<PAGE>
As Filed With the Securities and Exchange Commission on April 28, 1998
Registration No. 33-34275
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 10 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 12 [X]
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, MD 21202
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (410) 727-1700
--------------
Edward J. Veilleux
One South Street
Baltimore, MD 21202
----------------------------------------
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
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It is proposed that the filing will become effective (check appropriate box)
- ---- immediately upon filing pursuant to paragraph (b)
X on May 1, 1998 pursuant to paragraph (b)
- ----
- ---- 60 days after filing pursuant to paragraph (a)(1)
- ---- 75 days after filing pursuant to paragraph (a)(2)
- ---- on (date) pursuant to paragraph (a) of Rule 485
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<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
(Class A Shares)
Cross Reference Sheet
April 28, 1998
<TABLE>
<CAPTION>
Registration
Statement
Items Required by Form N-1A Location
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<S> <C> <C>
Part A - Information Required in a Prospectus
- ------
Item 1. Cover Page........................................ Cover Page
Item 2. Synopsis.......................................... Fund Expenses
Item 3. Condensed Financial
Information....................................... Financial Highlights
Item 4. General Description of
Registrant........................................ Investment Program; General Information
Item 5. Management of the Fund............................ Management of the Fund; Investment
Advisor; Distributor; Custodian, Transfer
Agent and Accounting Services
Item 5A. Management's Discussion of Fund
Performance....................................... *
Item 6. Capital Stock and Other
Securities........................................ Cover Page; Dividends and Taxes; General
Information
Item 7. Purchase of Securities Being
Offered........................................... The Fund's Net Asset Value; How to Buy
Shares; Distributor
Item 8. Redemption or Repurchase.......................... How to Redeem Shares
Item 9. Pending Legal Proceedings......................... **
Part B - Information Required in a
- ------ Statement of Additional
Information
Item 10. Cover Page........................................ Cover Page
Item 11. Table of Contents................................. Table of Contents
Item 12. General Information and
History........................................... General Information and History
Item 13. Investment Objectives and
Policies.......................................... Investment Objectives and Policies
- ----------
* Information required by Item 5A is contained in the 1997 Annual Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 14. Management of the Fund............................ Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities............................. Control Persons and Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services.......................................... Investment Advisory and Other Services;
Custodian, Transfer Agent and Accounting
Services; Independent Auditors
Item 17. Brokerage Allocation.............................. Brokerage
Item 18. Capital Stock and Other
Securities........................................ Capital Stock; Semi-Annual Reports
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered........................................... Valuation of Shares and Redemption
Item 20. Tax Status........................................ Federal Tax Treatment of Dividends and
Distributions
Item 21. Underwriters...................................... Distribution of Fund Shares
Item 22. Calculation of Performance
Data.............................................. Performance Information
Item 23. Financial Statements.............................. Financial Statements
</TABLE>
Part C - Other Information
- ------
Part C contains the information required by the items
contained therein under the items set forth in the form.
<PAGE>
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[GRAPHIC OMITTED]
FLAG INVESTORS
SHORT-INTERMEDIATE INCOME FUND, INC.
(Class A Shares)
Prospectus & Application -- May 1, 1998
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This mutual fund (the "Fund") seeks a high level of current income consistent
with preservation of principal within an intermediate-term maturity structure.
Class A Shares of the Fund ("Class A Shares") are available through your
securities dealer or the Fund's transfer agent. (See "How to Buy Shares.")
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated May 1, 1998 has been filed with the Securities
and Exchange Commission (the "SEC") and is hereby incorporated by reference. It
is available upon request and without charge by calling the Fund at (800)
767-FLAG.
TABLE OF CONTENTS
Fund Expenses ...................... 1
Financial Highlights ............... 2
Investment Program ................. 3
Investment Restrictions ............ 5
The Fund's Net Asset Value ......... 5
How to Buy Shares .................. 5
How to Redeem Shares ............... 7
Telephone Transactions ............. 8
Dealer Compensation ................ 9
Dividends and Taxes ................ 9
Management of the Fund ............. 10
Investment Advisor ................. 10
Distributor ........................ 10
Custodian, Transfer Agent and
Accounting Services ............. 11
Performance Information ............ 11
General Information ................ 11
Application ........................ A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
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FUND EXPENSES
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Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) ............ 1.50%*
Maximum Sales Charge Imposed on Reinvested Dividends ..................................... None
Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower) ............................................................ 0.50%*
</TABLE>
Annual Fund Operating Expenses (as a percentage of average daily net assets):
<TABLE>
<CAPTION>
<S> <C>
Management Fees (net of fee waivers) ..................................................... 0.09%**
12b-1 Fees ................................................................................ 0.25%
Other Expenses ............................................................................ 0.36%
-----
Total Fund Operating Expenses (net of fee waivers) ....................................... 0.70%**
=====
</TABLE>
- -----------
* If you purchase $1 million or more of Class A Shares, you will not have to
pay a sales charge. You may, however, be required to pay a contingent
deferred sales charge when you redeem your shares. (See "How to Buy Shares"
and "How to Redeem Shares.")
** The Fund's investment advisor currently intends to waive its fee or to
reimburse the Fund on a voluntary basis to the extent required so that
Total Fund Operating Expenses do not exceed 0.70% of the Class A Shares'
average daily net assets. Absent fee waivers, Management Fees would be
0.35% and Total Fund Operating Expenses would be 0.96% of the Class A
Shares' average daily net assets.
<TABLE>
<S> <C> <C> <C> <C>
Example: 1 year 3 years 5 years 10 years
- -------------------------------------------------------- -------- --------- --------- ---------
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:* ............. $22 $37 $53 $101
</TABLE>
- -----------
* Absent fee waivers, expenses would be higher.
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and
expenses that you will bear, directly and indirectly. If you purchase Class A
Shares through a financial institution, you may be charged separate fees by
that institution.
The rules of the SEC require that the maximum sales charge (in the Class A
Shares' case, 1.50% of the offering price) be reflected in the above table.
However, you may qualify for reduced sales charges or no sales charge at all.
(see "How to Buy Shares") Due to the continuous nature of Rule 12b-1 fees, you
may pay more than the equivalent of the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc. if you
hold your shares for a long time. The above table has not been audited by
Deloitte & Touche LLP, the Fund's independent auditors.
1
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<PAGE>
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FINANCIAL HIGHLIGHTS
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The financial highlights included in this table have been derived from the
Fund's financial statements for the periods indicated and have been audited by
Deloitte & Touche LLP, independent auditors. The financial statements and
related notes for the fiscal year ended December 31, 1997 and the independent
auditors' report thereon of Deloitte & Touche LLP are included in the Statement
of Additional Information. Additional performance information is contained in
the Fund's Annual Report for the fiscal year ended December 31, 1997 which can
be obtained at no charge by calling the Fund at (800) 767-FLAG.
(For a Class A Share outstanding throughout each period)
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<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................ $ 10.28 $ 10.48 $ 9.62 $ 10.57 $ 10.37 $ 10.54
-------- -------- -------- --------- -------- --------
Income from Investment
Operations:
Net investment income ........... 0.61 0.63 0.62 0.57 0.57 0.63
Net realized and unrealized
gain/(loss) on investments 0.10 (0.23) 0.84 (0.92) 0.34 (0.05)
-------- --------- -------- --------- -------- ---------
Total from Investment
Operations ..................... 0.71 0.40 1.46 (0.35) 0.91 0.58
-------- --------- -------- --------- -------- ---------
Less Distributions:
Dividends from net investment
income and short-term
gains ......................... (0.60) (0.60) (0.60) (0.57) (0.69) (0.75)
Return of capital ............... -- -- -- (0.03) -- --
Distributions from net realized
long-term gains ............... -- -- -- -- (0.02) --
--------- --------- --------- --------- -------- ---------
Total distributions ............. (0.60) (0.60) (0.60) (0.60) (0.71) (0.75)
--------- --------- --------- --------- -------- ---------
Net asset value at end of
period ........................ $ 10.39 $ 10.28 $ 10.48 $ 9.62 $ 10.57 $ 10.37
========= ========= ========= ========= ======== =========
Total Return2 .................... 7.13% 4.04% 15.43% (3.32)% 8.98% 5.68%
Ratios to Average Daily Net
Assets:
Expenses3 ....................... 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
Net investment income5 .......... 5.92% 6.11% 6.00% 5.57% 5.43% 6.01%
Supplemental Data:
Net assets at end of period
(000) ......................... $ 45,569 $ 58,584 $ 67,116 $ 78,789 $112,520 $ 78,706
Portfolio turnover rate ......... 65% 42% 46% 50% 86% 107%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Period
May 13, 1991 1
through
December 31, 1991
------------------
<S> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................ $ 10.00
--------
Income from Investment
Operations:
Net investment income ........... 0.32
Net realized and unrealized
gain/(loss) on investments 0.64
--------
Total from Investment
Operations ..................... 0.96
--------
Less Distributions:
Dividends from net investment
income and short-term
gains ......................... (0.42)
Return of capital ............... --
Distributions from net realized
long-term gains ............... --
---------
Total distributions ............. (0.42)
---------
Net asset value at end of
period ........................ $ 10.54
=========
Total Return2 .................... 9.79%
Ratios to Average Daily Net
Assets:
Expenses3 ....................... 0.70%(4)
Net investment income5 .......... 5.97%(4)
Supplemental Data:
Net assets at end of period
(000) ......................... $ 64,327
Portfolio turnover rate ......... 46%
</TABLE>
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(1) Commencement of operations.
(2) Total return excludes the effect of sales loads.
(3) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 0.96%, 0.99%, 0.93%, 0.84%, 0.85%, 0.87% and
1.73% (annualized) for the years ended December 31, 1997, 1996, 1995, 1994,
1993 and 1992 and for the period ended December 31, 1991, respectively.
(4) Annualized.
(5) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 5.66%, 5.83%, 5.77%, 5.43%, 5.28%,
5.83% and 4.94% (annualized) for the years ended December 31, 1997, 1996,
1995, 1994, 1993 and 1992 and for the period ended December 31, 1991,
respectively.
2
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<PAGE>
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INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk
Considerations
The Fund's investment objective is to provide a high level of current
income consistent with preservation of principal within an intermediate-term
maturity structure.
In seeking this objective the Fund will, under normal circumstances,
invest at least 65% of its total assets in U.S. Government Securities
(including certain mortgage-backed securities) and in collateralized mortgage
obligations ("CMOs") and corporate debt securities. The Fund may also invest in
other asset-backed securities and (subject to an overall 20% limit) non-U.S.
dollar-denominated securities. Quality criteria applicable to certain of the
Fund's investments are as follows:
Type of Permitted Minimum Rating1
Investment S&P2 Moody's3
- ---------------------------------- -------------- -------------
U.S. Government and Agency
Securities ..................... N/A N/A
CMO's ............................ AAA(4) Aaa(4)
Corporate Debt ................... A or better(4) A or better(4)
Other Asset-Backed Securities. AAA(4) Aaa(4)
Securities of Non-U.S.
Governmental Issuers ............ AAA(4) Aaa(4)
Securities of Designated
International Organizations ..... AAA(4) Aaa(4)
Non-Dollar U.S. Government
Securities ..................... AAA(4) Aaa(4)
Securities of Foreign
Corporations ................... AAA(4) Aaa(4)
- ------------------------
(1) In the event any security owned by the Fund is downgraded, the Fund's
investment advisor will review the situation and take appropriate action,
but will not be automatically required to sell any such security. For a
discussion of the above ratings, see the Appendix to the Statement of
Additional Information.
(2) Standard & Poor's Ratings Group.
(3) Moody's Investors Service, Inc.
(4) Or, if unrated, determined to be of comparable quality by the Fund's
investment advisor.
Under normal circumstances the Fund's portfolio will have a dollar
weighted expected average maturity of approximately three to five years and a
maximum dollar weighted average duration of four years. For purposes of
determining the dollar weighted expected average maturity of the Fund's
portfolio, the maturity of a mortgage-backed security will be deemed to be
equal to its assumed life, in recognition of the fact that such securities are
subject to prepayment.
To meet its short-term liquidity needs, the Fund may invest in repurchase
agreements with respect to U.S. Treasury securities, in variable amount master
demand notes and in commercial paper rated A-1 by S&P or Prime-1 by Moody's, or
if not rated, determined to be of comparable quality by the Fund's investment
advisor (the "Advisor"). For temporary, defensive purposes, the Fund may invest
up to 100% of its assets in such instruments.
U.S. Government Securities. U.S. Government securities include
obligations issued and backed by the full faith and credit of the United States
Treasury, as well as obligations issued by agencies or instrumentalities of the
U.S. Government (including securities of the Government National Mortgage
Association ("GNMA")). These obligations may or may not be backed by the full
faith and credit of the U.S. Government. Certain agencies or instrumentalities
of the U.S. Government (such as the United States Postal Service) have the
right to borrow from the United States Treasury to meet their obligations, but
in other instances the obligations of the issuing agency or instrumentality
(such as the Federal Farm Credit System and the Federal National Mortgage
Association ("FNMA")) are supported only by the credit of the agency or
instrumentality.
<PAGE>
Mortgage-Backed Securities. Mortgage-backed securities are obligations backed
by mortgage loans made by lenders, such as commercial banks and savings and
loan institutions, and then assembled into pools for sale to investors. One
type of mortgage-backed security in which the Fund may invest is a pass-through
certificate that provides monthly payments to the certificate holders,
consisting of both interest and principal payments, which in effect
"pass-through" the monthly interest and principal payments made on the
underlying mortgage loans. These certificates are backed as to the timely
payment of principal and interest by GNMA, FNMA and the Federal Home Loan
Mortgage Corporation. (See "U.S. Government Securities" above.)
Mortgage-backed securities may also take the form of a CMO, a bond or
similar obligation backed by pools of mortgages. A CMO is not insured or
guaranteed by the agency or instrumentality of the U.S. Government which issues
the mortgage-backed securities that collateralize the CMO. Payment of principal
and interest on the underlying mortgages, and any reinvestment income thereon,
provide the funds to pay debt service on the CMOs. If there is a default in the
payment of principal and interest, there can be no assurance that the
underlying collateral will be sufficient to effect full repayment. CMOs may be
issued by agencies or instrumentalities of the U.S. Government, or by private
originators of, or investors in, mortgage loans.
Asset-Backed Securities. The Fund may also invest in securities backed by
assets other than mortgages, including company receivables, truck and auto
3
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<PAGE>
- --------------------------------------------------------------------------------
loans, leases, and credit card receivables, subject to certain quality
requirements. Through the use of trusts and special purpose corporations, these
types of assets are being securitized in pass-through structures similar to the
mortgage pass-through structure or in pay-through structures similar to the CMO
structure, both as described above. In general, the collateral supporting
asset-backed securities is of shorter maturity than mortgage loans and is less
likely to experience substantial prepayments. However, asset-backed securities
do not generally have the benefit of the same security interest in the related
collateral as either mortgage-backed securities or CMOs, and may therefore
present certain risks not associated with other such securities.
Variable Amount Master Demand Notes. Variable amount master demand notes
are unsecured demand notes that permit investment of fluctuating amounts of
money at variable rates of interest pursuant to arrangements with issuers who
meet the quality criteria discussed above. All variable amount master demand
notes acquired by the Fund will be payable within a prescribed notice period
not to exceed seven days.
Non-U.S. Dollar-Denominated Securities. Non-U.S. dollar-denominated
securities include debt obligations denominated in foreign or composite
currencies (such as the European Currency Unit) issued by (i) foreign national,
provincial, state or municipal governments or their political subdivisions; (ii)
international organizations designated or supported by governmental entities
(e.g., the World Bank and the European Steel and Coal Community); (iii) the U.S.
Government (non-dollar securities only); and (iv) foreign corporations.
Forward Foreign Currency Exchange Transactions. The Fund is authorized to
use forward foreign currency exchange contracts to protect against uncertainty
in the level of future foreign exchange rates. A forward foreign currency
exchange contract is an obligation to purchase or sell a specific currency at a
future date at a price set at the time the contract is entered into. The Fund
may use such forward contracts only under two circumstances. First, if the
Advisor believes the Fund should fix the U.S. dollar price of the foreign
security when the Fund enters into a contract for the purchase or sale, at a
future date, of a security denominated in a foreign currency. Second, if the
Advisor believes the Fund should hedge against risk of loss in the value of
those portfolio securities denominated in foreign currencies.
Rule 144A Securities. Subject to the Fund's overall investment
limitations on investing in illiquid securities and restricted securities, the
Fund may purchase Rule 144A Securities. Rule 144A Securities are restricted
securities in that they have not been registered under the Securities Act of
1933, but they may be traded between certain qualified institutional investors,
including investment companies. The presence or absence of a secondary market
in these securities may affect their value. The Fund's Board of Directors has
established guidelines and procedures to be utilized to determine the liquidity
of such securities.
<PAGE>
Repurchase Agreements. The Fund may agree to purchase U.S. Treasury
securities from creditworthy financial institutions, such as banks and
broker-dealers, subject to the seller's agreement to repurchase the securities
at an established time and price. Default by or bankruptcy proceedings with
respect to the seller may expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
Purchase of When-Issued Securities. The Fund may purchase securities, at
their current market value, on a forward commitment or "when-issued" basis. A
segregated account of the Fund, consisting of cash or other liquid securities
equal at all times to the amount of the when-issued commitments will be
established and maintained by the Fund at the Fund's custodian. While the Fund
will purchase securities on a forward commitment or "when-issued" basis only
with the intention of acquiring the securities, the Fund may choose to sell the
securities before the settlement date. The value of securities so purchased or
sold is subject to market fluctuation and no interest accrues to the purchaser
during this period.
Risk Considerations. The market value of the Fund's debt securities will
change in response to interest rate changes and other factors. During periods
of falling interest rates, the value of outstanding debt securities generally
rises. Conversely, during periods of rising interest rates, the value of such
securities generally declines. Prices of longer term securities generally
increase or decrease more sharply in response to interest rate changes than
those of shorter term securities.
Mortgage-backed securities are subject to special risks due to the
possibility that prepayments on home mortgages will alter their cash flow.
During periods of declining interest rates, prepayments are passed through to
holders of mortgage-backed securities who may then have to reinvest at lower
interest rates. In periods of rising interest rates, prepayments tend to slow,
with the result that the average life of mortgage-backed securities may be
lengthened. Consequently, the possibility of prepayment makes it difficult to
assess the actual maturity and duration of mortgage-backed securities, which,
in turn, makes it difficult to predict both the direction and magnitude of
changes in the value of mortgage-backed securities in response to changes in
interest rates.
4
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<PAGE>
- --------------------------------------------------------------------------------
Purchasing foreign securities may subject the Fund to additional risks
associated with the holding of property abroad. Such risks include future
political and economic developments, currency fluctuations, the possible
withholding of tax payments, the possible seizure or nationalization of foreign
assets, the possible establishment of exchange controls or the adoption of
other foreign government restrictions that might adversely affect the payment
of principal or interest on foreign securities held by the Fund.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following investment restrictions numbered 1 and 2 are matters of
fundamental policy and may not be changed without shareholder approval.
Investment restriction number 3 may be changed by a vote of the majority of the
Board of Directors. The Fund will not:
1) Concentrate 25% or more of its total assets in securities of issuers in any
one industry (for these purposes the U.S. Government and its agencies and
instrumentalities are not considered an issuer);
2) Invest more than 5% of its total assets in the securities of any single
issuer or acquire more than 10% of the voting securities of any issuer (for
these purposes the U.S. Government and its agencies and instrumentalities
are not considered an issuer); and
3) Invest more than 10% of the Fund's net assets in illiquid securities,
including repurchase agreements with maturities of greater than seven days.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The following sections describe how to buy and redeem shares of the Fund.
The price you pay or receive is based on the Fund's net asset value per
share. When you buy Class A Shares, the price you pay may be increased by a
sales charge. When you redeem Class A Shares, the price you receive may be
reduced by a sales charge. Read the sections on how to buy shares and how to
redeem shares for details on how and when these charges may or may not be
imposed.
The net asset value per share of a class is determined on each business
day as of the close of trading on the New York Stock Exchange (ordinarily 4:00
p.m. Eastern Time). It is calculated by subtracting the liabilities
attributable to a class from its proportionate share of the Fund's assets and
dividing the result by the outstanding shares of the class.
In valuing the Fund's assets, its investments are priced at their market
value which is normally based on current prices but which may be determined
according to "fair value" procedures approved by the Fund's Board of Directors.
<PAGE>
You may buy or redeem shares on any day on which the New York Stock
Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that
day, the price you pay or receive will be based on the next Business Day's net
asset value per share.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may buy Class A Shares through your securities dealer or through any
financial institution that is authorized to act as a shareholder servicing
agent. Contact them for details on how to enter and pay for your order. You may
also buy Class A Shares by sending your check (along with a completed
Application Form) directly to the Fund. The Application Form, which includes
instructions, is attached to this Prospectus.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
5
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<PAGE>
- --------------------------------------------------------------------------------
o If you are investing in an IRA account, your initial investment may be
as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your
initial investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be as low as $250. If you participate in the
monthly plan, your subsequent investments may be as low as $100. If
you participate in the quarterly plan, your subsequent investments
may be as low as $250. Refer to the section on the Fund's Automatic
Investing Plan for details.
o There is no minimum investment requirement for qualified retirement
plans such as 401(k), pension or profit sharing plans.
Purchase Price
The price you pay to buy Class A Shares will be the Fund's offering price
which is calculated by adding any applicable sales charges to the net asset
value per share. The amount of any sales charge included in your purchase price
will be according to the following schedule.
Class A Sales
Charge as % of
------------------------
Offering Net Amount
Amount of Purchase Price Invested
- ----------------------------------------------------------
Less than $100,000............ 1.50% 1.52%
$ 100,000 - $499,999......... 1.25% 1.27%
$ 500,000 - $999,999......... 1.00% 1.01%
$1,000,000 and over .......... None None
- ----------------------------------------------------------
Although you do not pay an initial sales charge when you invest
$1,000,000 or more in Class A Shares, you may have to pay a sales charge when
you redeem your shares. Refer to the section on how to redeem shares for
details.
The sales charge you pay on your current purchase of Class A Shares may
be reduced under the circumstances listed below.
Rights of Accumulation. If you are also purchasing Class A shares of this
or any other Flag Investors fund or if you already have investments in Class A
or Class D shares, you may combine the value of your purchases with the value
of your existing investments to determine whether you qualify for a reduced
sales charge. (For this purpose your existing investments will be valued at the
higher of cost or current value.) You may also combine your purchases and
investments with those of your spouse and your children under the age of 21 for
this purpose. You must be able to provide sufficient information to verify that
you qualify for this right of accumulation.
<PAGE>
Letter of Intent. If you anticipate making additional purchases of Class
A Shares over the next 13 months, you may combine the value of your current
purchase with the value of your anticipated purchases to determine whether you
qualify for a reduced sales charge. You will be required to sign a letter of
intent specifying the total value of your anticipated purchases and to
initially purchase at least 5% of the total. When you make each purchase during
the period, you will pay the sales charge applicable to their combined value.
If, at the end of the 13-month period, the total value of your purchases is
less than the amount you indicated, you will be required to pay the difference
between the sales charges you paid and the sales charges applicable to the
amount you actually did purchase. Some of the shares you own will be redeemed
to pay this difference.
Purchases at Net Asset Value. You may buy Class A Shares without paying a
sales charge under the following circumstances:
1) If you are buying shares in any of the following types of accounts:
(i) A fiduciary or advisory account with a bank, bank trust department,
registered investment advisory company, financial planner or
securities dealer purchasing shares on your behalf. To qualify for
this provision you must be paying an account management fee for the
fiduciary or advisory services. You may be charged an additional fee
by your securities dealer or servicing agent if you buy shares in this
manner;
(ii) A qualified retirement plan;
(iii) A Flag Investors fund payroll savings plan program.
2) If you are reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the last 90 days.
3) If you are exchanging an investment in another Flag Investors fund for an
investment in this Fund (see "Purchases by Exchange" for a description of
the conditions).
4) If you are a current or retired Director of the Fund, a director, an
employee or a member of the immediate family of an employee of any of the
following (or their respective affiliates): the Distributor, the Advisor
and any broker-dealer authorized to sell shares of the Fund.
Purchases by Exchange
You may exchange shares of any other Flag Investors fund with the same or
higher sales charge structure for an equal dollar amount of Class A Shares,
without payment of the sales charges described above or
6
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<PAGE>
- --------------------------------------------------------------------------------
any other charge. If you own Flag Investors Cash Reserve Prime Class A Shares,
you may exchange into Class A Shares upon payment of the difference in sales
charges. You may enter both your redemption and purchase orders on the same
Business Day or, if you have already redeemed the shares of the other fund, you
may enter your purchase order within 90 days of the redemption. The Fund may
modify or terminate these offers of exchange at any time on 60 days' prior
written notice. You may request an exchange through your securities dealer or
servicing agent. Contact them for details on how to enter your order. If your
shares are in an account with the Fund's Transfer Agent, you may also request
an exchange directly through the Transfer Agent by mail or by telephone.
Investing Regularly
You may make regular investments in the Fund through any of the following
methods. If you wish to enroll in any of these programs or if you need any
additional information, complete the appropriate section of the attached
Application Form or contact your securities dealer, your servicing agent, or
the Transfer Agent.
Automatic Investing Plan. You may elect to make a regular monthly or
quarterly investment in Class A Shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
money is received by the Transfer Agent, it will be invested in Class A Shares
at that day's offering price. Either you or the Fund may discontinue your
participation upon 30 days' notice.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares at net
asset value. You may elect to receive your distributions in cash or to have
your distributions invested in shares of other Flag Investors funds. To make
either of these elections or to terminate automatic reinvestment, complete the
appropriate section of the attached Application Form or notify the Transfer
Agent, your securities dealer or your servicing agent at least five days before
the date on which the next dividend or distribution will be paid.
Systematic Purchase Plan. You may also purchase Class A Shares through a
Systematic Purchase Plan. Contact your securities dealer or servicing agent for
details.
<PAGE>
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem Class A Shares through your securities dealer or servicing
agent. Contact them for details on how to enter your order and for information
as to how you will be paid. If your shares are in an account with the Fund, you
may also redeem shares by contacting the Transfer Agent by mail or (if you are
redeeming less than $50,000) by telephone. The Transfer Agent will mail your
redemption check within seven days after it receives your order in proper form.
Refer to the section on telephone transactions for more information on this
method of redemption.
Your securities dealer, your servicing agent or the Transfer Agent may
require the following documents before they redeem your shares:
1) A letter of instructions specifying your account number and the number of
shares or dollar amount you wish to redeem. The letter must be signed by
all owners of the shares exactly as their names appear on the account.
2) If you are redeeming more than $50,000, a guarantee of your signature by a
member of the Federal Deposit Insurance Corporation, a trust company,
broker, dealer, securities exchange or association, clearing agency,
savings association or (if authorized by state law) credit union.
3) Any stock certificates representing the shares you are redeeming. The
certificates must be either properly endorsed or accompanied by a duly
executed stock power.
4) Any additional documents that may be required if your account is in the
name of a corporation, partnership, trust or fiduciary.
Redemption Price
The price you receive when you redeem shares will be the net asset value
of the shares you are redeeming less any applicable sales charge. The amount of
any sales charge deducted from your redemption price will be determined
according to the following schedule.
Years Since Purchase
Sales Charge as a Percentage of
the Dollar Amount Subject to
Charge
- -----------------------------------------
First ........................... 0.50%*
Second .......................... 0.50%*
Thereafter ...................... None
- -----------------------------------------
* You will pay a sales charge when you redeem Class A Shares only if you bought
those shares at net asset value as part of an investment of $1,000,000 or
more.
7
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<PAGE>
- --------------------------------------------------------------------------------
Determination of Sales Charge. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:
1) The sales charge is applied to the lesser of the cost of the shares or
their current market value.
2) No sales charge will be applied to shares you own as a result of
reinvesting dividends or distributions.
3) If you have purchased shares at various times, the sales charge will be
applied first to shares you have owned for the longest period of time.
4) If you acquired the shares through an exchange of shares of another Flag
Investors fund, the period of time you held the original shares will be
combined with the period of time you held the shares being redeemed to
determine the years since purchase.
Waiver of Sales Charge. You may redeem shares without paying a sales
charge under any of the following circumstances:
1) If you are exchanging your shares for shares of another Flag Investors fund
with the same sales charge structure.
2) If your redemption represents the minimum required distribution from an
individual retirement account or other retirement plan.
3) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under the
following conditions:
(i) The account is registered in your name either individually, as a
joint tenant with rights of survivorship, as a participant in
community property, or as a minor child under the Uniform Gifts or
Uniform Transfers to Minors Acts.
(ii) Either you or your representative notifies your securities dealer,
servicing agent or the Transfer Agent that such circumstances exist.
4) If your original investment was at least $3,000,000 and your securities
dealer has agreed to return to the Distributor any payments received when
you bought your shares.
<PAGE>
Other Redemption Information
If you own Fund shares having a value of at least $10,000, you may
arrange to have some of your shares redeemed monthly or quarterly under the
Fund's Systematic Withdrawal Plan. Each redemption under this plan involves all
the tax and sales charge implications normally associated with Fund
redemptions. Contact your securities dealer, your servicing agent or the
Transfer Agent for information on this plan.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be paid to you by check, whether or not that is the payment
option you have selected.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are automatically entitled
to telephone transaction privileges unless you specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information at the
time your account is opened and prior to effecting each telephone transaction.
You may be required to provide additional telecopied instructions. If these
procedures are employed, neither the Fund nor the Transfer Agent will bear any
liability for following instructions received by telephone that they reasonably
believe to be genuine. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail. If you hold your shares in certificate form,
you may not exchange or redeem them by telephone.
8
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<PAGE>
- --------------------------------------------------------------------------------
DEALER COMPENSATION
- --------------------------------------------------------------------------------
Your securities dealer is paid a commission when you buy shares and is
paid a servicing fee for as long as you hold your shares.
Dealer Compensation as
Amount of Purchase a % of Offering Price
- ---------------------------------------------------------
Less than $100,000 ........ 1.25%
$ 100,000 - $499,999......... 1.00%
$ 500,000 - $999,999......... 0.75%
$1,000,000 and over .......... *
- ---------------------------------------------------------
* Your securities dealer may be paid up to 0.50% of the Offering Price
In addition to the commissions shown above, your securities dealer may be
paid an annual fee equal to 0.25% of the value of your Class A Shares for as
long as you hold them. The annual fee will begin when you buy your shares.
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income (including net short-term capital gains) in
the form of monthly dividends. The Fund may distribute to shareholders any net
capital gains (net long-term capital gains less net short-term capital losses)
on an annual basis, or alternatively, may elect to retain net capital gains and
pay tax thereon.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences
affecting the Fund and its shareholders is based on current tax laws and
regulations, which may be changed by legislative, judicial, or administrative
action. No attempt has been made to present a detailed explanation of the
federal, state or local tax treatment of the Fund or the shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Accordingly, you are advised to consult with your tax advisor regarding
specific questions as to federal, state and local taxes. The Statement of
Additional Information sets forth further information regarding taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. Generally, as long as the Fund qualifies for this tax treatment, it
will not pay U.S. federal income tax on amounts distributed to shareholders.
