Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment advisor to
an investment company or any of its affiliated persons to receive any amount or
benefit in connection with a change in control of the investment advisor that
results in an assignment so long as two conditions are met. First, for a period
of three years after the change of control, at least 75% of the board members
of the investment company must not be interested persons of the acquired
advisor or the acquiror (Alex. Brown and Bankers Trust, respectively, in this
case). The Fund would be in compliance with this provision of Section 15(f).
Second, an "unfair burden" must not be imposed upon the investment company as a
result of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
Merger whereby the investment advisor, or any interested person of any such
advisor, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from
or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). Alex. Brown
and Bankers Trust are not aware of any express or implied term, condition,
arrangement or understanding that would impose an "unfair burden" on the Fund
as a result of the Merger. Alex. Brown and Bankers Trust have agreed that they,
and their affiliates, will take no action that would have the effect of
imposing an "unfair burden" on the Fund as a result of the Merger.
The Board also considered the terms of the Merger and the possible effects
of the Merger upon the Advisor's organization and upon the ability of the
Advisor to provide advisory services to the Fund. The Board considered the
skills and capabilities of the Advisor in this regard and the representations
of Alex. Brown and Bankers Trust that no material change was planned in the
current management or facilities of the Advisor.
The Board was also informed of the resources of Bankers Trust that could
be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Bankers Trust's experience as advisor and service provider to a family of
mutual funds. They also received preliminary information about Bankers Trust's
ability to provide other services, including custody.
The Board also considered the effect on the Fund of ICC becoming an
affiliated person of Bankers Trust. In particular, the Board considered the
potential impact of banking laws and steps that might be necessary to secure
Federal Reserve Board approval of the Merger. In this regard, the Board also
considered the likelihood that the Fund will have to engage an independent
principal underwriter after the Merger but that Alex. Brown & Sons will
continue to be able to provide services to its clients in connection with
shareholder accounts with the Fund. The Board also considered the fact that the
continued ability of Alex. Brown personnel to serve as Directors or officers of
the Fund was subject to Federal Reserve Board approval. Following the Merger,
the 1940 Act will prohibit or impose certain conditions on the ability of the
Fund to engage in certain transactions with Bankers Trust. For example, absent
exemptive relief, the Fund will be prohibited from entering into securities
transactions in which Alex. Brown or Bankers Trust acts as a principal.
Currently the Fund is prohibited from entering into transactions in which Alex.
Brown acts as principal. The Fund will also have to satisfy certain conditions
in order to engage in securities transactions in which Alex. Brown or Bankers
Trust is acting as an underwriter. The Fund is already required to satisfy such
conditions when engaging in transactions in which Alex. Brown is acting as an
underwriter. In this connection, management of the Advisor represented to the
Board that it does not believe these prohibitions or conditions will have a
material effect on the management or performance of the Fund.
The Board also considered that the costs of the Special Meeting would be
borne by ICC.
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the
Disinterested Directors, unanimously approved the New Advisory Agreement with
respect to the Fund and voted to recommend its approval to the shareholders of
the Fund.
In the event that shareholders of the Fund do not approve the New Advisory
Agreement, the Current Advisory Agreement will remain in effect and the Board
will take such action as it deems in the best interest of the Fund and its
shareholders, which may include proposing that shareholders approve an
agreement in lieu of the New Advisory Agreement. If the Merger is not
consummated, ICC will continue to serve as investment advisor of the Fund
pursuant to the terms of the Current Advisory Agreement.
5
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Investment Company Capital Corp.
ICC is a registered investment advisor that had under management as of May
31, 1997, approximately $5.5 billion, including assets of the Fund and the
assets of ICC's other clients. ICC is an indirect subsidiary of Alex. Brown
Incorporated. The principal address of each is One South Street, Baltimore,
Maryland 21202.
The following information is provided for each Director and the principal
executive officer of ICC.
Directors and Principal Executive Officer
of Investment Company Capital Corp.
<TABLE>
<CAPTION>
Name and Position
with the Advisor Address Principal Occupation
- -------------------------- --------------------------- ------------------------------
<S> <C> <C>
Charles W. Cole, Jr. One South Street Managing Director, Alex.
Chairman Baltimore, Maryland 21202 Brown & Sons Incorporated
Richard T. Hale One South Street Managing Director, Alex.
Director and President Baltimore, Maryland 21202 Brown & Sons Incorporated
David L. Hopkins One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated
Alvin B. Krongard One South Street Chairman, Chief Executive
Director Baltimore, Maryland 21202 Officer and Director, Alex.
