<PAGE>
As Filed With the Securities and Exchange Commission on April 28, 2000
Registration No. 33-34275
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 12 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 14 [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
Daniel O. Hirsch, Esq. Copy to: Richard W. Grant, Esq.
One South Street Morgan, Lewis & Bockius LLP
Baltimore, MD 21202 1701 Market Street
(Name and address of agent for service) Philadelphia, PA 19103
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b)
__X__ on May 1, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ 75 days after filing pursuant to paragraph (a)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
[GRAPHIC OMITTED]
Short-Intermediate
Income Fund, Inc.
(Class A Shares)
Prospectus
May 1, 2000
The Securities and Exchange Commission has neither approved nor disapproved
these securities nor has it passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
{GRAPHIC OMITTED]
This mutual fund (the "Fund") seeks a high level of current income consistent
with preservation of principal within an intermediate-term maturity structure.
The Fund offers shares through securities dealers and financial institutions
that act as shareholder servicing agents. You may also buy shares through the
Fund's Transfer Agent. This Prospectus describes Flag Investors Class A Shares
(the "Class A Shares") of the Fund.
TABLE OF CONTENTS
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Investment Summary ............................ 1
Fees and Expenses of the Fund ................. 2
Investment Program ............................ 3
The Fund's Net Asset Value .................... 4
How to Buy Shares ............................. 4
How to Redeem Shares .......................... 5
Telephone Transactions ........................ 6
Sales Charges ................................. 6
Dividends and Taxes ........................... 8
Investment Advisor and Sub-Advisor ............ 8
Financial Highlights .......................... 10
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
<PAGE>
INVESTMENT SUMMARY
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Objectives and Strategies
The Fund seeks a high level of current income consistent with
preservation of principal within an intermediate-term maturity structure. The
Fund's investment advisor and sub-advisor (the "Advisors") select U.S.
Government securities, corporate debt and mortgage-backed and asset-backed
securities for the Fund's portfolio subject to quality, maturity and duration
criteria. Corporate debt will be rated at least "A" by either Moody's Investors
Services, Inc. or Standard & Poors Ratings Group. Mortgage and asset-backed
securities will be rated at least "AAA" by S&P or "Aaa" by Moody's. Under
normal circumstances, the Fund's portfolio will have a dollar-weighted average
maturity at the time of investment of three to five years and a maximum
duration of four years.
Risk Profile
The Fund may be suited for you if you are seeking a high level of current
income but are willing to sacrifice some of that income to reduce your risk of
capital loss.
The value of your investment in the Fund will vary from day to day based
on changes in the prices of the securities the Fund holds. These prices will,
in turn, change in response to economic and market factors and especially in
response to changes in interest rates.
<PAGE>
Interest Rate Risk. The value of the Fund's shares can be expected to
increase during periods of falling interest rates and decrease during periods
of rising interest rates.
Maturity, Duration and Credit Risk. The increases and decreases in the
value of the Fund's shares in response to changes in interest rates will
generally be larger if the Fund's portfolio has a longer duration, if the Fund
holds securities with longer maturities or if the Fund holds lower-quality
securities.
Prepayment Risk. Unexpected prepayment of principal in connection with
mortgage-backed securities held by the Fund may negatively impact the value of
your investment in the Fund.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year by year and as an average over different periods of time. The different
levels of performance over time provide an indication of the risks of investing
in the Fund. The chart and table provide an historical record and do not
necessarily indicate how the Fund will perform in the future.
Class A Shares*
For years ended December 31,
<TABLE>
<CAPTION>
<S> <C>
5.68% 8.98% (3.32)% 15.43% 4.04% 7.13% 6.81% 0.70%
---------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
* The bar chart does not reflect sales charges. If it did, returns would be
less than those shown. For the period from December 31, 1999 through March
31, 2000, the year-to-date return for Class A Shares was 1.62%.
During the eight-year period shown in the bar chart, the highest return
for a quarter was 4.98% (quarter ended 6/30/95) and the lowest return for a
quarter was (2.55)% (quarter ended 3/31/94).
1
<PAGE>
Average Annual Total Return (for periods ended December 31, 1999)
<TABLE>
<CAPTION>
Lehman Brothers Intermediate Merrill Lynch 1-3
Government/Corp Bond Year Treasury
Class A Shares(1) Index(2) Index(2)
------------------------------ ------------------------------ ------------------
<S> <C> <C> <C>
Past One Year ........... (0.81)% 0.39% 3.06%
Past Five Years ......... 6.40% 7.10% 6.51%
Since Inception ......... 6.10%(5/13/91) 6.89%(3) 6.10%(3)
</TABLE>
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(1) These figures assume the reinvestment of dividends and capital gains
distributions and include the impact of the maximum sales charges.
(2) The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index that is widely recognized as a general measure of the
performance in the intermediate-term government and corporate bond sector.
The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index that is
widely recognized as a general measure of the performance in the short-term
Treasury sector. The indexes are passive measures of bond and Treasury
performance, respectively. They do not factor in the costs of buying,
selling and holding securities -- costs which are reflected in the Fund's
results.
(3) For the period from 5/31/91 through 12/31/99.
FEES AND EXPENSES OF THE FUND
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This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) ..... 1.50%(1)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or
redemption proceeds, whichever is lower) ............................................... 0.50%(1)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends .............................. None
Redemption Fee ........................................................................... None
Exchange Fee ............................................................................. None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees .......................................................................... 0.35%
Distribution and/or Service (12b-1) Fees ................................................. 0.25%
Other Expenses ........................................................................... 0.33%
----
Total Annual Fund Operating Expenses ..................................................... 0.93%
Less Fee Waivers and Expense Reimbursements .............................................. (0.23)%(2)
----
Net Expenses ............................................................................. 0.70%
====
</TABLE>
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(1) You will pay no sales charge on purchases of $1 million or more of Class A
Shares but, unless you are otherwise eligible for a sales charge waiver or
reduction, you may pay a contingent deferred sales charge when you redeem
your shares. (See "Sales Charges -- Redemption Price.")
(2) The Advisor has contractually agreed to limit its fees and reimburse
expenses to the extent necessary so that the Fund's Total Annual Fund
Operating Expenses do not exceed 0.70% of the Class A Shares' average daily
net assets. This agreement will continue until at least April 30, 2001 and
may be extended.
2
<PAGE>
Example:
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Class A Shares for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Class A Shares(1) ....... $220 $420 $637 $1,266
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(1) Based on Total Annual Fund Operating Expenses after fee waivers and expense
reimbursements for year one only.
Federal regulations require that the Example reflect the maximum sales
charge. However, you may qualify for reduced sales charges or no sales charge
at all. (Refer to the section on sales charges.) If you hold your shares for a
long time, the combination of the initial sales charge you paid and the
recurring 12b-1 fees may exceed the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
INVESTMENT PROGRAM
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Investment Objective, Policies and Risk
Considerations
The Fund seeks a high level of current income consistent with
preservation of principal within an intermediate-term maturity structure by
investing primarily in U.S. Government securities, corporate debt and
mortgage-backed and asset-backed securities.
The Advisors are responsible for managing the Fund's investments. In
selecting investments for the Fund, the Advisors first focus on a security's
quality. They will only purchase securities that have been granted certain
minimum credit ratings by an independent rating agency. Corporate debt will be
rated at least "A" by either S&P or Moody's. Mortgage and asset-backed
securities will be rated at least "AAA" by S&P or "Aaa" by Moody's. Then the
Advisors focus on maturity and duration. Under normal circumstances, the Fund's
portfolio will have an average maturity of three to five years and a maximum
duration of four years. Average maturity measures the average time until which
the bonds in the Fund's portfolio are payable. Average duration measures the
Fund's exposure to the risk of changing interest rates. Some of the securities
selected by the Advisors will be mortgage-backed and asset-backed securities. A
mortgage-backed security represents an interest in a pool of underlying
mortgage loans. An asset-backed security represents an interest in an
underlying pool of assets, such as auto loans or credit card receivables.
An investment in the Fund entails risk.
<PAGE>
Interest Rate Risk. The primary risk of the Fund is interest rate risk.
The value of the Fund's shares can be expected to increase during periods of
falling interest rates and decrease during periods of rising interest rates.
Maturity, Duration and Credit Risk. The increases and decreases in the
value of the Fund's shares in response to changes in interest rates will
generally be larger if the Fund's portfolio has a longer duration, if the Fund
holds securities with longer maturities or if the Fund holds lower-quality
securities.
Prepayment Risk. In addition to the interest rate risk experienced by all
fixed income securities, mortgage-backed securities are exposed to prepayment
risk. Rising interest rates tend to discourage refinancings, a primary source
of prepayments. As a result, in a rising interest rate environment, the average
life and volatility of mortgage-backed securities will increase and their
market price will decrease. Falling interest rates tend to encourage
refinancings. As a result, in a falling interest rate environment, the market
price of mortgage-backed securities will not increase as much as other debt
securities and the cash generated by the prepayments will have to be reinvested
at the lower prevailing rates. Prepayment changes may make it difficult to
calculate the average maturity of a portfolio of these securities and,
therefore, the ability to assess the volatility risk of the portfolio.
3
<PAGE>
There can be no guarantee that the Fund will achieve its goals.
To reduce the Fund's risks under adverse market conditions, the Advisors
may make temporary defensive investments. These investments may not be
consistent with the Fund's objectives. While engaged in a temporary defensive
strategy, the Fund may not achieve its investment objective. The Advisors would
follow such a strategy only if they believed that the risk of loss in pursuing
the Fund's primary investment strategies outweighed the opportunity for gain.
THE FUND'S NET ASSET VALUE
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The price you pay when you buy shares or receive when you redeem shares
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 amount you receive may be reduced by a sales charge. Read the
section on sales charges for details on how and when these charges may or may
not be imposed.
The net asset value per share of the Fund is determined at the close of
regular trading on the New York Stock Exchange on each day the Exchange is open
for business. While regular trading ordinarily closes at 4:00 p.m. Eastern
Time, it could be earlier on the day before a holiday. Contact the Transfer
Agent to determine whether the Fund will close early before a particular
holiday. The net asset value per share of a class 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. When price quotes for a particular security are not readily available,
the security is priced at its "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem shares on any day 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.
The following sections describe how to buy and redeem Class A Shares.
HOW TO BUY SHARES
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You may buy Class A Shares through your secur-ities 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.
You may invest in Class A Shares unless you are a defined contribution
plan with assets of $75 million or more.
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:
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. Your subsequent
4
<PAGE>
investments may be as low as $100 if you participate in the monthly
plan or $250 if you participate in the quarterly plan. 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.
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 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 Class A Shares at
net asset value. You may elect to receive your distributions in cash or to have
your distributions invested in Class A shares of other Flag Investors funds. To
make either of these elections or to terminate automatic reinvestment, complete
the appropriate section of the 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.
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 you have an account with the Fund that is in
your name, you may also redeem Class A 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
Class A Shares or dollar amount you wish to redeem. All owners of shares
must sign the letter exactly as their names appear on the account.
2) A guarantee of your signature if you are redeeming shares worth more than
$50,000. You can obtain a signature guarantee from most banks or securities
dealers.
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.
Other Redemption Information
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 in cash 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. The Fund reserves the right to redeem shares in kind under
certain circumstances.
If you own Class A 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.
5
<PAGE>
TELEPHONE TRANSACTIONS
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If your Class A Shares are in an account with the Transfer Agent, you may
redeem them in any amount up to $50,000 or exchange them for Class A shares in
another Flag Investors fund by calling the Transfer Agent on any Business Day
between the hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges but you may
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 when you
open your account and before you effect 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 telephone instructions that either reasonably believes 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 or facsimile. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
SALES CHARGES
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Purchase Price
The price you pay to buy Class A Shares is the offering price, which is
calculated by adding any applicable sales charges to the Class A Shares' net
asset value per share. The amount of any sales charge included in your purchase
price is based on 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
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Although you do not pay an initial sales charge when you invest
$1,000,000 or more in Class A Shares, you may pay a sales charge when you
redeem your Class A Shares. Refer to the section on redemption price for
details. Your securities dealer may be paid a commission at the time of your
purchase.
The sales charge you pay on your current purchase of Class A Shares may
be reduced under the following circumstances:
<PAGE>
Rights of Accumulation. If you are purchasing additional Class A Shares
of this Fund or Class A shares of any other Flag Investors fund or if you
already have investments in Class A 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.
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. Each time you make a 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 Class A 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 reinvesting some or all of the proceeds of a redemption of Class
A Shares made within the last 90 days.
2) If you are exchanging an investment in Class A shares of another Flag
Investors fund for an investment in this Fund (see "Purchases by Exchange"
for a description of the conditions).
6
<PAGE>
3) If you are a current or retired Director of this or any affiliated 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 Fund's
distributor, the Advisors or a broker-dealer authorized to sell shares of
the Fund.
4) If you are buying shares in any of the following types of accounts:
(i) A qualified retirement plan;
(ii) A Flag Investors fund payroll savings plan program;
(iii) 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. Your securities dealer or servicing
agent may charge you an additional fee if you buy shares in this
manner.
Purchases by Exchange
You may exchange Class A shares of any other Flag Investors fund for an
equal dollar amount of Class A Shares, without payment of the sales charges
described above or any other charge, up to four times a year. You may not
exchange Class A shares of a Flag Investors money market fund unless you
acquired those shares through a prior exchange from shares of another Flag
Investors fund. 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 upon 60 days' 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.