Unless you are otherwise exempt, you will pay income or capital gains tax on
the amounts distributed to you, regardless of whether such distributions are
paid in cash or reinvested in additional Class A Shares.
Capital gains distributions from the Fund are classified as either
short-term, long-term or mid-term depending upon how long the Fund held the
securities it sold to generate the gains. You will be taxed on the
distributions according to the category stipulated by the Fund regardless of
how long you have held your Fund shares. You will be taxed on all other income
distributions as ordinary income. Distributions from the Fund generally will
not qualify for the corporate dividends received deduction.
Ordinarily, you should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
December of one year but paid in January of the following year, will be deemed
for tax purposes to have been received by you and paid by the Fund in the year
in which the dividends were declared.
The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
You will be advised annually as to the federal income tax consequences of
distributions made during the year.
The sale, exchange or redemption of Class A Shares is a taxable event for
you.
9
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<PAGE>
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MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, distributor, custodian and transfer
agent. The day to day operations of the Fund are delegated to the Fund's
executive officers, to the Advisor and to the Distributor. A majority of the
Directors are not affiliated with the Advisor or the Distributor.
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor"), an indirect
subsidiary of Bankers Trust Corporation, is the Fund's investment advisor. ICC
is the investment advisor to mutual funds with approximately $6.5 billion of net
assets as of December 31, 1997. In addition to this Fund, these include other
funds in the Flag Investors family and BT Alex. Brown Cash Reserve Fund, Inc.
ICC is responsible for the general management of the Fund, as well as for
decisions to buy and sell securities for the Fund, for broker-dealer selection,
and for negotiation of commission rates.
As compensation for its services for the fiscal year ended December 31,
1997, ICC received from the Fund a fee (net of fee waivers) equal to 0.09% of
the Fund's average daily net assets. ICC currently intends to waive, on a
voluntary basis, its annual fee to the extent necessary so that the Fund's
annual expenses do not exceed 0.70% of the Class A Shares' average daily net
assets.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. An affiliate of ICC provides custody
services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
Portfolio Managers
Messrs. M. Elliott Randolph, Jr., and Paul D. Corbin have shared primary
responsibility for managing the Fund's assets since inception.
Mr. Randolph has nearly 24 years of investment experience and has been a
portfolio manager with the Advisor since 1991. From 1988-1991 he was a
Principal with Monument Capital Management, Inc.
Mr. Corbin has 20 years of investment experience and has been a portfolio
manager with the Advisor since 1991. From 1984-1991 he served as the Senior
Vice President in charge of Fixed Income Portfolio Management at First National
Bank of Maryland.
<PAGE>
DISTRIBUTOR
- --------------------------------------------------------------------------------
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has
served as distributor of each class of the Fund's shares since August 31, 1997.
ICC Distributors is a registered broker-dealer that offers distribution
services to a variety of registered investment companies including other funds
in the Flag Investors family of funds and BT Alex. Brown Cash Reserve Fund,
Inc. ICC Distributors is not affiliated with the Advisor.
The Fund has adopted a Distribution Agreement and related Plan of
Distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended. In addition, the Fund may enter into agreements with
certain financial institutions, including certain banks and BT Alex. Brown, to
provide shareholder services, pursuant to which the Distributor may allocate
on a proportional basis up to all of its distribution fee as compensation for
such financial institutions' ongoing shareholder services. Such financial
institutions may charge you separately for these services.
As compensation for providing distribution services for the Class A
Shares for the period from August 31, 1997 through December 31, 1997, the
Distributor received a fee equal to 0.25% (annualized) of the average daily net
assets of the Class A Shares.
Payments under the Plan are made as described above regardless of the
Distributor's actual cost of providing distribution services and may be used to
pay the Distributor's overhead expenses. If the cost of providing distribution
services to the Fund is less than the payments received, the unexpended portion
of the distribution fees may be retained as profit by the Distributor. ICC
Distributors or the Advisor and their respective affiliates may make payments
from their own
10
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<PAGE>
- --------------------------------------------------------------------------------
resources to securities dealers and servicing agents. Payments by the
Distributor will include additional dis-counts or promotional incentives in the
form of cash or other compensation (including merchandise or travel).
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services to the Fund for the fiscal year ended
December 31, 1997, ICC received a fee equal to 0.08% of the Fund's average
daily net assets. Bankers Trust Company, a subsidiary of Bankers Trust
Corporation, acts as custodian of the Fund's assets. (See the Statement of
Additional Information.)
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its performance including
comparisons to other mutual funds with similar investment objectives and to
relevant indices. Any quotations of yield of the Fund will be determined by
dividing the net investment income earned by the Fund during a 30-day period by
the maximum offering price per share on the last day of the period and
annualizing the result on a semi-annual basis. All advertisements of
performance will show the average annual total return, net of the Fund's
maximum sales charge, over one-, five- and ten-year periods or, if such periods
have not yet elapsed, shorter periods corre-sponding to the life of the Fund.
Such total return quotations will be computed by finding average annual
compounded rates of return over such periods that would equate an assumed
initial investment of $1,000 to the ending redeemable value, net of the maximum
sales charge and other fees according to the required standardized calculation.
The standardized calculation is required by the SEC to provide consistency and
comparability in investment company advertising and is not equivalent to a
yield calculation.
<PAGE>
If the Fund compares its performance to other funds or to relevant
indices, the Fund's performance will be stated in the same terms in which such
comparative data and indices are stated, which is normally total return rather
than yield. For these purposes, the performance of the Fund, as well as the
performance of such investment companies or indices, may not reflect sales
charges, which, if reflected, would reduce performance results.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services that monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Lehman Brothers
Intermediate Aggregate Bond Index, the Merrill Lynch 1-3 Year Treasury Index
and the Lehman Brothers Government Corporate Intermediate-Term Bond Index. The
Fund may also use total return performance data as reported in national
financial and industry publications that monitor the performance of mutual
funds such as Money Magazine, Forbes, Business Week, Barron's, Investor's
Daily, IBC/Donoghue's Money Fund Report and The Wall Street Journal.
Performance will fluctuate and any statement of performance should not be
considered as representative of the future performance of the Fund. Performance
is generally a function of the type and quality of instruments held by the
Fund, operating expenses and market conditions. Any fees charged by your bank
with respect to the account through which your Class A Shares may be purchased,
although not included in calculations of performance, will reduce your
performance results.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Description of Shares
The Fund is an open-end diversified management investment company
organized under the laws of the State of Maryland on April 16, 1990 and is
authorized to issue 60 million shares of capital stock, par value of $.001 per
share, all of which shares are designated common stock. Each share has one vote
and is entitled to dividends and distributions when and if declared by the
Fund. In the event of liquidation or dissolution of the Fund, each share is
entitled to its pro rata portion of the Fund's assets after all debts and
expenses have been paid. The fiscal year-end of the Fund is December 31. Prior
to February 14, 1997, the Fund was known as Flag Investors Intermediate-Term
Income Fund, Inc.
11
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<PAGE>
- --------------------------------------------------------------------------------
The Board of Directors is authorized to establish additional series of
shares of capital stock, each of which would evidence interests in a separate
portfolio of securities, and separate classes of each series of the Fund. The
shares offered by this Prospectus have been designated "Flag Investors
Short-Intermediate Income Fund Class A Shares." The Board has no present
intention of establishing any additional series of the Fund but the Fund has
another class of shares, "Flag Investors Short-Intermediate Income Fund
Institutional Shares." Additional information concerning this class may be
obtained by calling the Fund at (800) 767-FLAG. Different classes of the Fund
may be offered to certain investors and holders of such shares may be entitled
to certain exchange privileges not offered to Class A Shares. All classes of
the Fund share a common investment objective, portfolio of investments and
advisory fee, but the classes may have different sales load structures,
distribution fees or other expenses, and accordingly, the net asset value per
share of the classes may differ at times.
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders, unless
required by Maryland law. Shareholders of the Fund retain the right, under
certain circumstances to request that a meeting of 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 the shareholder communications in
connection with the meeting.
Reports
You will be furnished with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent auditors, Deloitte & Touche LLP.
Shareholder Inquiries
If you have questions concerning your Class A Shares, contact the
Transfer Agent at (800) 553-8080, the Fund at (800) 767-FLAG, or your
securities dealer or servicing agent.
12
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<PAGE>
- --------------------------------------------------------------------------------
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
(Class A Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Distributor Independent Auditors
ICC DISTRIBUTORS, INC. DELOITTE & TOUCHE LLP
P.O. Box 7558 117 Campus Drive
Portland, Maine 04101 Princeton, New Jersey 08540
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 2000 One Logan Square
New York, New York 10006 Philadelphia, Pennsylvania 19103
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
13
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<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "Flag Investors Short-Intermediate
Income Fund, Inc." and mail with this Application to:
Flag Investors Funds
P.O. Box 419663
Kansas City, MO 64141-6663
Attn: Flag Investors Short-Intermediate Income Fund, Inc.
For assistance in completing this Application please call: 1-800-553-8080,
Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
To open an IRA account, please call 1-800-767-3524 for an IRA information kit.
I enclose a check for $______ payable to "Flag Investors Short-Intermediate
Income Fund, Inc." for the purchase of Class A Shares of the Fund. The minimum
initial purchase is $2,000, except that the minimum initial purchase for
shareholders of any other Flag Investors Fund or class is $500 and the minimum
initial purchase for participants in the Fund's Automatic Investing Plan is
$250. The Fund reserves the right not to accept checks for more than $50,000
that are not certified or bank checks.
Your Account Registration (Please Print)
Existing Account No., if any:
Individual or Joint Tenant
- -------------------------------------------------------
First Name Initial Last Name
- -------------------------------------------------------
Social Security Number
- -------------------------------------------------------
Joint Tenant Initial Last Name
Corporations, Trusts, Partnerships, etc.
- -------------------------------------------------------
Name of Corporation, Trust or Partnership
- ----------------------- ------------------------
Tax ID Number Date of Trust
- -------------------------------------------------------
Name of Trustees (If to be included in the Registration)
- --------------------------------------------------------
For the Benefit of
<PAGE>
Gifts to Minors
- --------------------------------------------------------
Custodian's Name (only one allowed by law)
- --------------------------------------------------------
Minor's Name (only one)
- -------------------------------------------------------------------------------
Social Security Number of Minor Minor's Date of Birth (Mo./Day/Yr.)
under the ------------------- Uniform Gifts to Minors Act
State of Residence
Mailing Address
- ---------------------------------------------------------
Street
- ---------------------------------------------------------
City State Zip
( )
- --------------------------------------------------------
Daytime Phone
Letter of Intent (Optional)
|B) I agree to the Letter of Intent and Escrow Agreement set forth in the
accompanying prospectus. Although I am not obligated to do so, I intend to
invest over a 13-month period in Class A Shares of Flag Investors
Short-Intermediate Income Fund, Inc. in an aggregate amount at least equal to:
/ / $100,000 / / $500,000 / / $1,000,000
Right of Accumulation (Optional)
List the Account numbers of other Flag Investors Funds that you or your
immediate family already own that qualify for this purchase.
Fund Name Account No. Owner's Name Relationship
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution Options
Please check the appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Class A Shares at no sales
charge.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional
shares
[ ] Paid in Cash [ ] Paid in Cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
A-1
<PAGE>
Automatic Investing Plan (Optional)
[ ] I authorize you as Agent for the Automatic Investing Plan to automatically
invest $---------- for me, on a monthly or quarterly basis, on or about the
20th of each month or if quarterly, the 20th of January, April, July and
October, and to draw a bank draft in payment of the investment against my
checking account. (Bank drafts may be drawn on commercial banks only.)
Minimum Initial Investment: $250 [ ] Monthly ($100 minimum) [ ] Quarterly
($250 minimum)
Please attach a voided check.
Subsequent Investments (check one):
- ---------------------------------- -------------------------------------------
Bank Name Depositor's Signature Date
- ---------------------------------- -------------------------------------------
Existing Flag Investors Fund Depositor's Signature Date
Account No., if any (if joint acct., both must sign)
Systematic Withdrawal Plan (Optional)
|B) Beginning the month of ---------- , 19- please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of $---------- ,
from Class A Shares that I own, payable to the account registration address as
shown above. (Participation requires minimum account value of $10,000.)
Frequency (check one): [ ] Monthly [ ] Quarterly (January, April,
July and October)
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect to
other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/We do not want: [ ] Telephone exchange privileges
[ ] Telephone redemption privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a pre-designated bank account, please
provide the following information:
Bank: ------------------------- Bank Account
No.: -----------------------------
Address: ------------------------- Bank Account
Name: -----------------------------
-------------------------
<PAGE>
Signature and Taxpayer Certification
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] If no Tax ID Number of Social Security Number has been provided above,
I have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a
penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-553-8080).
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes:________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
I am of legal age in the state of my residence. I have received a copy of
the Fund's prospectus. I acknowledge that the telephone redemption and exchange
privileges are automatic and will be effective as described in the Fund's
current prospectus (see "Telephone Transactions"). I also acknowledge that I
may bear the risk of loss in the event of fraudulent use of such privileges. If
I do not want telephone redemption or exchange privileges, I have so indicated
on this Application.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- -------------------------------- -------------------------------------------
Signature Date Signature (if joint acct., Date
both must sign)
- -------------------------
For Dealer Use Only
- -------------------------
Dealer's Name: ________________________ Dealer Code:_________________________
Dealer's Address:______________________ Branch Code:_________________________
Representative:________________________ Rep. No.:____________________________
- --------------------------
A-2
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
(Institutional Shares)
Cross Reference Sheet
April 28, 1998
<TABLE>
<CAPTION>
Registration
Statement
Items Required by Form N-1A Location
- ---------------------------------------------------------------------- -------------
<S> <C> <C>
Part A - Information Required in a Prospectus
Item 1. Cover Page........................................ Cover Page
Item 2. Synopsis.......................................... Fund Expenses
Item 3. Condensed Financial
Information....................................... Financial Highlights
Item 4. General Description of
Registrant........................................ Investment Program; General Information
Item 5. Management of the Fund............................ Management of the Fund; Investment
Advisor; Distributor; Custodian, Transfer
Agent and Accounting Services
Item 5A. Management's Discussion of Fund
Performance....................................... *
Item 6. Capital Stock and Other
Securities........................................ Cover Page; Dividends and Taxes; General
Information
Item 7. Purchase of Securities Being
Offered........................................... The Fund's Net Asset Value; How to Buy
Institutional Shares; Distributor
Item 8. Redemption or Repurchase.......................... How to Redeem Institutional Shares
Item 9. Pending Legal Proceedings......................... **
Part B - Information Required in a
Statement of Additional
Information
Item 10. Cover Page........................................ Cover Page
Item 11. Table of Contents................................. Table of Contents
Item 12. General Information and
History........................................... General Information and History
Item 13. Investment Objectives and
Policies.......................................... Investment Objectives and Policies
______________
* Information required by Item 5A is contained in the 1997 Annual Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 14. Management of the Fund............................ Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities............................. Control Persons and Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services.......................................... Investment Advisory and Other Services;
Custodian, Transfer Agent and Accounting
Services; Independent Accountants
Item 17. Brokerage Allocation.............................. Brokerage
Item 18. Capital Stock and Other
Securities........................................ Capital Stock; Semi-Annual Reports
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered........................................... Valuation of Shares and Redemption
Item 20. Tax Status........................................ Federal Tax Treatment of Dividends and
Distributions
Item 21. Underwriters...................................... Distribution of Fund Shares
Item 22. Calculation of Performance
Data.............................................. Performance Information
Item 23. Financial Statements.............................. Financial Statements
</TABLE>
Part C - Other Information
- ------
Part C contains the information required by the items
contained therein under the items set forth in the form.
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
FLAG INVESTORS
SHORT-INTERMEDIATE INCOME FUND, INC.
(Institutional Shares)
Prospectus & Application -- May 1, 1998
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") seeks a high level of current income consistent
with preservation of principal within an intermediate-term maturity structure.
Institutional Shares of the Fund ("Institutional Shares") are available through
your securities dealer or the Fund's transfer agent and may be purchased only
by eligible institutions, certain qualified retirement plans, or investment
advisory affiliates of BT Alex. Brown Incorporated ("BT Alex. Brown"). (See
"How to Buy Institutional Shares.")
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated May 1, 1998 has been filed with the Securities
and Exchange Commission (the "SEC") and is hereby incorporated by reference. It
is available upon request and without charge by calling the Fund at
(800) 767-FLAG.
TABLE OF CONTENTS
Fund Expenses .............................. 1
Financial Highlights ....................... 2
Investment Program ......................... 3
Investment Restrictions .................... 5
The Fund's Net Asset Value ................. 5
How to Buy Institutional Shares ............ 5
How to Redeem Institutional Shares ......... 6
Telephone Transactions ..................... 6
Dividends and Taxes ........................ 6
Management of the Fund ..................... 7
Investment Advisor ......................... 7
Distributor ................................ 8
Custodian, Transfer Agent and
Accounting Services ..................... 8
Performance Information .................... 8
General Information ........................ 9
Application ................................ A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases ................................... None
Maximum Sales Charge Imposed on Reinvested Dividends ........................ None
Maximum Deferred Sales Charge ............................................... None
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees (net of fee waivers) ........................................ 0.09%*
12b-1 Fees .................................................................. None
Other Expenses .............................................................. 0.36%
-----
Total Fund Operating Expenses (net of fee waivers) .......................... 0.45%*
=====
</TABLE>
- -----------
* The Fund's investment advisor currently intends to waive its fee or reimburse
the Fund on a voluntary basis, to the extent required so that Total Fund
Operating Expenses do not exceed 0.45% of the Institutional Shares' average
daily net assets. Absent fee waivers, Management Fees would be 0.35% and
Total Fund Operating Expenses would be 0.72% of the Institutional Shares'
average daily net assets.
<TABLE>
<S> <C> <C> <C> <C>
Example: 1 year 3 years 5 years 10 years
- -------- ------ ------- ------- --------
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period:* ...................... $5 $14 $25 $57
</TABLE>
- -----------
* Absent fee waivers, expenses would be higher.
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the above table is to describe the various costs and
expenses that you will bear indirectly when you invest in Institutional Shares.
If you purchase Institutional Shares through a financial institution, you may
be charged separate fees by the financial institution.
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights included in this table have been derived from the
Fund's financial statements for the periods indicated and have been audited by
Deloitte & Touche LLP, independent auditors. The financial statements and
related notes for the fiscal year ended December 31, 1997 and the report
thereon of Deloitte & Touche LLP are included in the Statement of Additional
Information. Additional performance information is contained in the Fund's
Annual Report for the fiscal year ended December 31, 1997 which can be obtained
at no charge by calling the Fund at (800) 767-FLAG.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
Ended For the Period
December 31, November 2, 1995(1)
------------------------- through
1997 1996 December 31,1995
----------- ----------- --------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............................ $ 10.38 $ 10.58 $ 10.42
------- ------- --------
Income from Investment Operations:
Net investment income ............................................. 0.61 0.59 0.09
Net realized and unrealized gain/(loss) on investments ............ 0.13 ( 0.17) 0.12
------- ------- --------
Total from Investment Operations .................................. 0.74 0.42 0.21
Less Distributions:
Dividends from net investment income and short-term gains ......... ( 0.62) ( 0.62) ( 0.05)
------- ------- --------
Net asset value at end of period .................................. $ 10.50 $ 10.38 $ 10.58
======= ======= ========
Total Return ...................................................... 7.40% 4.20% 12.47%(2)
Ratios to Average Daily Net Assets:
Expenses(3) ....................................................... 0.45% 0.45% 0.45%(2)
Net investment income(4) .......................................... 6.17% 6.35% 6.52%(2)
Supplemental Data:
Net assets at end of period (000) ................................. $32,056 $17,507 $ 2,186
Portfolio turnover rate ........................................... 65% 42% 46%
</TABLE>
- --------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Annualized.
(3) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 0.72%, 0.76% and 0.72% (annualized) for the
years ended December 31, 1997 and 1996 and the period ended December 31,
1995, respectively.
(4) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 5.90%, 6.04% and 6.27%
(annualized) for the years ended December 31, 1997 and 1996 and the period
ended December 31, 1995, respectively.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk
Considerations
The Fund's investment objective is to provide a high level of current
income consistent with preservation of principal within an intermediate-term
maturity structure.
In seeking this objective the Fund will, under normal circumstances,
invest at least 65% of its total assets in U.S. Government Securities
(including certain mortgage-backed securities) and in collateralized mortgage
obligations ("CMOs") and corporate debt securities. The Fund may also invest in
other asset-backed securities and (subject to an overall 20% limit) non-U.S.
dollar-denominated securities. Quality criteria applicable to certain of the
Fund's investments are as follows:
<TABLE>
<CAPTION>
Type of Permitted Minimum Rating(1)
Investment S&P(2) Moody's(3)
- -------------------------------------------- -------------- -------------
<S> <C> <C>
U.S. Government and Agency
Securities ............................... N/A N/A
CMO's ...................................... AAA(4) Aaa(4)
Corporate Debt ............................. A or better(4) A or better(4)
Other Asset-Backed Securities .............. AAA(4) Aaa(4)
Securities of Non-U.S. Governmental
Issuers .................................. AAA(4) Aaa(4)
Securities of Designated Interna-
tional Organizations ..................... AAA(4) Aaa(4)
Non-Dollar U.S. Government
Securities ............................... AAA(4) Aaa(4)
Securities of Foreign Corporations ......... AAA(4) Aaa(4)
</TABLE>
- ------------------------
(1) In the event any security owned by the Fund is downgraded, the Fund's
investment advisor will review the situation and take appropriate action,
but will not be automatically required to sell any such security. For a
discussion of the above ratings, see the Appendix to the Statement of
Additional Information.
(2) Standard & Poor's Ratings Group.
(3) Moody's Investors Service, Inc.
(4) Or, if unrated, determined to be of comparable quality by the Fund's
investment advisor.
Under normal circumstances the Fund's portfolio will have a dollar
weighted expected average maturity of approximately three to five years and a
maximum dollar weighted average duration of four years. For purposes of
determining the dollar weighted expected average maturity of the Fund's
portfolio, the maturity of a mortgage-backed security will be deemed to be
equal to its assumed life, in recognition of the fact that such securities are
subject to prepayment.
To meet its short-term liquidity needs, the Fund may invest in repurchase
agreements with respect to U.S. Treasury securities, in variable amount master
demand notes and in commercial paper rated A-1 by S&P or Prime-1 by Moody's, or
if not rated, determined to be of comparable quality by the Fund's investment
advisor (the "Advisor"). For temporary, defensive purposes, the Fund may invest
up to 100% of its assets in such instruments.
U.S. Government Securities. U.S. Government securities include
obligations issued and backed by the full faith and credit of the United States
Treasury, as well as obligations issued by agencies or instrumentalities of the
U.S. Government (including securities of the Government National Mortgage
Association ("GNMA")). These obligations may or may not be backed by the full
faith and credit of the U.S. Government. Certain agencies or instrumentalities
of the U.S. Government (such as the United States Postal Service) have the
right to borrow from the United States Treasury to meet their obligations, but
in other instances the obligations of the issuing agency or instrumentality
(such as the Federal Farm Credit System and the Federal National Mortgage
Association ("FNMA")) are supported only by the credit of the agency or
instrumentality.
<PAGE>
Mortgage-Backed Securities. Mortgage-backed securities are obligations backed
by mortgage loans made by lenders, such as commercial banks and savings and
loan institutions, and then assembled into pools for sale to investors. One
type of mortgage-backed security in which the Fund may invest is a pass-through
certificate that provides monthly payments to the certificate holders,
consisting of both interest and principal payments, which in effect
"pass-through" the monthly interest and principal payments made on the
underlying mortgage loans. These certificates are backed as to the timely
payment of principal and interest by GNMA, FNMA and the Federal Home Loan
Mortgage Corporation. See "U.S. Government Securities" above.
Mortgage-backed securities may also take the form of a CMO, a bond or
similar obligation backed by pools of mortgages. A CMO is not insured or
guaranteed by the agency or instrumentality of the U.S. Government which issues
the mortgage-backed securities that collateralize the CMO. Payment of principal
and interest on the underlying mortgages, and any reinvestment income thereon,
provide the funds to pay debt service on the CMOs. If there is a default in the
payment of principal and interest, there can be no assurance that the
underlying collateral will be sufficient to effect full repayment. CMOs may be
issued by agencies or instrumentalities of the U.S. Government, or by private
originators of, or investors in, mortgage loans.
Asset-Backed Securities. The Fund may also invest in securities backed by
assets other than mortgages, including company receivables, truck and auto
loans, leases, and credit card receivables, subject to certain quality
requirements. Through the use of trusts and special purpose corporations, these
types of assets are being securitized in pass-through structures similar to the
mortgage pass-through structure or in pay-through structures similar to the CMO
structure, both
3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
as described above. In general, the collateral supporting asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. However, asset-backed securities do not
generally have the benefit of the same security interest in the related
collateral as either mortgage-backed securities or CMOs, and may therefore
present certain risks not associated with other such securities.
Variable Amount Master Demand Notes. Variable amount master demand notes
are unsecured demand notes that permit investment of fluctuating amounts of
money at variable rates of interest pursuant to arrangements with issuers who
meet the quality criteria discussed above. All variable amount master demand
notes acquired by the Fund will be payable within a prescribed notice period
not to exceed seven days.
Non-U.S. Dollar-Denominated Securities. Non- U.S. dollar-denominated
securities include debt obligations denominated in foreign or composite
currencies (such as the European Currency Unit) issued by (i) foreign national,
provincial, state or municipal governments or their political subdivisions;
(ii) international organizations designated or supported by governmental
entities (e.g., the World Bank and the European Steel and Coal Community);
(iii) the U.S. Government (non-dollar securities only); and (iv) foreign
corporations.
Forward Foreign Currency Exchange Transactions. The Fund is authorized to
use forward foreign currency exchange contracts to protect against uncertainty
in the level of future foreign exchange rates. A forward foreign currency
exchange contract is an obligation to purchase or sell a specific currency at a
future date at a price set at the time the contract is entered into. The Fund
may use such forward contracts only under two circumstances. First, if the
Advisor believes the Fund should fix the U.S. dollar price of the foreign
security when the Fund enters into a contract for the purchase or sale, at a
future date, of a security denominated in a foreign currency. Second, if the
Advisor believes the Fund should hedge against risk of loss in the value of
those portfolio securities denominated in foreign currencies.
Rule 144A Securities. Subject to the Fund's overall investment
limitations on investing in illiquid securities and restricted securities, the
Fund may purchase Rule 144A Securities. Rule 144A Securities are restricted
securities in that they have not been registered under the Securities Act of
1933, but they may be traded between certain qualified institutional investors,
including investment companies. The presence or absence of a secondary market
in these securities may affect their value. The Fund's Board of Directors has
established guidelines and procedures to be utilized to determine the liquidity
of such securities.
Repurchase Agreements. The Fund may agree to purchase U.S. Treasury
securities from creditworthy financial institutions, such as banks and
broker-dealers, subject to the seller's agreement to repurchase the securities
at an established time and price. Default by or bankruptcy proceedings with
respect to the seller may expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
Purchase of When-Issued Securities. The Fund may purchase securities at
their current market value on a forward commitment or "when-issued" basis. A
segregated account of the Fund, consisting of cash or other liquid securities
equal at all times to the amount of the when-issued commitments will be
established and maintained by the Fund at the Fund's custodian. While the Fund
will purchase securities on a forward commitment or "when-issued" basis only
with the intention of acquiring the securities, the Fund may choose to sell the
securities before the settlement date. The value of securities so purchased or
sold is subject to market fluctuation and no interest accrues to the purchaser
during this period.
<PAGE>
Risk Considerations. The market value of the Fund's debt securities will
change in response to interest rate changes and other factors. During periods
of falling interest rates, the value of outstanding debt securities generally
rises. Conversely, during periods of rising interest rates, the value of such
securities generally declines. Prices of longer term securities generally
increase or decrease more sharply in response to interest rate changes than
those of shorter term securities.
Mortgage-backed securities are subject to special risks due to the
possibility that prepayments on home mortgages will alter their cash flow.
During periods of declining interest rates, prepayments are passed through to
holders of mortgage-backed securities who may then have to reinvest at lower
interest rates. In periods of rising interest rates, prepayments tend to slow,
with the result that the average life of mortgage-backed securities may be
lengthened. Consequently, the possibility of prepayment makes it difficult to
assess the actual maturity and duration of mortgage-backed securities, which,
in turn, makes it difficult to predict both the direction and magnitude of
changes in the value of mortgage-backed securities in response to changes in
interest rates.
Purchasing foreign securities may subject the Fund to additional risks
associated with the holding of property abroad. Such risks include future
political and
4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
economic developments, currency fluctuations, the possible withholding of tax
payments, the possible seizure or nationalization of foreign assets, the
possible establishment of exchange controls or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
or interest on foreign securities held by the Fund.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following investment restrictions numbered 1 and 2 are matters of
fundamental policy and may not be changed without shareholder approval.
Investment restriction number 3 may be changed by a vote of the majority of the
Board of Directors. The Fund will not:
1) Concentrate 25% or more of its total assets in securities of issuers in any
one industry (for these purposes the U.S. Government and its agencies and
instrumentalities are not considered an issuer);
2) Invest more than 5% of its total assets in the securities of any single
issuer or acquire more than 10% of the voting securities of any issuer
(for these purposes the U.S. Government and its agencies and
instrumentalities are not considered an issuer); and
3) Invest more than 10% of the Fund's net assets in illiquid securities,
including repurchase agreements with maturities of greater than seven
days.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The following sections describe how to buy and redeem shares of the Fund.
The price you pay or receive is based on the Fund's net asset value per
share. The net asset value per share of a class is determined on each business
day as of the close of trading on the New York Stock Exchange (ordinarily 4:00
p.m. Eastern Time). It is calculated by subtracting the liabilities
attributable to a class from its proportionate share of the Fund's assets and
dividing the result by the outstanding shares of the class.
In valuing the Fund's assets, its investments are priced at their market
value which is normally based on current prices but which may be determined
according to "fair value" procedures approved by the Fund's Board of Directors.
You may buy or redeem shares on any day on which the New York Stock
Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that
day, the price you pay or receive will be based on the next Business Day's net
asset value per share.
<PAGE>
HOW TO BUY INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may buy Institutional Shares if you are any of the following:
o An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or
charitable institution).
o A qualified retirement plan with assets of at least $75 million.
o An investment advisory affiliate of BT Alex. Brown purchasing shares
for the accounts of your investment advisory clients.
You may buy Institutional Shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy Institutional Shares by sending your check (along with
a completed Application Form) directly to the Fund. The Application Form, which
includes instructions, is attached to this Prospectus.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
Investment Minimums
If you are an eligible institution, your initial investment must be at
least $500,000. There are no minimum initial investments for qualified
retirement plans or investment advisory affiliates of BT Alex. Brown. There are
no minimums for subsequent investments.
5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Purchases by Exchange
You may exchange Institutional shares of any other Flag Investors fund
for an equal dollar amount of Institutional Shares of the Fund. The Fund may
modify or terminate this offer of exchange at any time on 60 days' prior
written notice.
You may request an exchange through your securities dealer or your
servicing agent. Contact them for details on how to enter your order. If your
shares are in an account with the Fund's Transfer Agent, you may also request an
exchange directly through the Transfer Agent by express mail or telephone.