Brown Incorporated
Margaret-Mary V. Preston One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated
Robert F. Price One South Street Managing Director and
Director Baltimore, Maryland 21202 General Counsel, Alex.
Brown & Sons Incorporated
Mayo A. Shattuck III One South Street President, Chief Operating
Director Baltimore, Maryland 21202 Officer and Director, Alex.
Brown Incorporated
Truman T. Semans One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated
Beverly L. Wright One South Street Managing Director and Chief
Director Baltimore, Maryland 21202 Financial Officer, Alex.
Brown & Sons Incorporated
</TABLE>
For the fiscal year ended December 31, 1996, the Fund paid ICC an
aggregate fee of $44,259 (net of fee waivers of $201,059) for advisory
services. For such fiscal year, the Fund also paid ICC aggregate fees of
$32,766 for transfer agency services and $56,244 for accounting services
provided to the Fund. For the fiscal year ended December 31, 1996, the Fund
paid Alex. Brown & Sons Incorporated an aggregate distribution fee of $151,753.
As of May 31, 1997, to Fund Management's knowledge as provided by the
Directors and officers of the Fund, the following Directors and officers of the
Fund beneficially owned shares of Alex. Brown Incorporated. Mr. Hale, Chairman
and a Director of the Fund and President and a Director of ICC, beneficially
owned 90,470 shares of Alex. Brown Incorporated. Mr. Semans, a Director of the
Fund and a Director of ICC, beneficially owned 25,433 shares of Alex. Brown
Incorporated. Mr. Cole, a Director of the Fund and Chairman and a Director of
ICC, beneficially owned 4,356 shares of Alex. Brown Incorporated. Mr. M.
Elliott Randolph, Jr., President of the Fund, beneficially owned 4,441 shares
of Alex. Brown Incorporated. Mr. Paul D. Corbin, Executive Vice President of
the Fund, beneficially owned 3,025 shares of Alex. Brown Incorporated. Ms.
Monica M Hausner, a Vice President of the Fund, beneficially owned 137 shares
of Alex. Brown Incorporated. Mr. Edward J.
6
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Veilleux, a Vice President of the Fund and Executive Vice President of ICC,
beneficially owned 200 shares of Alex. Brown Incorporated. Mr. Joseph A.
Finelli, Treasurer of the Fund, beneficially owned 33 shares of Alex. Brown
Incorporated. Ms. Laurie D. Collidge, Assistant Secretary of the Fund,
beneficially owned 48 shares of Alex. Brown Incorporated.
Other Funds Advised by ICC with Similar Investment Objectives
ICC does not act as advisor to any other funds that have investment
objectives similar to those of the Fund.
Shareholder Approval of the New Advisory Agreement
Approval of the New Advisory Agreement requires the affirmative vote of a
majority of the outstanding shares of the Fund. For purposes of this proposal,
"majority of the outstanding shares" means the vote of (i) 67% or more of the
Fund's outstanding shares present at the Special 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE NEW ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
Directors and Executive Officers
Information about the Fund's current Directors and principal executive
officers, including their names, positions with the Fund, principal occupation
or employment during the past five years, the number of shares of the Fund
beneficially owned and the percentage of shares beneficially owned as of May
31, 1997, is set forth below. As of May 31, 1997, the Directors and officers of
the Fund as a group owned an aggregate of less than 1% of the shares of the
Fund.
<TABLE>
<CAPTION>
Shares
Business Experience During the Beneficially
Name and Position Past Five Years Owned as of
With the Fund (including all directorships) May 31, 1997** Percentage
- ----------------------- ---------------------------------------------------- ---------------- -----------
<S> <C> <C> <C>
Richard T. Hale* Managing Director, Alex. Brown & Sons 2,837 shares ***
Director & Chairman Incorporated; Director and President, Investment
Company Capital Corp. (registered investment
advisor); Chartered Financial Analyst. Director of
each fund in the Fund Complex.
Charles W. Cole, Jr.* Vice Chairman, Alex. Brown Capital Advisory & None ***
Director Trust Company; Chairman, Investment Company
Capital Corp. (registered investment advisor);
Director, Provident Bankshares Corporation and
Provident Bank of Maryland. Formerly, President
and Chief Executive Officer, Chief Administrative
Officer, and Director, First Maryland Bancorp, The
First National Bank of Maryland and First Omni
Bank; Director, York Bank and Trust Company.