Redemption Price
You will pay a sales charge when you redeem Class A Shares within 24
months of purchase only if your shares were purchased at net asset value
because they were part of an investment of $1 million or more. The amount of
any sales charge deducted from your redemption price will be determined
according to the following schedule:
<PAGE>
Sales Charge as a Percentage
of the Dollar Amount
Subject to Charge
(as % of
Years Since Purchase Cost or Value)
- -------------------------------------------------------
First ................ 0.50%
Second ............... 0.50%
Thereafter ........... None
- -------------------------------------------------------
Determination of Sales Charge. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:
1) No sales charge will be applied to shares you own as a result of reinvesting
dividends or distributions.
2) If you have purchased shares at various times, the sales charge will be
applied first to the shares you have owned for the longest period of time.
3) If you acquired your shares through an exchange of Class A 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.
4) The sales charge is applied to the lesser of the cost of the shares or their
value at the time of your redemption.
Waiver of Sales Charge. You may redeem Class A Shares within 24 months of
purchase without paying a sales charge under any of the following circumstances:
1) If you are exchanging your Class A Shares for Class A shares of another Flag
Investors fund.
2) If your redemption represents the minimum required distribution from an
individual retirement account or other retirement plan.
3) If your redemption represents a distribution from a Systematic Withdrawal
Plan. This waiver applies only if the annual withdrawals under your Plan are
12% or less of your share balance.
4) 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.
7
<PAGE>
5) If your original investment was at least $3,000,000 and your securities
dealer has agreed to return to the Fund's distributor any payments received
when you bought your shares.
Distribution Plan
The Fund has adopted a plan under Rule 12b-1 that allows it to pay your
securities dealer or shareholder servicing agent distribution and other fees
for the sale of Class A Shares and for shareholder service. Class A Shares pay
an annual distribution fee equal to 0.25% of average daily net assets. Because
these fees are paid out of net assets on an on-going basis, they will, over
time, increase the cost of your investment and may cost you more than paying
other types of sales charges. In addition to these payments, the Fund's
investment advisor may provide significant compensation to securities dealers
and servicing agents for distribution, administrative and promotional services.
DIVIDENDS AND TAXES
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Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its net investment income in the form of monthly dividends and to distribute
net capital gains on an annual basis.
Taxes
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its net income and capital
gains. The dividends and distributions you receive are subject to federal, state
and local taxation, depending on your tax situation. The tax treatment of
dividends and distributions is the same whether or not you reinvest them. Each
sale or exchange of the Fund's shares is generally a taxable event. The Fund
will tell you annually how to treat dividends and distributions.
More information about taxes is in the Statement of Additional
Information.
Please contact your tax advisor if you have specific questions about
federal, state and local income taxes.
INVESTMENT ADVISOR AND SUB-ADVISOR
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Investment Company Capital Corp. ("ICCC" or the "Advisor") is the Fund's
investment advisor and Brown Investment Advisory & Trust Company (formerly,
Alex. Brown Capital Advisory & Trust Company) ("Brown Trust" or the
"Sub-Advisor") is the Fund's sub-advisor. ICCC is also the investment advisor
to other mutual funds in the Flag Investors family of funds and Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $14 billion of net assets as of March 31, 2000. Brown Trust is a
Maryland trust company with approximately $5 billion under management as of
March 31, 2000.
ICCC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of Brown Trust. Brown Trust is
responsible for decisions to buy and sell securities for the Fund, for
broker-dealer selection and for negotiation of commission rates.
As compensation for its advisory services for the fiscal year ended
December 31, 1999, ICCC received from the Fund a fee equal to 0.12% (net of fee
waivers) of the Fund's average daily net assets. ICCC compensates Brown Trust
out of its investment advisory fee. ICCC has contractually agreed to waive its
fees and reimburse expenses to the extent necessary so that the Fund's total
annual operating expenses do not exceed 0.70% of average daily net assets. This
agreement will continue until at least April 30, 2001 and may be extended.
The Advisor is an indirect, wholly owned subsidiary of Deutsche Bank,
A.G. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking and insurance. The
Advisor was formerly an indirect subsidiary of Bankers Trust Corporation.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICCC became a subsidiary of Bankers Trust Corporation in a
merger that occurred after these events took place. Bankers Trust plead guilty
to misstating entries in the bank's books and records and agreed to pay a $63.5
8
<PAGE>
million fine to state and federal authorities. On July 26, 1999, the federal
criminal proceedings were concluded with Bankers Trust's formal sentencing. The
events leading up to the guilty pleas did not arise out of the investment
advisory or mutual fund management activities of Bankers Trust or its
affiliates.
As a result of the plea, absent an order from the SEC, ICCC may not be
able to continue to provide investment advisory services to the Fund. The SEC
has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Managers
M. Elliott Randolph, Jr., and Paul D. Corbin have shared primary
responsibility for managing the Fund's assets since its inception in 1991.
Mr. Randolph has over 25 years of investment experience. He is a Partner
at Brown Trust where he has served as the Fund's portfolio manager since
October 1998. Prior to that he served as the Fund's portfolio manager while
employed at BT Alex. Brown Incorporated. From 1988-1991 he was a Principal with
Monument Capital Management, Inc.
Mr. Corbin has 22 years of investment experience. He is a Partner at
Brown Trust where he has served as the Fund's portfolio manager since October
1998. Prior to that he served as the Fund's portfolio manager while employed at
BT Alex. Brown Incorporated. From 1984-1991 he served as the Senior Vice
President in charge of Fixed Income Portfolio Management at First National Bank
of Maryland.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five fiscal years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended December 31, 1999 has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is included in the Fund's Annual Report, which is
available upon request. The information for the years ended December 31, 1995
through December 31, 1998 has been audited by Deloitte & Touche LLP.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------
For the Years Ended December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year ............. $ 10.48 $ 10.39 $ 10.28 $ 10.48 $ 9.62
-------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income ............................ 0.57 0.58 0.61 0.63 0.62
Net realized and unrealized gain/(loss) on
investments .................................... (0.50) 0.11 0.10 (0.23) 0.84
--------- ------- ------- ------- -------
Total from Investment Operations ................. 0.07 0.69 0.71 0.40 1.46
--------- ------- ------- ------- -------
Less Distributions:
Distributions from net investment income ......... (0.59) (0.58) (0.60) (0.60) (0.60)
Distributions in excess of net investment
income ......................................... -- (0.02) -- -- --
Return of capital ................................ (0.01) -- -- -- --
--------- ------- ------- ------- -------
Total distributions .............................. (0.60) (0.60) (0.60) (0.60) (0.60)
--------- ------- ------- ------- -------
Net asset value at end of year ................... $ 9.95 $ 10.48 $ 10.39 $ 10.28 $ 10.48
========= ======= ======= ======= =======
Total Return(1) ................................... 0.70% 6.81% 7.13% 4.04% 15.43%
Ratios to Average Daily Net Assets:
Expenses before waivers .......................... 0.93% 0.93% 0.96% 0.99% 0.93%
Expenses after waivers ........................... 0.70% 0.70% 0.70% 0.70% 0.70%
Net investment income ............................ 5.63% 5.57% 5.92% 6.11% 6.00%
Supplemental Data:
Net assets at end of year (000) .................. $ 42,559 $47,107 $45,569 $58,584 $67,116
Portfolio turnover rate .......................... 47% 40% 65% 42% 46%
</TABLE>
- -----------
(1) Total return excludes the effect of a sales charge.
10
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor
BROWN INVESTMENT ADVISORY & TRUST COMPANY
Furness House
19 South Street
Baltimore, Maryland 21202
Distributor
ICC DISTRIBUTORS, INC.
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201
Custodian
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006
Fund Counsel
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
<PAGE>
[GRAPHIC OMITTED]
Flag Investors o P.O. Box 515 o Baltimore, MD 21203 o (800) 767-FLAG
www.flaginvestors.com
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling
(800) 767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-202-942-8090 to find out about the operation of the Public Reference
Room.) The EDGAR Database on the Commission's Internet site at
http://www.sec.gov has reports and other information about the Fund. Copies of
this information may be obtained, upon payment of a duplicating fee, by
electronic request at the following email address: [email protected], or by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-0102.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-6084 SHORTPRS (5/00)
<PAGE>
[GRAPHIC OMITTED]
Short-Intermediate
Income Fund, Inc.
(Institutional Shares)
Prospectus
May 1, 2000
The Securities and Exchange Commission has neither approved nor disapproved
these securities nor has it passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
[GRAPHIC OMITTED]
This mutual fund (the "Fund") seeks a high level of current income consistent
with preservation of principal within an intermediate-term maturity structure.
The Fund offers shares through securities dealers and financial institutions
that act as shareholder servicing agents. You may also buy shares through the
Fund's Transfer Agent. This Prospectus describes Flag Investors Institutional
Shares (the "Institutional Shares") of the Fund. Institutional Shares may be
purchased only by eligible institutions, by certain qualified retirement plans,
or by investment advisory affiliates of DB Alex. Brown LLC or the Flag Investors
family of funds on behalf of their clients. (See "How to Buy Institutional
Shares.")
TABLE OF CONTENTS
- -----------------
Investment Summary ............................ 1
Fees and Expenses of the Institutional
Shares ..................................... 2
Investment Program ............................ 2
The Fund's Net Asset Value .................... 3
How to Buy Institutional Shares ............... 4
How to Redeem Institutional Shares ............ 4
Telephone Transactions ........................ 4
Dividends and Taxes ........................... 5
Investment Advisor and Sub-Advisor ............ 5
Financial Highlights .......................... 7
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
<PAGE>
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Objectives and Strategies
The Fund seeks a high level of current income consistent with
preservation of principal within an intermediate-term maturity structure. The
Fund's investment advisor and sub-advisor (the "Advisors") select U.S.
Government securities, corporate debt and mortgage-backed and asset-backed
securities for the Fund's portfolio subject to quality, maturity and duration
criteria. Corporate debt will be rated at least "A" by either Moody's Investors
Services, Inc. or Standard & Poors Ratings Group. Mortgage and asset-backed
securities will be rated at least "AAA" by S&P or "Aaa" by Moody's. Under
normal circumstances, the Fund's portfolio will have a dollar-weighted average
maturity at the time of investment of three to five years and a maximum
duration of four years.
Risk Profile
The Fund may be suited for you if you are seeking a high level of current
income but are willing to sacrifice some of that income to reduce your risk of
capital loss.
The value of your investment in the Fund will vary from day to day based
on changes in the prices of the securities the Fund holds. These prices will,
in turn, change in response to economic and market factors and especially in
response to changes in interest rates.
Interest Rate Risk. The value of the Fund's shares can be expected to
increase during periods of falling interest rates and decrease during periods
of rising interest rates.
Maturity, Duration and Credit Risk. The increases and decreases in the
value of the Fund's shares in response to changes in interest rates will
generally be larger if the Fund's portfolio has a longer duration, if the Fund
holds securities with longer maturities or if the Fund holds lower-quality
securities.
Prepayment Risk. Unexpected prepayment of principal in connection with
mortgage-backed securities held by the Fund may negatively impact the value of
your investment in the Fund.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
<PAGE>
Fund Performance
The following bar chart and table show the performance of the Fund both
year by year and as an average over different periods of time. The different
levels of performance over time provide an indication of the risks of investing
in the Fund. The chart and table provide an historical record and do not
necessarily indicate how the Fund will perform in the future.
Institutional Shares*
For years ended December 31,
1996 1997 1998 1999
----------------------------------------
4.20% 7.40% 7.07% 1.02%
- --------------------------------------
* For the period from December 31, 1999 through March 31, 2000, the
year-to-date return for the Institutional Shares was 1.64%.
During the four-year period shown in the bar chart, the highest return
for a quarter was 3.69% (quarter ended 9/30/98) and the lowest return for a
quarter was (0.82)% (quarter ended 3/31/96).
Average Annual Total Return (for periods ended December 31, 1999)
<TABLE>
<CAPTION>
Lehman
Brothers Merrill
Intermediate Lynch
Government/ 1-3 Year
Institutional Corp Bond Treasury
Shares(1) Index(2) Index(2)
--------- -------- --------
<S> <C> <C> <C>
Past One Year ........ 1.02% 0.39% 3.06%
Since Inception ...... 5.20%(11/2/95) 5.52%(3) 5.61%(3)
</TABLE>
- -----------
(1) These figures assume the reinvestment of dividends and capital gain
distributions.
(2) The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index that is widely recognized as a general measure of the
performance in the intermediate-term government and corporate bond sector.
The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index that is
widely recognized as a general measure of the performance in the short-term
Treasury sector. The indexes are passive measures of bond and Treasury
performance, respectively. They do not factor in the costs of buying,
selling and holding securities -- costs which are reflected in the Fund's
results. 3 For the period from 10/31/95 through 12/31/99.
1
<PAGE>
FEES AND EXPENSES OF THE INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and
hold Institutional Shares.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases .............................. None
Maximum Deferred Sales Charge (Load) .......................................... None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ................... None
Redemption Fee ................................................................ None
Exchange Fee .................................................................. None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees ............................................................... 0.35%
Distribution and/or Service (12b-1) Fees ...................................... None
Other Expenses ................................................................ 0.33%
--------
Total Annual Fund Operating Expenses .......................................... 0.68%
--------
Less Fee Waivers and Expense Reimbursements ................................... (0.23)%(1)
Net Expenses .................................................................. 0.45%
========
</TABLE>
- ------------------------
(1) The Advisor has contractually agreed to limit its fees and reimburse
expenses to the extent necessary so that the Fund's Total Annual Fund
Operating Expenses do not exceed 0.45% of the Institutional Shares' average
daily net assets. This agreement will continue until at least April 30, 2001
and may be extended.