Other Information
In the interest of economy and convenience and because of the operating
procedures for the Institutional Shares, certificates representing such shares
will not be issued.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may redeem your shares through your securities dealer or your
servicing agent. Contact them for details on how to enter your order. If your
shares are in an account with the Fund, you may also redeem them by contacting
the Transfer Agent by telephone (if you are redeeming less than $500,000). You
will be paid for redeemed shares by wire transfer of funds to your securities
dealer, servicing agent or bank upon receipt of a duly authorized redemption
request as promptly as feasible and, under most circumstances within three
Business Days.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be remitted by wire to your securities dealer, servicing
agent or bank.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $500,000 or exchange them for Institutional Shares of
another Flag Investors fund by calling the Transfer Agent on any Business Day
between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges unless you
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information at the
time your account is opened and prior to effecting each telephone transaction.
You may be required to provide additional telecopied instructions. If these
procedures are employed, neither the Fund nor the Transfer Agent will bear any
liability for following instructions received by telephone that they reasonably
believe to be genuine. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by express mail or facsimile. (See "How to Buy
Institutional Shares -- Purchases by Exchange" and "How to Redeem Institutional
Shares.")
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income (including net short-term capital gains) in
the form of monthly dividends. The Fund may distribute to shareholders any net
capital gains (net long-term capital gains less net short-term capital losses)
on an annual basis, or alternatively, may elect to retain net capital gains and
pay tax thereon.
Unless you elect otherwise, all income dividends and net capital gains
distributions, if any, will be
6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
reinvested in additional Institutional Shares at net asset value. You may elect
to terminate automatic reinvestment by giving written instructions to the
Transfer Agent, either directly or through your securities dealer or servicing
agent, at least five days before the next date on which dividends or
distributions will be paid.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences
affecting the Fund and its shareholders is based on current tax laws and
regulations, which may be changed by legislative, judicial, or administrative
action. No attempt has been made to present a detailed explanation of the
federal, state or local tax treatment of the Fund or the shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Accordingly, you are advised to consult with your tax advisor regarding
specific questions as to federal, state and local taxes. The Statement of
Additional Information sets forth further information regarding taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. Generally, as long as the Fund qualifies for this tax treatment, it
will not pay U.S. federal income tax on amounts distributed to shareholders.
Unless you are otherwise exempt, you will pay income or capital gains tax on
the amounts distributed to you, regardless of whether such distributions are
paid in cash or reinvested in additional Institutional Shares.
Capital gains distributions from the Fund are classified as either
short-term, long-term or mid-term depending upon how long the Fund held the
securities it sold to generate the gains. You will be taxed on the
distributions according to the category stipulated by the Fund regardless of
how long you have held your Fund shares. You will be taxed on all other income
distributions as ordinary income. Distributions from the Fund generally will
not qualify for the corporate dividends received deduction.
Ordinarily, you should include all dividends declared by the Fund as
income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year but paid in January of the
following year, will be deemed for tax purposes to have been received by you
and paid by the Fund in the year in which the dividends were declared.
The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
You will be advised annually as to the federal income tax consequences of
distributions made during the year.
The sale, exchange or redemption of Institutional Shares is a taxable
event for you.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, distributor, custodian and transfer
agent. The day to day operations of the Fund are delegated to the Fund's
executive officers, to the Advisor and to the Distributor. A majority of the
Directors are not affiliated with the Advisor or the Distributor.
<PAGE>
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor"), an indirect
subsidiary of Bankers Trust Corporation, is the Fund's investment advisor. ICC
is the investment advisor to mutual funds with approximately $6.5 billion of net
assets as of December 31, 1997. In addition to this Fund, these include other
funds in the Flag Investors family and BT Alex. Brown Cash Reserve Fund, Inc.
ICC is responsible for the general management of the Fund, as well as for
decisions to buy and sell securities for the Fund, for broker-dealer selection,
and for negotiation of commission rates.
As compensation for its services for the fiscal year ended December 31,
1997, ICC received a fee (net of fee waivers) equal to 0.09% of the Fund's
average daily net assets. ICC currently intends to waive, on a voluntary basis,
its annual fee to the extent necessary so that the Fund's annual expenses do
not exceed 0.45% of the Institutional Shares' average daily net assets.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. An affiliate of ICC provides custody
services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
7
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Managers
Messrs. M. Elliott Randolph, Jr. and Paul D. Corbin, have shared primary
responsibility for managing the Fund's assets since inception.
Mr. Randolph has nearly 24 years of investment experience and has been a
portfolio manager with the Advisor since 1991. From 1988-1991 he was a
Principal with Monument Capital Management, Inc.
Mr. Corbin has 20 years of investment experience and has been a portfolio
manager with the Advisor since 1991. From 1984-1991 he served as the Senior
Vice President in charge of Fixed Income Portfolio Management at First National
Bank of Maryland.
DISTRIBUTOR
- --------------------------------------------------------------------------------
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves
as distributor of each class of the Fund's shares. ICC Distributors receives no
compensation for distributing the Institutional Shares. ICC Distributors is a
registered broker-dealer that offers distribution services to a variety of
registered investment companies including other funds in the Flag Investors
family of funds and BT Alex. Brown Cash Reserve Fund, Inc. ICC Distributors is
not affiliated with the Advisor.
ICC Distributors bears all expenses associated with advertisements,
promotional materials, sales literature and printing and mailing prospectuses
to other than Fund shareholders. The Advisor or its affiliates may make
payments from their own resources to securities dealers and servicing agents.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services to the Fund for the fiscal year ended
December 31, 1997, ICC received a fee equal to 0.08% of the Fund's average
daily net assets. Bankers Trust Company, a subsidiary of Bankers Trust
Corporation, acts as custodian of the Fund's assets. (See the Statement of
Additional Information.)
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its performance including
comparisons to other mutual funds with similar investment objectives and to
relevant indices. Any quotations of yield of the Fund will be determined by
dividing the net investment income earned by the Fund during a 30-day period by
the maximum offering price per share on the last day of the period and
annualizing the result on a semi-annual basis. All advertisements of
performance will show the average annual total return over one-, five- and
ten-year periods or, if such periods have not yet elapsed, shorter periods
corresponding to the life of the Fund. Such total return quotations will be
computed by finding average annual compounded rates of return over such periods
that would equate an assumed initial investment of $1,000 to the ending
redeemable value according to the required standardized calculation. The
standardized calculation is required by the SEC to provide consistency and
comparability in investment company advertising and is not equivalent to a
yield calculation.
<PAGE>
If the Fund compares its performance to other funds or to relevant
indices, the Fund's performance will be stated in the same terms in which such
comparative data and indices are stated, which is normally total return rather
than yield.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services which monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Lehman Brothers
Intermediate Aggregate Bond Index, the Merrill Lynch 1-3 Year Treasury Index
and the Lehman Brothers Government Corporate Intermediate-Term Bond Index. The
Fund may also use total return performance data as reported in national
financial and industry publications that monitor the performance of mutual
funds such as Money Magazine, Forbes, Business Week, Barron's, Investor's
Daily, IBC/Donoghue's Money Fund Report and The Wall Street Journal.
Performance will fluctuate and any statement of performance should not be
considered as representative of the future performance of the Fund. Performance
is generally a function of the type and quality of instruments held by the
Fund, operating expenses and market conditions. Any fees charged by your bank
with respect to the account through which your Institutional Shares may be
purchased, although not included in calculations of performance, will reduce
your performance results.
8
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Description of Shares
The Fund is an open-end diversified management investment company
organized under the laws of the State of Maryland on April 16, 1990 and is
authorized to issue 60 million shares of capital stock, par value of $.001 per
share, all of which shares are designated common stock. Each share has one vote
and is entitled to dividends and distributions when and if declared by the
Fund. In the event of liquidation or dissolution of the Fund, each share is
entitled to its pro rata portion of the Fund's assets after all debts and
expenses have been paid. The fiscal year-end of the Fund is December 31. Prior
to February 14, 1997, the Fund was known as Flag Investors Intermediate-Term
Income Fund, Inc.
The Board of Directors is authorized to establish additional series of
shares of capital stock, each of which would evidence interests in a separate
portfolio of securities, and separate classes of each series of the Fund. The
shares offered by this Prospectus have been designated "Flag Investors
Short-Intermediate Income Fund Institutional Shares." The Board has no present
intention of establishing any additional series of the Fund but the Fund does
have another class of shares, "Flag Investors Short-Intermediate Income Fund
Class A Shares." Additional information concerning this class may be obtained
by calling the Fund at (800) 767-FLAG. Different classes of the Fund may be
offered to certain investors and holders of such shares may be entitled to
certain exchange privileges not offered to Institutional Shares. All classes of
the Fund share a common investment objective, portfolio of investments and
advisory fee, but the classes may have different distribution fees or sales
load structures, and accordingly, the net asset value per share of the classes
may differ at times.
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders unless
required by Maryland law. Shareholders of the Fund retain the right, under
certain circumstances to request that a meeting of 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 the shareholder communications in
connection with the meeting.
Reports
You will be furnished with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent auditors, Deloitte & Touche LLP.
Shareholder Inquiries
If you have questions concerning your Institutional Shares, contact the
Fund at (800) 767-FLAG, the Transfer Agent at (800) 553-8080 or your securities
dealer or servicing agent.
9
- --------------------------------------------------------------------------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Send completed Application by overnight For assistance in completing this
carrier to: Application please call:
Flag Investors Funds 1-800-553-8080,
330 West 9th Street, First Floor Monday through Friday, 8:30 a.m. to
Kansas City, MO 64105 5:30 p.m. (Eastern Time).
Attn: Flag Investors Short-Intermediate
Income Fund, Inc.
If you are paying by check, make check payable to "Flag Investors
Short-Intermediate Income Fund, Inc." and mail with this Application. If you
are paying by wire, see instructions below.
- --------------------------------------------------------------------------------
Your Account Registration (Please Print)
Name on Account Mailing Address
______________________________________ _____________________________________
Name of Corporation, Trust or Name of Individual to Receive
Partnership Correspondence
______________________________________ _____________________________________
Tax ID Number Street
/ / Corporation / / Partnership / / Trust _____________________________________
/ / Non-Profit or Charitable Organization City State Zip
/ / Other________ ( )
_____________________________________
If a Trust, please provide the following: Daytime Phone
________________________________________________________________________________
Date of Trust For the Benefit of
________________________________________________________________________________
Name of Trustees (If to be included in the Registration)
Initial Investment
The minimum initial purchase for the Institutional Shares of the Fund is
$500,000. There are no minimums for qualified retirement plans or investment
advisory affiliates of BT Alex. Brown Incorporated or for subsequent
investments.
Indicate the amount to be invested and the method of payment:
__ A. By Mail: Enclosed is a check in the amount of $______ payable to Flag
Investors Short-Intermediate Income Fund, Inc.
__ B. By Wire: A bank wire in the amount of $_____ has been sent
from________________________ ___________________________________
Name of Bank Wire Control Number
Wire Instructions
Follow the instructions below to arrange for a wire transfer for initial
investment:
o Send completed Application by overnight carrier to Flag Investors
Funds at the address listed above.
o Call 1-800-553-8080 to obtain new investor's Fund account number.
o Wire payment of the purchase price to Investors Fiduciary Trust
Company ("IFTC"), as follows:
IFTC
<PAGE>
Flag Investors Funds
Acct. # 7528175
ABA # 1010-0362-1
Kansas City, Missouri 64105
Please include the following information in the wire:
o Flag Investors Short-Intermediate Income Fund, Inc. -- Institutional
Shares
o The amount to be invested
o "For further credit to _________________________________."
(Investor's Fund Account Number)
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Institutional Shares of the
Fund.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in cash [ ] Paid in cash
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $500,000) and exchange privileges (with respect to
Institutional Shares of other Flag Investors Funds) unless I mark one or both
of the boxes below:
No, I do not want:
[ ] Telephone redemption privileges [ ] Telephone exchange privileges
Redemptions effected by telephone will be wired to the bank
account designated below.
Bank Account Designation
(This Section Must Be Completed)
Please attach a blank, voided check to provide account and bank routing
information.
________________________________________________________________________________
Name of Bank Branch
________________________________________________________________________________
Bank Address City/State/Zip
________________________________________________________________________________
Name(s) on Account
________________________________________________________________________________
Account Number A.B.A. Number
A-1
<PAGE>
Acknowledgment, Certificate and Signature
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding is
not an additional tax, and any amounts withheld may be credited against your
ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as required
by federal law: (Please check applicable boxes)
/ / U.S. Citizen/Taxpayer:
/ / I certify that (1) the number shown above on this form is the correct
Tax ID Number and (2) I am not subject to any backup withholding either
because (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
/ / If no Tax ID Number has been provided above, I have applied, or intend
to apply, to the IRS for a Tax ID Number, and I understand that if I do
not provide such number to the Transfer Agent within 60 days of the date
of this Application or if I fail to furnish my correct Tax ID Number, I
may be subject to a penalty and a 31% backup withholding on distributions
and redemption proceeds. (Please provide your Tax ID Number on IRS Form
W-9. You may request such form by calling the Transfer Agent at
800-553-8080).
/ / Non-U.S. Citizen/Taxpayer: Indicated country of residence for tax
purposes:______________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal Revenue
Service.
I have received a copy of the Fund's prospectus. I acknowledge that the
telephone redemption and exchange privileges are automatic and will be effected
as described in the Fund's current prospectus (see "Telephone Transactions"). I
also acknowledge that I may bear the risk of loss in the event of fraudulent
use of such privileges. If I do not want telephone redemption or exchange
privileges, I have so indicated on this Application.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
________________________________________________________________________________
Signature of Corporate Officer, General Partner, Trustee, etc. Date
________________________________________________________________________________
Signature of Corporate Officer, General Partner, Trustee, etc. Date
Person(s) Authorized to Conduct Transactions
The following person(s) ("Authorized Person(s)") are currently officers,
trustees, general partners or other authorized agents of the investor. Any
_________* of the Authorized Person(s) is, by lawful and appropriate action of
the investor, a person entitled to give instructions regarding purchases and
redemptions or make inquiries regarding the Account.
__________________________________ ______________________________________
Name/Title Signature Date
__________________________________ ______________________________________
Name/Title Signature Date
__________________________________ ______________________________________
Name/Title Signature Date
__________________________________ ______________________________________
Name/Title Signature Date
<PAGE>
The signature appearing to the right of each Authorized Person is that person's
signature. Investment Company Capital Corp. ("ICC") may, without inquiry, act
upon the instructions (whether verbal, written, or provided by wire,
telecommunication, or any other process) of any person claiming to be an
Authorized Person. Neither ICC nor any entity on behalf of which ICC is acting
shall be liable for any claims or expenses (including legal fees) or for any
losses resulting from actions taken upon any instructions believed to be
genuine. ICC may continue to rely on the instructions made by any person
claiming to be an Authorized Person until it is informed through an amended
Application that the person is no longer an Authorized Person and it has a
reasonable period (not to exceed one week) to process the amended Application.
Provisions of this Application shall be equally Applicable to any successor of
ICC.
* If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from
any one Authorized Person. Written instructions will require signatures of
the number of Authorized Persons indicated in this space.
Certificate of Authority
Investors must complete one of the following two Certificates of Authority.
Certificate A: FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS (With a Board
of Directors or Board of Trustees.)
I ____________________, Secretary of the above-named investor, do hereby certify
that at a meeting on ___________, at which a quorum was present throughout, the
Board of Directors (Board of Trustees) of the investor duly adopted a
resolution which is in full force and effect and in accordance with the
investor's charter and by-laws, which resolution did the following: (1)
empowered the officers/trustees executing this Application (or amendment) to do
so on behalf of the investor; (2) empowered the above-named Authorized
Person(s) to effect securities transactions for the investor on the terms
described above; (3) authorized the Secretary to certify, from time to time,
the names and titles of the officers of the investor and to notify ICC when
changes in officers occur; and (4) authorized the Secretary to certify that
such a resolution has been duly adopted and will remain in full force and
effect until ICC receives a duly-executed amendment to the Certification form.
Witness my hand and seal on behalf of the investor:
this __ day of ______, 199__ Secretary_________________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the investor.
________________________________________________________________________________
Signature and title Date
Certificate B: FOR PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all general partners/trustees of the
investor and that they have done the following under the authority of the
investor's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application (or amendment) to do so on behalf of
the investor; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the investor on the terms described above; (3)
authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the investor and to notify ICC when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until ICC receives a further duly-executed certification. (If there
are not enough spaces here for all necessary signatures, complete a separate
certificate containing the language of this Certificate B and attach it to the
Application).
________________________________________________________________________________
Signature and title Date
________________________________________________________________________________
Signature and title Date
A-2
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
(Institutional Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Distributor Independent Auditors
ICC DISTRIBUTORS, INC. DELOITTE & TOUCHE LLP
P.O. Box 7558 117 Campus Drive
Portland, Maine 04101 Princeton, New Jersey 08540
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 2000 One Logan Square
New York, New York 10006 Philadelphia, Pennsylvania 19103
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------------
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
One South Street
Baltimore, Maryland 21202
----------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH A
PROSPECTUS, WHICH MAY BE OBTAINED FROM ANY
PARTICIPATING DEALER OR SHAREHOLDER SERVICING AGENT
OR BY WRITING THE FUND, ONE SOUTH STREET, BALTIMORE,
MARYLAND 21202, OR BY CALLING (800) 767-FLAG.
Statement of Additional Information Dated: May 1, 1998
Relating to the Prospectuses Dated:
May 1, 1998 -- Relating to the Flag Investors Class A Shares
and the Flag Investors Institutional Shares
<PAGE>
TABLE OF CONTENTS
Page
-----
1. General Information and History................................. 1
2. Investment Objectives and Policies.............................. 2
3. Valuation of Shares and Redemption.............................. 5
4. Federal Tax Treatment of Dividends and
Distributions................................................. 6
5. Management of the Fund.......................................... 8
6. Investment Advisory and Other Services......................... 13
7. Distribution of Fund Shares.................................... 14
8. Brokerage...................................................... 17
9. Capital Stock.................................................. 18
10. Semi-Annual Reports............................................ 19
11. Custodian, Transfer Agent and Accounting Services ............. 19
12. Independent Auditors .......................................... 19
13. Legal Matters.....................................................20
14. Performance Information........................................ 20
15. Control Persons and Principal Holders of
Securities................................................... 22
16. Financial Statements........................................... 22
Appendix....................................................... A-1
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Flag Investors Short-Intermediate Income Fund, Inc. (the "Fund") is an
open-end management investment company. Under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), all mutual funds are required to
furnish prospective investors with certain information concerning the activities
of the company being considered for investment. The Fund currently offers two
classes of shares: Flag Investors Short-Intermediate Income Fund Class A Shares
(the "Flag Investors Class A Shares") and Flag Investors Short-Intermediate
Income Fund Institutional Shares (the "Flag Investors Institutional Shares")
(collectively, the "Shares"). The Flag Investors Class A Shares were formerly
known as the Flag Investors Shares. Prior to February 14, 1997, the Fund was
known as Flag Investors Intermediate-Term Income Fund, Inc.
There are two separate prospectuses for the Fund's Shares: one for the
Flag Investors Class A Shares, one for the Flag Investors Institutional Shares.
Each prospectus contains important information concerning the class of Shares
offered thereby and the Fund and may be obtained without charge from the Fund's
distributor (the "Distributor"), or, from Participating Dealers and Shareholder
Servicing Agents. As used herein, the term "Prospectus" describes information
common to the prospectuses of the two classes of the Fund's shares, unless the
term "Prospectus" is modified by the appropriate class designation. As used
herein, the "Fund" refers to Flag Investors Short-Intermediate Income Fund, Inc.
and specific references to any class of the Fund's Shares will be made using the
name of such class. Some of the information required to be in this Statement of
Additional Information is also included in the Fund's current Prospectuses. To
avoid unnecessary repetition, references are made to related sections of the
Prospectuses. In addition, the Prospectuses and this Statement of Additional
Information omit certain information about the Fund and its business that is
contained in the Registration Statement for the Fund and its Shares filed with
the SEC. Copies of the Registration Statement as filed, including such omitted
items, may be obtained from the SEC by paying the charges prescribed under its
rules and regulations.
The Fund was incorporated under the laws of the State of Maryland on
April 16, 1990. The Fund filed a registration statement with the SEC registering
itself as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
its Shares under the Securities Act of 1933, as amended, and commenced
operations on May 13, 1991. The Fund has offered the Flag Investors Class A
Shares since its inception on May 13, 1991 and the Flag Investors Institutional
Shares since November 2, 1995.
Under a license agreement dated May 10, 1991 between the Fund and Alex.
Brown Incorporated (now BT Alex. Brown Incorporated), Alex. Brown Incorporated
licenses to the Fund the "Flag Investors" name and logo but retains the rights
to the name and logo, including the right to permit other investment companies
to use them.
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked it service providers whether they expect to have their
computer systems adjusted for the year 2000 transition, and received assurances
from each that its system is expected to accommodate the year 2000 without
material adverse consequences to the Fund. The Fund and its shareholders may
experience losses if these assurances prove to be incorrect if issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others with which the Fund does business experience difficulties as a result
of year 2000 issues.
-1-
<PAGE>
2. INVESTMENT OBJECTIVES AND POLICIES
The Fund is designed to provide a high level of current income
consistent with preservation of principal within an intermediate-term maturity
structure. As described in the Prospectus, the Fund will attempt to achieve its
objective by investing in high-quality debt obligations, primarily securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, corporate bonds, collateralized mortgage obligations and
other asset-backed securities. There can be no assurance that the Fund's
investment objective will be achieved.
Mortgage-Backed Securities
As indicated in the Prospectus, the Fund may invest in mortgage-backed
securities representing ownership interests in a pool of mortgage loans which
securities are issued or guaranteed by the Government National Mortgage
Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") or
the Federal National Mortgage Association ("FNMA").
GNMA Certificates.
GNMA Certificates are mortgage-backed securities that evidence an
undivided ownership interest in a pool of mortgage loans. Principal and interest
is paid back monthly by the borrower over the term of the underlying loans. The
National Housing Act authorizes GNMA to guarantee the timely payment of
principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration or the Farmers' Home Administration or
guaranteed by the Veterans Administration. The GNMA guarantee is backed by the
full faith and credit of the U.S. Government. The GNMA is also empowered to
borrow without limitation from the U.S. Treasury if necessary to make any
payments required under its guarantees.
The average life of a GNMA Certificate is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment substantially
before maturity of the mortgages in the pool. Because prepayment rates of
individual mortgage pools vary, it is not possible to predict accurately the
average life of a particular issue of GNMA Certificates. However, statistics
published by the FHA indicate that the average life of single-family home
mortgage loans with 25 to 30 year maturities (the type of mortgage underlying
most GNMA Certificates) is approximately 12 years. It is customary, therefore,
to treat GNMA Certificates as 30-year mortgage-backed securities that prepay in
full in the twelfth year.
FHLMC and FNMA Certificates.
The FHLMC is a corporate instrumentality of the U.S. Government and was
created in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing through the development of a nationwide secondary
market in conventional residential mortgages. The FHLMC issues Participation
Certificates that represent a pro rata share of all interest and principal
payments made and owed on the underlying pool (which consists of mortgages from
FHLMC's national portfolio). The FHLMC guarantees the timely payment of interest
and ultimate collection of principal. FHLMC Participation Certificates are
assumed to be prepaid in full in the twelfth year.
The FNMA is a government-sponsored corporation owned by private
stockholders that was established in 1938 to create a secondary market in
mortgages issued by the FHA. FNMA Certificates resemble GNMA Certificates in
that each Certificate represents a pro rata share of all interest and principal
payments made and owed on the underlying pool. FNMA guarantees timely payment of
interest
-2-
<PAGE>
on FNMA Certificates and full return of principal. FNMA Certificates are
assumed to be prepaid in full in the twelfth year.
Risk of foreclosure of the underlying mortgages is greater with FHLMC
and FNMA securities because, unlike GNMA securities, FHLMC and FNMA securities
are not backed by the full faith and credit of the U.S. Government.
Interests in such mortgage-backed securities differ from other forms of
debt securities, which typically provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Mortgage-backed securities provide monthly payments to the certificate holders,
consisting of both interest and principal payments, which in effect
"pass-through" the monthly interest and principal payments made on the
underlying mortgage loans. Although the underlying mortgage loans are for
specified periods of time (such as 20 or 30 years), borrowers can repay their
loans sooner and the certificate holders would receive any such prepayment of
principal in addition to the principal that is part of the monthly payment. A
borrower is more likely to prepay a mortgage that bears a relatively high rate
of interest. Accordingly, during periods of declining interest rates, prepayment
of mortgages underlying mortgage-backed securities can be expected to
accelerate. Because prepayment of the underlying mortgages may vary, it is not
possible to predict accurately the average life or realized yield of a
particular issue of pass-through certificates. When the prepayments of principal
are included in the monthly payments to the Fund as a certificate holder, the
Fund reinvests the prepaid amounts in securities, the yield of which reflects
interest rates prevailing at the time. Prepayments of mortgages that underlie
securities purchased at a premium could result in capital losses.
Collateralized Mortgage Obligations
As indicated in the Prospectus, the Fund may invest in collateralized
mortgage obligations ("CMOs") that are collateralized by mortgage-backed
securities issued by GNMA, FHLMC or FNMA (collectively, "Mortgage Assets").
In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche", is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semi-annual basis. Payments of principal of and interest
on the Mortgage Assets are commonly applied to the classes of a series of the
CMO in the order of their respective stated maturities or final distribution
dates, so that no payment of principal will be made on any class of a CMO until
all other classes having an earlier stated maturity or final distribution date
have been paid in full. Because CMOs are collateralized by mortgage-backed
securities, they are subject to similar risks and uncertainties associated with
the prepayment of principal and the ability to accurately predict yield
described above with respect to mortgage-backed securities.
Asset-Backed Securities
The Fund may also invest in securities backed by assets other than
mortgages, including company receivables, truck and auto loans, leases, and
credit card receivables. Through the use of trusts and special purpose
corporations, these types of assets are being securitized in pass-through
structures similar to the mortgage pass-through structure or in pay-through
structures similar to the CMO structure, both as described above. In general,
the collateral supporting asset-backed securities is of shorter maturity than
mortgage loans and is less likely to experience substantial prepayments.
However, asset-backed securities do not generally have the benefit of the same
security interest in the related collateral as either mortgage-backed securities
or CMOs, and may therefore present certain risks not associated with
-3-
<PAGE>
such other securities. If the asset-backed security is issued in a pay-through
structure similar to a CMO, the cash flow generated by the underlying assets is
applied to make required payments on the securities and to pay related
administrative expenses. The residual in an asset-backed security pay-through
structure represents the interest in any excess cash flow remaining after making
the foregoing payments, and will depend on, among other things, the
characteristics of the underlying assets, the coupon rates on the securities,
prevailing interest rates, the amount of administrative expenses and the actual
prepayment experience on the underlying assets.
Other Investment Practices
In addition, the Fund may enter into repurchase agreements and make
purchases of when-issued securities as described below.
Repurchase Agreements.
The Fund may enter into repurchase agreements with financial
institutions, such as banks and broker-dealers, deemed to be creditworthy by the
Fund's Board of Directors under criteria established with the guidance of the
Fund's investment advisor (the "Advisor"). A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Fund) acquires ownership
of a debt security and the seller agrees to repurchase the obligation at a
future time and set price, usually not more than seven days from the date of
purchase, thereby determining the yield during the purchaser's holding period.
The value of underlying securities will be at least equal at all times to the
total amount of the repurchase obligation, including the interest factor. The
Fund makes payment for such securities only upon physical delivery or evidence
of book entry transfer to the account of a custodian or bank acting as agent.
The underlying securities, which in the case of the Fund are securities of the
U.S. Treasury only, may have maturity dates exceeding one year. The Fund does
not bear the risk of a decline in value of the underlying securities unless the
seller defaults under its repurchase obligation. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying securities and loss including (a)
possible decline in the value of the underlying security while the Fund seeks to
enforce its rights thereto, (b) possible subnormal levels of income and lack of
access to income during this period and (c) expenses of enforcing its rights.
Foreign Currency Exchange Transactions.
The Fund may conduct its foreign currency exchange transactions through
forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specified currency at a future date (which may be any fixed number of days from
the date the contract is entered into by the parties) at the price set at the
time of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers.
Investment Restrictions
The Fund's investment program is subject to a number of investment
restrictions that reflect self-imposed standards as well as federal regulatory
limitations. The investment restrictions recited below are in addition to those
described in the Fund's Prospectus, and are matters of fundamental policy and
may not be changed without the affirmative vote of a majority of the outstanding
Shares. Accordingly, the Fund will not:
1. Borrow money except as a temporary measure to facilitate settlements
and for extraordinary or emergency purposes and then only from banks and in an
amount not exceeding 10% of the value of the
-4-
<PAGE>
total assets of the Fund at the time of such borrowing, provided that, while
borrowings by the Fund equaling 5% or more of the Fund's total assets are
outstanding, the Fund will not purchase securities;
2. Invest in real estate or mortgages on real estate;
3. Purchase or sell commodities or commodities contracts or futures
contracts;
4. Act as an underwriter of securities within the meaning of the U.S.
federal securities laws except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities;
5. Issue senior securities;
6. Make loans, except that the Fund may purchase or hold debt
instruments in accordance with its investment objectives and policies;
7. Effect short sales of securities;
8. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
9. Purchase participations or other direct interests in oil, gas or
other mineral exploration or development programs; or
10. Invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements with remaining maturities in excess
of seven days.
The following investment restriction may be changed by a vote of the
majority of the Board of Directors. The Fund will not:
1. Invest in shares of any other investment company registered under the
Investment Company Act, except as permitted by federal law;
The percentage limitations contained in these restrictions apply at the
time of purchase of securities.
3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined daily as of the close of the
New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time) on each
day on which the New York Stock Exchange is open for business (a "Business
Day"). The New York Stock Exchange is open for business on all weekdays except
for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund may enter into agreements that allow a third party, as agent
for the Fund, to accept orders from its customers up until the Fund's close of
business which is ordinarily 4:00 p.m. (Eastern Time). So long as a third party
receives an order prior to the Fund's close of business, the order is deemed to
have
-5-
<PAGE>
been received by the Fund and, accordingly, may receive the NAV computed at the
close of business that day. These "late day" agreements are intended to permit
shareholders placing orders with a third party to place orders up to the same
time as other shareholders.
Redemption
The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC so that valuation of the net assets of the Fund is not
reasonably practicable.
Under normal circumstances, the Fund will redeem shares by check or wire
transfer of funds. However, if the Board of Directors determines that it would
be in the best interests of the remaining shareholders to make payment of the
redemption price in whole or in part by a distribution in kind of securities
from the portfolio of the Fund in lieu of cash, in conformity with applicable
rules of the SEC, the Fund will make such distributions in kind. If Shares are
redeemed in kind, the redeeming shareholder will incur brokerage costs in later
converting the assets into cash. The method of valuing portfolio securities is
described in the Prospectus under "The Fund's Net Asset Value" and such
valuation will be made as of the same time the redemption price is determined.