James J. Cunnane Managing Director, CBC Capital (merchant None ***
Director banking), 1993-Present. Formerly, Senior Vice
President and Chief Financial Officer, General
Dynamics Corporation (defense), 1989-1993; and
Director, The Arch Fund (registered investment
company). Director of each fund in the Fund
Complex.
John F. Kroeger Director/Trustee, AIM Funds (registered None ***
Director investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting
firm) and General Manager, Shell Oil Company.
Director of each fund in the Fund Complex.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Shares
Business Experience During the Beneficially
Name and Position Past Five Years Owned as of
With the Fund (including all directorships) May 31, 1997** Percentage
- --------------------------- ---------------------------------------------------- ---------------- -----------
<S> <C> <C> <C>
Louis E. Levy Director, Kimberly-Clark Corporation (personal None ***
Director consumer products) and Household International
(finance and banking); Chairman of the Quality
Control Inquiry Committee, American Institute of
Certified Public Accountants. Formerly, Trustee,
Merrill Lynch Funds for Institutions, 1991-1993;
Adjunct Professor, Columbia University-Graduate
School of Business, 1991-1992; Partner, KPMG
Peat Marwick, retired 1990. Director of each fund
in the Fund Complex.
Eugene J. McDonald President, Duke Management Company None ***
Director (investments); Executive Vice President, Duke
University (education, research and health care);
Director, Central Carolina Bank & Trust
(banking), Key Funds (registered investment
companies), AMBAC Treasurers Trust (registered
investment company) and DP Mann Holdings
(insurance). Director of each fund in the Fund
Complex.
Rebecca W. Rimel President and Chief Executive Officer, The Pew None ***
Director Charitable Trusts; Director and Executive Vice
President, The Glenmede Trust Company.
Formerly, Executive Director, The Pew Charitable
Trusts. Director of 10 funds in the Fund
Complex.
Truman T. Semans* Managing Director, Alex. Brown & Sons None ***
Director Incorporated; Director, Investment Company
Capital Corp. (registered investment advisor).
Formerly, Vice Chairman, Alex. Brown & Sons
Incorporated. Director of 10 funds in the Fund
Complex.
Carl W. Vogt, Esq. Senior Partner, Fulbright & Jaworski L.L.P. (law); None ***
Director Director, Yellow Corporation (trucking). Formerly,
Chairman and Member, National Transportation
Safety Board; Director, National Railroad
Passenger Corporation (Amtrak); and Member,
Aviation System Capacity Advisory Committee
(Federal Aviation Administration). Director of 9
funds in the Fund Complex.
M. Elliott Randolph, Jr. Principal, Alex. Brown & Sons Incorporated, 2,288 shares ***
President 1991-Present.
Paul D. Corbin Principal, Alex. Brown & Sons Incorporated, 2,754 shares ***
Executive Vice President 1991-Present.
Edward J. Veilleux Principal, Alex. Brown & Sons Incorporated; Vice None ***
Vice President President, Armata Financial Corp. (registered
broker-dealer); Executive Vice President,
Investment Company Capital Corp. (registered
investment advisor).
Gary V. Fearnow Managing Director, Alex. Brown & Sons None ***
Vice President Incorporated and Manager, Private Client
Marketing, Alex. Brown & Sons Incorporated.
Monica M. Hausner Vice President, Fixed Income Management 689 shares ***
Vice President Department, Alex. Brown & Sons Incorporated,
March 1992-Present. Formerly, Assistant Vice
President, First National Bank of Maryland,
1984-1992.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Shares
Business Experience During the Beneficially
Name and Position Past Five Years Owned as of
With the Fund (including all directorships) May 31, 1997** Percentage
- ---------------------- -------------------------------------------------- ---------------- -----------
<S> <C> <C> <C>
Scott J. Liotta Manager, Fund Administration, Alex. Brown & None ***
Vice President and Sons Incorporated, July1996-Present. Formerly,
Secretary Manager and Foreign Markets Specialist, Putnam
Investments, Inc. (registered investment
companies), April 1994-July 1996; Supervisor,
Brown Brothers Harriman & Co. (domestic and
global custody), August 1991-April 1994.
Joseph A. Finelli Vice President, Alex. Brown & Sons Incorporated None ***
Treasurer and Vice President, Investment Company Capital
Corp. (registered investment advisor), September
1995-Present. Formerly, Vice President and
Treasurer, The Delaware Group of Funds
(registered investment companies) and Vice
President, Delaware Management Company Inc.