Example:
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Institutional Shares for
the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Institutional Shares(1) .......... $46 $196 $362 $853
</TABLE>
- ------------------------
(1) Based on Total Annual Fund Operating Expenses after fee waivers and expense
reimbursements for year one only.
<PAGE>
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk
Considerations
The Fund seeks a high level of current income consistent with
preservation of principal within an intermediate-term maturity structure by
investing primarily in U.S. Government securities, corporate debt and
mortgage-backed and asset-backed securities.
The Advisors are responsible for managing the Fund's investments. In
selecting investments for the Fund, the Advisors first focus on a security's
quality. They will only purchase securities that have been granted certain
minimum credit ratings by an independent rating agency. Corporate debt will be
rated at least "A" by either S&P or Moody's. Mortgage and asset-backed
securities will be rated at least "AAA" by S&P or "Aaa" by Moody's. Then the
Advisors focus on maturity and duration. Under normal circumstances, the Fund's
portfolio will have an average maturity of three to five years and a maximum
duration of four years. Average maturity measures the average time until which
the bonds in the Fund's portfolio are payable. Average duration measures the
Fund's exposure to the risk of changing interest rates. Some of the securities
selected by the Advisors will be mortgage-backed and asset-backed securities. A
mortgage-backed security represents an interest in a pool of underlying
mortgage loans. An asset-backed security represents an interest in an
underlying pool of assets, such as auto loans or credit card
receivables.
An investment in the Fund entails risk.
Interest Rate Risk. The primary risk of the Fund is interest rate risk.
The value of the Fund's shares can be expected to increase during periods of
falling interest rates and decrease during periods of rising interest rates.
2
<PAGE>
Maturity, Duration and Credit Risk. The increases and decreases in the
value of the Fund's shares in response to changes in interest rates will
generally be larger if the Fund's portfolio has a longer duration, if the Fund
holds securities with longer maturities or if the Fund holds lower-quality
securities.
Prepayment Risk. In addition to the interest rate risk experienced by all
fixed income securities, mortgage-backed securities are exposed to prepayment
risk. Rising interest rates tend to discourage refinancings, a primary source
of prepayments. As a result, in a rising interest rate environment, the average
life and volatility of mortgage-backed securities will increase and their
market price will decrease. Falling interest rates tend to encourage
refinancings. As a result, in a falling interest rate environment, the market
price of mortgage-backed securities will not increase as much as other debt
securities and the cash generated by the prepayments will have to be reinvested
at the lower prevailing rates. Prepayment changes may make it difficult to
calculate the average maturity of a portfolio of these securities and,
therefore, the ability to assess the volatility risk of the portfolio.
There can be no guarantee that the Fund will achieve its goals.
To reduce the Fund's risks under adverse market conditions, the Advisors
may make temporary defensive investments. These investments may not be
consistent with the Fund's objectives. While engaged in a temporary defensive
strategy, the Fund may not achieve its investment objective. The Advisors would
follow such a strategy only if they believed that the risk of loss in pursuing
the Fund's primary investment strategies outweighed the opportunity for gain.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. The net asset value per share
of the Fund is determined at the close of regular trading on the New York Stock
Exchange on each day the Exchange is open for business. While regular trading
ordinarily closes at 4:00 p.m. Eastern Time, it could be earlier on the day
before a holiday. Contact the Transfer Agent to determine whether the Fund will
close early before a particular holiday. The net asset value per share of the
Institutional Shares is calculated by subtracting the liabilities attributable
to the Institutional Shares from their proportionate share of the Fund's assets
and dividing the result by the outstanding Institutional Shares.
In valuing the Fund's assets, its investments are priced at their market
value. When price quotes for a particular security are not readily available,
the secur-ity is priced at its "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem shares on any day 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.
The following sections describe how to buy and redeem Institutional
Shares.
3
<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 or a qualified retirement plan other than a
defined contribution plan).
o A defined contribution plan with assets of at least $75 million.
o An investment advisory affiliate of DB Alex. Brown LLC or the Flag
Investors family of funds 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.
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 $500,000.
The following are exceptions to this minimum:
o There is no minimum initial investment for investment advisory
affiliates of DB Alex. Brown LLC or the Flag Investors family of funds
purchasing shares for the accounts of their investment advisory clients.
o There is no minimum initial investment for defined contribution plans
with assets of at least $75 million.
o The minimum initial investment for all other qualified retirement plans
is $1 million.
There are no minimums for subsequent investments.
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 up to four times
a year. The Fund may modify or terminate this offer of exchange upon 60 days'
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.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may redeem Institutional 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 them by contacting the Transfer Agent by mail or
(if you are redeeming less than $500,000) by telephone. 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 paid in cash 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. The Fund reserves the right to redeem shares in kind under
certain circumstances.
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 7:00 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges but you may
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.
4
<PAGE>
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 when you
open your account and before you effect 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 telephone instructions that either reasonably believes 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 or facsimile. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its net investment income in the form of monthly dividends and to distribute
net capital gains on an annual basis.
Dividend Reinvestment
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
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.
Taxes
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its net income and capital
gains. The dividends and distributions you receive are subject to federal,
state and local taxation, depending on your tax situation. The tax treatment of
dividends and distributions is the same whether or not you reinvest them. Each
sale or exchange of the Fund's shares is generally a taxable event. The Fund
will tell you annually how to treat dividends and distributions.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state and local income taxes.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICCC" or the "Advisor") is the Fund's
investment advisor and Brown Investment Advisory & Trust Company (formerly,
Alex. Brown Capital Advisory & Trust Company) ("Brown Trust" or the
"Sub-Advisor") is the Fund's sub-advisor. ICCC is also the investment advisor
to other mutual funds in the Flag Investors family of funds and Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $14 billion of net assets as of March 31, 2000. Brown Trust is a
Maryland trust company with approximately $5 billion under management as of
March 31, 2000.
ICCC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of Brown Trust. Brown Trust is
responsible for decisions to buy and sell securities for the Fund, for
broker-dealer selection and for negotiation of commission rates.
As compensation for its advisory services for the fiscal year ended
December 31, 1999, ICCC received from the Fund a fee equal to 0.12% (net of fee
waivers) of the Fund's average daily net assets. ICCC compensates Brown Trust
out of its advisory fee. ICCC has contractually agreed to waive its fees and
reimburse expenses to the extent necessary so that the Fund's total annual
operating expenses do not exceed 0.45% of average daily net assets. This
agreement will continue until at least April 30, 2001 and may be extended. ICCC
also may provide significant compensation to securities dealers and servicing
agents for distribution, administrative and promotional services.
The Advisor is an indirect, wholly owned subsidiary of Deutsche Bank,
A.G. Deutsche Bank is a major global banking institution that is engaged in a
wide range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking and insurance. The
Advisor was formerly an indirect subsidiary of Bankers Trust Corporation.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in
5
<PAGE>
the Southern District of New York to resolve an investigation concerning
inappropriate transfers of unclaimed funds and related record-keeping problems
that occurred between 1994 and early 1996. ICCC became a subsidiary of Bankers
Trust Corportion in a merger that occurred after these events took place.
Bankers Trust pleaded guilty to misstating entries in the bank's books and
records and agreed to pay a $63.5 million fine to state and federal
authorities. On July 26, 1999, the federal criminal proceedings were concluded
with Bankers Trust's formal sentencing. The events leading up to the guilty
pleas did not arise out of the investment advisory or mutual fund management
activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICCC may not be
able to continue to provide investment advisory services to the Fund. The SEC
has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Managers
M. Elliott Randolph, Jr., and Paul D. Corbin have shared primary
responsibility for managing the Fund's assets since its inception in 1991.
Mr. Randolph has over 25 years of investment experience. He is a Partner
at Brown Trust where he has served as the Fund's portfolio manager since
October 1998. Prior to that he served as the Fund's portfolio manager while
employed at BT Alex. Brown Incorporated. From 1988-1991 he was a Principal with
Monument Capital Management, Inc.
Mr. Corbin has 22 years of investment experience. He is a Partner at
Brown Trust where he has served as the Fund's portfolio manager since October
1998. Prior to that he served as the Fund's portfolio manager while employed at
BT Alex. Brown Incorporated. From 1984-1991 he served as the Senior Vice
President in charge of Fixed Income Portfolio Management at First National Bank
of Maryland.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance since
the class began operations. Certain information reflects financial results for
a single Fund share. The total returns in the table represent the rate that an
investor would have earned on an investment in the Fund (assuming reinvestment
of all dividends and distributions). The information for the year ended
December 31, 1999 has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the Fund's Annual
Report, which is available upon request. The information for the period ended
December 31, 1995 and the years ended December 31, 1996 through December 31,
1998 has been audited by Deloitte & Touche LLP.
(For an Institutional Share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years
Ended
December 31,
------------------------------------------------------
<S> <C> <C> <C> <C>
1999 1998 1997 1996
---- ---- ---- ----
Per Share Operating Performance:
Net asset value at beginning of period ................... $ 10.60 $ 10.50 $ 10.38 $ 10.58
-------- -------- --------- ---------
Income from Investment Operations:
Net investment income .................................... 0.61 0.61 0.61 0.59
Net realized and unrealized gain/(loss) on
investments ............................................ (0.51) 0.11 0.13 (0.17)
-------- -------- --------- ---------
Total from Investment Operations ......................... 0.10 0.72 0.74 0.42
-------- -------- --------- ---------
Less Distributions:
Distributions from net investment income ................. (0.60) (0.61) (0.62) (0.62)
Distributions in excess of net investment income ......... -- (0.01) -- --
-------- -------- --------- ---------
Return of capital ........................................ (0.02) -- -- --
Total distributions ...................................... (0.62) (0.62) (0.62) (0.62)
-------- -------- --------- ---------
Net asset value at end of period ......................... $ 10.08 $ 10.60 $ 10.50 $ 10.38
======== ======== ========= =========
Total Return .............................................. 1.02% 7.07% 7.40% 4.20%
Ratios to Average Daily Net Assets:
Expenses before waivers .................................. 0.68% 0.67% 0.72% 0.76%
Expenses after waivers ................................... 0.45% 0.45% 0.45% 0.45%
Net investment income .................................... 5.88% 5.81% 6.17% 6.35%
Supplemental Data:
Net assets at end of period (000) ........................ $ 40,617 $ 45,112 $ 32,056 $ 17,507
Portfolio turnover rate .................................. 47% 40% 65% 42%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Period
November 2, 1995(1)
through
December 31,
------------------
<S> <C>
1995
----
Per Share Operating Performance:
Net asset value at beginning of period ................... $ 10.42
---------
Income from Investment Operations:
Net investment income .................................... 0.09
Net realized and unrealized gain/(loss) on
investments ............................................ 0.12
---------
Total from Investment Operations ......................... 0.21
---------
Less Distributions:
Distributions from net investment income ................. (0.05)
Distributions in excess of net investment income ......... --
---------
Return of capital ........................................ --
Total distributions ...................................... (0.05)
---------
Net asset value at end of period ......................... $ 10.58
=========
Total Return .............................................. 12.47%
Ratios to Average Daily Net Assets:
Expenses before waivers .................................. 0.72%
Expenses after waivers ................................... 0.45%(2)
Net investment income .................................... 6.52%(2)
Supplemental Data:
Net assets at end of period (000) ........................ $ 2,186
Portfolio turnover rate .................................. 46%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Annualized.
7
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor
BROWN INVESTMENT ADVISORY & TRUST COMPANY
Furness House
19 South Street
Baltimore, Maryland 21202
Distributor
ICC DISTRIBUTORS, INC.
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201
Custodian
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006
Fund Counsel
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
<PAGE>
[GRAPHIC OMITTED]
Flag Investors o P.O. Box 515 o Baltimore, MD 21203 o (800) 767-FLAG
www.flaginvestors.com
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling
(800) 767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-202-942-8090 to find out about the operation of the Public Reference
Room.) The EDGAR Database on the Commission's Internet site at
http://www.sec.gov has reports and other information about the Fund. Copies of
this information may be obtained, upon payment of a duplicating fee, by
electronic request at the following email address: [email protected], or by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-0102.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-6084 SHORTIPRS (5/00)
<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 YOUR SECURITIES DEALER OR
SHAREHOLDER SERVICING AGENT OR BY WRITING
THE FUND, ONE SOUTH STREET,
BALTIMORE, MARYLAND 21202, OR BY CALLING (800)
767-FLAG. THE FUND'S FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1999, AND
THE REPORT OF INDEPENDENT ACCOUNTANTS ARE
INCLUDED IN THE FUND'S ANNUAL REPORT AND
INCORPORATED BY REFERENCE INTO THIS
STATEMENT OF ADDITIONAL INFORMATION.