The Fund has elected to be governed by Rule 18f-1 under the Investment Company
Act pursuant to which the Fund is obligated to redeem Shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one shareholder.
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectus is not intended as a substitute for
careful tax planning.
The following general discussion of certain federal income tax
consequences is based on the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations issued thereunder as in effect on the date of this
Prospectus. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
The Fund intends to continue to qualify as a regulated investment
company ("RIC") under Subchapter M of the Code. In order to qualify as a RIC for
any taxable year, the Fund must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock, securities or foreign currencies
and other income (including, but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement").
In addition, at the close of each quarter of the Fund's taxable year, at
least 50% of the value of its assets must consist of cash and cash items, U.S.
government securities, securities of other RICs, and securities of other issuers
(as to which the Fund has not invested more than 5% of the value of its total
assets in securities of such issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of such issuer), and no more than
25% of the value of its total assets may be invested in the securities of any
one issuer (other than U.S. government securities and securities of other
-6-
<PAGE>
regulated investment companies), or in two or more issuers that the Fund
controls and that are engaged in the same, similar or related trades or
businesses (the "Asset Diversification Test"). Generally, the Fund will not lose
its status as a RIC if it fails to meet the Asset Diversification Test solely as
a result of a fluctuation in value of portfolio assets not attributable to a
purchase.
Under Subchapter M, the Fund is exempt from federal income tax on its
net investment income and net capital gains that it distributes to shareholders,
provided generally that it distributes at least 90% of its investment company
taxable income (net investment income and the excess of net short-term capital
gains over net long-term capital loss) for the year (the "Distribution
Requirement") and complies with the other requirements of the Code described
above. The Distribution Requirement for any year may be waived if a regulated
investment company establishes to the satisfaction of the Internal Revenue
Service that it is unable to satisfy the Distribution Requirement by reason of
distributions previously made for the purpose of avoiding liability for federal
excise tax (discussed below).
For purposes of the Distribution Requirement (as well as for other
purposes), the Fund will be required to treat as interest income any recognized
market discount on debt obligations which it holds. Generally, market discount
is the amount by which the stated redemption price of a bond exceeds the amount
paid by a purchaser of the bond (most common where the value of a bond decreases
after original issue as a result of a decline in the creditworthiness of the
issuer or an increase in prevailing interest rates). Generally, upon the
disposition of a bond bearing market discount or receipt of any principal
payment with respect to such a bond, market discount is recognized by treating a
portion of the proceeds as interest income. The application of these rules (and
the rules regarding original issue discount) to debt obligations held by the
Fund could affect (i) the amount and timing of distributions to shareholders and
(ii) the ability of the Fund to satisfy the Distribution Requirement.
The Fund may either retain or distribute to shareholders its excess of
net long-term capital gains over net short-term capital losses ("net capital
gain"). If such gains are distributed as capital gains, they are taxable to
shareholders at a rate of 20% or at a rate of 28%, depending upon the holding
period of the Fund in the underlying asset generating the net capital gain and
regardless of the length of time the shareholder has held the Share. Conversely,
if the Fund elects to retain its net capital gains, it will be taxed thereon at
the applicable corporate capital gains tax rate. In this event, it is expected
that the Fund also will elect to have shareholders treated as having received a
distribution of such gains, with the result that they will be required to report
such gains on their returns as long-term capital gains, will receive a tax
credit for their allocable share of capital gains tax paid by the Fund on the
gains, and will increase the tax basis for their Shares by an amount equal to
65% of the deemed distribution.
Generally, gains or losses on the sale or exchange of a Share will be
capital gains or losses, which will be long-term if the Share is held for more
than eighteen months, will be mid-term if the Share is held for more than twelve
but not more than eighteen months and otherwise will be short-term capital
gains. However, if a shareholder realizes a loss on the sale, exchange or
redemption of a Share held for six months or less and has previously received a
capital gains distribution with respect to the Share (or any undistributed net
capital gains of the Fund with respect to such Share are included in determining
the shareholder's long-term capital gains), the shareholder must treat the loss
as a long-term capital loss to the extent of the amount of the prior capital
gains distribution (or any undistributed net capital gains of the Fund that have
been included in determining such investor's long-term capital gains). In
addition, any loss realized on a sale or other disposition of Shares will be
disallowed to the extent an investor repurchases (or enters into a contract or
option to repurchase) Shares within a period of 61 days (beginning 30 days
before and ending 30 days after the disposition of the Shares). This loss
disallowance rule will apply to Shares received through the reinvestment of
dividends during the 61-day period.
-7-
<PAGE>
Investors purchasing Shares just prior to the ex-dividend date of any
ordinary income dividend or capital gains distribution will be taxable on the
entire amount of the dividend received, even though the net asset value per
Share on the date of such purchase reflected the amount of such distribution.
If for any taxable year, the Fund does not qualify as a RIC, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will
generally be taxable as ordinary dividends to the extent of the Fund's current
and accumulated earnings and profits. However, in the case of corporate
shareholders, such distributions will generally be eligible for the 70%
dividends received deduction for "qualifying dividends."
The Fund will be required in certain cases to withhold and remit tax to
the United States Treasury on distributions payable to any shareholder who (1)
has provided the Fund either an incorrect tax identification number or no number
at all, (2) is subject to backup withholding by the Internal Revenue Service for
failure to properly report payments of interest or dividends, or (3) has failed
to certify to the Fund that such shareholder is not subject to backup
withholding.
The Fund will provide a statement annually to shareholders as to the
federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year.
The Code imposes a nondeductible 4% federal excise tax on RICs that do
not distribute in each calendar year an amount equal to 98% of their ordinary
income for the calendar year plus 98% of their capital gains net income (the
excess of short- and long-term capital gains over short- and long-term capital
losses) for the one-year period ending on October 31 of such calendar year. The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, an investment company is treated as having distributed
any amount on which it is subject to income tax for any taxable year ending in
such calendar year.
The Fund intends to make sufficient distributions of its ordinary income
and capital gains net income prior to the end of each calendar year to avoid
liability for excise tax. However, the Fund may in certain circumstances be
required to liquidate portfolio investments in order to make sufficient
distributions to avoid excise tax liability.
Rules of state and local taxation of dividend and capital gains
distributions from regulated investment companies often differ from the rules
for federal income taxation described above. Shareholders are urged to consult
their tax advisors as to the consequences of these and other state and local tax
rules affecting an investment in the Fund and also as to the application of the
rules set forth above to a shareholder's particular circumstances.
5. MANAGEMENT OF THE FUND
Directors and Officers
The Directors and executive officers of the Fund, their respective dates
of birth and their principal occupations during the last five years are set
forth below. Unless otherwise indicated, the address of each Director and
executive officer is One South Street, Baltimore, Maryland 21202.
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<PAGE>
*RICHARD T. HALE, Chairman and Director (7/17/45)
Managing Director, BT Alex. Brown Incorporated; Director and President,
Investment Company Capital Corp. (registered investment advisor); and
Chartered Financial Analyst.
*TRUMAN T. SEMANS, Director (10/27/26)
Managing Director Emeritus, BT Alex. Brown Incorporated; Formerly, Vice
Chairman, Alex. Brown & Sons Incorporated (now BT Alex. Brown
Incorporated); Vice Chairman, Alex. Brown Capital Advisory & Trust
Company; and Director, Investment Company Capital Corp. (registered
investment advisor).
JAMES J. CUNNANE, Director (3/11/38)
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141, Managing
Director, CBC Capital (merchant 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).
JOHN F. KROEGER, Director (8/11/24)
37 Pippins Way, Morristown, New Jersey 07960, Director/Trustee, AIM
Funds (registered investment companies); Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm); and General Manager, Shell
Oil Company.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078, Director,
Kimberly-Clark Corporation (personal 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; and Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705, President, Duke Management Company
(investments); Executive Vice President, Duke University (education,
research and health care); Director, Central Carolina Bank & Trust
(banking); Key Funds (registered investment companies); and DP Mann
Holdings (insurance; Formerly, Director AMBAC Treasurers Trust
(registered investment company).
REBECCA W. RIMEL, Director (4/10/51)
The Pew Charitable Trusts, One Commerce Square, 2005 Market Street,
Suite 1700, Philadelphia, Pennsylvania 19103-7017. President and Chief
Executive Officer, The Pew Charitable Trusts; Director and Executive
Vice President, The Glenmede Trust Company; Formerly, Executive
Director, The Pew Charitable Trusts.
CARL W. VOGT, Esq., Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington,
D.C. 20004-2604. Senior Partner, Fulbright & Jaworski L.L.P. (law);
Director, Yellow Corporation (trucking) and American Science &
Engineering (x-ray detection equipment); Formerly, Chairman and Member,
National Transportation Safety Board; Director, National Railroad
Passenger Corporation (Amtrak) and Member, Aviation System Capacity
Advisory Committee (Federal Aviation Administration).
HARRY WOOLF, President (8/12/23)
Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; Director, ATL
and Spacelabs Medical Corp. (medical equipment) and Family Health
International (non-profit research and education); Director, Research
America (non-profit medical research); Formerly, Trustee, Reed College
(education);
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<PAGE>
Trustee, Rockefeller Foundation; Director, Merrill Lynch Cluster C
Funds (registered investment companies) and Director, Flag Investors/ISI
and BT Alex. Brown Family of funds.
JOSEPH A. FINELLI, Treasurer (1/24/57)
Vice President, BT Alex. Brown Incorporated and 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.
AMY M. OLMERT, Secretary (5/14/63)
Vice President, BT Alex. Brown Incorporated, June 1997-Present.
Formerly, Senior Manager, Coopers & Lybrand L.L.P., September 1988 -
June 1997.
SCOTT J. LIOTTA, Assistant Secretary (3/18/65)+
Assistant Vice President, BT Alex. Brown Incorporated, July
1996-Present; Formerly, 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.
* Messrs. Hale and Semans are Directors who are "interested persons," as
defined in the Investment Company Act.
Directors and officers of the Fund are also directors and officers of
some or all of the other investment companies managed, administered or advised
by BT Alex. Brown Incorporated ("BT Alex. Brown") or its affiliates. There are
currently 13 funds in the Flag Investors/ISI Funds and BT Alex. Brown Cash
Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Hale serves as
Chairman of four funds, and as a Director of eight funds in the Fund Complex.
Mr. Semans serves as Chairman of five funds and as a Director of six other funds
in the Fund Complex. Messrs. Cunnane, Kroeger, Levy and McDonald serve as
Directors of each fund in the Fund Complex. Ms. Rimel and Mr. Vogt serve as
Directors of 11 funds in the Fund Complex. Mr. Woolf serves as President of
seven funds in the Fund Complex. Ms. Olmert serves as Secretary, Mr. Finelli
serves as Treasurer and Mr. Liotta serves as Assistant Secretary of each fund in
the Fund Complex.
Some of the Directors of the Fund are customers of, and have had normal
brokerage transactions with, BT Alex. Brown in the ordinary course of business.
All such transactions were made on substantially the same terms as those
prevailing at the time for comparable transactions with unrelated persons.
Additional transactions may be expected to take place in the future.
With the exception of the Fund's President, officers of the Fund receive
no direct remuneration in such capacity from the Fund. Officers and Directors of
the Fund who are officers or directors of BT Alex. Brown or its affiliates may
be considered to have received remuneration indirectly. As compensation for his
or her services as Director, each Director who is not an "interested person" of
the Fund (as defined in the Investment Company Act) (an "Independent Director")
and Mr. Woolf receives an aggregate annual fee (plus reimbursement for
reasonable out-of-pocket expenses incurred in connection with his or her
attendance at Board and committee meetings) from each fund in the Fund Complex
for which he or she serves. In addition, the Chairman of the Fund Complex's
Audit Committee receives an aggregate annual fee from the Fund Complex. Payment
of such fees and expenses are allocated among all such funds described above in
direct proportion to their relative net assets. For the fiscal year ended
December 31, 1997, Independent Directors' fees attributable to the assets of the
Fund totaled approximately $4,976.
The following table shows aggregate compensation payable to each of the
Fund's Directors by the Fund and the Fund Complex, respectively, and pension or
retirement benefits accrued as part of Fund expenses in the fiscal year ended
December 31, 1997.
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<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Name of Person, Position Aggregate Compensation Pension or Retirement Total Compensation
From the Fund Payable to Benefits Accrued As From the Fund
Directors for the Fiscal Year Part of Fund Expenses and Fund Complex
Ended December 31, 1997 Payable to Directors
for the Fiscal Year
Ended December 31, 1997
<S> <C> <C> <C>
Richard T. Hale, Chairman (1) $0 $0 $0
Charles W. Cole, Jr., Director (1, 2) $0 $0 $0
Truman T. Semans, Director (1) $0 $0 $0
James J. Cunnane, Director $465 (3) (4) $39,000 for service on 13
Boards in the Fund Complex
John F. Kroeger, Director $584 (4) $49,000 for service on 13
Boards in the Fund Complex
Louis E. Levy, Director $465 (3) (4) $39,000 for service on 13
Boards in the Fund Complex
Eugene J. McDonald, Director $465 (3) (4) $39,000 for service on 13
Boards in the Fund Complex
Rebecca W. Rimel, Director $475 (3) (4) $39,000 for service on 11
Boards in the Fund Complex 5
Carl W. Vogt, Esq., Director $480 (3) (4) $39,000 for service on 11
Boards in the Fund Complex 5
</TABLE>
(1) A Director who is an "interested person" as defined in the Investment
Company Act.
(2) Retired on September 1, 1997.
(3) Of the amounts payable to Messrs. Cunnane, Levy, McDonald and Vogt and
Ms. Rimel, $465, $0, $465, $480, and $475 respectively, was
deferred pursuant to a deferred compensation plan.
(4) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund for
the year ended December 31, 1997 was approximately $4,620.
(5) Ms. Rimel and Mr. Vogt receive proportionately higher compensation from
each fund for which they serve as a director.
The Fund Complex has adopted a Retirement Plan (the "Retirement Plan")
for Directors who are not employees of the Fund, the Fund's Advisor or their
respective affiliates (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 fee earned in his or her last year of
service. Upon retirement, each Participant will receive annually 10% of such fee
for each year that he or she served after completion of the first five years, up
to a maximum annual benefit of 50% of the fee earned by the Participant in his
or her last year of service. The fee will be paid quarterly, for life, by each
Fund for which he or she serves. The Retirement Plan is unfunded and unvested.
Mr. Kroeger has qualified but has not received benefits. The Fund has two
Participants, a Director who retired effective December 31, 1994 and Mr. Woolf,
who have qualified for the Retirement Plan by serving thirteen years and
fourteen years, respectively, as Directors in the Fund Complex and each of whom
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 or her last year of
service, as described above. The approximate credited years of
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<PAGE>
service at December 31, 1997 was as follows: for Mr. Cunnane, 3 years; for Mr.
Kroeger, 15 years; for Mr. Levy, 3 years; for Mr. McDonald, 5 years; for Ms.
Rimel, 2 years; and for Mr. Vogt, 2 years.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex
Upon Retirement -------------------------------------------------------------
- ---------------
Chairman of Audit Committee Other Participants
--------------------------- -------------------
<S> <C> <C>
6 years $4,900 $3,900
7 years $9,800 $7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>
Any Director who receives fees from the Fund is permitted to defer a
minimum of 50%, or up to all, of his or her annual compensation pursuant to a
Deferred Compensation Plan. Messrs. Cunnane, Levy, McDonald and Vogt, and Ms.
Rimel have each executed a Deferred Compensation Agreement. Currently, the
deferring Directors may select from among various Flag Investors funds and BT
Alex. Brown Cash Reserve Fund, Inc. 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 generally equal quarterly
installments over a period of ten years.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of Ethics
pursuant to Rule 17j-1 under the Investment Company Act. The Code of Ethics
applies to the personal investing activities of all directors and officers of
the Fund, as well as to designated officers, directors and employees of the
Advisor and the Distributor. As described below, the Code of Ethics imposes
significant restrictions on the Advisor's investment personnel, including the
portfolio managers and employees who execute or help execute a portfolio
manager's decisions or who obtain contemporaneous information regarding the
purchase or sale of a security by the Fund.
The Code of Ethics requires that any officer, director or employee of
the Fund or the Advisor preclear personal securities investments (with certain
exceptions, such as non-volitional purchases or purchases that are part of an
automatic dividend reinvestment plan). The foregoing would apply to any officer,
director or employee of the Distributor that is an access person. The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and special preclearance of the
acquisition of securities in private placements. Furthermore, the Code of Ethics
provides for trading "blackout periods" that prohibit trading by investment
personnel and certain other employees of the Advisor within periods of trading
by the Fund in the same security. Trading by investment personnel and certain
other employees of the Advisor would be exempt from this "blackout period"
provided that (1) the market capitalization of a particular security exceeds $2
billion; and (2) orders of the Advisor (including trades of both clients and
covered persons) do not exceed ten percent of the daily average trading volume
of the security for the prior 15 days. Officers, directors and employees of the
Advisor and the Distributor may comply with codes of ethics instituted by those
entities so long as they contain similar requirements and restrictions.
-12-
<PAGE>
6. INVESTMENT ADVISORY AND OTHER SERVICES
On June 17, 1997 the Board of Directors of the Fund, including a
majority of the Independent Directors, approved an Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. ("ICC" or the "Advisor")
which is described in greater detail below. The Investment Advisory Agreement
was approved by a vote of shareholders of the Fund on August 14, 1997. ICC is an
indirect subsidiary of Bankers Trust Corporation. ICC is also the investment
advisor to other funds in the Flag Investors family of funds and BT Alex. Brown
Cash Reserve Fund, Inc.
Under the Investment Advisory Agreement, ICC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. Any investment program undertaken by ICC will
at all times be subject to policies and control of the Fund's Board of
Directors. ICC will provide the Fund with office space for managing its affairs,
with the services of required executive personnel and with certain clerical and
bookkeeping services and facilities. These services are provided by ICC without
reimbursement by the Fund for any costs. ICC shall not be liable to the Fund or
its shareholders for any act or omission by ICC or any losses sustained by the
Fund or its shareholders, except in the case of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duty. As compensation for its
services, ICC receives an annual fee from the Fund, payable monthly, at the
following annual rates based upon the Fund's average daily net assets: 0.35% of
the first $1 billion, 0.30% of the next $500 million and 0.25% of that portion
in excess of $1.5 billion. ICC has voluntarily agreed to reduce its annual fee,
if necessary, or to make payments to the Fund to the extent required so that the
Fund's annual expenses do not exceed .70% of the Flag Investors Class A Shares'
average daily net assets and .45% of the Flag Investors Institutional Shares'
average daily net assets. The services of ICC to the Fund are not exclusive and
ICC is free to render similar services to others. Investment advisory fees paid
to ICC for the last three fiscal years are shown below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Advisory Fees For the Fiscal Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contractual Fee $268,092 $245,318 $252,372
- ---------------------------------------------------------------------------------------------------------------
Less amount waived (203,590) (201,059) (162,943)
- ---------------------------------------------------------------------------------------------------------------
Fee after waivers $ 64,502* $ 44,259* $ 89,429*
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Absent fee waivers for the fiscal years ended December 31, 1997, December
31, 1996 and December 31, 1995, the Fund's Total Operating Expenses would
have been 0.96%, 0.99% and 0.93%, respectively, of the Flag Investors Class
A Shares' average daily net assets.
The Investment Advisory Agreement will continue in effect from year to
year thereafter if such continuance is specifically approved at least annually
by the Fund's Board of Directors, including a majority of the Independent
Directors who have no direct or indirect financial interest in such agreement,
by votes cast in person at a meeting called for such purpose, or by a vote of a
majority of the outstanding Shares (as defined under "Capital Stock"). The
Investment Advisory Agreement was approved in the foregoing manner by the Fund's
Board of Directors most recently on September 16, 1997. The Fund or ICC may
terminate the Investment Advisory Agreement on sixty days' written notice
without penalty. The Investment Advisory Agreement will terminate automatically
in the event of assignment (as defined in the Investment Company Act).
In addition to its services as investment advisor, ICC also provides
accounting services to the Fund and serves as the Fund's transfer and dividend
disbursing agent. An affiliate of ICC provides custody services. (See
"Custodian, Transfer Agent and Accounting Services.")
-13-
<PAGE>
7. DISTRIBUTION OF FUND SHARES
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves
as the distributor of each class of the Fund's Shares pursuant to a Distribution
Agreement (the "Distribution Agreement") effective August 31, 1997. Prior to
August 31, 1997, Alex. Brown & Sons Incorporated ("Alex. Brown") was distributor
of the Fund's Shares for the same rate of compensation and on substantially the
same terms and conditions as ICC Distributors.
The Distribution Agreement provides that ICC Distributors shall; (i)
use reasonable efforts to sell Shares upon the terms and conditions contained in
the Distribution Agreement and the Fund's then current Prospectus; (ii) use its
best efforts to conform with the requirements of all federal and state laws
relating to the sale of the Shares; (iii) adopt and follow procedures as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. and any other applicable self-regulatory organization;
(iv) perform its duties under the supervision of and in accordance with the
directives of the Fund's Board of Directors and the Fund's Articles of
Incorporation and By-Laws; and (v) provide the Fund's Board of Directors with a
written report of the amounts expended in connection with the Distribution
Agreement. ICC Distributors shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of ICC Distributors are not exclusive and ICC Distributors
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment, or for any action
or inaction of ICC Distributors in the absence of bad faith, willful misfeasance
or gross negligence in the performance of its duties or obligations under the
Distribution Agreement or by reason of its reckless disregard of its duties and
obligations under the Distribution Agreement. The Distribution Agreement further
provides that the Fund and ICC Distributors will mutually indemnify each other
for losses relating to disclosures in the Fund's registration statement.
The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock") or
upon 60 days' written notice by the Distributor and shall automatically
terminate in the event of an assignment. The Distribution Agreement has an
initial term of one year from the date of effectiveness. It shall continue in
effect thereafter with respect to each class of the Fund provided that it is
approved at least annually by (i) a vote of a majority of the outstanding voting
securities of the related class of the Fund or (ii) a vote of a majority of the
Fund's Board of Directors including a majority of the Independent Directors and,
with respect to each class of the Fund for which there is a plan of
distribution, so long as such plan of distribution is approved at least annually
by the Independent Directors in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement, including the form of
Sub-Distribution Agreement, was initially approved by the Board of Directors,
including a majority of the Independent Directors, on August 4, 1997 and most
recently on March 27, 1998.
ICC Distributors and certain broker-dealers ("Participating Dealers")
have entered into Sub-Distribution Agreements under which such broker-dealers
have agreed to process investor purchase and redemption orders and respond to
inquiries from shareholders concerning the status of their accounts and the
operations of the Fund. Any Sub-Distribution Agreement may be terminated in the
same manner as the Distribution Agreement at any time and shall automatically
terminate in the event of assignment.
In addition, the Fund may enter into Shareholder Servicing Agreements
with certain financial institutions, such as BT Alex. Brown and certain banks,
to act as Shareholder Servicing Agents, pursuant to which ICC Distributors will
allocate a portion of its distribution fee as compensation for such financial
institutions' ongoing shareholder services. The Fund may also enter into
Shareholder Servicing Agreements pursuant to which the Advisor, the Distributor,
or their respective affiliates, will provide compensation out of their own
resources for ongoing shareholder services. Although banking laws and
regulations prohibit banks from distributing shares of open-end investment
-14-
<PAGE>
companies such as the Fund, according to interpretations by various bank
regulatory authorities, financial institutions are not prohibited from acting in
other capacities for investment companies, such as the shareholder servicing
capacities described above. Should future legislative, judicial or
administrative action prohibit or restrict the activities of the Shareholder
Servicing Agents in connection with the Shareholder Servicing Agreements, the
Fund may be required to alter materially or discontinue its arrangements with
the Shareholder Servicing Agents.
As compensation for providing distribution services for the Flag
Investors Class A Shares as described above, ICC Distributors receives an annual
fee, paid monthly, equal to 0.25% of the average daily net assets of the Flag
Investors Class A Shares. ICC Distributors expects to allocate most of its
annual fee to Participating Dealers and Shareholder Servicing Agents. ICC
Distributors receives no compensation for distributing the Flag Investors
Institutional Shares.
As compensation for providing distribution and shareholder services to
the Fund for the last three fiscal years, the Fund's distributor received fees
in the following amounts:
Fiscal Year Ended December 31,
Class 1997 1996 1995
------ ---- ---- -----
Class A 12b-1 Fee $136,962(1) $151,753(2) $179,666(2)
- ------------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $93,060 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $43,902.
(2) Fees received by Alex. Brown, the Fund's distributor for the fiscal years
ended December 31, 1996 and December 31, 1995.
Pursuant to Rule 12b-1 under the Investment Company Act, which provides
that investment companies may pay distribution expenses, directly or indirectly,
only pursuant to a plan adopted by the investment company's board of directors
and approved by its shareholders, the Fund has adopted a Plan of Distribution
for the Fund's Flag Investors Class A Shares (the "Flag Investors Class A
Plan"). Under the Flag Investors Class A Plan, the Fund pays a fee to ICC
Distributors for distribution and other shareholder servicing assistance as set
forth in the Distribution Agreement, and ICC Distributors is authorized to make
payments out of its fee to Participating Dealers and Shareholder Servicing
Agents. The Flag Investors Class A Plan was most recently approved by the Fund's
Board of Directors, including a majority of the Independent Directors, on
September 16, 1997. The Flag Investors Class A Plan will remain in effect from
year to year thereafter, if specifically approved at least annually by the
Fund's Board of Directors and by the affirmative vote of a majority of the
Independent Directors by votes cast in person at a meeting called for such
purpose.
-15-
<PAGE>
In approving the Flag Investors Class A Plan, the Directors concluded,
in the exercise of reasonable business judgment, that there was a reasonable
likelihood that the Flag Investors Class A Plan would benefit the Fund and its
shareholders. The Flag Investors Class A Plan will be renewed only if the
Directors make a similar determination in each subsequent year. The Flag
Investors Class A Plan may not be amended to increase materially the fee to be
paid pursuant to the Distribution Agreement without the approval of the
shareholders of the Fund. The Flag Investors Class A Plan may be terminated at
any time upon sixty days' notice, without penalty, by the vote of a majority of
the Fund's Independent Directors or by a vote of a majority of the outstanding
Shares (as defined under "Capital Stock").
During the continuance of the Flag Investors Class A Plan, the Fund's
Board of Directors will be provided for their review, at least quarterly, a
written report concerning the payments made under the Flag Investors Class A
Plan to ICC Distributors pursuant to the Distribution Agreement and to
broker-dealers pursuant to Sub-Distribution Agreements. Such reports shall be
made by the persons authorized to make such payments. In addition, during the
continuance of the Flag Investors Class A Plan, the selection and nomination of
the Fund's Independent Directors shall be committed to the discretion of the
Independent Directors then in office.
Under the Plan, amounts allocated to Participating Dealers and
Shareholder Servicing Agents may not exceed amounts payable to ICC Distributors
under the Plan with respect to shares held by or on behalf of customers of such
entities. Payments under the Plan are made as described above regardless of ICC
Distributors' actual cost of providing distribution services and may be used to
pay ICC Distributors' overhead expenses. If the cost of providing distribution
services to the Fund in connection with the sale of the Flag Investors Class A
Shares is less than 0.25% of the Flag Investors Class A Shares' average daily
net assets for any period, the unexpended portion of the distribution fee may be
retained by ICC Distributors. The Plan does not provide for any charges to the
Fund for excess amounts expended by ICC Distributors and, if the Plan is
terminated in accordance with its terms, the obligation of the Fund to make
payments to ICC Distributors pursuant to the Plan will cease and the Fund will
not be required to make any payments past the date the Distribution Agreement
terminates with respect to the class of the Fund. In return for payments
received pursuant to the Plan for the last three years, the fund's distributor
paid the distribution-related expenses of the Fund including one or more of the
following: printing and mailing of prospectuses to other than current
shareholders; compensation to dealers and sales personnel; and interest,
carrying, or other financing charges.
The Fund's distributor received commissions on the sale of Class A
Shares (of which only a portion was retained) in the following amounts:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
------------------------------
Class 1997 1996 1995
----- ---- ---- ----
Received Retained Received Retained Received Retained
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Class A $13,144(1) $6,190(2) $26,849(3) $24,060(3) $11,196(3) $11,088(3)
======== ======= ======== ======== ======== ========
</TABLE>
Commissions
- -------------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $6,926 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $6,188.
(2) Of commissions received, Alex. Brown retained $6,190 and ICC Distributors
retained $0, respectively.
(3) By Alex. Brown, the Fund's distributor for the fiscal years ended
December 31, 1996 and December 31, 1995.
<PAGE>
General Information
The Fund will pay all costs associated with its organization and
registration under the Securities Act of 1933 and the Investment Company Act.
Except as described elsewhere, the Fund pays or causes to be paid all continuing
expenses of the Fund, including, without limitation: investment advisory and
distribution fees; the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of 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; 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 proxy statements
and reports to shareholders; fees and travel expenses of Directors and 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
Shares; fees and expenses of legal counsel, including counsel to the Independent
Directors, and of independent auditors, in connection with any matter relating
to the Fund; a portion of membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund that 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
assumed by ICC Distributors or ICC.
8. BROKERAGE
ICC is responsible for decisions to buy and sell securities for the
Fund, for the broker-dealer selection and for negotiation of commission rates.
Purchases and sales of securities on a securities exchange are effected through
broker-dealers who charge a commission for their services. ICC may direct
purchase and sale orders to any broker-dealer, including, to the extent and in
the manner permitted by applicable law, its affiliates and ICC Distributors.
In over-the-counter transactions, orders are placed directly with a
principal market maker and such purchases normally include a mark up over the
bid to the broker-dealer based on the spread between the bid and asked price for
the security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. The Fund will not deal with
affiliates of the Advisor in any transaction in which they act as a principal,
nor will the Fund buy or sell over-the-counter securities with them acting as
market maker.
If affiliates of the Advisor are participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with rules of the SEC. The Fund believes that the limitation will
not affect its ability to carry out its present investment objective.
ICC's primary consideration in effecting securities transactions is to
obtain best price and execution of orders on an overall basis. As described
below, however, ICC may, in its discretion, effect brokerage transactions with
broker-dealers that furnish statistical, research or other information or
services that are deemed by ICC to be beneficial to the Fund's investment
program. Certain research services furnished by broker-dealers may be useful to
ICC with clients other than the Fund. Similarly, any research services received
by ICC through placement of portfolio transactions of other clients may be of
value to ICC in fulfilling its obligations to the Fund. No specific value can be
determined for research and statistical services furnished without cost to ICC
by a broker-dealer. ICC is of the opinion that because the material must be
analyzed and reviewed by its staff, its receipt does not tend to reduce
expenses, but may be beneficial in supplementing ICC's research and analysis.
Therefore, it may tend to benefit the Fund by improving ICC's investment advice.
ICC's policy is to pay a broker-dealer higher commissions for particular
transactions than might be charged if a different broker-dealer had been chosen
when, in ICC's opinion, this policy furthers the overall objective of obtaining
best price and execution. Subject to periodic review by the Fund's Board of
Directors, ICC is also authorized to pay broker-dealers other than affiliates of
the Advisor higher commissions than other brokers might have charged on
brokerage transactions for the Fund for brokerage or research services. The
allocation of orders among broker-dealers and the commission rates paid by the
Fund will be reviewed periodically by the Board of Directors. For the fiscal
years ended December 31, 1997, December 31, 1996 and December 31, 1995, ICC
directed no brokerage transactions to broker-dealers and paid no related
commissions because of research services provided to the Fund.