(investments), 1980-August 1995.
Laurie D. Collidge Asset Management Department, Alex. Brown & None ***
Assistant Secretary Sons Incorporated, 1991-Present.
</TABLE>
- ------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act. Mr. Cole has resigned from the Board, effective upon the consummation
of the Merger, so that 75% of the Board members will be Disinterested
persons within the contemplation of Section 15(f) of the 1940 Act.
** This information has been provided by each Director and officer.
*** As of May 31, 1997, the Directors and officers of the Fund as a group (17
persons) beneficially owned an aggregate of less than 1% of the shares of
the Fund.
Investment Advisor
See "Investment Company Capital Corp." on page 6 for additional
information concerning the Advisor.
Principal Underwriter
Alex. Brown & Sons Incorporated, located at One South Street, Baltimore,
Maryland 21202, a wholly- owned subsidiary of Alex. Brown Incorporated, acts as
the Fund's principal underwriter.
Portfolio Transactions
In the fiscal year ended December 31, 1996, the Fund paid no brokerage
commissions to affiliated brokers.
Beneficial Owners
To the knowledge of Fund Management, as of the Record Date, the following
were beneficial owners of 5% or more of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
Amount of Percent of
Name and Address Beneficial Ownership Total Shares Outstanding
- --------------------------------- ---------------------- -------------------------
<S> <C> <C>
Olicom A/S 964,585 shares 13.28%
Attn: Jorgen Nielsen
Nybrovej 114
DK-2800
Lyngby Denmark
Alex. Brown & Sons Incorporated 953,518 shares 13.13%
FBO 250-10788-16
P.O. Box 1346
Baltimore, MD 21203-1346
</TABLE>
9
<PAGE>
Submission of Shareholder Proposals
As a Maryland corporation, the Fund is not required to hold annual
shareholder meetings, except in certain limited circumstances. 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 the Proposal requires the affirmative vote of a majority of
the outstanding shares of the Fund. As defined in the 1940 Act, the vote of a
majority of the outstanding shares means the vote of (i) 67% or more of the
Fund's outstanding shares 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
Proposal 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 the
Proposal. 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 the Proposal when they have not
received instructions from beneficial owners.
Other Matters
No business other than the matter 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 FILL IN, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
By Order of the Directors,
Scott J. Liotta
Vice President and Secretary
Dated: July 17, 1997
10
<PAGE>
EXHIBIT A
FORM OF NEW
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the ---- day of --------
, 1997 by and between FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
(formerly, Flag Investors Intermediate-Term Income Fund, Inc.), a Maryland
corporation (the "Fund") and INVESTMENT COMPANY CAPITAL CORP., a Maryland
corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter into an agreement to
provide investment advisory and administrative services for the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF INVESTMENT ADVISOR. The Fund hereby appoints the Advisor
to act as the Fund's investment advisor. The Advisor shall manage the Fund's
affairs and shall supervise all aspects of the Fund's operations (except as
otherwise set forth herein), including the investment and reinvestment of the
cash, securities or other properties comprising the Fund's assets, subject at
all times to the policies and control of the Fund's Board of Directors. The
Advisor shall give the Fund the benefit of its best judgment, efforts and
facilities in rendering its service as Advisor.
2. DELIVERY OF DOCUMENTS. The Fund has furnished the Advisor with copies
properly certified or authenticated of each of the following:
a. The Fund's Articles of Incorporation, filed with the State of Maryland
on April 16, 1990 and all amendments thereto (such Articles of Incorporation,
as presently in effect and as they shall from time to time be amended, are
herein called the "Articles of Incorporation");
b. The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are
herein called the "By-Laws");
c. Resolutions of the Fund's Board of Directors and shareholders
authorizing the appointment of the Advisor and approving this Agreement;
d. The Fund's Notification of Registration filed pursuant to Section
8(a) of the Investment Company Act of 1940 on Form N-8A under the 1940 Act
as filed with the Securities and Exchange Commission (the "SEC") on April
17, 1990;
e. The Fund's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended (the "1933 Act") (File No. 33-34275) and under the
1940 Act as filed with the SEC on April 17, 1990 relating to the shares of
the Fund, and all amendments thereto; and
f. The Fund's most recent prospectus (such prospectus, as presently in
effect and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.