Statement of Additional Information Dated May 1, 2000
Relating to the Prospectuses Dated May 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
----
GENERAL INFORMATION AND HISTORY...............................................................................1
INVESTMENT OBJECTIVES AND POLICIES............................................................................1
RISK CONSIDERATIONS........................................................................................1
U.S. GOVERNMENT SECURITIES.................................................................................1
MORTGAGE-BACKED SECURITIES.................................................................................3
COLLATERALIZED MORTGAGE OBLIGATIONS........................................................................4
ASSET-BACKED SECURITIES....................................................................................4
OTHER INVESTMENT PRACTICES.................................................................................4
INVESTMENT RESTRICTIONS....................................................................................6
VALUATION OF SHARES AND REDEMPTION............................................................................7
VALUATION OF SHARES........................................................................................7
REDEMPTION.................................................................................................7
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS..........................................................7
QUALIFICATION AS A REGULATED INVESTMENT COMPANY............................................................8
FUND DISTRIBUTIONS.........................................................................................8
SALE OR EXCHANGE OF FUND SHARES............................................................................9
FEDERAL EXCISE TAX; MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION.............................9
STATE AND LOCAL TAX CONSIDERATIONS........................................................................10
MANAGEMENT OF THE FUND.......................................................................................10
DIRECTORS AND OFFICERS....................................................................................10
COMPENSATION TABLE........................................................................................13
CODE OF ETHICS............................................................................................14
INVESTMENT ADVISORY AND OTHER SERVICES.......................................................................15
DISTRIBUTION OF FUND SHARES..................................................................................16
CLASS..................................................................................................17
GENERAL INFORMATION.......................................................................................18
BROKERAGE....................................................................................................19
CAPITAL STOCK................................................................................................20
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES............................................................21
INDEPENDENT ACCOUNTANT.......................................................................................22
LEGAL MATTERS................................................................................................22
PERFORMANCE INFORMATION...................................................................................22
TOTAL RETURN CALCULATIONS.................................................................................22
YIELD CALCULATIONS........................................................................................24
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................................................24
FINANCIAL STATEMENTS.........................................................................................25
APPENDIX..................................................................................................26
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
Flag Investors Short-Intermediate Income Fund, Inc. (the "Fund") is an
open-end diversified management investment company. 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.
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.
Important information concerning the Fund is included in the Fund's
Prospectuses, which may be obtained without charge from the Fund's distributor
(the "Distributor") or from Participating Dealers that offer Shares to
prospective investors. Prospectuses may also be obtained from Shareholder
Servicing Agents. 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 Securities and Exchange Commission (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 "1940 Act"), and its Shares
under the Securities Act of 1933, as amended (the "1933 Act"), and began
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 & Sons Incorporated (predecessor to DB Alex. Brown LLC (formerly BT Alex.
Brown Incorporated)), Alex. Brown & Sons 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.
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. 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 Investment Minimum Rating(1)
---------------------------- -----------------
S&P(2) Moody's(3)
------ ----------
<S> <C> <C>
U.S. Government and Agency Securities.................... N/A N/A
CMO's.................................................... AAA 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 Organization...... AAA(4) Aaa(4)
Non-Dollar U.S. Government Securities.................... AAA(4) Aaa(4)
Securities of Foreign Corporations....................... AAA(4) Aaa(4)
</TABLE>
<PAGE>
- ----------
(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.
To meet its short-term liquidity needs, the Fund may invest in
repurchase agreements 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.
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.
Purchases of 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 which might adversely affect the payment of
principal or interest.
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
<PAGE>
obligations of the issuing agency or instrumentality (such as the Federal Farm
Credit System and Fannie Mae are supported only by the credit of the agency or
instrumentality.
Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities representing
ownership interests in a pool of mortgage loans which securities are issued or
guaranteed by GNMA, Fannie Mae or the Federal Home Loan Mortgage Corporation
("FHLMC").
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 ("FHA") 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 the 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.
FHLMC and Fannie Mae 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.
The Fannie Mae 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. Fannie Mae 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. Fannie Mae guarantees
timely payment of interest on Fannie Mae Certificates and full return of
principal.
Risk of foreclosure of the underlying mortgages is greater with FHLMC
and Fannie Mae securities because, unlike GNMA securities, FHLMC and Fannie Mae
securities are not backed by the full faith and credit of the U.S. Government.
Interests in 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.
<PAGE>
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, at a yield 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
The Fund may invest in collateralized mortgage obligations ("CMOs")
that are collateralized by mortgage-backed securities issued by GNMA, FHLMC or
Fannie Mae (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 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 also may 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 previously. 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 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 in the following paragraphs.
Repurchase Agreements.
The Fund may enter into repurchase agreements with financial
institutions, such as banks and broker-dealers, deemed to be creditworthy by the
<PAGE>
Advisor and sub-advisor (the "Advisors"). A repurchase agreement is a short-term
investment in which 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 Fund'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 is authorized to use forward foreign currency exchange
contracts to protect against uncertainty in the level of future foreign exchange
rates. 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. The Fund may use
such forward contracts only under two circumstances; (i) if the Advisors believe
the Fund should fix the U.S. dollar price of the foreign security when the Fund
enters into a contract for the purchase of sale, at a future date, of a security
denominated in a foreign currency;and (ii) if the Advisors believe the Fund
should hedge against risk of loss in the value of those portfolio securities
denominated in foreign currencies.
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
previously. 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.
Rule 144A Securities.
Subject to the Fund's overall investment limitations on investment 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 1933 Act, 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>
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.
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. 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);
3) Borrow money except as a temporary measure for extraordinary or emergency
purposes in an amount not exceeding 10% of the value of the total assets at
the time of such borrowing;
4) Invest in real estate or mortgages on real estate;
5) Purchase or sell commodities or commodities contracts provided that the Fund
may invest in financial futures and options on such futures;
6) 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;
7) Issue senior securities; or
8) Make loans, except that the Fund may purchase or hold debt instruments in
accordance with its investment objectives and policies and may loan portfolio
securities and enter into repurchase agreements.
The following investment restrictions 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 1940
Act, except as permitted by federal law; or
2) Invest more than 10% of the value of its net assets in illiquid securities
(as defined under federal and state securities laws).
The percentage limitations contained in these restrictions apply at the
time of purchase of securities.
<PAGE>
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 (or the days on which they are observed): 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. So long as a third party receives an order prior to the Fund's close
of business, the order is deemed to have been received by the Fund and,
accordingly, may receive the net asset value computed at the close of business
that day. These "late day" agreements are intended to permit investors placing
orders with third parties to place orders up to the same time as other
investors.
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, the Fund will make
payment of the redemption price in whole or in part by a distribution of readily
marketable securities from the portfolio of the Fund in lieu of cash, in
conformity with applicable rules of the SEC. 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 under
"Valuation of Shares" 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 1940 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.
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 Prospectuses. 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 Prospectuses is not intended as a
substitute for careful tax planning. For example, under certain specified
circumstances, state income tax laws may exempt from taxation distributions of a
regulated investment company to the extent that such distributions are derived
from interest on federal obligations. Investors are urged to consult with their
tax advisor regarding whether such exemption is available.
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
Statement of Additional Information. 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.
Qualification as a Regulated Investment Company
The Fund intends to qualify and elect to be treated for each taxable
year as a regulated investment company ("RIC") under Subchapter M of the Code.
<PAGE>
Accordingly, the Fund must, among other things, (a) derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, and certain other related income, including,
generally, certain gains from options, futures and forward contracts; and (b)
diversify its holdings so that, at the end of each fiscal quarter of the Fund's
taxable year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash and cash items, United States Government securities,
securities of other RICs, and other securities, with such other securities
limited, in respect to any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets or 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities (other than United States Government securities or
securities of other RICs) of any one issuer or two or more issuers that the Fund
controls and which are engaged in the same, similar, or related trades or
business. For purposes of the 90% gross income requirement described previously,
foreign currency gains that are not directly related to the Fund's principal
business of investing in stock or securities (or options or futures with respect
to stock or securities) may be excluded from income that qualifies under the 90%
requirement.
In addition to the requirements described previously, in order to
qualify as a RIC, the Fund must distribute at least 90% of its investment
company taxable income (that generally includes dividends, taxable interest, and
the excess of net short-term capital gains over net long-term capital losses
less operating expenses, but determined without regard to the deduction for
dividends paid) and at least 90% of its net tax-exempt interest income, for each
tax year, if any, to its shareholders. If the Fund meets all of the RIC
requirements, it will not be subject to federal income tax on any of its net
investment income or capital gains that it distributes to shareholders.
Although the Fund intends to distribute substantially all of its net
investment income and may distribute its capital gains for any taxable year, the
Fund will be subject to federal income taxation to the extent any such income or
gains are not distributed.
If the Fund fails to qualify for any taxable year as a RIC, all of its
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders, and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
the Fund's current and accumulated earnings and profits. In this event, such
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
Fund Distributions
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year.
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
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders that are individuals at a maximum rate of 20%,
regardless of the length of time the shareholder has held Shares. If any such
gains are retained, the Fund will pay federal income tax thereon, and, if the
Fund makes an election, the shareholders will include such undistributed gains
in their income, will increase their basis in Fund shares by the difference
between the amount of such includable gains and the tax deemed paid by such
shareholder and will be able to claim their share of the tax paid by the Fund as
a refundable credit.
In the case of corporate shareholders, Fund distributions (other than
capital gains distributions) generally qualify for the dividends-received
deduction to the extent of the gross amount of qualifying dividends received by
the Fund for the year. Generally, and subject to certain limitations, a dividend
will be treated as a qualifying dividend if it has been received from a domestic
corporation. Accordingly, it is not expected that any Fund distribution will
qualify for the corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the
year of payment. However, dividends declared payable to shareholders of record
<PAGE>
in December of one year, but paid in January of the following year, will be
deemed for tax purposes to have been received by the shareholder and paid by the
Fund in the year in which the dividends were declared.
Investors should be careful to consider the tax implications of
purchasing Shares just prior to the ex-dividend date of any ordinary income
dividend or capital gains distribution. Those investors will be taxable on the
entire amount of the dividend or distribution received, even though the net
asset value per share on the date of such purchase may have reflected the amount
of such distribution.
The Fund will provide an annual statement to shareholders as to the
federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year, including the amount of dividends eligible for the corporate
dividends-received deduction.
Sale or Exchange of Fund Shares
The sale or exchange of a Share is generally a taxable event for the
shareholder. Generally, gain or loss on the sale or exchange of a Share will be
capital gain or loss that will be long-term if the Share has been held for more
than twelve months and otherwise will be short-term. For individuals, long-term
capital gains are currently taxed at a rate of 20% and short-term capital gains
are currently taxed at ordinary income tax rates. 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 shareholder'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.
In certain cases, the Fund will be required to withhold and remit to
the United States Treasury 31% of distributions payable to any shareholder who
(1) has failed to provide a correct tax identification number, (2) is subject to
backup withholding by the Internal Revenue Service for failure to properly
report receipt of interest or dividends, or (3) has failed to certify to the
Fund that such shareholder is not subject to backup withholding.
Federal Excise Tax; Miscellaneous Considerations; Effect of Future Legislation
If the Fund fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain 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 that year (and any retained
amount from the prior calendar year), the Fund will be subject to a
nondeductible 4% Federal excise tax on the undistributed amounts. The Fund
intends to make sufficient distributions to avoid imposition of this tax, or to
retain, at most, its net capital gains and pay tax thereon.
State and Local Tax Considerations
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.
MANAGEMENT OF THE FUND
Directors and Officers
The Fund's Board of Directors manages the Fund's overall business and
affairs. 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 Advisors, distributor, custodian and transfer
agent.
<PAGE>
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.
*RICHARD T. HALE, Chairman (7/17/45)
Managing Director, Deutsche Asset Management and DB Alex. Brown LLC
(formerly BT Alex. Brown Incorporated); Director and President,
Investment Company Capital Corp. (registered investment advisor);
Director or President, Deutsche Asset Management Family of Funds
(registered investment companies); Chartered Financial Analyst.
Formerly, Director, ISI Family of Funds (registered investment
companies).
RICHARD R. BURT, Director (2/3/47)
IEP Advisors, LLP, 1275 Pennsylvania Avenue, NW, 10th Floor,
Washington, DC 20004. Chairman, IEP Advisors, Inc.; Chairman of the
Board, Weirton Steel Corporation; Member of the Board, Archer Daniels
Midland Company (agribusiness operations), Hollinger International,
Inc. (publishing), Homestake Mining Company (mining and exploration),
HCL Technologies (information technology) and Anchor Gaming (gaming
software and equipment); Director, Mitchell Hutchins family of funds
and Flag Investors Funds, Inc. (formerly Deutsche Funds, Inc.); and
Trustee, Flag Investors Portfolios Trust (formerly Deutsche Portfolios)
(registered investment companies); and Member, Textron Corporation
International Advisory Council. Formerly, partner, McKinsey & Company
(consulting), 1991-1994; U.S. Chief Negotiator in Strategic Arms
Reduction Talks (START) with former Soviet Union and U.S. Ambassador to
the Federal Republic of Germany, 1985-1991.
JOSEPH R. HARDIMAN, Director (5/27/37)
8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor
and Capital Markets Consultant; Director, Wit Capital Group (registered
broker-dealer), The Nevis Fund and ISI Family of Funds (registered
investment companies). Formerly, Director, Circon Corp. (medical
instruments), November 1998-January 1999; President and Chief Executive
Officer, The National Association of Securities Dealers, Inc. and The
NASDAQ Stock Market, Inc., 1987-1997; Chief Operating Officer of Alex.
Brown & Sons Incorporated (now DB Alex. Brown LLC), 1985-1987; and
General Partner, Alex. Brown & Sons (now DB Alex. Brown LLC),
1976-1985.