-17-
<PAGE>
Subject to the above considerations, the Board of Directors has
authorized the Fund to effect portfolio transactions, on an agency basis,
through affiliates of the Advisor. At the time of such authorization, the Board
adopted certain policies and procedures incorporating the standards of Rule
17e-1 under the Investment Company Act, which requires that the commissions paid
the affiliates of the Advisor must be "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." Rule 17e-1 also contains requirements for
the review of such transactions by the Board of Directors and requires ICC to
furnish reports and to maintain records in connection with such reviews. For the
period from September 1, 1997 through December 31, 1997, the Fund did not pay
brokerage commissions to BT Alex. Brown or its affiliates. For the period from
January 1, 1997 through August 31, 1997 and for the fiscal years ended December
31, 1996 and December 31, 1995, the Fund did not pay brokerage commissions to
Alex. Brown. The Fund is required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the Investment Company Act) that
the Fund has acquired during its most recent fiscal year. As of December 31,
1997, the Fund held a 6.25% repurchase agreement issued by Goldman Sachs & Co.
valued at $6,585,000. Goldman Sachs & Co. is a "regular broker or dealer" of the
Fund.
ICC manages other investment accounts. It is possible that, at times,
identical securities will be acceptable for the Fund and one or more of such
other accounts; however, the position of each account in the securities of the
same issuer may vary and the length of time that each account may choose to hold
its investment in such securities may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of the
Fund or one or more of these accounts is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by ICC. ICC may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Such simultaneous transactions, however, could adversely
affect the ability of the Fund to obtain or dispose of the full amount of a
security that it seeks to purchase or sell.
9. CAPITAL STOCK
The Fund is authorized to issue 60 million shares of common stock, par
value $.001 per share. The Board of Directors may increase or decrease the
number of authorized Shares without shareholder approval.
The Fund's Articles of Incorporation provide for the establishment of
separate series and separate classes of Shares by the Directors at any time
without shareholder approval. The Fund currently has one Series and the Board
has designated four classes of shares: Flag Investors Short-Intermediate Income
Fund Class A Shares, Flag Investors Short-Intermediate Income Fund Class B
Shares, Flag Investors Short-Intermediate Income Fund Institutional Shares and
Alex. Brown Capital Advisory & Trust Short-Intermediate Income Shares. The ABCAT
Shares and the Flag Investors Class B Shares are not currently being offered.
Shares of the Fund, regardless of series or class would have equal rights with
respect to voting, except that with respect to any matter affecting the rights
of the holders of a particular series or class, the holders of each series or
class would vote separately. In general, each series would be managed separately
and shareholders of each series would have an undivided interest in the net
assets of that series. For tax purposes, the series would be treated as separate
entities. Generally, each class of Shares would be identical to every other
class in a particular series and expenses of the Fund (other than 12b-1 and any
applicable service fees) would be prorated between all classes of a series based
upon the relative net assets of each class. Any matters affecting any class
exclusively will be voted on by the holders of such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding Shares voting together
for election of Directors may elect all the
-18-
<PAGE>
members of the Board of Directors of the Fund. In such event, the remaining
holders cannot elect any members of the Board of Directors of the Fund. There
are no preemptive, conversion or exchange rights applicable to any of the
Shares. The issued and outstanding Shares are fully paid and non-assessable. In
the event of liquidation or dissolution of the Fund, each Share is entitled to
its portion of the Fund's assets (or the assets allocated to a separate series
of shares if there is more than one series) after all debts and expenses have
been paid.
As used in this Statement of Additional Information the term "majority
of the outstanding Shares" means the vote of the lesser of (i) 67% or more of
the Shares present at a meeting, if the holders of more than 50% of the
outstanding Shares are present or represented by proxy, or (ii) more than 50% of
the outstanding Shares.
10. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of investments
held in the Fund's portfolio and financial statements. The annual financial
statements are audited by the Fund's independent auditors.
11. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Bankers Trust Company ("Bankers Trust") serves as custodian of the
Fund's investments. Bankers Trust receives such compensation from the Fund for
its services as custodian as may be agreed to from time to time by Bankers Trust
and the Fund. For the period from September 22, 1997 to December 31, 1997,
Bankers Trust accrued $4,671 as compensation for providing custody services to
the Fund. Investment Company Capital Corp. serves as the Fund's transfer and
dividend disbursing agent and provides certain accounting services to the Fund
under a Master Services Agreement between the Fund and ICC. As compensation for
providing dividend and transfer agency services, the Fund pays ICC up to $15.62
per account per year, plus reimbursement for out-of-pocket expenses incurred in
connection therewith. For the fiscal year ended December 31, 1997, such fees
totaled $31,985.
As compensation for providing accounting services, ICC receives an
annual fee, calculated daily and paid monthly, as shown below.
Average Net Assets
Accounting Fee Incremental Annual
------------------ ------------------
$ 0 - $ 10,000,000 $15,000 (fixed fee)
$ 10,000,000 - $ 25,000,000 0.080%
$ 25,000,000 - $ 50,000,000 0.077%
$ 50,000,000 - $ 75,000,000 0.050%
$ 75,000,000 - $ 100,000,000 0.030%
$100,000,000 - $ 500,000,000 0.020%
$500,000,000 - $1,000,000,000 0.008%
over $1,000,000,000 0.003%
In addition, the Fund reimburses ICC for certain out-of-pocket expenses.
For the fiscal year ended December 31, 1997, ICC received accounting fees of
$59,200.
12. INDEPENDENT AUDITORS
The annual financial statements of the Fund are audited by Deloitte &
Touche LLP.
-19-
<PAGE>
13. LEGAL MATTERS
Morgan, Lewis & Bockius LLP acts as counsel to the Fund.
14. PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the Fund to
that of other open-end diversified management investment companies and to stock
or other relevant indices in advertisements or in certain reports to
shareholders, performance will generally be stated both in terms of total return
and in terms of yield. However, the Fund may also from time to time state the
performance of the Fund solely in terms of total return.
Total Return Calculations
The total return quotations, under the rules of the SEC, must be
calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1-, 5-, or
10-year periods (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of the
1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover one-, five-, and ten-year periods or a shorter period dating from the
effectiveness of the Fund's registration statement (or the later commencement of
operations of a Series or class). In calculating the ending redeemable value,
the maximum sales load is deducted from the initial $1,000 payment and all
dividends and distributions by the Fund are assumed to have been reinvested at
net asset value as described in the Prospectuses on the reinvestment dates
during the period. "T" in the formula above is calculated by finding the average
annual compounded rate of return over the period that would equate an assumed
initial payment of $1,000 to the ending redeemable value. Any sales loads that
might in the future be made applicable at the time to reinvestments would be
included as would any recurring account charges that might be imposed by the
Fund.
Calculated according to SEC rules, the ending redeemable value and
average annual total return of a hypothetical $1,000 payment for the periods
ended December 31, 1997 were as follows:
-20-
<PAGE>
<TABLE>
<CAPTION>
One-Year Period Ended Five-Year Period Ended Inception Through
December 31, 1997 December 31, 1997 December 31, 1997
------------------- ------------------- ------------------
Ending Average Ending Average Ending Average
Class Redeemable Annual Total Redeemable Annual Total Redeemable Annual Total
- ----- ---------- ------------ ---------- ------------ ---------- ------------
Value Return Value Return Value Return
------- -------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Flag Investors Class A $1,055.22 5.52% $1,336.08 5.97% $1,550.26 6.83%
May 31, 1991 +
Flag Investors Institutional $1,074.00 7.40% N/A N/A $1,141.68 6.32%
November 2, 1995 +
- ---------------
</TABLE>
+ Inception Date.
The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth above
to compare more accurately the Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., CDA/Weisenberger or Morningstar
Inc., or with the performance of the Lehman Brothers Intermediate Aggregate Bond
Index, the Lehman Brothers Government Intermediate-Term Bond Index or the
Merrill Lynch 1-3 Year Treasury Index, the Fund calculates its aggregate and
average annual total return for the specified periods of time by assuming the
investment of $10,000 in Shares and assuming the reinvestment of each dividend
or other distribution at net asset value on the reinvestment date.
For this alternative computation, the Fund assumes that the $10,000
invested in Shares is net of all sales charges. The Fund will, however, disclose
the maximum sales charges and will also disclose that the performance data do
not reflect sales charges and that inclusion of sales charges would reduce the
performance quoted. Such alternative total return information will be given no
greater prominence in such advertising than the information prescribed under SEC
rules, and all advertisements containing performance data will include a legend
disclosing that such performance data represent past performance and that the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Yield Calculations
The Fund's yield for the Flag Investors Class A Shares and the Flag
Investors Institutional Shares for the 30-day period ended December 31, 1997 was
5.62% and 5.99%, respectively, and was computed in the manner discussed below.
The yield of the Fund is calculated by dividing the net investment income per
Share earned by the Fund during a 30-day (or one month) period by the maximum
offering price per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. The Fund's net investment income per Share earned during the period
is based on the average daily number of Shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements.
Except as noted below, for the purpose of determining net investment
income earned during the period, interest earned on debt obligations held by the
Fund is calculated by computing the yield to maturity of each obligation based
on the market value of the obligation (including actual accrued
-21-
<PAGE>
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, based on the purchase
price (plus actual accrued interest), dividing the result by 360 and multiplying
the quotient by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is held by the Fund. For
purposes of this calculation, it is assumed that each month contains 30 days.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date.
Undeclared earned income will be subtracted from the net asset value per
share. Undeclared earned income is net investment income that, at the end of the
base period, has not been declared as a dividend, but is reasonably expected to
be and is declared as a dividend shortly thereafter.
The Fund's annual portfolio turnover rate (the lesser of the value of
the purchases or sales for the year divided by the average monthly market value
of the portfolio during the year, excluding U.S. Government securities and
securities with maturities of one year or less) may vary from year to year, as
well as within a year, depending on market conditions. The Fund's portfolio
turnover rate was 65% for the fiscal year ended December 31, 1997 and 42% for
the fiscal year ended December 31, 1996. A high level of portfolio turnover may
generate relatively high transaction costs and may increase the amount of taxes
payable by the Fund's shareholders.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, the following persons owned of record or
beneficially 5% or more of the Fund's outstanding Shares, as of April 17, 1998:
Name and Address % Ownership
Chase Manhattan Bank TR. 5.78%
Wells Aluminum Corp.
Master Trust 29400333
770 Broadway
New York, NY 10003-9522
BT Alex. Brown Incorporated 7.93%
FBO 201-95002-10 and 201-95002-28
P.O. Box 1346
Baltimore, MD 21203-1346
BT Alex. Brown Incorporated 24.80%
FBO 250-10788-16
P.O. Box 1346
Baltimore, MD 21203-1346
* As of such date, BT Alex. Brown owned beneficially less than
1% of such Shares.
Directors and officers as a group owned less than 1% of the
Fund's total outstanding Shares, as of April 23, 1998.
16. FINANCIAL STATEMENTS
(See next page.)
-22-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Statement of Net Assets December 31, 1997
<TABLE>
<CAPTION>
S&P Par Market Value
Security Rating* (000) (Note 1)
- -------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS--27.8%
Banc One Columbus
7.375%, 12/1/02 AA- $1,000 $ 1,043,750
Bear Stearns Company Incorporated
6.50%, 8/1/02 A 2,000 2,015,000
Block Financial Corporation
6.75%, 11/1/04 A 2,000 2,032,500
Countrywide Home Loan
7.26%, 5/10/04 A 2,000 2,092,500
First Maryland Bancorp
7.20%, 7/1/07 A- 2,000 2,090,000
Ford Motor Credit
6.05%, 3/31/98 A+ 2,000 2,000,300
General Motors Acceptance Corporation
5.625%, 2/15/01 A- 1,000 987,500
International Lease Finance
6.43%, 9/15/00 A+ 2,000 2,015,000
Norwest Corporation
7.68%, 5/10/02 AA- 1,048 1,054,550
Pacific Gas & Electric
6.25%, 3/1/04 AA- 2,000 2,010,000
Philip Morris Cos., Inc.
6.95%, 6/1/06 A 2,000 2,050,000
Sears Roebuck Acceptance Corporation
6.34%, 9/19/00 A- 2,190 2,203,687
-----------
Total Corporate Bonds
(Cost $21,390,553) 21,594,787
-----------
U.S. GOVERNMENT AGENCY SECURITIES--25.5%
Federal Home Loan Banks Board - 7.7%
Debentures
7.151%, 9/13/05 (Callable 3/13/98) AAA 3,000 2,999,880
6.900%, 4/28/00 (Callable 4/28/98) AAA 3,000 3,011,550
Federal National Mortgage Assoc. - 7.1%
Debentures
6.250%, Due 8/12/03 AAA 3,500 3,494,785
7.120%, Due 4/19/02 AAA 2,000 2,023,820
Mortgage-Backed Securities - 9.4%
Federal Home Loan Mortgage Corp.
Pool #G10049, 8.00%, 10/1/07 AAA 844 871,922
</TABLE>
-23-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) December 31, 1997
<TABLE>
<CAPTION>
S&P Par Market Value
Security Rating* (000) (Note 1)
- --------------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AGENCY SECURITIES (concluded)
Mortgage-Backed Securities (concluded)
Federal Home Loan Mortgage Corp.
Pool #G10543, 6.00%, 6/1/11 AAA $2,649 $ 2,607,868
Pool #M19094, 7.00%, 2/1/98 AAA 792 803,591
Federal National Mortgage Assoc.
Pass-through
Pool #326570, 7.00%, Due 2/1/08 AAA 2,980 3,025,905
Guaranteed Export Trust - 1.3%
8.187%, 12/15/04 AAA 913 971,339
-----------
Total U.S. Government Agency Securities
(Cost $19,492,391) 19,810,660
-----------
U.S. TREASURY SECURITIES--16.9%
U.S. Treasury Notes
5.875%, 2/15/00 AAA 1,000 1,004,150
6.250%, 2/15/03 AAA 5,000 5,115,700
5.750%, 8/15/03 AAA 2,000 2,001,720
5.750%, 10/31/03 AAA 5,000 5,005,800
-----------
Total U.S. Treasury Securities
(Cost $12,751,849) 13,127,370
-----------
ASSET-BACKED SECURITIES--17.9%
Aesop Funding II Limited Liability Company
6.22%, 10/20/01 AAA 2,500 2,514,500
California Infrastructure Pacific Gas &
Electric, 97-1-A4
6.16%, 6/25/03 AAA 2,000 2,002,109
FHLMC Structured Pass-through, Series T-9
6.43%, 2/25/13 AAA 1,500 1,469,590
Green Tree Financial Corporation
8.25%, 1/15/20 NR** 3,000 3,190,980
Metris Master Trust
6.87%, 10/20/05 AAA 3,000 3,084,492
Premier Auto Trust, 94-1-A3
4.75%, 2/2/00 AAA 54 53,813
Premier Auto Trust, 96-3-A4
6.75%, 11/6/00 AAA 1,500 1,529,130
-----------
Total Asset-Backed Securities
(Cost $13,697,185) 13,844,614
-----------
</TABLE>
-24-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P Par Market Value
Security Rating* (000) (Note 1)
- ------------------------------------------------------------------------------------
<S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--3.2%
Federal Home Loan Mortgage Corp. - 2.1%
Multi-Class Mortgage Certificates
Series 106-F, 8.50%, 12/15/20 AAA $1,615 $ 1,647,006
Federal National Mortgage Assoc. - 1.1%
Multi-Class Mortgage Certificates
Series 88-18-B, 9.40%, 7/25/03 AAA 125 131,027
Series 91-11-G, 7.00%, 11/25/19 AAA 705 703,859
-----------
Total Collateralized Mortgage Obligations
(Cost $2,468,052) 2,481,892
-----------
REPURCHASE AGREEMENT--8.5%
Goldman Sachs & Co., 6.25%
Dated 12/31/97, to be repurchased on 1/2/98, collateralized by U.S. Treasury
Bonds with a market value of $6,716,883.
(Cost $6,585,000) NR 6,585 6,585,000
----------
Total Investment in Securities--99.8%
(Cost $76,385,030)*** 77,444,323
Other Assets in Excess of Liabilities, Net--0.2% 181,175
-----------
Net Assets--100.0% $77,625,498
===========
Net Asset Value and Redemption Price Per:
Class A Share
($45,569,338 / 4,386,630 shares outstanding) $10.39
======
Institutional Share
($32,056,160 / 3,052,560 shares outstanding) $10.50
======
MAXIMUM OFFERING PRICE PER:
Class A Share ($10.39 / 0.985) $10.55
======
Institutional Share $10.50
======
</TABLE>
- ----------
* The Standard & Poor's rating indicated is believed to be the most recent
rating available as of December 31, 1997. The U.S. Government Agency
Securities and U.S. Treasury Securities are assumed to have AAA ratings
because they are backed by the full faith and credit of the U.S.
government. These ratings have not been audited by Deloitte & Touche LLP.
** Although this holding is not rated by S&P, it is rated Aaa by Moody's and
AAA by Fitch.
*** Also aggregate cost for federal tax purposes.
See Notes to Financial Statements.
-25-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31,
- --------------------------------------------------------------------------------
1997
Investment Income (Note 1):
Interest $5,072,268
----------
Expenses:
Investment advisory fee (Notes 2 and 7) 268,092
Distribution fee (Note 2) 136,962
Legal 76,448
Accounting fee (Note 2) 59,200
Transfer agent fee (Note 2) 31,985
Registration fees 31,620
Printing and postage 26,951
Audit 25,025
Custodian fee (Note 2) 16,089
Directors' fees 4,976
Pricing fee 4,820
Miscellaneous 2,309
Insurance 745
----------
Total expenses 685,222
Less: Fees waived (Note 2) (203,590)
----------
Net expenses 481,632
----------
Net investment income 4,590,636
----------
Realized and unrealized gain/(loss) on investments (Note 1):
Net realized gain from security transactions 95,306
Change in unrealized appreciation
or depreciation of investments 680,823
----------
Net gain on investments 776,129
----------
Net increase in net assets resulting from operations $5,366,765
==========
See Notes to Financial Statements.
-26-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 4,590,636 $ 4,307,970
Net gain/(loss) from security transactions 95,306 (141,613)
Change in unrealized appreciation or
depreciation of investments 680,823 (1,267,527)
------------ ------------
Net increase in net assets resulting
from operations 5,366,765 2,898,830
------------ ------------
Dividends to Shareholders From:
Net investment income:
Class A Shares (3,165,854) (3,528,967)
Institutional Shares (1,359,289) (602,635)
------------ ------------
Total distributions (4,525,143) (4,131,602)
------------ ------------
Capital Share Transactions (Note 3):
Proceeds from sale of shares 23,594,729 24,144,316
Value of shares issued in reinvestment of
dividends 2,514,042 2,641,312
Cost of shares repurchased (25,416,223) (18,763,222)
------------ ------------
Increase in net assets derived from
capital share transactions 692,548 8,022,406
------------ ------------
Total increase in net assets 1,534,170 6,789,634
Net Assets:
Beginning of year 76,091,328 69,301,694
------------ ------------
End of year $ 77,625,498 $ 76,091,328
============ ============
See Notes to Financial Statements.
-27-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class A Shares (For a share outstanding throughout each
year)
For the
Year Ended
December 31,
- --------------------------------------------------------------------------------
1997
Per Share Operating Performance:
Net asset value at beginning of year $ 10.28
-------
Income from Investment Operations:
Net investment income 0.61
Net realized and unrealized gain/(loss) on investments 0.10
-------
Total from Investment Operations 0.71
Less Distributions:
Distributions from net investment income
and short-term gains (0.60)
Return of capital --
Distributions from net realized long-term gains --
-------
Total distributions (0.60)
-------
Net asset value at end of year $ 10.39
=======
Total Return(1) 7.13%
Ratios to Average Daily Net Assets:
Expenses(2) 0.70%
Net investment income(3) 5.92%
Supplemental Data:
Net assets at end of year (000) $45,569
Portfolio turnover rate 65%
- ----------
(1) Total return excludes the effect of sales charge.
(2) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 0.96%, 0.99%, 0.93%, 0.84% and
0.85% for the years ended December 31, 1997, 1996, 1995, 1994 and 1993,
respectively.
(3) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 5.66%, 5.83%, 5.77%,
5.43% and 5.28% for the years ended December 31, 1997, 1996, 1995, 1994 and
1993, respectively.
-28-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of year $ 10.48 $ 9.62 $ 10.57 $ 10.37
------- ------- ------- -------
Income from Investment Operations:
Net investment income 0.63 0.62 0.57 0.57
Net realized and unrealized gain/(loss) on investments (0.23) 0.84 (0.92) 0.34
------- ------- ------- -------
Total from Investment Operations 0.40 1.46 (0.35) 0.91
Less Distributions:
Distributions from net investment income
and short-term gains (0.60) (0.60) (0.57) (0.69)
Return of capital -- -- (0.03) --
Distributions from net realized long-term gains -- -- -- (0.02)
------- -------- ------- -------
Total distributions (0.60) (0.60) (0.60) (0.71)
------- -------- ------- -------
Net asset value at end of year $ 10.28 $ 10.48 $ 9.62 $ 10.57
======= ======== ======= =======
Total Return(1) 4.04% 15.43% (3.32)% 8.98%
Ratios to Average Daily Net Assets:
Expenses(2) 0.70% 0.70% 0.70% 0.70%
Net investment income(3) 6.11% 6.00% 5.57% 5.43%
Supplemental Data:
Net assets at end of year (000) $58,584 $67,116 $78,789 $112,520
Portfolio turnover rate 42% 46% 50% 86%
</TABLE>
See Notes to Financial Statements.
-29-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Financial Highlights--Institutional Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
November 2,
For the Year Ended 1995(1) through
December 31, December 31,
- -----------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at
beginning of period $ 10.38 $ 10.58 $10.42
------- ------- ------
Income from Investment Operations:
Net investment income 0.61 0.59 0.09
Net realized and unrealized
gain/(loss) on investments 0.13 (0.17) 0.12
------- ------- ------
Total from Investment Operations 0.74 0.42 0.21
Less Distributions:
Distributions from net investment
income and short-term gains (0.62) (0.62) (0.05)
------- ------- ------
Net asset value at end of period $ 10.50 $ 10.38 $10.58
======= ======= ======
Total Return 7.40% 4.20% 12.47%(2)
Ratios to Average Daily Net Assets:
Expenses(3) 0.45% 0.45% 0.45%(2)
Net investment income(4) 6.17% 6.35% 6.52%(2)
Supplemental Data:
Net assets at end of period (000) $32,056 $17,507 $2,186
Portfolio turnover rate 65% 42% 46%
</TABLE>
- ----------
(1) Commencement of operations.
(2) Annualized.
(3) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 0.72%, 0.76% and 0.72%
(annualized) for the years ended December 31, 1997 and 1996 and the period
ended December 31, 1995, respectively.
(4) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 5.90%, 6.04% and 6.27%
(annualized) for the years ended December 31, 1997 and 1996 and the period
ended December 31, 1995, respectively.
See Notes to Financial Statements.
-30-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Flag Investors Short-Intermediate Income Fund, Inc. (the "Fund"), formerly
Flag Investors Intermediate-Term Income Fund, Inc., was organized as a Maryland
Corporation on April 16, 1990 and commenced operations May 13, 1991. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
investment management company. It is designed to provide a high level of current
income consistent with preservation of principal within an intermediate-term
maturity structure.
The Fund consists of two share classes: Class A Shares, which commenced May
13, 1991, and Institutional Shares, which commenced November 2, 1995.
The Class A Shares have a 1.50% maximum front-end sales charge and a 0.25%
distribution fee. The Institutional Shares have neither a front-end sales charge
nor a distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. The Fund's significant accounting policies are:
A. SECURITY VALUATION--The Fund values a debt security based on
quotations provided by a pricing service, which uses transactions on
bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities to determine
value. The Fund values a portfolio security that is primarily traded
on a national exchange by using the last sale price reported for the
day. When a market quotation is unavailable, the Investment Advisor
determines a fair value using procedures that the Board of Directors
establishes and monitors. The Fund values short-term obligations with
maturities of 60 days or less at amortized cost.
B. REPURCHASE AGREEMENTS--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
-31-
<PAGE>
FLAG INVESTORS SHORT-INTERMDIATE INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENT (CONTINUED)
NOTE 1--concluded
collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the broker defaults.
The Fund's access to the collateral may be delayed or limited if the
broker defaults and the value of the collateral declines or if the
broker enters into an insolvency proceeding.
C. FEDERAL INCOME TAXES--The Fund determines its distributions according
to income tax regulations, which may be different from generally
accepted accounting principles. As a result, the Fund occasionally
makes reclassifications within its capital accounts to reflect income
and gains that are available for distribution under income tax
regulations.
The Fund is organized as a regulated investment company. As long
as it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net
realized capital gains, it will be exempt from most, if not all,
federal income and excise taxes. As a result, the Fund has made no
provisions for federal income taxes.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER--The
Fund uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed.
Interest income is recorded on an accrual basis and includes the pro
rata scientific method for amortization of premiums and accretion of
discounts when appropriate. Income and common expenses are allocated
to each class based on its respective average net assets. Class
specific expenses are charged directly to each class. Dividends from
net investment income are declared and paid monthly. Distributions of
capital gains are recorded on the ex-dividend dates. Distributions in
excess of net investment income are due to different tax treatments of
dividends declared.
-32-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
NOTE 2--Investment Advisory Fee, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust New
York Corporation, is the Fund's investment advisor. As compensation for its
advisory services, the Fund pays ICC an annual fee. This fee is based on the
Fund's average daily net assets and is calculated daily and paid monthly at the
following annual rates: 0.35% of the first $1 billion, 0.30% of the next $500
million and 0.25% of the amount over $1.5 billion.
ICC has agreed to reduce its aggregate fees so that ordinary Fund expenses
for any fiscal year do not exceed 0.70% of the Class A Shares' average daily net
assets and 0.45% of the Institutional Shares' average daily net assets. For the
year ended December 31, 1997, ICC waived fees of $203,590.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisor.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $59,200 for accounting services for the year ended
December 31, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $31,985 for
transfer agent services for the year ended December 31, 1997.
Effective September 22, 1997, Bankers Trust Company, a subsidiary of
Bankers Trust New York Corporation, became the Fund's custodian. Prior to
September 22, 1997, PNC Bank served as the Fund's custodian. From September 22,
1997 to December 31, 1997, the Fund accrued $4,671 in custody expenses.
As compensation for providing distribution services, the Fund pays ICC
Distributors, Inc. ("ICC Distributors"), which is not related to ICC, an annual
fee that is calculated daily and paid monthly. This fee is paid at an annual
rate equal to 0.25% of the Class A Shares' average daily net assets. Prior to
September 1, 1997, Alex. Brown & Sons Incorporated served as the Fund's
distributor for the same compensation and on substantially the same terms as ICC
Distributors. For the year ended December 31, 1997, distribution fees aggregated
$136,962.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
December 31, 1997 was $4,620, and the accrued liability was $5,029.
-33-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 3--Capital Share Transactions
The Fund is authorized to issue up to 60 million shares of $.001 par value
capital stock (45 million Class A, 2 million Class B, 5 million Institutional, 5
million Alex. Brown Capital Advisory & Trust and 3 million undesignated).
Transactions in shares of the Fund are listed below.
Class A Shares
----------------------------
For the For the
Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996
------------- -------------
Shares sold 643,871 824,212
Shares issued to shareholders on
reinvestment of dividends 188,623 223,342
Shares redeemed (2,147,036) (1,752,832)
------------ ------------
Net decrease in shares outstanding (1,314,542) (705,278)
============ ============
Proceeds from sale of shares $ 6,656,537 $ 8,509,093
Value of reinvested dividends 1,939,315 2,288,737
Cost of shares redeemed (22,186,651) (18,054,319)
------------ ------------
Net decrease from capital share transactions $(13,590,799) $ (7,256,489)
============ ============
Institutional Shares
----------------------------
For the For the
Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996
------------- -------------
Shares sold 1,621,803 1,513,443
Shares issued to shareholders on
reinvestment of dividends 55,315 34,119
Shares redeemed (310,716) (67,989)
----------- -----------
Net increase in shares outstanding 1,366,402 1,479,573
=========== ===========
Proceeds from sale of shares $16,938,192 $15,635,223
Value of reinvested dividends 574,727 352,575
Cost of shares redeemed (3,229,572) (708,903)
----------- -----------
Net increase from capital share transactions $14,283,347 $15,278,895
=========== ===========
-34-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
NOTE 4--Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $47,383,704 and sales of investment securities aggregated $46,467,965
for the year ended December 31, 1997.
On December 31, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $1,116,074 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $56,781.
NOTE 5--Net Assets
On December 31, 1997, net assets consisted of:
Paid-in capital:
Class A Shares.......................................... $48,313,133
Institutional Shares.................................... 31,719,118
Accumulated net realized loss from security transactions..... (3,409,521)
Unrealized appreciation of investments....................... 1,059,293
Distributions in excess of net investment income............. (56,525)
-----------
$77,625,498
===========
NOTE 6--Federal Income Tax Information
Generally accepted accounting principles require that we reclassify certain
components of net assets to reflect permanent differences between financial
reporting and tax purposes. We have reclassified permanent book/tax differences
of $69,801 to undistributed net investment income from accumulated net realized
loss from security transactions. This reclassification has no effect on net
assets or net asset values per share.
On December 31, 1997, there was a tax capital loss carryforward of
$3,406,552 of which $260,038 expires in 2002, $3,111,390 expires in 2003 and
$35,124 expires in 2004. This carryforward will be used to offset any future net
capital gains.
NOTE 7--Shareholder Meeting
Alex. Brown Incorporated, which was the parent corporation of the Fund's
investment advisor, merged into a subsidiary of Bankers Trust New York
Corporation on September 1, 1997. Due to the change in control of Alex. Brown
Incorporated, the Flag Investors Short-Intermediate Income Fund held a special
meeting for its shareholders on August 14, 1997. During the meeting,
shareholders approved a new Investment Advisory Agreement between the Fund and
ICC. The new agreement is substantially the same as the former agreement.
-35-
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
Flag Investors Short-Intermediate Income Fund, Inc.:
We have audited the accompanying statement of net assets of the Flag
Investors Short-Intermediate Income Fund, Inc. as of December 31, 1997, and the
related statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1997 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Flag Investors
Short-Intermediate Income Fund, Inc. as of December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
January 29, 1998
-36-
<PAGE>
APPENDIX
Corporate Bond Rating Definitions
- -------------------------------------------------------------------------------
Standard & Poor's Ratings Group
AAA - Highest rating assigned by Standard & Poor's to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only to a small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal
although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories.
- -------------------------------------------------------------------------------
Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Commercial Paper Rating Definitions
- -------------------------------------------------------------------------------
Standard & Poor's Ratings Group
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated
A-1+ are those with "extremely strong" safety characteristics. Those rated A-1
reflect a " strong" degree of safety regarding timely payment.
- -------------------------------------------------------------------------------
Moody's Investors Service, Inc.