3. DUTIES OF INVESTMENT ADVISOR. In carrying out its obligations under
Section 1 hereof, the Advisor shall:
a. supervise and manage all aspects of the Fund's operations, except for
distribution services;
b. formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies
of the Fund;
A-1
<PAGE>
c. provide the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors;
d. provide the Fund with, or obtain for it, adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery, supplies and similar items for the Fund's principal
office;
e. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund,
and whether concerning the individual issuers whose securities are included
in the Fund's portfolio or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion
in the Fund's portfolio;
f. determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Fund's Board of
Directors;
g. take all actions necessary to carry into effect the Fund's purchase
and sale programs;
h. supervise the operations of the Fund's transfer and dividend
disbursing agent;
i. provide the Fund with such administrative and clerical services for
the maintenance of certain shareholder records, as are deemed advisable by
the Fund's Board of Directors; and
j. arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filing with the SEC and state Blue Sky
authorities.
4. BROKER-DEALER RELATIONSHIPS. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Fund, broker-dealer
selection, and negotiation of its brokerage commission rates, the Advisor's
primary consideration in effecting securities transactions will be to obtain the
best price and execution on an overall basis. In performing this function the
Advisor shall comply with applicable policies established by the Board of
Directors and shall provide the Board of Directors with such reports as the
Board of Directors may require in order to monitor the Fund's portfolio
transaction activities. In certain instances the Advisor may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Fund. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Fund to
such broker-dealers other than the distributor of the Fund's shares, Alex. Brown
& Sons Incorporated ("Alex. Brown"), who also provide research or statistical
material or other services to the Fund or the Advisor. Such allocation shall be
in such amounts and proportions as the Advisor shall determine and the Advisor
will report on said allocation regularly to the Board of Directors of the Fund,
indicating the broker-dealers to whom such allocations have been made and the
basis therefor.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Advisor may consider services in connection with the sale of shares of the Fund
as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
A-2
<PAGE>
Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct Alex. Brown to execute
portfolio transactions for the Fund on an agency basis. The commissions paid to
Alex. Brown must be, as required by Rule 17e-1 under the 1940 Act, "reasonable
and fair compared to the commission, fee or other remuneration received or to
be received by other brokers in connection with comparable transactions
involving similar securities during a comparable period of time." If the
purchase or sale of securities consistent with the investment policies of the
Fund or one or more other account of the Advisor is considered at or about the
same time, transactions in such securities will be allocated among the accounts
in a manner deemed equitable by the Advisor. Alex. Brown and the Advisor may
combine such transactions, in accordance with applicable laws and regulations,
in order to obtain the best net price and most favorable execution.
The Fund will not deal with the Advisor or Alex. Brown in any transaction
in which the Advisor or Alex. Brown acts as a principal with respect to any
part of the Fund's order. If Alex. Brown is participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with policies established by the Board of Directors in compliance
with the rules of the SEC.
5. CONTROL BY BOARD OF DIRECTORS. Any management or supervisory activities
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
a. all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
b. the provisions of the Registration Statement of the Fund under the
1933 Act and the 1940 Act;
c. the provisions of the Articles of Incorporation;
d. the provisions of the By-Laws; and
e. any other applicable provisions of state and federal law.
7. EXPENSES. The expenses connected with the Fund shall be allocable
between the Fund and the Advisor as follows:
a. The Advisor shall, subject to compliance with applicable banking
regulations, furnish, at its expense and without cost to the Fund, the
services of one or more officers of the Fund, to the extent that such
officers may be required by the Fund, for the proper conduct of its
affairs.
b. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including, without limitation: payments to the Advisor and the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions, chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to
Federal, State or other governmental agencies; the costs and the expenses of
engraving or printing of certificates representing shares of the Fund; all
costs and expenses in connection with registration and maintenance of
registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees, legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the
Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
of proxy statements and reports to shareholders; fees and travel expenses of
Directors or Director members of any advisory board or committee; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not
"interested persons" (as defined in the 1940 Act) of the Fund and of
independent accountants, in connection with any
A-3
<PAGE>
matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and Directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
8. DELEGATION OF RESPONSIBILITIES. The Advisor may, but shall not be under
any duty to, perform services on behalf of the Fund which are not required by
this Agreement upon the request of the Fund's Board of Directors. Such services
will be performed on behalf of the Fund and the Advisor's charge in rendering
such services may be billed monthly to the Fund, subject to examination by the
Fund's independent accountants. Payment or assumption by the Advisor of any
Fund expense that the Advisor is not required to pay or assume under this
Agreement shall not relieve the Advisor of any of its obligations to the Fund
nor obligate the Advisor to pay or assume any similar Fund expense on any
subsequent occasions.