<PAGE>
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director,
Kimberly-Clark Corporation (personal consumer products), Household
International (banking and finance) and ISI Family of Funds (registered
investment companies). Formerly, Chairman of the Quality Control
Inquiry Committee, American Institute of Certified Public Accountants,
1992-1998; Trustee, Merrill Lynch Funds for Institutions, 1991-1993;
Adjunct Professor, Columbia University-Graduate School of Business,
1991-1992; and Partner, KPMG Peat Marwick, retired 1990.
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); Executive Vice Chairman and
Director, Central Carolina Bank & Trust (banking) and Director, Victory
Funds (registered investment companies). Formerly, Director AMBAC
Treasurers Trust (registered investment company), DP Mann Holdings
(insurance) and ISI Family of Funds (registered investment companies).
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 (charitable foundation);
Director and Executive Vice President, The Glenmede Trust Company.
Formerly, Executive Director, The Pew Charitable Trusts; and Director,
ISI Family of Funds (registered investment companies).
*TRUMAN T. SEMANS, Director (10/27/26)
Brown Investment Advisory & Trust Company, 19 South Street, Baltimore,
Maryland 21202. Vice Chairman, Brown Investment Advisory & Trust
Company (formerly, Alex. Brown Capital Advisory & Trust Company);
Director, Investment Company Capital Corp. (registered investment
advisor) and Director and President of Virginia Hot Springs Inc.
(property management). Formerly, Managing Director, BT Alex. Brown
Incorporated (now DB Alex. Brown LLC); Vice Chairman, Alex. Brown &
Sons Incorporated (now DB Alex. Brown LLC) and Director, ISI Family of
Funds (registered investment companies).
ROBERT H. WADSWORTH, Director (1/29/40)
4455 E. Camelback Road, Suite 261 E., Phoenix, Arizona 85018.
President, Director, Investment Company Administration LLC, and
President, Director, First Fund Distributors, Inc. (registered
broker-dealer); Director, The Germany Fund, Inc., The New Germany Fund
Inc., The Central European Equity Fund, Inc., Flag Investors Funds,
Inc. (formerly Deutsche Funds, Inc.); Trustee, Flag Investors
Portfolios Trust (formerly Deutsche Portfolios); and Vice President,
Professionally Managed Portfolios and Advisors Series Trust (registered
investment companies). Formerly, President, Guinness Flight Investment
Funds, Inc. (registered investment companies); and President, The
Wadsworth Group (registered investment advisor)
CARL W. VOGT, Esq., President (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);
Interim President of Williams College; Director, Yellow Corporation
(trucking), American Science & Engineering (x-ray detection equipment)
and ISI Family of Funds (registered investment companies); Formerly,
Chairman and Member, National Transportation Safety Board; Director,
National Railroad Passenger Corporation (Amtrak); and Member, Aviation
System Capacity Advisory Committee (Federal Aviation Administration);
and Director, of Flag Investors Family of Funds (registered investment
companies).
<PAGE>
CHARLES A. RIZZO, Treasurer (8/5/57)
Director, Deutsche Asset Management. Certified Public Accountant and
Certified Management Accountant. Formerly, Vice President, BT Alex.
Brown Incorporated (now DB Alex. Brown LLC), 1998-1999 and Senior
Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP)
1993-1998.
AMY M. OLMERT, Secretary (5/14/63)
Director, Deutsche Asset Management. Certified Public Accountant.
Formerly, Vice President, BT Alex. Brown Incorporated (now DB Alex.
Brown LLC), 1997-1999 and Senior Manager, Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP) 1992-1997.
DANIEL O. HIRSCH, Assistant Secretary (3/27/54)
Director, Deutsche Asset Management. Formerly, Principal, BT Alex.
Brown Incorporated (now DB Alex. Brown LLC), 1998-1999 and Assistant
General Counsel, United States Securities and Exchange Commission,
1993-1998.
- ----------
* Messrs. Semans and Hale are directors who are "interested persons," as defined
in the 1940 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 Investment Company Capital Corporation ("ICCC") or its affiliates. There are
currently 24 funds in the Flag Investors Funds and Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as
Chairman of five funds and as a Director of 19 other funds in the Fund Complex.
Mr. Hale serves as Chairman of three funds and as Director of 21funds in the
Fund Complex. Ms. Rimel and Messrs. Burt, Hardiman, Levy, McDonald and Wadsworth
serve as Directors of each of the funds in the Fund Complex. Mr. Vogt serves as
President of seven of the funds in the Fund Complex. Mr. Rizzo serves as
Treasurer, Ms. Olmert serves as Secretary, and Mr. Hirsch serves as Assistant
Secretary, for each of the funds in the Fund Complex. Prior to September 28,
1999, the Fund Complex included the four funds in the ISI Family of Funds.
Some of the Directors of the Fund are customers of, and have had normal
brokerage transactions with, DB 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 DB 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 1940 Act) (an "Independent Director") and Mr. Vogt
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 Chairmen of the Fund Complex's Audit Committee and
Executive Committee receive an 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,
1999, Independent Directors' fees attributable to the assets of the Fund totaled
approximately $5,997.
<PAGE>
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, 1999.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Compensation Pension or Retirement Total Compensation From the
Position From the Fund Payable to Benefits Accrued As Fund and Fund Complex payable
Directors for the Fiscal Year Part of Fund Expenses to Directors for the Fiscal Year
Ended December 31, 1999 Ended December 31, 1999(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard T. Hale, Chairman (2) $ 0 $0 $0
Truman T. Semans, Director(2) $ 0 $0 $0
Richard R. Burt, Director(5) $ 803 4 $39,000 for service on 12
Boards in the Fund Complex
James J. Cunnane, Director(6) $2673 4 $29,250 for service on 12
Boards in the Fund Complex
Joseph R. Hardiman, Director $ 251 4 $39,000 for services on 12
Boards in the Fund Complex
Louis E. Levy, Director $ 436 4 $49,000 for service on 12
Boards in the Fund Complex
Eugene J. McDonald, Director $4363 4 $49,000 for service on 12
Boards in the Fund Complex
Rebecca W. Rimel, Director $3483 4 $39,000 for service on 12
Boards in the Fund Complex
Carl W. Vogt, Esq., President(7) $3483 4 $39,000 for service on 12
Boards in the Fund Complex
Robert H. Wadsworth, Director(5) $ 803 4 $9,750 for service on 12
Boards in the Fund Complex
</TABLE>
- ----------
(1) At December 31, 1999, there were eight funds in the Fund Complex. Prior to
September 28, 1999, the Fund Complex included the four funds in the ISI Fund
Complex.
(2) A Director who is an "interested person" as defined in the 1940 Act.
(3) Of the amounts payable to Messrs. Burt, Cunnane, McDonald, Vogt and
Wadsworth and Ms. Rimel, $80, $267, $436, $348, $80 and $348, respectively,
was deferred pursuant to a deferred compensation plan.
(4) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described in the next paragraph. The actuarially computed pension expense
for the Fund for the year ended December 31, 1999 was approximately $2,351.
(5) Elected to the Fund's board effective October 7, 1999.
(6) Retired from the Fund's board effective October 7, 1999.
(7) Retired as Fund Director effective October 7, 1999. Currently President of
the Fund.
<PAGE>
The Fund Complex has adopted a Retirement Plan for Directors who are
not employees of the Fund, the Fund's Advisor or its respective affiliates (the
"Directors' Retirement Plan") and a Retirement Plan for a former Director
serving as the Fund's President (collectively the "Retirement Plans"). After
completion of six years of service, each participant in the Retirement Plans
will be entitled to receive an annual retirement benefit equal to a percentage
of the fee earned by the participant 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 Plans are unfunded and unvested. The Fund
currently has two participants in the Directors' Retirement Plan, a Director who
retired effective December 31, 1994 and another Director who retired effective
December 31, 1996, 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. Mr. McDonald has qualified for, but has not received, benefits
Set forth in the next table 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 previously. The approximate credited years of service at
December 31, 1999 was as follows: for Mr. Levy, 5 years; for Mr. McDonald, 7
years; for Ms. Rimel, 4 years; for Mr. Vogt, 4 years; for Mr. Hardiman, 1 year
and for Mr. Burt and Mr. Wadsworth, 0 years.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- -----------------------------------------------------------------
Chairmen of Audit and
Executive Committees 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 and the President of the Fund who receive fees from the
Fund are permitted to defer 50% to 100% of his or her annual compensation
pursuant to a Deferred Compensation Plan. Messrs. Burt, Levy, McDonald, Vogt and
Wadsworth and Ms. Rimel have each executed a Deferred Compensation Agreement.
Currently, the deferring Directors and the President may select from among
various Flag Investors funds and Deutsche Banc 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.
<PAGE>
Code of Ethics
The Board of Directors of the Fund has adopted a Code of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Fund's Code of Ethics permits
access persons to trade securities that may be purchased or held by the Fund for
their own accounts, subject to compliance with the Code's pre-clearance
requirements. In addition, the Fund's Code provides for trading "blackout
periods" that prohibit trading by personnel within periods of trading by the
Fund in the same security, subject to certain exceptions. The Fund's Code also
prohibits short term trading profits and personal investment in initial public
offerings. The Fund's Code require prior approval with respect to purchases of
securities in private placements.
<PAGE>
Access persons of The Fund's advisor, Investment Company Capital
Corporation ("ICCC" or the "Advisor"), and the sub-advisor, Brown Investment
Advisory & Trust, are subject to the same Code of Ethics. The Code permits
access persons to trade securities that may be purchased or held by the Fund for
their own accounts, subject to compliance with preclearance requirements. In
addition, the Code also provides for trading "blackout periods" that prohibit
trading by access persons within periods of trading by the fund in the same
security, subject to certain exceptions. The Code also prohibits short-term
trading profits and personal investment in initial public offerings. The Code
requires prior approval with respect to purchases of securities in private
placements.
These codes of ethics are on public file with, and are available from,
the SEC.
The Fund's principal underwriter, ICC Distributors, Inc., is not
required to adopt a Code of Ethics as it meets the exception provided by Rule
17j-1(c)(3) under the 1940 Act.
INVESTMENT ADVISORY AND OTHER SERVICES
The Advisor is an indirect subsidiary of Deutsche Bank A.G. Brown Trust
is a trust company chartered under the laws of the State of Maryland. Brown
Trust is a wholly-owned subsidiary of Brown Capital Holdings Incorporated
("Brown Capital Holdings"), a Maryland corporation whose principal executive
<PAGE>
officer is Michael D. Hankin. Brown Capital Holdings is owned by management and
employees of Brown Trust and outside investors. ICCC also serves as investment
advisor and Brown Trust serves as sub-advisor to other funds in the Fund
Complex.
Under the Investment Advisory Agreement, ICCC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. ICCC has delegated this responsibility to
Brown Trust provided that ICCC continues to supervise the performance of Brown
Trust and report thereon to the Fund's Board of Directors. Any investment
program undertaken by ICCC or Brown Trust will at all times be subject to
policies and control of the Fund's Board of Directors. ICCC 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 ICCC without reimbursement by the
Fund for any costs. Neither ICCC nor Brown Trust shall be liable to the Fund or
its shareholders for any act or omission by ICCC or Brown Trust 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. The
services of ICCC and Brown Trust to the Fund are not exclusive and ICCC and
Brown Trust are free to render similar services to others. Investment advisory
fees paid to ICCC for the last three fiscal years are shown below:
<TABLE>
<CAPTION>
Advisory Fees For the Fiscal Year Ended December 31,
- -------------------------------
1999 1998 1997
---- ---- ----
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contractual Fee $317,059 $323,196 $268,092
- ---------------------------------------------------------------------------------------------------------------
Less amount waived ($212,106) ($208,010) ($203,590)
- ---------------------------------------------------------------------------------------------------------------
Fee after waivers $104,953* $115,186* $ 64,502*
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Absent fee waivers for the fiscal years ended December 31, 1999, December
31, 1998 and December 31, 1997, the Fund's Total Operating Expenses would
have been 0.93%, 0.93% and 0.96%, respectively, of the Flag Investors Class
A Shares' average daily net assets.
For the period from December 31, 1998 through December 31, 1999, Brown
Trust received $70,413 (net of fee waivers of $137,869) for sub-advisory
services.
As compensation for its services, ICCC 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. ICCC has
contractually agreed to reduce its annual fee, if necessary, or to reimburse
expenses of the Fund to the extent so that the Fund's annual expenses do not
exceed 0.70% of the Flag Investors Class A Shares' average daily net assets and
0.45% of the Flag Investors Institutional Shares' average daily net assets. This
agreement will continue until at least April 30, 2001 and may be extended.
As compensation for providing sub-advisory services, Brown Trust is
entitled to receive a fee from ICCC, calculated daily and payable monthly at the
<PAGE>
following annual rates based upon the Fund's average daily net assts: 0.23% of
the first $1 billion , 0.20% of the next $500 million and 0.16% of that portion
in excess of $1.5 billion. Brown Trust has agreed to waive its fees in
proportion to any fee waivers by ICCC.
Each of the Investment Advisory Agreement and the Sub-Advisory
Agreement has an initial term of two years and 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
agreements, by votes cast in person at a meeting called for such purpose, and by
a vote of a majority of the outstanding Shares (as defined under "Capital
Stock"). The Fund or ICCC 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 1940
Act). The Sub-Advisory Agreement has similar termination provisions.
In addition to its services as Advisor, ICCC also provides accounting
services to the Fund and serves as the Fund's transfer and dividend disbursing
agent. An affiliate of ICCC provides custody services. (See "Custodian, Transfer
Agent and Accounting Services.")
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").
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.