Commercial paper issuers rated Prime-1 by Moody's are judged by Moody's to be of
the highest quality on the basis of relative repayment capacity.
A-1
<PAGE>
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits.
----------------------------------
List all financial statements and exhibits filed as part of
the Registration Statement.
(a) Financial statements:
(1) Included in Part A of the Registration
Statement:
- Financial Highlights for Flag
Investors Class A Shares for the
fiscal years ended December 31,
1997, December 31, 1996, December
31, 1995, December 31, 1994,
December 31, 1993 and December 31,
1992 and for the period May 13,
1991 (commencement of operations)
through December 31, 1991.
- Financial Highlights for Flag
Investors Institutional Shares for
the fiscal years ended December 31,
1997 and December 31, 1996 and for
the period November 2, 1995
(commencement of operations)
through December 31, 1995.
(2) Included in Part B of the Registration
Statement:
- Statement of Net Assets as of
December 31, 1997.
- Statement of Operations for the
year ended December 31, 1997.
- Statements of Changes in Net Assets
for the years ended December 31,
1997 and December 31, 1996.
- Financial Highlights for Flag
Investors Class A Shares for the
years ended December 31, 1997,
December 31, 1996, December 31,
1995, December 31, 1994, December
31, 1993 and December 31, 1992 and
for the period ended December 31,
1991.
- Financial Highlights for Flag
Investors Institutional Shares for
the fiscal years ended December 31,
1997, December 31, 1996 and the
period November 2, 1995
(commencement of operations)
through December 31, 1995.
- Notes to Financial Statements.
(3) All required financial statements are
included in Part B of the Registration
Statement. All other financial
statements and schedules are
inapplicable.
(b) Exhibits.
(1) (a) Articles of Incorporation.(1)
(b) Amended Articles of
Incorporation.(2)
C-1
<PAGE>
(c) Amendment to Amended Articles of
Incorporation.(2)
(d) Articles Supplementary dated April
23, 1992.(2)
(e) Articles Supplementary dated
October 6, 1995.(2)
(f) Articles Supplementary dated April
25, 1996.(3)
(g) Articles Supplementary with
respect to creation of ABCAT
Shares Class dated October 31,
1996.(3)
(h) Articles of Amendment to Articles
of Incorporation with respect to
Registrant's name change dated
December 19, 1996.(3)
(2) By-Laws, as amended through December 18,
1996.(3)
(3) Not Applicable.
(4) Specimen Security.(4)
(5) Investment Advisory Agreement dated
September 1, 1997 between Registrant
and Investment Company Capital
Corp., filed herewith.
(6) (a) Distribution Agreement dated
August 31, 1997 between
Registrant and ICC
Distributors, Inc., filed
herewith.
(b) Form of Sub-Distribution
Agreement between ICC
Distributors, Inc. and
Participating Dealers, filed
herewith.
(c) Form of Shareholder Servicing
Agreement between Registrant
and Shareholder Servicing
Agents, filed herewith.
(7) Not Applicable.
(8) (a) Form of Custodian Agreement between
Registrant and Bankers Trust Company,
filed herewith.
(b) Master Services Agreement
between Registrant and
Investment Company Capital
Corp.(2)
(9) Not Applicable.
(10) Opinion of Counsel.(2)
(11) (a) Consent of Independent
Auditors, filed herewith.
(b) Consents of Directors to
serve.(2)
(12) Not Applicable.
(13) Form of Subscription Agreement re:
initial $100,000 capital.(1)
C-2
<PAGE>
(14) Not Applicable.
(15) (a) Distribution Plan (Flag
Investors Class A Shares).(2)
(b) Amended Distribution Plan (Flag
Investors Class A Shares),
filed herewith.
(16) Schedule of Computation of Performance
Quotations (unaudited).(1)
(18) (a) Rule 18f-3 Plan.(5)
(b) Amended Rule 18f-3 Plan, filed
herewith.
(24) Powers of Attorney, filed herewith.
(27) Financial Data Schedule, filed herewith.
____________________
(1) Incorporated by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on August 18, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on April 26, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on April 28, 1997.
(4) Incorporated by reference to Exhibit 1(Articles of Incorporation) as
amended to date, filed as part of Post-Effective Amendments Nos. 6,
7 and 8, to Registrant's Registration Statement on Form N-1A
(Registration No. 33-12179) filed with the Securities and Exchange
Commission via EDGAR on August 18, 1995, April 26, 1996 and April
28, 1997, respectively, and Exhibit 2 (By-Laws) as amended to date,
filed as part of Post-Effective Amendment No. 9 to such Registration
Statement filed with the Securities and Exchange Commission via
EDGAR on April 28, 1997.
(5) Incorporated by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on October 18, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Furnish a list or diagram of all persons directly or
indirectly controlled by or under common control with the Registrant and as to
each such person indicate (1) if a company, the state or other sovereign power
under the laws of which it is organized, and (2) the percentage of voting
securities owned or other basis of control by the person, if any, immediately
controlling it.
None.
C-3
<PAGE>
Item 26. Number of Holders of Securities.
--------------------------------
State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number of record
holders of each class of securities of the Registrant.
The following information is given as of April 17, 1998.
Title of Class Number of Record Holders
------------------------------------------------------------
Flag Investors Class A Shares 1,689
Flag Investors Institutional Shares 73
Item 27. Indemnification.
----------------
State the general effect of any contract, arrangements or
statute under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified in any manner against any liability
which may be incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own protection.
Section 1, 2, 3 and 4 of Article VIII of Registrant's
Articles of Incorporation, included as Exhibit 1 to this Registration Statement
and incorporated herein by reference, provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of
the Corporation shall have any liability to the Corporation
or its stockholders for damages. This limitation on
liability applies to events occurring at the time a person
serves as a director or officer of the Corporation whether
or not such person is a director or officer at the time of
any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to
the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents
in the By-Laws of the Corporation or by resolution or
agreement to the fullest extent permitted by the Maryland
General Corporation Law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 4. References to the Maryland General Corporation
Law in this Article VIII are to such law as from time to
time amended. No further amendment to the Charter of the
Corporation shall decrease, but may expand, any right of any
person under this Article VIII based on any event, omission
or proceeding prior to such amendment.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1940 Act and is, therefore, unenforceable. In the event
C-4
<PAGE>
of a claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person in connection with the securities being registered) the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Advisor.
-----------------------------------------------------
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment advisor of the
Registrant, and each director, officer or partner of any such investment
advisor, is or has been, at any time during the past two fiscal years, engaged
for his own account or in the capacity of director, officer, employee, partner
or trustee.
During the last two fiscal years, no director or officer of
Investment Company Capital Corp., the Registrant's investment advisor, has
engaged in any other business, profession, vocation or employment of a
substantial nature other than that of the business of investment management and,
through affiliates, investment banking.
Item 29. Principal Underwriters.
-----------------------
(a) ICC Distributors, Inc. acts as distributor for BT
Alex. Brown Cash Reserve Fund, Inc., Flag Investors
Telephone Income Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging
Growth Fund, Inc., the Flag Investors Total Return
U.S. Treasury Fund Shares of Total Return U.S.
Treasury Fund, Inc., the Flag Investors Managed
Municipal Fund Shares of Managed Municipal Fund, Inc.,
Flag Investors Value Builder Fund, Inc., Flag
Investors Maryland Intermediate Tax Free Income Fund,
Inc., Flag Investors Real Estate Securities Fund, Inc.
and Flag Investors Equity Partners Fund, Inc., all
registered open-end management investment companies.
(b) Position and
Offices with Position and
Name and Principal Principal Officers with
Business Address* Underwriter Registrant
- ------------------ ------------- --------------
John Y. Keffer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Richard C. Butt Vice President None
Benjamin L. Niles Vice President None
C-5
<PAGE>
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance None
Officer
_____________
* Two Portland Square
Portland, Maine 04101
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
With respect to each account, book or other document
required to be maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)]
and the Rules [17 CFR 270.31a-1 to 31a-3] promulgated thereunder, furnish the
name and address of each person maintaining physical possession of each such
account, book or other document.
Investment Company Capital Corp., One South Street,
Baltimore, Maryland 21202, the Registrant's investment
advisor and transfer and dividend disbursing agent,
maintains physical possession of each such account, book or
other document of the Fund, except for those maintained by
the Registrant's custodian, Bankers Trust Company, 130
Liberty Street, New York, New York 10006.
In particular, with respect to the records required
by Rule 31a-1(b)1, ICC maintains physical possession of all
journals containing itemized daily records of all purchases
and sales of securities, including sales and redemptions of
Fund securities, and Bankers Trust Company maintains
physical possession of all receipts and deliveries of
securities (including certificate numbers if such detail is
not recorded by the transfer agent), all receipts and
disbursements of cash, and all other debts and credits.
Item 31. Management Services.
--------------------
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
See Exhibit 8.
Item 32. Undertakings.
-------------
Furnish the following undertakings in substantially the
following form in all initial Registration Statements filed under the 1933 Act:
(a) Not Applicable.
C-6
<PAGE>
(b) Not Applicable.
(c) A copy of the Registrant's latest Annual Report to
Shareholders is available upon request, without
charge by contacting the Registrant at (800)
767-3524.
C-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned thereto duly authorized in the City of Baltimore, in the
State of Maryland, on the 27th day of April, 1998.
FLAG INVESTORS SHORT-INTERMEDIATE
INCOME FUND, INC.
By:/s/Harry Woolf
---------------
Harry Woolf
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities on the date(s) indicated:
* April 27, 1998
- ---------------------- Chairman ---------------
Richard T. Hale and Director Date
* Director April 27, 1998
- ---------------------- ---------------
James J. Cunnane Date
* Director April 27, 1998
- ---------------------- ---------------
John F. Kroeger Date
* Director April 27, 1998
- ---------------------- ---------------
Louis E. Levy Date
* Director April 27, 1998
- ---------------------- ---------------
Eugene J. McDonald Date
* Director April 27, 1998
- ---------------------- ---------------
Rebecca W. Rimel Date
* Director April 27, 1998
- ---------------------- ---------------
Truman T. Semans Date
* Director April 27, 1998
- ---------------------- ---------------
Carl W. Vogt Date
/s/ Harry Woolf President April 27, 1998
- ---------------------- ---------------
Harry Woolf Date
/s/ Joseph A. Finelli April 27, 1998
- ---------------------- Chief Financial ---------------
Joseph A. Finelli and Accounting Date
Officer
*By:/s/Amy M. Olmert
----------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
Flag Investors Short-Intermediate Income Fund, Inc.
Index of Exhibits
-----------------
EDGAR
Exhibit Number Document
- -------------- --------
(1) (a) Articles of Incorporation.(1)
(b) Amended Articles of Incorporation.(2)
(c) Amendment to Amended Articles of Incorporation.(2)
(d) Articles Supplementary dated April 23, 1992.(2)
(e) Articles Supplementary dated October 6, 1995.(2)
(f) Articles Supplementary dated April 25, 1996.(3)
(g) Articles Supplementary with respect to
creation of ABCAT Shares Class dated
October 31, 1996.(3)
(h) Articles of Amendment to Articles of
Incorporation with respect to
Registrant's name change dated December
19, 1996.(3)
(2) By-Laws, as amended through December 18, 1996.(3)
(3) Not Applicable
(4) Specimen Security.(4)
EX-99.B (5) Investment Advisory Agreement dated September
1, 1997 between Registrant and Investment Company
Capital Corp., filed herewith.
EX-99.B (6) (a) Distribution Agreement dated August 31, 1997
between Registrant and ICC Distributors, Inc.,
filed herewith.
EX-99.B (b) Form of Sub-Distribution Agreement between ICC
Distributors, Inc. and Participating Dealers,
filed herewith.
EX-99.B (c) Form of Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents,
filed herewith.
(7) Not Applicable
EX-99.B (8) (a) Form of Custodian Agreement between Registrant
and Bankers Trust Company, filed herewith.
(b) Master Services Agreement between Registrant
and Investment Company Capital Corp.(2)
<PAGE>
(9) Not Applicable
(10) Opinion of Counsel.(2)
EX-99.B (11) (a) Consent of Independent Auditors, filed
herewith.
(b) Consents of Directors to serve.(2)
(12) Not Applicable
(13) Form of Subscription Agreement re: initial
$100,000 capital.(1)
(14) Not Applicable
(15) (a) Distribution Plan (Flag Investors Class A
Shares).(2)
EX-99.B (b) Amended Distribution Plan (Flag Investors
Class A Shares), filed herewith.
(16) Schedule of Computation of Performance Quotations
(unaudited).(1)
(18) (a) Rule 18f-3 Plan.(5)
EX-99.B (b) Amended Rule 18f-3 Plan, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith.
EX-27 (27) Financial Data Schedule, filed herewith.
________________
(1) Incorporated by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on August 18, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on April 26, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on April 28, 1997.
(4) Incorporated by reference to Exhibit 1(Articles of Incorporation) as
amended to date, filed as part of Post-Effective Amendments Nos. 6,
7 and 8, to Registrant's Registration Statement on Form N-1A
(Registration No. 33-12179) filed with the Securities and Exchange
Commission via EDGAR on August 18, 1995, April 26, 1996 and April
28, 1997, respectively, and Exhibit 2 (By-Laws) as amended to date,
filed as part of Post-Effective Amendment No. 9 to such Registration
Statement filed with the Securities and Exchange Commission via
EDGAR on April 28, 1997.
(5) Incorporated by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via
EDGAR on October 18, 1996.
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 1st day of
September, 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
-1-
<PAGE>
f. The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto, are herein
called "Prospectus").
The Fund will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. In carrying out its obligations under
Section 1 hereof, the Advisor shall:
a. supervise and manage all aspects of the Fund's operations,
except for distribution services;
b. formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Fund;
c. provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
d. provide the Fund with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, utilities, stationery, supplies and similar items for the Fund's
principal office;
e. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund's
portfolio or the activities in which they engage, or with respect to securities
which the Advisor considers desirable for inclusion in the Fund's portfolio;
f. determine which issuers and securities shall be represented
in the Fund's portfolio and regularly report thereon to the Fund's Board of
Directors;
g. take all actions necessary to carry into effect the Fund's
purchase and sale programs;
h. supervise the operations of the Fund's 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 filings 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
- 2 -
<PAGE>
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.
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;
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<PAGE>
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 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.
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<PAGE>
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective offices as of the day and year first
above written.
[SEAL] FLAG INVESTORS SHORT-INTERMEDIATE
INCOME FUND, INC.
Attest: /s/Amy M. Olmert By: /s/ Harry Woolf
------------------------ ----------------------------
Name:
Title:
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Amy M. Olmert By: /s/ Edward J. Veilleux
------------------------ ----------------------------
Name: Edward J. Veilleux
Title: Executive Vice President
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<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 31st day of August, 1997, by and between Flag
Investors Short-Intermediate Income Fund, Inc., with its principal office and
place of business at One South Street, Baltimore, Maryland 21202 (the "Fund"),
and ICC Distributors, Inc., a Delaware corporation with its principal office and
place of business at Two Portland Square, Portland, Maine 04101 (the
"Distributor").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
may issue its shares of common stock (the "Shares") in separate series and
classes and continuously offers for sale its Shares to the public; and
WHEREAS, the Distributor is registered under the Securities Exchange
Act of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the
business of selling shares of registered investment companies either directly to
purchasers or through other securities dealers;
WHEREAS, the Fund offers Shares in one or more series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Section 16, being herein referred to as a "Series," and collectively as the
"Series") and the Fund offers shares of one or more classes (each such class
together with all other classes subsequently established by a Series being
herein referred to as a "Class," and collectively as the "Classes");
WHEREAS, the Fund desires that the Distributor offer the Shares of each
Series and Class thereof to the public and the Distributor is willing to provide
those services on the terms and conditions set forth in this Agreement in order
to promote the growth of the Fund and facilitate the distribution of the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and the Distributor hereby agree as
follows:
SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT
(a) The Fund has delivered to the Distributor properly certified or
authenticated copies of its Articles of Incorporation and Bylaws (collectively,
as amended from time to time, "Organic Documents"), the Fund's Notification of
Registration filed with the U.S. Securities and Exchange Commission ("SEC")
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, the
Fund's Registration Statement and all amendments thereto filed with the SEC
pursuant to the
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<PAGE>
Securities Act of 1933, as amended (the "Securities Act"), or the 1940 Act (the
"Registration Statement") and its current Prospectuses and Statements of
Additional Information (collectively, as currently in effect and as amended or
supplemented, the "Prospectus") and shall promptly furnish the Distributor with
all amendments of or supplements to the foregoing, each properly certified or
authenticated. In addition, the Fund shall furnish the Distributor with properly
certified or authenticated copies of all documents, notices and reports filed
with the SEC.
(b) The Fund has delivered to the Distributor certified copies of the
resolutions of the Board of Directors (the "Board") authorizing the appointment
of the Distributor as distributor and approving this Agreement.
(b) The Fund hereby appoints the Distributor as its principal
underwriter and distributor to sell its Shares to the public and hereby agrees
during the term of this Agreement to sell its Shares to the Distributor upon the
terms and conditions herein set forth.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Fund to
act as its principal underwriter and distributor except that the rights given
under this Agreement to the Distributor shall not apply to Shares issued in
connection with the merger, consolidation or reorganization of any other
investment company with the Fund; the Fund's acquisition by purchase or
otherwise of all or substantially all of the assets or stock of any other
investment company; or the reinvestment in Shares by the Fund's shareholders of
dividends or other distributions or any other offering by the Fund of securities
to its shareholders.
SECTION 3. PURCHASE OF SHARES; OFFERING OF SHARES
(a) The Distributor shall have the right to buy from the Fund the
Shares needed to fill unconditional orders for unsold Shares of the Fund as
shall then be effectively registered under the Securities Act placed with the
Distributor by investors or securities dealers or depository institutions or
other financial intermediaries acting as agent for their customers or on their
own behalf. Alternatively, the Distributor may act as the Fund's agent, to
offer, and to solicit offers to subscribe to, unsold Shares of the Fund as shall
then be effectively registered under the Securities Act. The Distributor will
promptly forward all orders and subscriptions for Shares of the Fund. The price
which the Distributor shall pay for Shares purchased by it from the Fund shall
be the net asset value, determined as set forth in Section 3(c) hereof, used in
determining the public offering price on which the orders are based. The price
at which the Distributor shall offer and sell Shares to investors shall be the
public offering price, as set forth in Section 3(b) hereof. The Distributor may
sell Shares to securities dealers, depository institutions or other financial
intermediaries acting as agent for their
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<PAGE>
customers that have entered into agreements with the Distributor pursuant to
Section 9 hereof or acting on their own behalf. The Fund reserves the right to
sell its Shares directly to investors through subscriptions received by the
Fund, but no such direct sales shall affect the sales charges due to the
Distributor hereunder.
(b) The public offering price of the Shares of the Fund, i.e., the
price per Share at which the Distributor or selected dealers or selected agents
(each as defined in Section 11 hereof) may sell Shares to the public or to those
persons eligible to invest in Shares as described in the Fund's Prospectus,
shall be the public offering price determined in accordance with the then
currently effective Prospectus of the Fund or Class thereof under the Securities
Act, relating to such Shares, but not to exceed the net asset value at which the
Distributor, when acting as principal, is to purchase such Shares, plus, in the
case of Shares for which an initial sales charge is assessed, an initial charge
equal to a specified percentage or percentages of the public offering price of
the Shares as set forth in the current Prospectus relating to the Shares. In the
case of Shares for which an initial sales charge may be assessed, Shares may be
sold to certain classes of persons at reduced sales charges or without any sales
charge as from time to time set forth in the current Prospectus relating to the
Shares. The Fund will advise the Distributor of the net asset value per Share at
each time as the net asset value per Share shall have been determined by the
Fund.
(c) The net asset value per Share of each Series or Class thereof shall
be determined by the Fund, or an agent of the Fund, as of the close of the New
York Stock Exchange or such other time as set forth in the applicable Prospectus
on the Fund business day in accordance with the method set forth in the
Prospectus and guidelines established by the Board.
(d) The Fund reserves the right to suspend the offering of Shares of
any Class at any time in the absolute discretion of the Board, and upon notice
of such suspension the Distributor shall cease to offer Shares of the Fund or
Classes thereof specified in the notice.
(e) The Fund, or any agent of the Fund designated in writing to the
Distributor by the Fund, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions for
Shares obtained by the Distributor as agent shall be directed to the Fund for
acceptance and shall not be binding until accepted by the Fund. Any order or
subscription may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or confirm orders
or subscriptions for the purchase of Shares. The Fund (or its agent) will
confirm orders and subscriptions upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment thereof, will
issue such Shares in certificated or uncertificated form pursuant to the
instructions of the Distributor. The Distributor agrees to cause such payment
and such instructions to be delivered promptly to the Fund (or its agent).
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<PAGE>
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES
(a) Any of the outstanding Shares of the Fund may be tendered for
redemption at any time, and the Fund agrees to redeem or repurchase the Shares
so tendered in accordance with its obligations as set forth in the Fund's
Organic Documents and the Prospectus relating to the Shares. The price to be
paid to redeem or repurchase the Shares of the Fund shall be equal to the net
asset value calculated in accordance with the provisions of Section 3(b) hereof
less, in the case of Shares for which a deferred sales charge is assessed, a
deferred sales charge equal to a specified percentage or percentages of the net
asset value of those Shares as from time to time set forth in the Prospectus
relating to those Shares or their cost, whichever is less. Shares for which a
deferred sales charge may be assessed and that have been outstanding for a
specified period of time may be redeemed without payment of a deferred sales
charge as from time to time set forth in the Prospectus relating to those
Shares.
(b) The Fund or its designated agent shall pay (i) the total amount of
the redemption price consisting of the redemption price less any applicable
deferred sales charge to the redeeming shareholder or its agent and (ii) except
as may be otherwise required by the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. (the "NASD") and any interpretations
thereof, any applicable deferred sales charges to the Distributor in accordance
with the Distributor's instructions on or before the third business day
subsequent to each calendar month-end.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than its
customary weekend or holiday closings, when trading thereon is restricted, when
an emergency exists as a result of which disposal by the Fund of securities
owned by the Fund is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the SEC so permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the
Fund upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Fund hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long as
the performance of its obligations hereunder is not impaired thereby.
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<PAGE>
(b) In selling Shares of the Fund, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by the Fund to give any information or to make any representations
other than as is contained in the Fund's Prospectus or any advertising materials
or sales literature specifically approved in writing by the Fund or its agents.
(c) The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers or selected agents, the
collection of amounts payable by investors and selected dealers or selected
agents on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD and any other applicable
self-regulatory organization.
(d) The Distributor will perform its duties hereunder under the
supervision of and in accordance with the directives of the Board. The
Distributor will perform its duties hereunder in accordance with the Fund's
Organic Documents and Prospectuses and with the instructions and directions of
the Board and will conform to and comply with the requirements of the 1940 Act,
the Securities Act and other applicable laws.
(e) The Distributor shall provide the Board with a written report of
the amounts expended in connection with this Agreement as requested by the
Board.
(f) The Distributor represents and warrants to the Fund that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) It is empowered under applicable laws and by its Articles
of Incorporation to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(v) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Distributor,
enforceable against the Distributor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of
creditors and secured parties;
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<PAGE>
(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify the
Fund if its membership in the NASD is terminated or suspended; and
(vii) The performance by the Distributor of its obligations
hereunder does not and will not contravene any provision of its
Articles of Incorporation.
(g) Notwithstanding anything in this Agreement, including the
Appendices, to the contrary, the Distributor makes no warranty or representation
as to the number of selected dealers or selected agents with which it has
entered into agreements in accordance with Section 11 hereof, as to the
availability of any Shares to be sold through any selected dealer, selected
agent or other intermediary or as to any other matter not specifically set forth
herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF THE FUND
(a) The Fund shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other papers
or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. The Fund shall make available to the
Distributor the number of copies of its Prospectuses as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, subject to the approval of
its Board and any required approval of its shareholders, all action necessary to
fix the number of authorized Shares (if such number is not limited) and to
register the Shares under the Securities Act, to the end that there will be
available for sale the number of Shares as reasonably may be expected to be sold
pursuant to this Agreement.
(c) The Fund shall register or qualify its Shares for sale under the
securities laws of the various states of the United States and other
jurisdictions ("States") as the Fund, in its sole discretion shall determine.
Any registration or qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such registration or qualification.
- 6 -
<PAGE>
(d) The Fund represents and warrants to the Distributor that:
(i) It is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland;
(ii) It is empowered under applicable laws and by its Organic Documents
to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have been taken
to authorize it to enter into and perform its duties under this
Agreement;
(iv) It is registered as an open-end management investment company with
the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully paid and
non-assessable;
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Fund, enforceable against
the Fund in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured
parties;
(vii) The performance by the Fund of its obligations hereunder does not
and will not contravene any provision of its Articles of Incorporation.
(viii) The Fund's Registration Statement is currently effective and
will remain effective with respect to all Shares of the Fund's Series
and Classes thereof being offered for sale;
(ix) It will use its best efforts to ensure that its Registration
Statement and Prospectuses have been or will be, as the case may be,
carefully prepared in conformity with the requirements of the
Securities Act and the rules and regulations thereunder;
(x) It will use its best efforts to ensure that (A) its Registration
Statement and Prospectuses contain or will contain all statements
required to be stated therein in accordance with the Securities Act and
the rules and regulations thereunder, (B) all statements of fact
contained or to be contained in the Registration Statement or
Prospectuses are or will be true and correct at the time indicated or
on the effective date as the case may be and (C) neither the
Registration Statement nor any Prospectus, when they shall become
effective or be authorized for use, will include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of Shares;
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<PAGE>
(xi) It will from time to time file such amendment or amendments to its
Registration Statement and Prospectuses as, in the light of
then-current and then-prospective developments, shall, in the opinion
of its counsel, be necessary in order to have the Registration
Statement and Prospectuses at all times contain all material facts
required to be stated therein or necessary to make any statements
therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to its Registration Statement or
Prospectuses without giving the Distributor reasonable advance notice
thereof (which shall be at least three Fund business days); provided,
however, that nothing contained in this Agreement shall in any way
limit the Fund's right to file at any time such amendments to its
Registration Statement or Prospectuses, of whatever character, as the
Fund may deem advisable, such right being in all respects absolute and
unconditional; and
(xiii) It will use its best efforts to ensure that (A) any amendment to
its Registration Statement or Prospectuses hereafter filed will, when
it becomes effective, contain all statements required to be stated
therein in accordance with the 1940 Act and the rules and regulations
thereunder, (B) all statements of fact contained in the Registration
Statement or Prospectuses will, when it becomes effective, be true and
correct at the time indicated or on the effective date as the case may
be and (C) no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Shares.
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and efforts in
rendering services to the Fund under this Agreement but shall be under no duty
to take any action except as specifically set forth herein or as may be
specifically agreed to by the Distributor in writing. The Distributor shall not
be liable to the Fund or any of the Fund's shareholders for any error of
judgment or mistake of law, for any loss arising out of any investment, or for
any action or inaction of the Distributor in the absence of bad faith, willful
misfeasance or gross negligence in the performance of the Distributor's duties
or obligations under this Agreement or by reason of the Distributor's reckless
disregard of its duties and obligations under this Agreement
(b) The Distributor shall not be liable to the Fund for any action
taken or failure to act in good faith reliance upon:
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<PAGE>
(i) the advice of the Fund or of counsel, who may be counsel to the
Fund or counsel to the Distributor;
(ii) any oral instruction which the Distributor receives and which it
reasonably believes in good faith was transmitted by the person or
persons authorized by the Board to give such oral instruction (the
Distributor shall have no duty or obligation to make any inquiry or
effort of certification of such oral instruction);
(iii) any written instruction or certified copy of any resolution of
the Board, and the Distributor may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith by the
Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by
the Distributor to be genuine and to have been signed or presented by
the Fund or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which the Distributor reasonably believes in
good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties (other than those related to the
Distributor's employees), fire, mechanical breakdowns, flood or catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply. In addition, to the extent the Distributor's
obligations hereunder are to oversee or monitor the activities of third parties,
the Distributor shall not be liable for any failure or delay in the performance
of the Distributor's duties caused, directly or indirectly, by the failure or
delay of such third parties in performing their respective duties or cooperating
reasonably and in a timely manner with the Distributor.
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<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Fund will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section 15 of the Securities Act or section 20
of the 1934 Act ("Distributor Indemnitees") free and harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable counsel fees
incurred in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, under the securities laws of the various States or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Fund's Registration Statement or
Prospectuses, arising out of or based upon any alleged omission to state a
material fact required to be stated in any one thereof or necessary to make the
statements in any one thereof not misleading, or arising out of or based upon
any filing made with the regulatory authorities of any State unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished in writing to the Fund in connection with the preparation
of the Registration Statement, exhibits to the Registration Statement or filings
made with the regulatory authorities of any State by or on behalf of the
Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Fund shall indemnify and hold each Distributor Indemnitee free and
harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor Claim
related to the matters for which the Distributor has requested amendment to the
Fund's Registration Statement and for which the Fund has not filed a Required
Amendment, regardless of with respect to such matters whether any statement in
or omission from the Registration Statement was made in reliance upon, or in
conformity with, information furnished to the Fund by or on behalf of the
Distributor.
(b) The Fund may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Fund and
approved by the Distributor, which approval shall not be withheld unreasonably.
The Fund shall advise the Distributor that it will assume the defense of the
suit and retain counsel within ten (10) days of receipt of the notice of the
claim. If the Fund assumes the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional counsel that they
retain. If the Fund does not assume the defense of any such suit, or if
Distributor does not approve of counsel chosen by the Fund or has been advised
that it may have available defenses or claims that are not available to or
conflict with those available to the Fund, the Fund will reimburse any
Distributor Indemnitee named as defendant in such suit for the reasonable fees
and expenses of any counsel that person retains. A Distributor
- 10 -
<PAGE>
Indemnitee shall not settle or confess any claim without the prior written
consent of the Fund, which consent shall not be unreasonably withheld or
delayed.
(c) The Distributor will indemnify, defend and hold the Fund and its
several officers and directors (collectively, the "Fund Indemnitees"), free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained in the
Fund's Registration Statement or Prospectus or any alleged omission of
a material fact required to be stated or necessary to make the
statements therein not misleading, if such statement or omission was
made in reliance upon, and in conformity with, information furnished to
the Fund in writing in connection with the preparation of the
Registration Statement or Prospectus by or on behalf of the
Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement (collectively, "Fund Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Fund Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Fund, which approval shall not be withheld
unreasonably. The Distributor shall advise the Fund that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if the Fund does not approve of counsel chosen by
the Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to the
Distributor, the Distributor will reimburse any Fund Indemnitee named as
defendant in such suit for the reasonable fees and expenses of any counsel that
person retains. A Fund Indemnitee shall not settle or confess any claim without
the prior written consent of the Distributor, which consent shall not be
unreasonably withheld or delayed.