9. COMPENSATION. For the services to be rendered and the expenses assumed
by the Advisor hereunder, the Fund shall pay to the Advisor monthly
compensation at an annual rate of .35% of the first $1 billion of the Fund's
average net assets, .30% of the Fund's average net assets in excess of $1
billion but not exceeding $1.5 billion and .25% of the Fund's average net
assets in excess of $1.5 billion.
Except as hereinafter set forth, compensation under this Agreement shall
be calculated and accrued daily and the amounts of the daily accruals shall be
paid monthly. If this Agreement becomes effective subsequent to the first day
of a month or shall terminate before the last day of a month, compensation for
the part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Advisor's compensation for the preceding month shall be made as promptly as
possible.
10. NON-EXCLUSIVITY. The services of the Advisor to the Fund are not to be
deemed to be exclusive, and the Advisor shall be free to render investment
advisory or other services to others (including other investment companies) and
to engage in other activities, so long as its services under this Agreement are
not impaired thereby. It is understood and agreed that officers or directors of
the Advisor may serve as officers or Directors of the Fund, and that officers
or Directors of the Fund may serve as officers or directors of the Advisor to
the extent permitted by law; and that the officers and directors of the Advisor
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, officers,
trustees or directors of any other firm, trust or corporation, including other
investment companies.
11. TERM AND RENEWAL. This Agreement shall become effective as of the date
hereof and shall continue in force and effect, subject to Section 12 hereof,
for two years from the date hereof. Following the expiration of its initial
two-year term, this Agreement shall continue in force and effect from year to
year, provided that such continuance is specifically approved at least
annually:
a. (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act);
and
b. by the affirmative vote of a majority of the Directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as Directors of the Fund) by
votes cast in person at a meeting specifically called for such purpose.
12. TERMINATION. This Agreement may be terminated without the payment of
any penalty, by the Fund upon vote of the Fund's Board of Directors or a vote
of a majority of the Fund's outstanding voting securities (as defined in the
1940 Act) or by the Advisor, upon sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
13. LIABILITY OF ADVISOR. In the performance of its duties hereunder, the
Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under the Agreement.
14. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund
and of the Advisor for this purpose shall be One South Street, Baltimore,
Maryland 21202.
A-4
<PAGE>
15. QUESTIONS OF INTERPRETATION. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States courts or in the absence of any controlling decision
of any such court, by rules, regulations or orders of the SEC issued pursuant
to the 1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise the provisions of this Agreement
shall be interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective offices as of the day and year first
above written.
[SEAL] FLAG INVESTORS SHORT-INTERMEDIATE INCOME
FUND, INC.
Attest:__________________ By:_____________________________________
Name:
Title:
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest:__________________ By:_____________________________________
Name:
Title:
A-5
<PAGE>
FLAG INVESTORS
PROXY SERVICES
P.O. BOX 9148
FARMINGDALE, NY 11735
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
August 14, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FLAG INVESTORS SHORT-
INTERMEDIATE INCOME FUND, INC.
This proxy is for your use in voting the matter relating to Flag Investors
Short-Intermediate Income Fund, Inc. (the "Fund"). The undersigned
shareholder(s) of the Fund, revoking previous proxies, hereby appoint(s) Scott
J. Liotta, I. Alisa Stesch and Laurie D. Collidge 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 August 14, 1997 (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 matter set forth
below.
This proxy will be voted as indicated below. If no indication is made, this
proxy will be voted FOR the proposal 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.
<TABLE>
<CAPTION>
<S> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |X|
KEEP THIS PORTION FOR YOUR RECORDS
- ----------------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
Vote on The Proposal
To approve or disapprove a new Investment Advisory Agreement between the Fund and Investment
Company Capital Corp.
|_| For |_| Against |_| Abstain
Please print and sign your
name in the space provided to
authorize the voting of your ________________________________ ___________________________
shares as indicated and return Signature [PLEASE SIGN WITHIN BOX] Date
promptly. When signing on
behalf of a corporation,
<PAGE>
partnership, estate, trust
or in any other ___________________________ ____________________________
representative capacity, Signature (Joint Owners) Date
title. For joint accounts,
each joint owner must sign.
</TABLE>
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