<PAGE>
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, including DB 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. Such financial institutions may
impose separate fees in connection with these services and investors should
review the Prospectus and this Statement of Additional Information in
conjunction with any such institution's fee schedule. State securities laws may
require banks and financial institutions to register as dealers.
As compensation for providing distribution services for the Flag
Investors Class A Shares as described previously, 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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Class Fiscal Year Ended December 31,
---------------------------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Flag Investors Class A Shares 12b-1 Fee $113,276(1) $124,577(1) $136,962(2)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) Received by ICC Distributors.
(2) Of this amount, Alex Brown & Sons, the distributor prior to August 31, 1997,
received $93,060 and ICC Distributors, the distributor effective August 31,
1997, received $43,902.
<PAGE>
Pursuant to Rule 12b-1 under the 1940 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 "Plan"). Under the 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 Plan will remain in effect from year to year,
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.
In approving the Plan, the Directors concluded, in the exercise of
reasonable business judgment, that there was a reasonable likelihood that the
Plan would benefit the Fund and its shareholders. The Plan will be renewed only
if the Directors make a similar determination in each subsequent year. The 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
Plan may be terminated at any time upon 60-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 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 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 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 previously 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 1999 1998 1997
- ----- ---- ---- ----
--------------------------------------------------------------------------------------------------
Received Retained Received Retained Received Retained
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Flag Investors
Class A Shares
Commissions $25,126(1) $0(1) $35,645(1) $0(1) $13,144(2) $6,190(2)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) By ICC Distributors.
(2) Of this amount, Alex Brown & Sons, the distributor prior to August 31, 1997,
received $6,926 and ICC Distributors, the distributor effective August 31,
1997 received $6,188.
<PAGE>
General Information
The Fund will pay all costs associated with its organization and
registration under the Securities Act of 1933 and the 1940 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 ICCC.
BROKERAGE
ICCC 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. ICCC 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.
<PAGE>
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.
ICCC's primary consideration in effecting securities transactions is to
obtain best price and execution of orders on an overall basis. As described
below, however, ICCC may, in its discretion, effect brokerage transactions with
broker-dealers that furnish statistical, research or other information or
services that are deemed by ICCC to be beneficial to the Fund's investment
program. Certain research services furnished by broker-dealers may be useful to
ICCC with clients other than the Fund. Similarly, any research services received
by ICCC through placement of portfolio transactions of other clients may be of
value to ICCC in fulfilling its obligations to the Fund. No specific value can
be determined for research and statistical services furnished without cost to
ICCC by a broker-dealer. ICCC 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 ICCC's research and analysis.
Therefore, it may tend to benefit the Fund by improving ICCC's investment
advice. ICCC'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 ICCC'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, ICCC 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, 1999, December 31, 1998 and December 31,
1997, ICCC directed no brokerage transactions to broker-dealers and paid no
related commissions because of research services provided to the Fund.
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 1940 Act, which requires that the commissions paid to 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 ICCC to furnish reports and
to maintain records in connection with such reviews. For the fiscal years ended
December 31, 1999 and 1998, and for the period from September 1, 1997 through
December 31, 1997, the Fund did not pay brokerage commissions to DB Alex. Brown
LLC or its affiliates. For the period from January 1, 1997 through August 31,
1997, the Fund did not pay brokerage commissions to Alex. Brown & Sons
Incorporated. The Fund is required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the 1940 Act) that the Fund has
acquired during its most recent fiscal year. As of December 31, 1999, the Fund
held a 6.25%, 2/1/03 corporate note issued by Goldman Sachs Group and a 2.0%
repurchase agreement issued by Goldman Sachs & Co. valued at $8,556,500. Goldman
Sachs & Co. is a "regular broker or dealer" of the Fund.
ICCC 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 ICCC. ICCC 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.
<PAGE>
CAPITAL STOCK
The Fund is authorized to issue 85 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 Class C Shares and Flag
Investors Short-Intermediate Income Fund Institutional Shares. The Flag
Investors Class B Shares and the Flag Investors Class C 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 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.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Bankers Trust Company ("Bankers Trust"), 130 Liberty Street, New York,
New York 10006, has been retained to act 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 fiscal year ended December 31, 1999, Bankers Trust was paid $36,813 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 ICCC. As compensation for providing dividend and
transfer agency services, the Fund pays ICCC up to $16.61 per account per year,
plus reimbursement for out-of-pocket expenses incurred in connection therewith.
For the fiscal year ended December 31, 1999, ICCC received transfer agency fees
of $27,452.
As compensation for providing accounting services, ICCC receives an
annual fee, calculated daily and paid monthly, as shown below.
<PAGE>
Average Net Assets Incremental Annual Accounting Fee
$ 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 ICCC for certain out-of-pocket
expenses. For the fiscal year ended December 31, 1999, ICCC received accounting
fees of $62,427.
INDEPENDENT ACCOUNTANT
The independent accountant for the Fund is PricewaterhouseCoopers LLP,
250 West Pratt Street, Baltimore, Maryland, 21201. For the period ended December
31, 1991 and for the fiscal years ended December 31, 1992 through December 31,
1998, the annual financial statements of the Fund were audited by Deloitte &
Touche LLP, located at Princeton Forrestal Village, 116-300 Village Boulevard,
Princeton, New Jersey 08540.
On December 15, 1999, at a regular meeting of the Board of Directors,
the Audit and Compliance Committees and the Board of Directors of the Fund
participated in and approved the decision to change the Fund's independent
auditors from Deloitte & Touche LLP to PricewaterhouseCoopers LLP for the Fund's
fiscal year ended December 31, 1999.
The reports of Deloitte & Touche LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with the Fund's audits for the two most recent fiscal
years and through December 13, 1999, there have been no disagreements with
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Deloitte & Touche LLP would
have caused them to make reference thereto in their report on the financial
statements for such years.
During the two most recent fiscal years and through December 13, 1999,
there have been no reportable events (as defined in Regulation S-K Item
304(a)(1)(v)).
LEGAL MATTERS
Morgan, Lewis & Bockius LLP acts as counsel to the Fund.
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
<PAGE>
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.
<PAGE>
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, 1999 were as follows:
<TABLE>
<CAPTION>
One-Year Period Ended Five-Year Period Ended Inception Through
December 31, 1999 December 31, 1999 December 31, 1999
----------------- ----------------- -----------------
Ending Ending Average Ending Average
Redeemable Redeemable Annual Total Redeemable Annual Total
Class Value Total Return Value Return Value Return
- ----- ----- ------------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Flag Investors Class A $ 992 (0.81)% $1,364 6.40% $1,667 6.10%
5/13/91*
Flag Investors $1,010 1.02% N/A N/A $1,235 5.20%
Institutional Class-
11/2/95*
</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, 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, 1999 was
6.10% and 6.45%, respectively, and was computed in the following manner. 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.
<PAGE>
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 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 rates for the fiscal years ended December 31, 1999, 1998 and 1997, were
47%, 40% and 65%, respectively. 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.
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 4, 2000, to Fund management's knowledge, DB Alex. Brown
beneficially owned less than 1% of the Fund's total outstanding Shares and
directors and officers as a group, owned less than 1% of the Fund's total
outstanding Shares. As of April 4, 2000, to Fund management's knowledge, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of a class of the Fund:
<TABLE>
<CAPTION>
Owned of Beneficially
Name and Address Record Owned Percentage Owned
- ---------------- ------ ----- ----------------
<S> <C> <C>
Mercantile TR X 5.21% of Class A Shares
U/A 08/01/96
Keswick Pension Plan
FBO Keswick Home Pension Plan
766 Old Hammonds Ferry Road Linthicum, MD 21090
Chase Manhattan Bank TR X 7.03% of Institutional
Wells Aluminum Corp Shares
Master Trust 29400333
4 New York Plaza
New York, NY 10004-2413
DB Alex. Brown LLC X 80.53% of
FBO 250-10788-16 Institutional Shares
PO Box 1346
Baltimore, MD 21203-1346
Wexford Clearing Services Corp X 7.16% Class A Shares
FBO Gettysburg Hospital Operating Investment
Attn: Richard A. Harley CFO
147 Gettys Street
Gettysburg, PA 17325-2534
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
The Fund furnishes shareholders with semi-annual and 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 financial statements for the Fund for the period ended December 31,
1999, are incorporated herein by reference to the Fund's Annual Report dated
December 31, 1999. A copy of the Fund's Annual Report must accompany this
Statement of Additional Information. The annual financial statements are audited
by the Fund's independent accountants.
<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 - Qualify as high-quality debt obligations. Capacity to pay principal and
interest is very strong, and in the majority of instances different from AAA
issues only to a small degree.
A - Strong capacity to pay interest and repay principal although 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 - Judged to be of the best quality. 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 - Judged to be of high quality by all standards. Together with the Aaa group
comprise what are generally known as high-grade bonds. 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 - 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.
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits.
(a) (1) Articles of Incorporation, incorporated by reference to 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. 950116-95-000390) on August 18, 1995.
(2) Amended Articles of Incorporation, incorporated by reference to Exhibit
(1)(b) 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. 950116-95-000390) on August 18, 1995.
(3) Amendment to Amended Articles of Incorporation, incorporated by
reference to Exhibit (1)(c) 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 (Accession No. 950116-96-000268) on
April 26, 1996.
(4) Articles Supplementary dated April 23, 1992, incorporated by reference
to Exhibit (1)(d) 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 (Accession No. 950116-96-000268) on April 26,
1996.
(5) Articles Supplementary dated October 6, 1995, incorporated by reference
to Exhibit (1)(e) 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 (Accession No. 950116-96-000268) on April 26,
1996.
(6) Articles Supplementary dated April 25, 1996, incorporated by reference
to Exhibit (1)(f) 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. 950116-97-000791) on April 28,
1997.
(7) Articles Supplementary with respect to creation of ABCAT Shares Class
dated October 31, 1996, incorporated by reference to 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. 950116-97-000791) on April 28, 1997.
(8) Articles of Amendment to Articles of Incorporation with respect to
Registrant's name change dated December 19, 1996, incorporated by reference to
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. 950116-97-000791) on April 28,
1997.
<PAGE>
(9) Articles Supplementary dated October 23, 1998, incorporated by
reference to Post-Effective Amendment No. 11 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-34275), filed with the Securities
and Exchange Commission via EDGAR (Accession No. 950116-99-000310) on February
26, 1999.
(10) Articles Supplementary dated November 19, 1998, incorporated by
reference to Post-Effective Amendment No. 11 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-34275), filed with the Securities
and Exchange Commission via EDGAR (Accession No. 950116-99-000310) on February
26, 1999.
(11) Articles of Amendment to Articles of Incorporation to reclassify the
ABCAT Shares dated November 20, 1998, incorporated by reference to
Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form
N-1A (Registration No. 33-34275), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-99-000310) on February 26, 1999.
(b) By-Laws, as amended through July 28, 1999, filed herewith.
(c) Instruments Defining Rights of Security Holders, 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. 33-34275) filed with the Securities and
Exchange Commission via EDGAR (Accession Nos. 950116-95-000390, 950116-96-000268
and 950116-97-000791, respectively) 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.
(d) (1) Investment Advisory Agreement dated June 4, 1999, between Registrant
and Investment Company Capital Corp., filed herewith.
(2) Investment Sub-Advisory Agreement dated June 4, 1999, between
Registrant, Investment Company Capital Corp. and Brown Investment Advisory &
Trust Company, filed herewith.
(3) Expense Limitation Agreement dated May 1, 2000, between Registrant and
Investment Company Capital Corp., filed herewith.
(e) (1) Distribution Agreement dated August 31, 1997 between Registrant and ICC
Distributors, Inc., incorporated by reference to Exhibit (6)(a) to
Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form
N-1A (Registration No. 33-34275) filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-98-000948) on April 28, 1998.
(2) Form of Sub-Distribution Agreement between ICC Distributors, Inc. and
Participating Dealers, incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form
N-1A (Registration No. 33- 34275) filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-98-000948) on April 28, 1998.
<PAGE>
(3) Form of Shareholder Servicing Agreement between Registrant and
Shareholder Servicing Agents, incorporated by reference to Exhibit (6)(c) to
Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form
N-1A (Registration No. 33-34275) filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-98-000948) on April 28, 1998.
(f) Not Applicable.
(g) (1) Custodian Agreement dated June 5, 1998 between Registrant and Bankers
Trust Company, incorporated by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A (Registration No. 33-34275),
filed with the Securities and Exchange Commission via EDGAR (Accession No.
950116-99-000310) on February 26, 1999.
(2) Master Services Agreement between Registrant and Investment Company
Capital Corp., incorporated by reference to Exhibit (8)(b) 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 (950116-96-000268) on April 26, 1996.
(h) Not Applicable.
(i) Opinion of Counsel, filed herewith.
(j) (1) Consent of Independent Accountants, filed herewith.
(2) Consents of Directors to serve, incorporated by reference to Exhibit
(11)(b) 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 (950116-96-000268) on April 26, 1996.
(k) Not Applicable.
(l) Form of Subscription Agreement re: initial $100,000 capital, incorporated
by reference to Exhibit 13 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. 950116-95-000390) on
August 18, 1995.
(m) (1) Distribution Plan (Flag Investors Class A Shares), incorporated by
reference to Exhibit (15)(a) 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 (950116-96-000268) on April 26,
1996.
<PAGE>
(2) Amended Distribution Plan (Flag Investors Class A Shares), incorporated
by reference to Exhibit (15)(b) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (Registration No. 33-34275)
filed with the Securities and Exchange Commission via EDGAR (Accession No.