(e) The Fund's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Fund or the
Distributor receiving notice of any action brought against a Distributor
Indemnitee or Fund Indemnitee, respectively, by the person against whom such
action is brought within twenty (20) days after the summons or other first legal
process is served. Such notice shall refer to the person or persons against whom
the action is brought. The failure to
- 11 -
<PAGE>
provide such notice shall not relieve the party entitled to such notice of any
liability that it may have to any Distributor Indemnitee or Fund Indemnitee
except to the extent that the ability of the party entitled to such notice to
defend such action has been materially adversely affected by the failure to
provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Fund Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the benefit
of each person that may be a Distributor Indemnitee or Fund Indemnitee at any
time and their respective successors and assigns (it being intended that such
persons be deemed to be third party beneficiaries under this Agreement).
(g) The Distributor agrees promptly to notify the Fund of the
commencement of any litigation or proceeding of which it becomes aware arising
out of or in any way connected with the issuance or sale of Shares. The Fund
agrees promptly to notify the Distributor of the commencement of any litigation
or proceeding of which it becomes aware arising out of or in any way connected
with the issuance or sale of its Shares.
(h) Nothing contained herein shall require the Fund to take any action
contrary to any provision of its Organic Documents or any applicable statute or
regulation or shall require the Distributor to take any action contrary to any
provision of its Articles of Incorporation or Bylaws or any applicable statute
or regulation; provided, however, that neither the Fund nor the Distributor may
amend their Organic Documents or Articles of Incorporation and Bylaws,
respectively, in any manner that would result in a violation of a representation
or warranty made in this Agreement, except if required by any applicable statute
or regulation.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Fund or the security holders of the
Fund to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.
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<PAGE>
SECTION 9. NOTIFICATION TO THE DISTRIBUTOR
The Fund shall advise the Distributor immediately: (i) of any request
by the SEC for amendments to the Fund's Registration Statement or Prospectus or
for additional information; (ii) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Fund's Registration Statement or
any Prospectus or the initiation of any proceedings for that purpose; (iii) of
the happening of any material event which makes untrue any statement made in the
Fund's then current Registration Statement or Prospectus or which requires the
making of a change in either thereof in order to make the statements therein not
misleading; and (iv) of all action of the SEC with respect to any amendments to
the Fund's Registration Statement or Prospectus which may from time to time be
filed with the Commission under the 1940 Act or the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with
the distribution of Shares of the Fund and each Class thereof, the Distributor
shall receive: (i) any applicable sales charge assessed upon investors in
connection with the purchase of Shares; (ii) from the Fund, any applicable
contingent deferred sales charge ("CDSC") assessed upon investors in connection
with the redemption of Shares; (iii) from the Fund, the distribution service
fees with respect to the Shares of those Classes as designated in Appendix A for
which a plan under Rule 12b-1 under the 1940 Act (a "Plan") is effective (the
"Distribution Fee"); and (iv) from the Fund, the shareholder service fees with
respect to the Shares of those Classes as designated in Appendix A (the "Service
Fee"). The Distribution Fee and Service Fee shall be accrued daily by each
applicable Fund or Class thereof and shall be paid monthly as promptly as
possible after the last day of each calendar month but in any event on or before
the fifth (5th) Fund business day after month-end, at the rate or in the amounts
set forth in Appendix A and, as applicable, the Plan(s). The Fund grants and
transfers to the Distributor a general unperfected lien and security interest in
any and all securities and other assets of the Fund now or hereafter maintained
in an account at the Fund's custodian on behalf of the Fund to secure any
Distribution Fees and Service Fees owed the Distributor by the Fund under this
Agreement.
(b) The Fund shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Series
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after each month end.
(c) Except as specified in Sections 8 and 10(a), the Distributor shall
be entitled to no compensation or reimbursement of expenses for the services
provided by the Distributor pursuant to this Agreement. The Distributor may
receive compensation from the Fund's investment advisors, other service
providers or their respective affiliates (collectively, the "Advisor") for its
services
- 13 -
<PAGE>
hereunder or for additional services all as may be agreed to between the Advisor
and the Distributor. Notwithstanding anything in this Agreement to the contrary,
to the extent the Distributor receives compensation from the Advisor that is
disclosed to the Board, the Fund will indemnify, defend and hold each
Distributor Indemnitees free and harmless from and against any and all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such claims,
demands, actions, suits or liabilities and any reasonable counsel fees incurred
in connection therewith) related in any way to such payment.
(d) The Fund shall be responsible and assumes the obligation for
payment of all its expenses, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of the Registration
Statement and Prospectuses (including but not limited to the expense of setting
in type the Registration Statement and Prospectuses and printing sufficient
quantities for internal compliance, regulatory purposes and for distribution to
current shareholders).
(e) The Fund shall bear the cost and expenses (i) of the registration
of its Shares for sale under the Securities Act; (ii) of the registration or
qualification of its Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Fund, or its Series or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Fund; and (iv) payable to each State for continuing registration or
qualification therein until the Fund decides to discontinue registration or
qualification. The Distributor shall pay all expenses relating to the
Distributor's broker-dealer qualification.
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
(a) The Distributor shall have the right to enter into sub-distribution
agreements with securities dealers of its choice ("selected dealers") and with
depository institutions and other financial intermediaries of its choice
("selected agents") for the sale of Shares and to fix therein the portion of the
sales charge, if any, that may be allocated to the selected dealers or selected
agents; provided, that all such agreements shall be in substantially the form of
agreement as set forth in Appendix B hereto. Shares of each Series or Class
thereof shall be resold by selected dealers or selected agents only at the
public offering price(s) set forth in the Prospectus relating to the Shares. The
Distributor shall offer and sell Shares of the Fund only to such selected
dealers as are members in good standing of the NASD. The Distributor shall have
the right to enter into shareholder servicing agreements with financial
intermediaries of its choice; provided, that all such agreements shall be in
substantially the form of agreement as set forth in Appendix C hereto.
- 14 -
<PAGE>
(b) The Distributor will supervise the Fund's relationship with
selected dealers and agents and may make payments to those selected dealers and
agents in such amounts as the Distributor may determine from time to time in its
sole discretion. The amount of payments to selected dealers and agents by the
Distributor may be reviewed by the Board from time to time; provided, however,
that no payment by the Distributor to any selected dealer or agent with respect
to a Share shall exceed the amount of payments made to the Distributor hereunder
with respect to that Share.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information
related to the Fund as proprietary information of the Fund and, on behalf of
itself and its employees, to keep confidential all such information, except that
the Distributor may:
(i) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(iii) release such other information as approved in writing by the
Fund, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding
the Fund without the consent of the Fund if the Distributor reasonably believes
that it may be exposed to civil or criminal legal proceedings for failure to
comply, when requested to release any information by duly constituted
authorities or when so requested by the Fund.
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each series
or class listed in Appendix A on the later of (i) August 31, 1997 or (ii) the
date on which the Fund's Registration Statement relating to Shares of the Fund
becomes effective. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Fund.
(b) This Agreement shall continue in effect with respect to a Series
Fund for a period of one year from its effectiveness and thereafter shall
continue in effect with respect to the Series until terminated; provided, that
continuance is specifically approved at least annually (i) by the Board or by a
vote of a majority of the outstanding voting securities of the Fund and (ii) by
a vote of a majority of Directors of the Fund (I) who are not parties to this
Agreement or interested persons of
- 15 -
<PAGE>
any such party (other than as Directors of the Fund) and (II) with respect to
each Class of a Series for which there is an effective Plan, who do not have any
direct or indirect financial interest in any such Plan applicable to the Class
or in any agreements related to the Plan, cast in person at a meeting called for
the purpose of voting on such approval.
(c) This Agreement may be terminated at any time with respect to a
Series, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Series or, with respect to
each Class for which there is an effective Plan, a majority of Directors of the
Fund who do not have any direct or indirect financial interest in any such Plan
or in any agreements related to the Plan, on 60 days' written notice to the
Distributor or (ii) by the Distributor on 60 days' written notice to the Fund.
(d) This Agreement shall automatically terminate upon its assignment
and upon the termination of the Distributor's membership in the NASD.
(e) If the Fund does not file a Required Amendment within fifteen days
following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement immediately.
(f) The obligations of Sections 5(e), 6(d), 8, 9 and 10 shall survive
any termination of this Agreement with respect to a Series or Class thereof.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by the
Distributor to the Fund or the Fund to the Distributor shall be deemed
sufficiently given if personally delivered or sent by telegram, facsimile or
registered, certified or overnight mail, postage prepaid, addressed by the party
giving such notice to the other party at the last address furnished by the other
party to the party giving such notice, and unless and until changed pursuant to
the foregoing provisions hereof each such notice shall be addressed to the Fund
or the Distributor, as the case may be, at their respective principal places of
business.
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of the Distributor's employees, agents, officers or
directors who may also be a director, officer or employee of the Fund, or
affiliated persons of the Fund to engage in any other business or to devote time
and attention to
- 16 -
<PAGE>
the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
SECTION 16. ADDITIONAL FUNDS AND CLASSES
In the event that the Fund establishes one or more series of Shares or
one or more classes of Shares after the effectiveness of this Agreement, such
series of Shares or classes of Shares, as the case may be, shall become Series
and Classes under this Agreement upon approval of this Agreement by the Fund
with respect to the series of Shares or class of Shares and the execution of an
amended Appendix A reflecting the applicable names and terms. The Distributor
may elect not to make any such series or classes subject to this
Agreement.
SECTION 17. MISCELLANEOUS
(a) The Distributor shall not be liable to the Fund and the Fund shall
not be liable to the Distributor for consequential damages under any provision
of this Agreement except that Distributor Claims, as that term is used in
Section 8(a), shall include consequential damages related to, arising out of or
based upon any filing made with the regulatory authorities of any State.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Distributor and the Fund.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Maryland.
(d) This Agreement constitutes the entire agreement between the
Distributor and the Fund and supersedes any prior agreement with respect to the
subject matter hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
- 17 -
<PAGE>
(h) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(i) The Fund shall be liable to the Distributor only with respect to those
Series and Classes of the Fund and the Distributor shall look solely to the Fund
to satisfy any liability of a Series or Class thereof to the Distributor.
(j) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof.
(k) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
FLAG INVESTORS SHORT-INTERMEDIATE
INCOME FUND, INC.
By: /s/ Amy M. Olmert
------------------------------
Name: Amy M. Olmert
Secretary
ICC DISTRIBUTORS, INC.
By: /s/John Y. Keffer
------------------------------
John Y. Keffer
President
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
DISTRIBUTION AGREEMENT
Appendix A
as of August 31, 1997
<TABLE>
<CAPTION>
Distribution Service
Series Class Fee Fee
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flag Investors Short-Intermediate Income Class A 0.25% ----
Fund, Inc. Class B(1) 0.75% 0.25%
Institutional Class ---- ----
Alex Brown Advisory Capital
and Trust Class(1) ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not currently offered.
A-1
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
DISTRIBUTION AGREEMENT
Appendix B
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" as used herein refers to each
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating
Dealer and as such are authorized (i) to accept orders for the purchase of
Shares and to transmit to the Funds such orders
- B1 -
<PAGE>
and the payment made therefore, (ii) to accept orders for the redemption of
Shares and to transmit to the Funds such orders and all additional material,
including any certificates for Shares, as may be required to complete the
redemption and (iii) to assist shareholders with the foregoing and other matters
relating to their investments in each Fund, in each case subject to the terms
and conditions set forth in the Prospectus of each Fund. You are to review each
Share purchase or redemption order submitted through you or with your assistance
for completeness and accuracy. You further agree to undertake from time to time
certain shareholder servicing activities for customers of yours who have
purchased Shares and who use your facilities to communicate with the Funds or to
effect redemptions or additional purchases of the Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will look
solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $25,000 in the fund family for which you
are to be compensated, and provided that in all cases your name is transmitted
with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of National Association of Securities Dealers, Inc. (the "NASD"). Your
expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension.
- B2 -
<PAGE>
You agree that you will not offer Shares to persons in any jurisdiction in which
you may not lawfully make such offer due to the fact that you have not
registered under, or are not exempt from, the applicable registration or
licensing requirements of such jurisdiction. You agree that in performing the
services under this Agreement, you at all times, will comply with the Conduct
Rules (formerly the Rules of Fair Practice) of the NASD, including, without
limitation, the provisions of Rule 2830 (formerly Section 26) of such Rules. You
agree that you will not combine customer orders to reach breakpoints in
commission for any purposes whatsoever unless authorized by the then current
Prospectus in respect of a particular class of Shares or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the relevant
prospectus and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares
under the Securities Act. The Funds intend to make appropriate notice filings in
certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund shall have full authority to take such
action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party,
without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment,
- B3 -
<PAGE>
as defined in the Investment Company Act. This Agreement may also be terminated
at any time for any particular Fund without penalty by the vote of a majority of
the members of the Board of Directors or Trustees of such Fund who are not
"interested persons" (as such phrase is defined in the Investment Company Act)
and who have no direct or indirect financial interest in the operation of the
Distribution Agreement between such Fund and the Distributor or by the vote of a
majority of the outstanding voting securities of the Fund.
11. Communications. All communications other than this agreement and those
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
Confirmed and accepted:
Firm Name:
By:
Signature
- B4 -
<PAGE>
Printed Name and Title
Date:
Address:
Clears Through:
Phone No.:
- B5 -
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you
concerning the provision of support services to your clients and customers
("Customers") who may from time to time beneficially own shares of our common
stock ("Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1.
(a) You agree to provide the following services to Customers who may from
time to time beneficially own Shares: (i) aggregating and processing purchase
and redemption requests for Shares from Customers and placing net purchase and
redemption orders with our distributor; (ii) processing dividend payments from
us on behalf of Customers; (iii) providing information periodically to Customers
showing their positions in Shares; (iv) arranging for bank wires; (v) responding
to Customer inquiries relating to the services performed by you; (v) providing
subaccounting with respect to Shares beneficially owned by Customers; (vii) as
required by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; and (viii) providing such other
similar services as we may reasonably request to the extent you are permitted to
do so under applicable statutes, rules or regulations. You will provide to
Customers a schedule
- C1 -
<PAGE>
of any fees that you may charge directly to them for such services. You hereby
represent that such fees are not unreasonable or excessive. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records required by law
relating to transactions in Shares and, upon our request, promptly make such of
these records available to us as we may reasonably request in connection with
our operations, and (ii) promptly notify us if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be a part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
Section 3. Neither you nor any of your officers, employees, agents or
assignees are authorized to make any representations concerning us or Shares
except those contained in our then current prospectus for such Shares, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement, you will be deemed to be an
independent contractor and will have no authority to act as agent for us in any
matter or in any respect. You may, upon prior written notice to us, delegate
your responsibilities hereunder to another person or persons; provided, however,
that notwithstanding any such delegation, you will remain responsible for the
performance of all your responsibilities under this Agreement. By your written
acceptance of this Agreement, you agree and do release, indemnify and hold us
harmless from and against any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or by you and your
offices, employees, agents or assigns regarding your responsibilities hereunder
or the purchase, redemption, transfer or registration of Shares by or on behalf
of Customers. You and your employees will, upon request, be available during
normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
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Section 5. In consideration of the services and facilities provided by you
hereunder, we will cause our distributor to pay you, and you will accept as full
payment therefore, a fee (as we may determine from time to time in writing)
computed as a percentage of the average daily net assets of the Customers'
Shares held of record by you from time to time, which fee will be computed daily
and payable no less often than annually. For purposes of determining the fees
payable under this Section 5, the average daily net assets of the Customer's
Shares will be computed in the manner specified in our registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by us or by
our distributor, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Shares, including
the sale of such shares to you for the account of any Customer or Customers.
Section 6. You will furnish us or our designees with such information
relating to your performance under this Agreement as we or they may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and shall otherwise
cooperate with us and our designees (including, without limitation, any auditors
designated by us), in connection with the preparation of reports to our Board of
Directors concerning this Agreement and the monies paid or payable by us
pursuant hereto, as well as any other reports or filings that may be required by
law.
Section 7. We may enter into other similar services agreements with any
other person or persons without your consent.
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or by our distributor, and is
terminable, without penalty, at any time by us or by you upon ten days' notice
to the other party hereto and shall automatically terminate in the event of its
assignment, as that term is defined in the Investment Company Act of 1940, as
amended.
Section 9. This Agreement will be construed in accordance with the laws of
the State of Maryland.
Section 10. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed, or transmitted by similar
telecommunications device, if to us at the address below, and if to you, at the
address specified by you after your signature below:
ICC Distributors, Inc.
P.O. Box 7558
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<PAGE>
Portland, Maine 04101
Attention: Dealer Services
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at the address set forth in Section 10 above.
Very truly yours,
ICC DISTRIBUTORS, INC.
By: ________________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name:
By:
Name:
Address:
Date:
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<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
FLAG INVESTORS FUNDS
FORM OF SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" as used herein refers to each
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating Dealer
and as such are authorized (i) to accept orders for the purchase of Shares and
to transmit to the Funds such orders and the payment made therefore, (ii) to
accept orders for the redemption of Shares and to transmit to the Funds such
orders and all additional material, including any certificates for Shares, as
may be required to complete the redemption and (iii) to assist shareholders with
the foregoing and other matters relating to their investments in each Fund, in
each case subject to the terms and conditions set forth in the Prospectus of
each Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
the Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
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<PAGE>
3. Compensation. As compensation for such services, you will look solely to
the Distributor, and you acknowledge that the Funds shall have no direct
responsibility for any compensation. In addition to any sales charge payable to
you by your customer pursuant to a Prospectus, the Distributor will pay you no
less often than annually a shareholder processing and service fee (as we may
determine from time to time in writing) computed as a percentage of the average
daily net assets maintained with each Fund during the preceding period by
shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $25,000 in the fund family for which you
are to be compensated, and provided that in all cases your name is transmitted
with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of National Association of Securities Dealers, Inc. (the "NASD"). Your
expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times, will comply with the Conduct Rules (formerly the
Rules of Fair Practice) of the NASD, including, without limitation, the
provisions of Rule 2830 (formerly Section 26) of such Rules. You agree that you
will not combine customer orders to reach breakpoints in commission for any
purposes whatsoever unless authorized by the then current Prospectus in respect
of a particular class of Shares or by us in writing. You also agree that you
will place orders immediately upon their receipt and will not withhold any order
so as to profit therefrom. In determining the amount payable to you hereunder,
we reserve the right to exclude any sales which we reasonably determine are not
made in accordance with the terms of the relevant prospectus and provisions of
the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares under
the Securities Act. The Funds intend to make appropriate notice filings in
certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund shall have full authority to take such
action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
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<PAGE>
8. Record Keeping. You will (i) maintain all records required by law to be
kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party, without
penalty, upon ten days' notice to the other party and shall automatically
terminate in the event of its assignment, as defined in the Investment Company
Act. This Agreement may also be terminated at any time for any particular Fund
without penalty by the vote of a majority of the members of the Board of
Directors or Trustees of such Fund who are not "interested persons" (as such
phrase is defined in the Investment Company Act) and who have no direct or
indirect financial interest in the operation of the Distribution Agreement
between such Fund and the Distributor or by the vote of a majority of the
outstanding voting securities of the Fund.
11. Communications. All communications other than this agreement and those
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
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<PAGE>
Confirmed and accepted:
Firm Name:____________________________________________
By:___________________________________________________
Signature
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<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
FLAG INVESTORS FAMILY OF FUNDS
FORM OF SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you
concerning the provision of support services to your clients and customers
("Customers") who may from time to time beneficially own shares of our common
stock ("Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1.
(a) You agree to provide the following. services to Customers who may
from time to time beneficially own Shares: (i) aggregating and processing
purchase and redemption requests for Shares from Customers and placing net
purchase and redemption orders with our distributor; (ii) processing dividend
payments from us on behalf of Customers; (iii) providing information
periodically to Customers showing their positions in Shares; (iv) arranging for
bank wires; (v) responding to Customer inquiries relating to the services
performed by you; (v) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to Customers; and (viii) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. You will provide to Customers a schedule of any
fees that you may charge directly to them for such services. You hereby
represent that such fees are not unreasonable or excessive. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records required by law
relating to transactions in Shares and, upon our request, promptly make such of
these records available to us as we may reasonably request in connection with
our operations, and (ii) promptly notify us if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
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<PAGE>
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be a part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
Section 3.. Neither you nor any of your officers, employees, agents or
assignees are authorized to make any representations concerning us or Shares
except those contained in our then current prospectus for such Shares, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement, you will be deemed to be
an independent contractor and will have no authority to act as agent for us in
any matter or in any respect. You may, upon prior written notice to us, delegate
your responsibilities hereunder to another person or persons; provided, however,
that notwithstanding any such delegation, you will remain responsible for the
performance of all your responsibilities under this Agreement. By your written
acceptance of this Agreement, you agree and do release, indemnify and hold us
harmless from and against any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or by you and your
offices, employees, agents or assigns regarding your responsibilities hereunder
or the purchase, redemption, transfer or registration of Shares by or on behalf
of Customers. You and your employees will, upon request, be available during
normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by
you hereunder, we will cause our distributor to pay you, and you will accept as
full payment therefore, a fee (as we may determine from time to time in writing)
computed as a percentage of the average daily net assets of the Customers'
Shares held of record by you from time to time, which fee will be computed daily
and payable no less often than annually. For purposes of determining the fees
payable under this Section 5, the average daily net assets of the Customer's
Shares will be computed in the manner specified in our registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by us or by
our distributor, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Shares, including
the sale of such shares to you for the account of any Customer or Customers.
Section 6. You will furnish us or our designees with such information
relating to your performance under this Agreement as we or they may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and shall otherwise
cooperate with us and our designees (including, without limitation, any auditors
designated by us), in connection with the preparation of reports to our Board of
Directors concerning this Agreement and the monies paid or payable by us
pursuant hereto, as well as any other reports or filings that may be required by
law.
Section 7. We may enter into other similar services agreements with any
other person or persons without your consent.
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<PAGE>
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or by our distributor, and is
terminable, without penalty, at any time by us or by you upon ten days' notice
to the other party hereto and shall automatically terminate in the event of its
assignment, as that term is de.fined in the Investment Company Act of 1940, as
amended.
Section 9. This Agreement will be construed in accordance with the laws
of the State of Maryland.
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed, or transmitted by similar
telecommunications device, if to us at the address below, and if to you, at the
address specified by you after your signature below:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at the address set forth in Section 10 above.
Very truly yours,
ICC DISTRIBUTORS, INC.
By:
-------------------------------
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name:
By:
Name:
Address:
Date:
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<PAGE>
FORM OF
CUSTODIAN AGREEMENT
AGREEMENT dated as of______________, 199__ between BANKERS TRUST
COMPANY (the "Custodian") and __________________________________ (the
"Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desire to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
noncash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instruction to settle Securities transactions in any country
shall be deemed to authorize the holding of such Securities and Cash in that
country.
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions (as herein defined in Section
14), specifically indicate which
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<PAGE>
Portfolio such Property belongs or if such Property belongs to more than one
Portfolio shall allocate such Property to the appropriate Portfolio. The
Custodian shall allocate such Property to the Accounts in accordance with the
Instructions; provided that the Custodian shall have the right, in its sole
discretion, to refuse to accept any Property that is not in proper form for
deposit for any reason. The Customer on behalf of each Portfolio, acknowledges
its responsibility as a principal for all of its obligations to the Custodian
arising under or in connection with this Agreement warrants its authority to
deposit in the appropriate Account any Property received therefor by the
Custodian or a Subcustodian and to give, and authorize others to give,
instructions relative thereto. The Custodian may deliver securities of the same
class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account;
(b) present for payment all Securities held in an Account which
are called, redeemed or otherwise become payable and all
coupons and other income items which call for payment upon
presentation to the extent that the Custodian or Subcustodian
is actually aware of such opportunities and hold the cash
received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, withoutlimitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Custodian
to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Custodian to take timely
action or if actual notice of such actions was received too
late to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby authorizes the
Custodian to make) such rights entitlement or fractional
interest and credit the Account with the net proceeds of such
sale:
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<PAGE>
(e) execute in the Customer's name for an Account whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with the
payment of any such taxes to cooperate with the Custodian in
furnishing information, executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.,
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non- U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions: provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any Subcustodian or
Securities System has been proper under the 1940 Act or any rule or regulation
thereunder.
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Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement Subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities as may reasonably be requested by the
Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5 requires
the Customer's Board of Trustees to directly approve its foreign custody
arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the nominal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such
Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its
agents.
(c) Property deposited with a Subcustodian will be maintained in
an account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall
require that (i) the Account will be adequately indemnified or
its losses adequately insured; (ii) the Securities are not
subject to any right, charge, security interest, lien or claim
of any kind in favor of such Subcustodian or its creditors
except a claim for payment in accordance with such agreement
for their safe custody or administration and expenses related
thereto, (iii) beneficial ownership of such Securities be
freely transferable without the payment of money or value
other than for safe custody or administration and expenses
related
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thereto, (iv) adequate records will be maintained identifying
the Property held pursuant to such Agreement as belonging to
the Custodian, on behalf of its customers and (v) to the
extent permitted by applicable law, officers of or auditors
employed by, or other representatives of or designated by, the
Custodian, including the independent public accountants of or
designated by, the Customer be given access to the books and
records of such Subcustodian relating to its actions under its
agreement pertaining to any Property held by it thereunder or
confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by
the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by
its agreement with the Custodian to, identify on its books
such Property as being held for the account of the Custodian
or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or
other property, and whether held by the Custodian or a
Subcustodian or in a Securities System as authorized herein,
shall be clearly recorded on the Custodian's books as
belonging to the appropriate Account and not for the
Custodian's own interest. The Custodian
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shall keep accurate and detailed accounts of all investments,
receipts, disbursements and other transactions for each
Account. All accounts, books and records of the Custodian
relating thereto shall be open to inspection and audit at all
reasonable times during normal business hours by any person
designated by the Customer. All such accounts shall be
maintained and preserved in the form reasonably requested by
the Customer. The Custodian will supply to the Customer from
time to time, as mutually agreed upon, a statement in respect
to any Property in an Account held by the Custodian or by a
Subcustodian. In the absence of the filing in writing with the
Custodian by the Customer of exceptions or objections to any
such statement within sixty (60) days of the mailing thereof,
the Customer shall be deemed to have approved such statement
and in such case or upon written approval of the Customer of
any such statement, such statement shall be presumed to be for
all purposes correct with respect to all information set forth
therein.
(b) The Custodian shall take all reasonable action as the Customer
may request to obtain from year to year favorable opinions
from the Customer's independent certified public accountants
with respect to the Custodian's activities hereunder in
connection with the preparation of the Customer's Form N1-A
and the Customer's Form N-SAR or other periodic reports to the
SEC and with respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to
the Customer a written report prepared by the Custodian's
independent certified public accountants with respect to the
services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for
safeguarding Cash and Securities, including Cash and
Securities deposited and/or maintained in a securities system
or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required
by the Customer and as may reasonably be obtained by the
Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the
Custodian which can provide the Customer, on a daily basis,
with the ability to view on-line or to print on hard copy
various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such
service shall include market values of Securities in an
Account, the Customer hereby acknowledges that the Custodian
now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be
reliable and the Customer agrees that the Custodian (i) does
not verify or represent or warrant either the reliability of
such service nor the accuracy or completeness of any such
information furnished or obtained by or through such service
and (ii) shall be without liability in selecting and utilizing
such service or furnishing any information derived therefrom.
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<PAGE>
9. Holding of Securities, Nominees, etc. Securities in an Account which
are held by the Custodian or any Subcustodian may be held by such entity in the
name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. The
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called portion of the respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the Jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
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<PAGE>
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. The
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Global Guide provided to the Customer by the Custodian, the Custodian may,
at its sole option, reverse such credits or debits to the appropriate Account in
the event that the transaction does not settle, or the income is not received in
a timely manner, and the Customer agrees to hold the Custodian harmless from any
losses which may result therefrom.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the
Custodian shall not be required to comply with any
Instructions to settle the purchase of any securities for the
Account, unless there are sufficient immediately available
funds in the relevant currency in the Account, provided that
if, after all expenses, debits and withdrawals -------- ----
of Cash in the relevant currency ("Debits") applicable to the
Account have been made and if after all Conditional Credits,
as defined below, applicable to the Account have been made
final entries as set forth in (c) below, the amount of
immediately available funds of the relevant currency in such
Account is at least equal to the aggregate purchase price of
all securities for which the Custodian has received
Instructions to settle on that date ("Settlement Date"), the
Custodian, upon settlement, shall credit the Securities to the
Account by making a final entry on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable
to the Account have been made, there remains outstanding any
Conditional Credit (as defined below) applicable to the
Account or the amount of immediately available funds in a
given currency in such Account are less than the aggregate
purchase price in such currency of all securities for which
the Custodian has received Instructions to settle on the
Settlement Date, the Custodian, upon settlement, may credit
the securities to the Account by making a conditional entry on
its books and records ("Conditional Credit"), pending receipt
of sufficient immediately available funds in the relevant
currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have
been made, immediately available funds in the relevant
currency at least equal to the aggregate purchase price in
such currency of all securities subject to a Conditional
Credit on a Settlement Date are deposited into the Account,
the Custodian shall make the Conditional Credit a final entry
on its books and records. In such case, the Customer shall be
liable to the Custodian only for late
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<PAGE>
charges at a rate which the Custodian customary charges for
similar extensions of credit.
(d) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have
been made, immediately available funds in the relevant
currency at least equal to the aggregate purchase price in
such currency of all securities subject to a Conditional
Credit on a Settlement Date are not deposited into the
Account, the Customer authorizes the Custodian, as agent, to
sell the securities and credit the Account with the proceeds
of such sale. In such case, the Customer shall be liable to
the Custodian for any deficiencies, out-of-pocket costs and
expenses associated with the sale of the securities, including
but not limited to, shortfalls in the sales proceeds and the
Custodian is hereby authorized to sell such other securities
to the extent necessary to satisfy such shortfalls with the
net proceeds of such sales.
(e) The Customer agrees that it will not use the Account to
facilitate the purchase of securities without sufficient funds
in the Account (which funds shall not include the expected
proceeds of the sale of the purchased securities).
14. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance with Section 15 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or
readjustment.
(d) Upon conversion of Securities pursuant to their terms into
other securities.
(e) Upon exercise of subscription, purchase or other similar
rights represented by Securities.
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts
borrowed.
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<PAGE>
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of
the Customer against delivery of the shares to be redeemed to
the Custodian, a Subcustodian or the Customer's transfer
agent.
(j) For the purpose of redeeming in kind shares of the Customer
against delivery of the shares to be redeemed to the
Custodian, a Subcustodian or the Customer's transfer agent.
(k) For delivery in accordance with the provisions of any
agreement among the Customer, on behalf of a Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association
of Securities Dealers, Inc., relating to compliance with the
rules of The Options Clearing Corporation, the Commodities
Futures Trading Commission and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to the Custodian of monies for the
premium due and a receipt for the Securities which are to be
held in escrow. Upon exercise of the option, or at expiration,
the Custodian will receive the Securities previously deposited
from broker. The Custodian will act strictly in accordance
with Instructions in the delivery of Securities to be held in
escrow and will have no responsibility or liability for any
such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to
facilitate security trading or receipt of income from
Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section
20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 22 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose
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<PAGE>
name and (if applicable) signature and office address have been filed with the
Custodian, or (ii) which have been transmitted electronically through an
electronic on-line service and communications system offered by the Custodian or
other electronic instruction system acceptable to the Custodian, or (iii) a
telephonic or oral communication by one or more persons as the Customer shall
have from time to time authorized to give the particular class of Instructions
in question and whose name has been filed with the Custodian; or (iv) upon
receipt of such other form of instructions as the Customer may from time to time
authorize in writing and which the Custodian has agreed in writing to accept.
Instructions in the form of oral communications shall be confirmed by the
Customer by tested telex or writing in the manner set forth in clause (i) above,
but the lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions prior to the Custodian's
receipt of such confirmation. Instructions may relate to specific transactions
or to types or classes of transactions, and may be in the form of standing
instructions.
The Custodian shall have the night to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
16. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be
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<PAGE>
counsel for the Customer) on all matters and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution, strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
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<PAGE>
18. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit C. The Customer hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expense related thereto, which may be imposed, or assessed with respect to
any Property in an Account and also agrees to hold the Custodian, its
Subcustodians, and their respective nominees harmless from any liability as a
record holder of Property in such Account. The Custodian is authorized to charge
the applicable Account for such items and the Custodian shall have a lien on the
Property in the applicable Account for any amount payable to the Custodian under
this Agreement, including but not limited to amounts payable pursuant to Section
13 and pursuant to indemnities granted by the Customer under this Agreement. The
provisions of this Section shall survive the termination of this Agreement.
19. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
21. Termination.
(a) Termination of Entire Agreement. This Agreement may be
terminated by the Customer or the Custodian by ninety (90)
days' written notice to the other; provided that notice by the
Customer shall specify the names of the persons to whom the
Custodian shall deliver the Securities in each Account and to
whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall,
within ninety (90) days following the giving of such notice,
deliver to the Custodian a written notice specifying the names
of the persons to whom the Custodian shall deliver the
Securities in each Account and to whom the Cash in such
Account shall be paid. In either case, the Custodian will
deliver such Securities and Cash to the persons so specified,
after deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 13, 18, and 24. In
addition, the Custodian may in its discretion withhold from
such delivery such Cash and Securities as may be necessary
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<PAGE>
to settle transactions pending at the time of such delivery.
The Customer grants to the Custodian a lien and right of
setoff against the Account and all Property held therein from
time to time in the full amount of the foregoing obligations.
If within ninety (90) days following the giving of a notice of
termination by the Custodian, the Custodian does not receive
from the Customer a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities in
each Account and to whom the Cash in such Account shall be
paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or may continue
to hold such Securities and Cash until a written notice as
aforesaid is delivered to the Custodian, provided that the
Custodian's obligations shall be limited to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may
be terminated by the Customer or the Custodian as to one or
more Portfolios (but less than all of the Portfolios) by
delivery of an amended Exhibit A deleting such Portfolios, in
which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery,
or such earlier time as mutually agreed. The execution and
delivery of an amended Exhibit A which deletes one or more
Portfolios shall constitute a termination of this Agreement
only with respect to such deleted Portfolio(s), shall be
governed by the preceding provisions of Section 21 as to the
identification of a successor custodian and the delivery of
Cash and Securities of the Portfolio(s) so deleted to such
successor custodian and shall not affect the obligations of
the Custodian and the Customer hereunder with respect to the
other Portfolios set forth in Exhibit A, as amended from time
to time.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by
registered mail, telex or facsimile addressed to such other address as shall
have been furnished by the receiving party pursuant to the provisions hereof and
(b) shall be deemed effective when received, or, in the case of a telex, when
sent to the proper number and acknowledged by a proper answerback.
23. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
24. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations;
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<PAGE>
provided that, if there is more than one Account and the obligations secured
pursuant to this Section can be allocated to a specific Account or the Portfolio
related to such Account, such security interest and right of setoff will be
limited to Property held for that Account only and its related Portfolio. Should
the Customer fail to pay promptly any amounts owed hereunder, Custodian shall be
entitled to use available Cash in the Account or applicable Account, as the case
may be, and to dispose of Securities in the Account or such applicable Account
as is necessary. In any such case and without limiting the foregoing, Custodian
shall be entitled to take such other action(s) or exercise such other options,
powers and rights as Custodian now or hereafter has as a secured creditor under
the New York Uniform Commercial Code or any other applicable law.
25. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian
that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian a duly
executed Secretary's Certificate in the form of Exhibit E hereto or such other
evidence of such authorization as the Custodian may reasonably require, whether
by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any
obligation by which the Custodian is bound, whether
arising by contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by
appropriate action and when executed and delivered
will be binding upon the Custodian in accordance with
its terms;
(iii) the Custodian will deliver to the Customer such
evidence of such authorization as the Customer may
reasonably require, whether by way of a certified
resolution or otherwise; and
15
<PAGE>
(iv) Custodian is qualified as a custodian under Section
26(a) of the 1940 Act and warrants that it will
remain so qualified or upon ceasing to be so
qualified shall promptly notify the Customer in
writing.
26. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
27. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 22 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement.
28. Representative Capacity and Binding Obligation. A copy of the
Articles of Incorporation of the Customer is on file with The Secretary of the
State of Maryland, and notice is hereby given that this Agreement is not
executed on behalf of the Directors of the Customer as individuals, and the
obligations of this Agreement are not binding upon any of the Directors,
officers or shareholders of the Customer individually but are binding only upon
the assets and property of the Portfolios.
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
29. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the
16
<PAGE>
parties hereto, by judicial or administrative process or otherwise by applicable
law or regulation. The provisions of this Section shall survive the termination
of this Agreement.
31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
32. Entire Agreement. This Agreement together with any exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior writings
with respect thereto.
33. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
34. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
signatories to execute this Agreement as of the date first written above.
_____________________________________
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
BANKERS TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
17
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of ______________,199__ between Bankers
Trust Company and _______________________________.
LIST OF PORTFOLIOS
------------------
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above- referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Dated as of:
_____________________________________
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
BANKERS TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of ________________, 199__ between
Bankers Trust Company and ______________________________.
PROXY SERVICE
-------------
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in the countries specified in the Global Guide]. For the United
States and Canada, the term "corporate communications" means the proxy
statements or meeting agenda, proxy cards, annual reports and any other meeting
materials received by the Custodian. For countries other then the United States
and Canada, the term "corporate communications" means the meeting agenda only
and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
<PAGE>
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian wall not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
Global Guide. The Custodian will notify the Customer as
<PAGE>
to the inclusion of additional countries or deletion of existing countries after
their inclusion or deletion and this Exhibit B will be deemed to be
automatically amended to include or delete such countries as the case may be.
Dated as of ___________________________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
BANKERS TRUST COMPANY
By:________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of _____________, 199__ between Bankers
Trust Company and _____________________________________.
CUSTODY FEE SCHEDULE
--------------------
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of _____________, 199__ between Bankers
Trust Company and ________________________________.
TAX RECLAIMS
------------
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When Withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian,
<PAGE>
counsel or other professional tax advisers and shall be without liability to the
Customer for any action reasonably taken or omitted pursuant to information
contained in such services or such advice.
Dated as of ___________________________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
BANKERS TRUST COMPANY
By:________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE>
EXHIBIT E
[Name of Entity]
Certificate of the Secretary
----------------------------
I, [Name of Secretary], hereby certify that I am the Secretary of
_____________________ an open-end investment company organized under the laws of
the State of Maryland (the "Company"), and as such I am duly authorized to, and
do hereby, certify that:
1. Organizational Documents. The Company's organizational documents,
and all amendments thereto, have been filed with the appropriate governmental
officials of Maryland, the Company continues to be in existence and is in good
standing, and no action has been taken to repeal such organizational documents,
the same being in full force and effect on the date hereof.
2. By-laws. The Company's By-laws have been duly adopted and no action
has been taken to repeal such By-laws, the same being in full force and effect.
3. Resolutions. Resolutions have been duly adopted on behalf of the
Company, which resolutions (i) have not in any way been revoked or rescinded,
(ii) have been in full force and effect since their adoption, to and including
the date hereof, and are now in full force and effect, and (iii) are the only
corporate proceedings of the Company now in force relating to or affecting the
matters referred to therein, including, without limitation, confirming that the
Company is duly authorized to enter into a certain custody agreement with
Bankers Trust Company (the "Agreement"), and that certain designated officers,
including those identified in paragraph 4 of this Certificate, are authorized to
execute said Agreement on behalf of the Company, in conformity with the
requirements of the Company's organizational documents, Bylaws, and other
pertinent documents to which the Company may be bound.
4. Incumbency. The following named individuals are duly elected (or
appointed), qualified, and acting officers of the Company holding those offices
set forth opposite their respective names as of the date hereof, each having
full authority, acting individually, to bind the Company as a legal matter, with
respect to all matters pertaining to the Agreement, and to execute and deliver
said Agreement on behalf of the Company, and the signatures set forth opposite
the respective names and titles of said officers are their true, authentic
signatures:
Name Title Signature
[Name] [Position] -------------------------------
[Name] [Position] -------------------------------
[Name] [Position] -------------------------------
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
[Date], 19__.
By:________________________________________
Name:______________________________________
Title: Secretary
I, [Name of Confirming Officer], [Title] of the Company, hereby certify
that on this ___ day of [Date], 19__, [Name of Secretary] is the duly elected
Secretary of the Company and that the signature above is his genuine signature.
By:________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Flag Investors Short-Intermediate Income Fund, Inc.
We consent to the use in Post-Effective Amendment No. 10 to the Registration
Statement of Flag Investors Short-Intermediate Income Fund, Inc. (Registration
No. 33-34275) of our report dated January 29, 1998 appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the references to us under the caption "Financial Highlights" appearing in the
Prospectuses, which also are a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Princeton, New Jersey
April 24, 1998
<PAGE>
Amended
August 4, 1997
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
FLAG INVESTORS CLASS A SHARES
DISTRIBUTION PLAN
1. The Plan. The Plan (the "Plan") is a written plan as described in
Rule 12b-1 (the "Rule") under the investment Company Act of 1940, as amended
(the "1940 Act") of the Flag Investors Class A Shares (the "Shares") of Flag
Investors Short-Intermediate Income Fund, Inc. (the "Fund"). Other capitalized
terms herein have the meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) The Fund's distributor (the "Distributor")
is authorized, pursuant to the Plan, to make payments to any Participating
Dealer under a Sub-Distribution Agreement, to accept payments made to it under
the Distribution Agreement and to make payments on behalf of the Fund to
Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund do
not exceed, in any fiscal year of the Fund, the amount paid to the Distributor
under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily net
assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized, pursuant to the
Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the Distribution
Agreement, the Fund assumes certain expenses, which the Distributor is
authorized to pay or cause to be paid on its behalf and such payments shall not
be included in the limitations contained in this Plan. These expenses include:
the fees of the Fund's investment advisor, sub-advisor and the Distributor; 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 stock transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions chargeable to the Fund in connection
with portfolio transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and corporate fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing Shares; all costs and
expenses in connection with maintenance of registration of the Fund and its
Shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and 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 who are not "interested persons" of the Fund (as defined in the 1940
Act) or 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
<PAGE>
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; a portion of 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 therein.
5. Other Distribution Resources. The Distributor and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. The Distributor will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor shall report
in writing at least quarterly to the Fund's Board of Directors, and the Board
shall review, the following: (i) the amounts of all payments under the Plan, the
identity of the recipients of each such payment; (ii)the basis on which the
amount of the payment to such recipient was made; (iii) the amounts of expenses
authorized under this Plan and the purpose of each such expense; and (iv) all
costs of each item specified in Section 4 of this Plan (making estimates of such
costs where necessary or desirable), in each case during the preceding calendar
or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a) This
Plan has been approved by a vote of the Board of Directors of the Fund and of a
majority of the Directors who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on this Plan.
This Plan shall, unless terminated as hereinafter provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by the vote of the Fund's Board of Directors and by the vote of a
majority of the Directors of the Fund who are not interested persons (as defined
in the 1940 Act), cast in person at a meeting called for the purpose of voting
on such continuance.
(b) This Plan may be terminated at any time by a vote of a
majority of the Directors who are not interested persons (as defined in the 1940
Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase materially the
amount of payments to be made without approval by a vote of the holders of at
least a majority of the Fund's outstanding voting securities (as defined in the
1940 Act) and all amendments must be approved by the Board of Directors in the
manner set forth under (a) above.
<PAGE>
EX-99.B(18)
Flag Investors Short-Intermediate Income Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A, Flag Investors Class B, Flag Investors Institutional
and Alex. Brown Capital Advisory & Trust Shares Classes
Adopted December 13, 1995
Amended through March 26, 1997
With exhibits through August 4, 1997
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of Flag Investors
Short-Intermediate Income Fund, Inc. (formerly, Flag Investors Intermediate-Term
Income Fund, Inc.) (the "Fund"), including a majority of the Directors of the
Fund who are not "interested persons" of the Fund (the "Independent Directors")
pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act").
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC-20813, IC-14695 and IC-15592, respectively) (collectively, the
"Order"). On December 13, 1995, the Fund elected to rely on Rule 18f-3 rather
than the Order, as permitted by Rule 18f-3 subject to certain conditions, and
created a multiple class distribution arrangement for its classes of shares of
the common stock of the Fund's one existing series (the "Series"). The multiple
class distribution arrangement will be effective on the date of effectiveness of
the post-effective amendment to the Fund's registration statement that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing (Flag Investors Class A (formerly known as the Flag
Investors Shares), Flag Investors Class B, Flag Investors Institutional and
Alex. Brown Capital Advisory & Trust) and future classes of Fund shares. The
Flag Investors Class A Shares have been offered since the Fund's inception on
May 13, 1991 and the Flag Investors Institutional Shares have been offered since
November 2, 1995. The Alex. Brown Capital Advisory & Trust Shares and the Flag
Investors Class B Shares have not yet been offered.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors. Before any material amendment of the
Plan, the Fund is required to obtain a finding by a majority of the Board, and a
majority of the Independent
<PAGE>
majority of the Independent Directors, that the Plan as proposed to be amended,
including the expense allocations, is in the best interests of each class
individually and the Fund as a whole.
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly attributable to such class ("Class
Expenses") 1/; and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
- --------------
(1/) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
<PAGE>
III. Expense Allocations
Expenses of each class created after the date hereof must be allocated
as follows: (i) distribution and shareholder servicing payments associated with
any Rule 12b-1 Plan or servicing agreement, if any, relating to each respective
class of shares (including any costs relating to implementing such plans or any
amendment thereto) will be borne exclusively by that class; (ii) any incremental
transfer agency fees relating to a particular class will be borne exclusively by
that class; and (iii) Class Expenses relating to a particular class will be
borne exclusively by that class.
The methodology and procedures for calculating the net asset value and
dividends and distributions of the various classes of shares of the Fund and the
proper allocation of income and expenses among the various classes of shares of
the Fund are required to comply with the Fund's internal control structure
pursuant to applicable auditing standards, including Statement on Auditing
Standards No. 55, and to be reviewed as part of the independent accountants'
review of such internal control structure. The independent accountants' report
on the Fund's system of internal controls required by Form N-SAR, Item 77B, is
not required to refer expressly to the procedures for calculating the classes'
net asset values.
<PAGE>
BOARD APPROVALS
Class A Shares
Date Approved: March 20, 1991
Resolutions of Board Approving Distribution Agreement, Plan of Distribution and
Form of Sub-Distribution Agreement
RESOLVED, that the proposed Distribution Agreement, between the Fund
and Alex. Brown & Sons Incorporated for distribution of the Fund's shares be,
and the same hereby is, approved, and that the appropriate officers of the Fund
be, and they hereby are, authorized and directed to enter into and execute such
Distribution Agreement with such modifications as said officers shall deem
necessary or appropriate or as may be required to conform with the requirements
of any applicable statute, regulation or regulatory body;
FURTHER RESOLVED, that the proposed Plan of Distribution (the"Plan") is
determined to be reasonably likely to benefit the Fund and its shareholders;
FURTHER RESOLVED, that the Plan be, and the same hereby is, approved by
the Board of Directors and by the Directors who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) of the Fund and have
no direct or indirect financial interest in the operation of the Plan;
FURTHER RESOLVED, that the proposed form of Sub-Distribution Agreement
of the Fund be, and the same hereby is, approved.
RESOLVED, that the filing of the Articles of Incorporation of the Fund
and the Articles of Amendment thereto by the Fund's incorporator be, and the
same hereby is, ratified.
Date Approved: September 23, 1994
Resolutions of Board Creating Flag Investors Shares
FURTHER RESOLVED, that the previously undesignated shares of common
stock, par value $.001 per share, of Flag Investors Intermediate-Term Income
Fund, Inc. be, and they hereby are, designated as the "Flag Investors Shares"
FURTHER RESOLVED, that the proper officers of the foregoing Fund be,
and each of them hereby is, authorized and directed to file articles
supplementary to the Fund's Articles of Incorporation and to take such other
action as may be necessary to designate and reclassify shares in the foregoing
matter.
<PAGE>
Date Approved: April 1, 1996
Resolutions of Board Renaming Flag Investors Shares
RESOLVED, that the Fund's forty-five million (45,000,000) shares of
common stock, par value $.001 per share, previously designated and classified as
the "Flag Investors Shares" be, and hereby are, renamed the "Flag Investors
Class A Shares";
FURTHER RESOLVED, that the Articles Supplementary to the Fund's
Articles of Incorporation be, and they hereby are, approved and adopted;
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed in the name and on behalf of the Fund to
take any other action that the officer so acting may deem necessary or
appropriate to effectuate the renaming of the Flag Investors Shares and the
filing and recording of the Articles Supplementary in the appropriate offices in
the State of Maryland.
Date Approved: September 23, 1994
Resolutions of Board Creating Flag Investors Class B Shares
FURTHER RESOLVED, that an additional class of shares of Flag Investors
Intermediate-Term Income Fund, Inc. (the "Fund") be, and hereby is, classified
and designated as the "Flag Investors Class B Shares" (the "Class B Shares") and
that unissued shares of common stock, par value $.001 per share of the Fund be,
and the same hereby are, reclassified as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
================================================================================================================
Total No. of Shares Class A Shares Class B Shares Unclassified Shares
- ----------------------------------------------------------------------------------------------------------------
50,000,000 45,000,000 2,000,000 3,000,000
================================================================================================================
</TABLE>
FURTHER RESOLVED, that the proper officers of the Fund be, and each of
them hereby is, authorized and directed to file articles supplementary to the
Fund's Articles of Incorporation and to take such other action as may be
necessary to designate and reclassify shares in the foregoing manner.
RESOLVED, that the Distribution Agreement between Flag Investors
Intermediate-Term Income Fund, Inc. and Alex. Brown & Sons Incorporated for the
Class B Shares of the Fund be, and the same hereby is, approved;
FURTHER RESOLVED, that at such time as the Fund offers the Class B
Shares, the Plan of Distribution shall govern the payment of 12b-1 fees by that
class;
<PAGE>
FURTHER RESOLVED, that the Plan of Distribution for the Class B Shares
of the Fund is determined to be reasonably likely to benefit the Fund and its
shareholders; and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for similar plans;
FURTHER RESOLVED, that said Plan be, and the same hereby is, approved.
Date Approved: September 26, 1995
Resolutions of Board Creating Flag Investors Institutional Shares
RESOLVED, that the total number of shares of common stock, par value
$.001 per share, that Flag Investors Intermediate-Term Income Fund, Inc.
(the "Fund") is authorized to issue is hereby increased from fifty million
(50,000,000) to fifty-five million (55,000,000) and that from such amount,
five million (5,000,000) authorized and unissued shares be, and hereby are,
designated and classified as the "Flag Investors Intermediate-Term Income
Fund Institutional Shares" ("Institutional Shares");
FURTHER RESOLVED, that the proper officers of the Fund be, and
each of them hereby is, authorized and directed to file Articles Supplementary
to the Fund's Articles of Incorporation to effectuate the increase in authorized
shares and to designate and classify the new class;
FURTHER RESOLVED, that the Distribution Agreement between Flag
Investors Intermediate-Term Income Fund, Inc. and Alex. Brown & Sons
Incorporated for the Institutional Shares of said Fund be, and the same hereby
is, approved in substantially the form presented to this meeting;
FURTHER RESOLVED, that the proper officers of Flag Investors
Intermediate- Term Income Fund, Inc. be, and they hereby are, authorized and
directed to enter into and execute the Distribution Agreement on behalf of the
Fund, and to take all other actions that such officer deems necessary or
appropriate in connection with the execution of such agreement, the taking of
any action to establish conclusively such officer's authority therefore and the
approval and ratification thereof by the Fund.
Date Approved: October 1, 1996
Resolutions of Board Creating Alex. Brown
Capital Advisory & Trust Shares
RESOLVED, that the total number of shares of common stock, par value
$.001 per share, that Flag Investors Intermediate-Term Income Fund, Inc. is
authorized to issue is hereby increased from fifty-five million (55,000,000) to
sixty million (60,000,000) and that from
<PAGE>
such amount, five million (5,000,000) authorized and unissued shares be, and
hereby are, designated and classified as the "Alex. Brown Advisory & Trust
Intermediate-Term Income Shares";
FURTHER RESOLVED, that the proper officers of Flag Investors
Intermediate-Term Income Fund, Inc. be, and each of them hereby is, authorized
and directed to file Articles Supplementary to the Fund's Articles of
Incorporation to effectuate the increase in authorized shares and to designate
and classify the new class;
FURTHER RESOLVED, that any filings previously made and any actions
previously taken by the appropriate officers of the Fund in connection with the
establishment and registration of the new class be, and they hereby are
ratified, confirmed and approved as the act and deed of the Fund.
Date Approved: October 1, 1996
Resolutions of Board Approving Distribution Agreement for
New Alex. Brown Capital Advisory & Trust Shares
FURTHER RESOLVED, that the Distribution Agreement between Flag
Investors Intermediate-Term Income Fund, Inc. and Alex. Brown & Sons
Incorporated for the Alex. Brown Capital & Advisory Trust Shares of said Fund
be, and the same hereby is, approved in substantially the form presented to this
meeting;
FURTHER RESOLVED, that the proper officers of Flag Investors
Intermediate- Term Income Fund, Inc. be, and they hereby are, authorized and
directed to enter into and execute the Distribution Agreement on behalf of the
Fund, and to take all other actions that such officer deems necessary or
appropriate in connection with the execution of such agreement, the taking of
any action to establish conclusively such officer's authority therefore and the
approval and ratification thereof by the Fund.
<PAGE>
Date Approved: March 26, 1997
Approval of Amended Rule 18f-3 Plan
RESOLVED, based upon information presented to the Board of Directors of
Flag Investors Short-Intermediate Income Fund, Inc. (the "Fund"), that the
Directors, including a majority of the Directors who are not "interested
persons" of the Fund, have determined that the Fund's amended Rule 18f-3 Plan,
including the expense allocations described therein, is in the best interests of
the Fund and each of its classes;
FURTHER RESOLVED, that the amended Rule 18f-3 Plan for the Fund be, and
hereby is, approved, in substantially the form presented to this meeting; and
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed to take any and all actions necessary or
appropriate to cause the amended Rule 18f-3 Plan to be filed with the Securities
and Exchange Commission.
Approved: August 4, 1997
Approval of Distribution Agreements for all classes of
Flag Investors Short-Intermediate Income Fund, Inc.
RESOLVED, that ICC Distributors, Inc. Brown Cash Reserve Fund, Inc., Flag
Investors Telephone Income Fund, Inc., Flag Investors International Fund, Inc.,
Flag Investors Emerging Growth Fund, Inc., Flag Investors Short-Intermediate
Income Fund, Inc., Flag Investors Value Builder Fund, ("ICC ") be, and it hereby
is, appointed distributor for all classes of Alex. Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc. and Flag Investors Equity Partners Fund, Inc., and for the Flag
Investors classes of each of Managed Municipal Fund, Inc. and Total Return U.S.
Treasury Fund, Inc., such appointment to be effective upon the consummation of
the merger of Alex. Brown Incorporated with and into a subsidiary of Bankers
Trust New York Corporation (the "Merger"), or at such other time as the proper
officers of the Fund shall determine;
FURTHER RESOLVED, that the proposed Distribution Agreement between
Alex. Brown Cash Reserve Fund, Inc. and ICC Distributors, Inc. with respect to
all shares except the Flag Investors Shares be, and the same hereby is, approved
in substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to
negotiate, enter into and execute such Distribution Agreement with such
modifications as said officers in consultation with counsel shall deem necessary
or appropriate or as may be required to conform with the requirements of any
applicable statute, regulation or regulatory body;
<PAGE>
FURTHER RESOLVED, that the proposed Distribution Agreement between
Alex. Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income Fund, Inc.,
Flag Investors International Fund, Inc., Flag Investors Emerging Growth Fund,
Inc., Total Return U.S. Treasury Fund, Inc. (for Flag Investors Shares), Managed
Municipal Fund, Inc. (for the Flag Investors Shares), Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors
Real Estate Securities Fund, Inc., and Flag Investors Equity Partner Fund, Inc.,
and ICC Distributors, Inc. be, and the same hereby is, approved in substantially
the form presented to this meeting and that the appropriate officers of the
Funds be, and they hereby are, authorized and directed to negotiate, enter into
and execute such Distribution Agreement with such modifications as said officers
in consultation with counsel shall deem necessary or appropriate or as may be
required to conform with the requirements of any applicable statute, regulation
or regulatory body.
Approved: August 4, 1997
Approval of Distribution Plans for Flag Investors
Class A Shares and Flag Investors Class B Shares
RESOLVED, that the Plan of Distribution for the Flag Investors Class A Shares of
Flag Investors Short-Intermediate Income Fund, Inc. be, and hereby is, amended
to reflect the change in distributor approved at this meeting, such amendment to
be effective upon the consummation of the Merger, or such other time as the
proper officers of the Fund shall determine;
RESOLVED, that the amended Plan is determined to be reasonably likely
to benefit such class and its shareholders; and that based on information
reasonably available to the Directors, expenditures contemplated by such Plan
are comparable to expenditures for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan, as amended, be,
and the same hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the Flag Investors
Class B Shares of said Fund be, and hereby is, amended to reflect the change in
distributor approved at this meeting, such amendment to be effective upon the
consummation of the Merger, or such other time as the proper officers of the
Fund shall determine;
FURTHER RESOLVED, that the amended Plan is determined to be reasonably
likely to benefit such class and its shareholders; and that based on information
reasonably available to the Directors, expenditures contemplated by such Plan
are comparable to expenditures for other similar plans;
<PAGE>
FURTHER RESOLVED, that the continuation of said Plan, as amended, be,
and the same hereby is, approved; and
FURTHER RESOLVED, that at such time as the Fund offers the Flag
Investors Class B Shares, the amended Plan of Distribution presented at this
meeting shall govern the payment of 12b-1 fees by that class.
Approved: March 27, 1998
Approval of Restated Distribution Agreement
and Forms of Sub-Distribution and
Shareholder Servicing Agreements
---------------------------------------------
RESOLVED, that the proposed Restated Distribution Agreement between Flag
Investors Short-Intermediate Income Fund, Inc. and ICC Distributors, Inc. for
each class of the Fund's shares, be, and the same hereby is, approved in
substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to enter
into and execute such Distribution Agreement with such modifications as said
officers shall deem necessary or appropriate or as may be required to conform
with the requirements of any applicable statute, regulation or regulatory body.
FURTHER RESOLVED, that the proper officers of Flag Investors
Short-Intermediate Income Fund, Inc. be, and they hereby are, authorized and
directed in the name and on behalf of the Fund to take all necessary or
appropriate actions to effect the purposes of the foregoing resolution.
<PAGE>
EXHIBIT A
Exhibits to Registrant's 18f-3 Plan
1. Articles of Incorporation filed as Exhibit (1)(a) to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A (Registration No. 33-
34275), filed with the Securities and Exchange Commission via EDGAR (Accession
No. 0000950116-95-000390) on August 18, 1995 are incorporated herein by
reference.
2. Articles Supplementary establishing the ABCAT Shares filed as Exhibit (1)(g)
to Post-Effective Amendment No. 9 to Registrant's Registration Statement on Form
N- 1A (Registration No. 33-34275), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 0000950116-97-000791) on April 28, 1997 are
incorporated herein by reference.
3. Articles of Amendment to the Articles of Incorporation with respect to the
Registrant's name change filed as Exhibit (1)(h) to Post-Effective Amendment No.
9 to Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 0000950116-97-000791) on April 28, 1997 are incorporated herein
by reference.
4. By-Laws as amended through December 18, 1996 filed as Exhibit (2) to Post-
Effective Amendment No. 9 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-34275), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 0000950116-97-000791) on April 28, 1997 are
incorporated herein by reference.
5. Distribution Agreement between Registrant and ICC Distributors, Inc. with
respect to Flag Investors Shares filed as Exhibit (6)(a) to this Post-Effective
Amendment to Registrant's Registration Statement on Form N-1A (Registration No.
33-34275), filed herewith and is incorporated herein by reference.
6. Distribution Agreement between Registrant and ICC Distributors, Inc. with
respect to Registrant's Alex. Brown Capital Advisory & Trust Shares filed as
Exhibit (6)(a) to this Registration Statement on Form N-1A (Registration No.
33-34275), filed herewith is incorporated herein by reference.
7. Distribution Plan with respect to the Class A Shares filed as Exhibit (15)(b)
to this Post-Effective Amendment to Registrant's Registration Statement on Form
N-1A (Registration No. 33-34275), filed herewith is incorporated herein by
reference.
8. Form of Sub-Distribution Agreement between ICC Distributors, Inc. and
Participating Broker-Dealers filed as Exhibit (6)(b) to this Post Effective
Amendment to Registrant's Registration Statement on Form N-1A (Registration No.
33-34275) filed herewith is incorporated herein by reference.
<PAGE>
9. Prospectus relating to Registrant's Class A Shares filed as part of this
Post- Effective Amendment to Registrant's Registration Statement on Form N-1A
(Registration No. 33-34275), and as amended from time to time, is incorporated
herein by reference.
10. Prospectus relating to Registrant's Institutional Shares filed as part of
this Post- Effective Amendment to Registrant's Registration Statement on Form
N-1A (Registration No. 33-34275), and as amended from time to time, is
incorporated herein by reference.
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/James J. Cunnane
-------------------
James J. Cunnane
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chairman and a director of
the Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Richard T. Hale
------------------
Richard T. Hale
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/John F. Kroeger
------------------
John F. Kroeger
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Louis E. Levy
----------------
Louis E. Levy
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Eugene J. McDonald
---------------------
Eugene J. McDonald
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Amy M.
Olmert, and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Flag Investors Short-Intermediate Income Fund, Inc.
(the "Fund") to comply with the Securities Act of 1933, as amended (the "1933
Act") and the Investment Company Act of 1940, as amended (the "1940 Act"), and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Carl W. Vogt
---------------
Carl W. Vogt
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, her true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in her name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/Rebecca W. Rimel
-------------------
Rebecca W. Rimel
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Short-Intermediate Income Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Truman T. Semans
-------------------
Truman T. Semans
Date: April 27, 1998
--------------
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Amy M.
Olmert, and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Flag Investors Short-Intermediate Income Fund, Inc.
(the "Fund") to comply with the Securities Act of 1933, as amended (the "1933
Act") and the Investment Company Act of 1940, as amended (the "1940 Act"), and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as President of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Harry Woolf
--------------
Harry Woolf
Date: April 27, 1998
--------------
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