950116-98-000948) on April 28, 1998.
(n) Financial Data Schedule, not applicable.
(o) (1) Rule 18f-3 Plan, incorporated by reference to Exhibit (18)(a) 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 (Accession No. 950116-96-001118) on October 18, 1996.
(2) Amended Rule 18f-3 Plan, incorporated by reference to Post-Effective
Amendment No. 11 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-34275), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-99-000310) on February 26, 1999.
(p) Codes of Ethics, filed herewith.
(q) Powers of Attorney, filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification.
Section 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, included as Exhibit (a) 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.
<PAGE>
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 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 26. Business and Other Connections of Investment Advisor.
During the last two fiscal years, no director or officer of Investment
Company Capital Corp., the Registrant's investment advisor, and no partner of
Brown Investment Advisory & Trust Company 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 27. Principal Underwriters.
(a) ICC Distributors, Inc., the Distributor for shares of the Registrant, acts
as principal underwriter for the following open-end investment companies:
BT Advisor Funds, BT Institutional Funds, BT Pyramid Mutual Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, NY Tax Free Money
Portfolio, Treasury Money Portfolio, International Equity Portfolio, Equity
500 Index Portfolio, Capital Appreciation Portfolio, Asset Management
Portfolio, BT Investment Portfolios, Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications 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 Short-Intermediate Income Fund, Inc., Flag Investors Value
Builder Fund, Inc., Flag Investors Real Estate Securities Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Flag Investors Series Funds, Inc.
(formerly, Flag Investors International Fund, Inc), Flag Investors Funds,
Inc. (formerly, Deutsche Funds, Inc.), Flag Investors Portfolios Trust
(formerly, Deutsche Portfolios), Morgan Grenfell Investment Trust, Glenmede
Fund, Inc. and Glenmede Portfolios.
<PAGE>
(b) Names and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
John Y. Keffer President None
Ronald H. Hirsch Treasurer None
Nanette K. Chern Chief Compliance Officer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Frederick Skillin Assistant Treasurer None
Marc D. Keffer Assistant Secretary None
- -----
* Two Portland Square
Portland, ME 04101
(c) Not Applicable.
Item 28. Location of Accounts and Records.
Investment Company Capital Corp., One South Street, Baltimore, Maryland
21202, the Registrant's investment advisor and transfer and dividend disbursing
agent and Brown Investment Advisory & Trust Company, Furness House, 19 South
Street, Baltimore, Maryland 21202, Registrant's sub-advisor, maintain 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
and Brown Investment Advisory & Trust Company each 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 29. Management Services.
Not Applicable.
Item 30. Undertakings.
Not Applicable.
<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 under rule 485(b) under the Securities Act and has duly caused this
Post-Effective Amendment No. 12 to the Registration Statement to be signed on
its behalf by the undersigned, duly authorized in the City of Baltimore, and
State of Maryland on the 28th day of April, 2000.
Flag Investors Short-Intermediate Income Fund, Inc.
By: /s/Carl W. Vogt, Esq.*
----------------------
Carl W. Vogt
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the date(s) indicated:
Name Title Date
- ---------------------------------------------------------------------------
*/s/ Richard T. Hale Chairman and Director April 28, 2000
Richard T. Hale
*/s/ Richard R. Burt Director April 28, 2000
Richard R. Burt
*/s/ Joseph R. Hardiman Director April 28, 2000
Joseph R. Hardiman
*/s/ Louis E. Levy Director April 28, 2000
Louis E. Levy
*/s/ Eugene J. McDonald Director April 28, 2000
Eugene J. McDonald
*/s/ Rebecca W. Rimel Director April 28, 2000
Rebecca W. Rimel
*/s/ Truman T. Semans Director April 28, 2000
Truman T. Semans
*/s/ Robert H. Wadsworth Director April 28, 2000
Robert H. Wadsworth
*/s/ Carl W. Vogt, Esq. President April 28, 2000
Carl W. Vogt, Esq.
*/s/ Charles A. Rizzo Chief Financial and April 28, 2000
Charles A. Rizzo Accounting Officer
By: /s/Daniel O. Hirsch
-------------------
Daniel O. Hirsch, Attorney-In-Fact April 28, 2000
* By Power of Attorney.
<PAGE>
RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and any
Post-Effective Amendments thereto, of Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
North American Government Bond Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Flag Investors Equity Partners Fund, Inc. and ISI Strategy Fund,
Inc. on behalf of each Fund's President pursuant to a properly executed power of
attorney.
RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and any
Post-Effective Amendments thereto, of Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
North American Government Bond Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Flag Investors Equity Partners Fund, Inc. and ISI Strategy Fund,
Inc. on behalf of each Fund's Chief Financial Officer pursuant to a properly
executed power of attorney.
<PAGE>
As Amended Through
July 28, 1999
BY-LAWS
OF
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the
Corporation shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive
office of the Corporation shall be in the City of Baltimore, State of Maryland.
Section 3. Other Offices. The Corporation may have such other
offices in such places as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meetings. An annual meeting of the
shareholders of the Corporation shall not be required to be held in any year in
which shareholders are not required to elect directors under the Investment
Company Act of 1940 (the "1940 Act") even if the Corporation is holding a
meeting of the shareholders for a purpose other than the election of directors.
If the Corporation is required by the 1940 Act to hold a meeting to elect
directors, the meeting shall be designated as the Annual Meeting of shareholders
for that year and shall be held within 120 days after the occurrence of an event
requiring the election of directors. The Board of Directors may, in its
discretion, hold a meeting to be designated as the Annual Meeting of
shareholders on a date within the month of March, in any year where an election
of directors by shareholders is not required under the 1940 Act. The date of an
Annual Meeting shall be set by appropriate resolution of the Board of Directors,
and shareholders shall vote on the election of directors and transact any other
business as may be properly brought before the Annual Meeting.
<PAGE>
Section 2. Special Meetings. Special meetings of the
shareholders, unless otherwise provided by law or by the Charter of the
Corporation may be called for any purpose or purposes by a majority of the Board
of Directors or the President, and shall be called by the President or Secretary
on the written request of the shareholders as provided by the Maryland General
Corporation Law. Such request shall state the purpose or purposes of the
proposed meeting and the matters proposed to be acted on at it; provided,
however, that unless requested by shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the shareholders held during the preceding twelve
(12) months.
Section 3. Place of Meetings. The regular meeting, if any, and
any special meeting of the shareholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice; Shareholder
List. (a) Notice of the place, date and time of the holding of each regular and
special meeting of the shareholders and the purpose or purposes of the meeting
shall be given personally or by mail, not less than ten nor more than ninety
days before the date of such meeting, to each shareholder entitled to vote at
such meeting and to each other shareholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid. The notice of every
meeting of shareholders may be accompanied by a form of proxy approved by the
Board of Directors in favor of such actions or persons as the Board of Directors
may select.
(b) Notice of any meeting of shareholders shall be deemed
waived by any shareholder who shall attend such meeting in person or by proxy,
or who shall, either before or after the meeting, submit a signed waiver of
notice which is filed with the records of the meeting. A meeting of shareholders
convened on the date for which it was called may be adjourned from time to time
without further notice to a date not more than 120 days after the original
record date.
(c) At least five (5) days prior to each meeting of
shareholders, the officer or agent having charge of the share transfer books of
the Corporation shall make a complete list of shareholders entitled to vote at
such meeting, in alphabetical order with the address of and the number of shares
held by each shareholder.
Section 5. Organization. At each meeting of the shareholders,
the Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the shareholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
-2-
<PAGE>
Section 6. Voting. (a) Except as otherwise provided by statute
or the Charter of the Corporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any meeting of
shareholders may authorize another person or persons to act as proxy for the
shareholder by (1) a written authorization signed by such shareholder or the
shareholder's authorized agent; or (2) by telephone, a telegram, cablegram,
datagram or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. No proxy shall be valid after the expiration of eleven
months from the date thereof, unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the shareholder executing it, except
in those cases where such proxy states that it is irrevocable and where an
irrevocable proxy is permitted by law. Except as otherwise provided by statute,
the Charter of the Corporation or these By-Laws, any corporate action to be
taken by vote of the shareholders shall be authorized by a majority of the total
votes cast at a meeting of shareholders at which a quorum is present by the
holders of shares present in person or represented by proxy and entitled to vote
on such action, except that a plurality of all the votes cast at a meeting at
which a quorum is present is sufficient to elect a director.
(c) If a vote shall be taken on any question other than the
election of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the shareholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
-3-
<PAGE>
Section 7. Inspectors. The Board may, in advance of any
meeting of shareholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any shareholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except
as otherwise provided by statute any action required to be taken at any regular
or special meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of shareholders' meetings: (i) a unanimous written consent which sets
forth the action and is signed by each shareholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the
Charter of the Corporation, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the shareholders by law or by the Charter
of the Corporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number of
directors shall in no event be less than three (except for any period during
which shares of the corporation are held by fewer than three shareholders) nor
more than fifteen. Any vacancy created by an increase in directors may be filled
in accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be shareholders.
Section 3. Election and Term of Directors. Directors shall be
elected by plurality vote of a quorum cast by written ballot at the regular
meeting of shareholders, if any, or at a special meeting held for that purpose.
The term of office of each director shall be from the time of his election and
qualification and until his successor shall have been elected and shall have
qualified, or until his death, or until he shall have resigned, or have been
removed as hereinafter provided in these By-Laws, or as otherwise provided by
statute or the Charter of the Corporation.
-4-
<PAGE>
Section 4. Resignation. A Director of the Corporation may
resign at any time by giving written notice of his resignation to the Board or
the Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the
Corporation may be removed by the shareholders by a vote of a majority of the
votes entitled to be cast for the election of directors.
Section 6. Vacancies. The shareholders may elect a successor
to fill a vacancy on the Board of Directors which results from the removal of a
Director. A majority of the remaining Directors, whether or not sufficient to
constitute a quorum, may fill a vacancy on the Board of Directors which results
from any cause except an increase in the number of directors, and a majority of
the entire Board of Directors may fill a vacancy which results from an increase
in the number or Directors; provided, however, that no vacancies shall be filled
by action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the shareholders of the Corporation. In the event that at any
time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the shareholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of shareholders and until his successor is elected and qualifies. A
Director elected by the shareholders of the Corporation to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 7. Regular Meetings. Regular meetings of the Board may
be held with notice at such times and places as may be determined by the Board
of Directors.
Section 8. Special Meetings. Special meetings of the Board may
be called by the Chairman of the Board, the President, or by a majority of the
directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
Section 9. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter provided, in
which notice shall be stated the time and place of the meeting. Notice of each
such meeting shall be delivered to each director, either personally or by
telephone, telegraph, cable or wireless, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, or by commercial delivery services addressed to him at his residence or
usual place of business, at least three days before the day on which such
meeting is to be held.
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Section 10. Waiver of Notice of Special Meetings. Notice of
any special meeting need not be given to any Director who shall, either before
or after the meeting, sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting. Except as otherwise
specifically required by these By-Laws, a notice or waiver of notice of any
meeting need not state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than
three members, of the members of the entire Board shall be present in person at
any meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter of the Corporation, these By-Laws, the 1940 Act or other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board; provided, however, that the
approval of any contract with an investment adviser or principal underwriter, as
such terms are defined in the 1940 Act, which the Corporation enters into or any
renewal or amendment thereof, the approval of the fidelity bond required by the
1940 Act, and the selection of the Corporation's independent public accountants
shall each require the affirmative vote of a majority of the Directors who are
not interested persons (as defined in the 1940 Act) of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the Directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the Directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other Directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time
appoint one of its members as Chairman of the Board, who shall serve at the
pleasure of the Board and who shall perform and execute such duties and powers
as may be conferred upon or assigned to him by the Board or these By-Laws, but
who shall not by reason of performing and executing these duties and powers be
deemed an officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if one has been selected and is present,
shall preside. In the absence or inability of the Chairman of the Board to
preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside at it. The Secretary (or, in his absence or
inability to act, any person appointed by the Chairman) shall act as secretary
of the meeting and keep the minutes thereof.
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Section 14. Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
Section 15. Meeting by Conference Telephone. Members of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time.
Section 16. Compensation. Any Director, whether or not he is a
salaried officer, employee or agent of the Corporation, may be compensated for
his services as director or as a member of a committee, or as Chairman of the
Board or chairman of a committee, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the
directors may from time to time determine.
Section 17. Investment Policies. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the shareholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by
resolution adopted by a majority of the entire Board, designate an Executive
Committee, Compensation Committee, Audit Committee and Nomination Committee,
each of which shall consist of two or more of the directors of the Corporation,
which committee shall have and may exercise all the powers and authority of the
Board with respect to all matters other than as set forth in Section 3 of this
Article IV.
Section 2. Other Committees of the Board. The Board of
Directors may from time to time, by resolution adopted by a majority of the
whole Board, designate one or more other committees of the Board, each such
committee to consist of two or more directors and to have such powers and duties
as the Board of Directors may, by resolution, prescribe.
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Section 3. Limitation of Committee Powers. No committee of the
Board shall have power or authority to:
(a) recommend to shareholders any action requiring
authorization of shareholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an
investment adviser or principal underwriter, as such terms are defined in the
1940 Act, or take any other action required to be taken by the Board of
Directors by the 1940 Act;
(c) amend or repeal these By-Laws or adopt new
By-Laws;
(d) declare dividends or other distributions or issue
capital stock of the Corporation; and
(e) approve any merger or share exchange which does
not
require shareholder approval.
Section 4. General. (a) One-third, but not less than two
members, of the members of any committee shall be present in person at any
meeting of such committee in order to constitute a quorum for the transaction of
business at such meeting, and the act of a majority present shall be the act of
such committee. The Board may designate a chairman of any committee and such
chairman or any two members of any committee may fix the time and place of its
meetings unless the Board shall otherwise provide. In the absence or
disqualification of any member or any committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. The Board shall have the power at any time to change the membership of
any committee, to fill all vacancies, to designate alternate members, to replace
any absent or disqualified member, or to dissolve any such committee.
(b) All committees shall keep written minutes of
their proceedings and shall report such minutes to the Board. All such
proceedings shall be subject to revision or alteration by the Board; provided,
however, that third parties shall not be prejudiced by such revision or
alteration.
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ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint such other officers,
agents and employees as it may deem necessary or proper. Any two or more offices
may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. The Board may from time to time elect or appoint, or
delegate to the President the power to appoint, such other officers (including
one or more Assistant Vice Presidents, one or more Assistant Treasurers and one
or more Assistant Secretaries) and such agents, as may be necessary or desirable
for the business of the Corporation. Such other officers and agents shall have
such duties and shall hold their offices for such terms as may be prescribed by
the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board, the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate such power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Such removal shall be without prejudice to such person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
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Section 6. Bonds or other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief
executive officer of the Corporation. In the absence of the Chairman of the
Board (or if there be none), he shall preside at all meetings of the
shareholders and of the Board of Directors. He shall have, subject to the
control of the Board of Directors, general charge of the business and affairs of
the Corporation. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers.
Section 8. The Vice Presidents. In the absence or disability
of the President, or when so directed by the President, any Vice President
designated by the Board of Directors may perform any or all of the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of which the
President is a member or chairman by designation of ex-officio, except when
designated by the Board. Each Vice President shall perform such other duties as
from time to time may be conferred upon or assigned to him by the Board or the
President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible
for, all the funds and securities of the Corporation, except those which the
Corporation has placed in the custody of a bank or trust company or member of a
national securities exchange (as that term is defined in the Securities Exchange
Act of 1934) pursuant to a written agreement designating such bank or trust
company or member of a national securities exchange as custodian of the property
of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be
deposited to the credit of the Corporation;
(d) receive, and give receipts for, moneys due and
payable to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or authorized by the Board,
taking proper vouchers therefor; and
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(f) in general, perform all the duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability
of the Treasurer, or when so directed by the Treasurer, any Assistant Treasurer
may perform any or all of the duties of the Treasurer, and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings of the Board, the
committees of the Board and the shareholders;
(b) see that all notices are duly given in accordance
with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 12. Assistant Secretaries. In the absence or
disability of the Secretary, or when so directed by the Secretary, any Assistant
Secretary may perform any or all of the duties of the Secretary, and, when so
acting, shall have all the powers of, and be subject to all restrictions upon,
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any Director.
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ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing the
number of shares of stock of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by the President, a
Vice President, or the Chairman of the Board, and countersigned by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 2. Rights of Inspection. There shall be kept at the
principal executive office, which shall be available for inspection during usual
business hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
shareholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been shareholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual business hours the Corporation's
books of account and stock ledger in accordance with the General Laws of the
State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of
the Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of shareholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
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Section 4. Transfer Agents and Registrars. The Corporation may
have one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
Section 5. Record Date and Closing of Transfer Books. The
Board of Directors may set a record date for the purpose of making any proper
determination with respect to shareholders, including which shareholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise other rights. The record date may
not be more than ninety (90) days before the date on which the action requiring
the determination will be taken; and, in the case of a meeting of shareholders,
the record date shall be at least ten (10) days before the date of the meeting.
The Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates.
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss, theft, destruction or
mutilation of such certificate, and the Corporation may issue a new certificate
of stock in the place of any certificate theretofore issued by it which the
owner thereof shall allege to have been lost, stolen or destroyed or which shall
have been mutilated, and the Board may, in its discretion, require such owner or
his legal representatives to give to the Corporation a bond in such sum, limited
or unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 8. Stock Ledgers. The Corporation shall not be
required to keep original or duplicate stock ledgers at its principal office in
the City of Baltimore, Maryland, but stock ledgers shall be kept at the
office(s) of the Transfer Agent(s) of the Corporation's capital stock.
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ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing
the name of the Corporation, which shall be in the charge of the secretary. The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of
the Corporation shall end on the last day of December in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments
shall be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
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Section 2. Sale or Transfer of Securities. Money market
instruments, bonds or other securities at any time owned by the Corporation may
be held on behalf of the Corporation or sold, transferred or otherwise disposed
of subject to any limits imposed by these By-Laws, and pursuant to authorization
by the Board and, when so authorized to be held on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name of
the Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the Board of Directors or the shareholders in
accordance with the provisions of the 1940 Act.
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the shareholders based upon each such examination shall be mailed to
each shareholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
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ARTICLE XIII
Indemnification of Directors and officers
Section 1. Indemnification. The Corporation shall indemnify
its directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify its officers to the same extent as its Directors and to such further
extent as is consistent with law. The Corporation shall indemnify its Directors
and officers who while serving as Directors or officers also serve at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the fullest extent consistent with
law. This Article XIII shall not protect any such person against any liability
to the Corporation or any shareholder thereof to which such person 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 2. Advances. Any current or former director or officer
of the Corporation claiming indemnification within the scope of this Article
XIII shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the Maryland
General Corporation Law and the 1940 Act, as such statutes are now or hereafter
in force.
Section 3. Procedure. On the request of any current or former
director or officer requesting indemnification or an advance under this Article
XIII, the Board of Directors shall determine, or cause to be determined, in a
manner consistent with the Maryland General Corporation Law and the 1940 Act, as
such statutes are now or hereafter in force, whether the standards required by
this Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this
Article XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested directors or otherwise, both as to action by a Director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Maryland Law. References to the Maryland General
Corporation Law in this Article XIII are to such law as from time to time
amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or
repealed at any annual meeting of the shareholders or at any special meeting of
the shareholders at which a quorum is present or represented, provided that
notice of the proposed amendment, alteration or repeal be contained in the
notice of such special meeting. These By-Laws may also be amended, altered or
repealed by the affirmative vote of a majority of the Board of Directors at any
regular or special meeting of the Board of Directors.
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FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 4th day of June,
1999 by and between FLAG INVESTORS SHORT-INTERMEDIATE 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
<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
- 15 -
<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 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 BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Advisor is considered at or about the same time, transactions in
such securities will be allocated among the accounts in a manner deemed
equitable by the Advisor. BT Alex. Brown and the Advisor may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution.
The Fund will not deal with the Advisor or BT Alex. Brown in any
transaction in which the Advisor or BT Alex. Brown acts as a principal with
respect to any part of the Fund's order. If BT Alex. Brown is participating in
an underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.
5. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
a. all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
- 16 -
<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 0.35% of the first $1 billion of the Fund's
average net assets, 0.30% of the Fund's average net assets in excess of $1
billion but not exceeding $1.5 billion and 0.25% of the Fund's average net
assets in excess of $1.5 billion.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for the part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Advisor's compensation for the preceding month shall be
made as promptly as possible.
- 17 -
<PAGE>
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.
- 18 -
<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/Kathy Churko By: /s/Harry Woolf
---------------- ------------------
Name: Harry Woolf
Title: President
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/Kathy Churko By: /s/Edward J. Veilleux
---------------- ---------------------
Name: Edward J. Veilleux
Title: Executive Vice President
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT is made as of the 4th
day of June, 1999 by and among FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND,
INC., a Maryland corporation (the "Fund"), INVESTMENT COMPANY CAPITAL CORP., a
Maryland corporation (the "Advisor"), and, BROWN INVESTMENT ADVISORY & TRUST
COMPANY, a Maryland trust company (the "Sub-Advisor").
WHEREAS, the Advisor is the investment advisor to the Fund,
which is an open-end, diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Advisor wish to retain the
Sub-Advisor for purposes of rendering advisory services to the Fund and the
Advisor in connection with the Advisor's responsibilities to the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Advisor. The Fund hereby appoints the
Sub-Advisor to act as the Fund's Sub-Advisor under the supervision of the Fund's
Board of Directors and the Advisor, and the Sub-Advisor hereby accepts such
appointment, all subject to the terms and conditions contained herein.
2. Delivery of Documents. The Fund has furnished the
Sub-Advisor with copies properly certified or authenticated of each of the
following:
(a) The Fund's Articles of Incorporation, filed with the
Department of Assessments and Taxation of the State of Maryland on
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 Sub-Advisor and
approving this Agreement;
(d) The Fund's Notification of Registration Filed Pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed
with the Securities and Exchange Commission (the o SEC o) 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
<PAGE>
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are
herein called the "Prospectus").
The Fund will furnish the Sub-Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties of Sub-Advisor. In carrying out its obligations
under Section 1 hereof, the Sub-Advisor shall, subject to overall supervision by
the Advisor:
(a) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of
Directors;
(b) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(c) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Fund's Board of Directors;
(d) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect such purchase and sale programs
as aforesaid, including the placing of orders for the purchase and sale
of securities of the Fund;
(e) provide the Board of Directors of the Fund on a regular
basis with financial reports with respect to the Fund's portfolio
investments and analyses of the Fund's operations and the operations of
comparable investment companies; and
(f) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio.
4. Broker-Dealer Relationships. In circumstances when the
Sub-Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of its brokerage commission
rates, the Sub-Advisor's primary consideration in effecting a security
transaction will be execution of orders at the most favorable price on an
overall basis. In performing this function the Sub-Advisor shall comply with
applicable policies established by the Board of Directors and shall provide the
Board of Directors with such reports as the Board of Directors may require in
order to monitor the Fund's portfolio transaction activities. In certain
instances the Sub-Advisor may make purchases of underwritten issues at prices
which include underwriting fees. In selecting a broker-dealer to execute each
particular transaction, the Sub-Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Directors may determine, the Sub-Advisor shall
not be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the Fund to
pay a broker-dealer that provides brokerage and research services to the
Sub-Advisor an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction, if the Sub-Advisor determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the Sub-Advisor's
overall responsibilities with respect to the Fund. The Sub-Advisor is further
authorized to allocate the orders placed by it on behalf of the Fund to such
broker-dealers who also provide research or statistical material or other
services to the Fund or the Sub-Advisor. Such allocation shall be in such
amounts and proportions as the Sub-Advisor shall determine and the Sub-Advisor
will report on said allocation regularly to the Board of Directors of the Fund,
indicating the brokers to whom such allocations have been made and the basis
therefor.
<PAGE>
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
Sub-Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Sub-Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Sub-Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Sub-Advisor. BT Alex. Brown and the Sub-Advisor may
combine such transactions, in accordance with applicable laws and regulations,
in order to obtain the best net price and most favorable execution.
The Fund will not deal with the Sub-Advisor or BT Alex. Brown
in any transaction in which the Sub-Advisor or BT Alex. Brown acts as a
principal with respect to any part of the Fund's order. If BT Alex. Brown is
participating in an underwriting or selling group, the Fund may not buy
portfolio securities from the group except in accordance with policies
established by the Board of Directors in compliance with rules of the SEC.
5. Control by Fund's Board of Directors. Any activities
undertaken by the Sub-Advisor on behalf of the Fund pursuant hereto, shall at
all times be subject to any applicable directives of the Board of Directors of
the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Sub-Advisor shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder, as amended;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the By-Laws; and
(e) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be
allocable among the Fund, the Sub-Advisor and the Advisor as follows:
(a) The Sub-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.
-22-
<PAGE>
(b) The Sub-Advisor shall maintain, at its expense and without
cost to the Fund, a trading function in order to carry out its obligations under
Section 3 hereof to place orders for the purchase and sale of portfolio
securities for the Fund.
(c) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to the
Advisor under the Investment Advisory Agreement between the Fund and the
Advisor; payments to the Fund's distributor under the Fund's plan of
distribution; the charges and expenses of any registrar, any custodian or any
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
expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and maintenance
of registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees, legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Directors or Director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the Directors of the Fund who are not "interested persons"
(as defined in the 1940 Act) of the Fund and of the 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, liabilities and litigation costs and any indemnification related
thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
8. Compensation. For the services to be rendered hereunder by
the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly compensation
equal to the sum of the amounts determined by applying the following annual
rates to the Fund's average daily net assets: 0.23% of the first $1 billion of
the Fund's average daily net assets, 0.20% of the next $500 million of the
Fund's average daily net assets and 0.16% of the Fund's average daily net assets
in excess of $1.5 billion. The Sub-Advisor will waive its fee in an amount
proportionate to any fee waivers by the Advisor. Except as hereinafter set
forth, compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals paid monthly. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculations of the
fees as set forth above. Payment of the Sub-Advisor's compensation for the
preceding month shall be made as promptly as possible.
9. Additional Responsibilities. The Sub-Advisor may, but shall
not be under any duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Sub-Advisor's
charges in rendering such services will be billed monthly to the Fund, subject
to examination by the Fund's independent certified public accountants. Payment
or assumption by the Sub-Advisor of any Fund expense that the Sub-Advisor is not
required to pay or assume under this Agreement shall not relieve the Sub-Advisor
of any of its obligations to the Fund nor obligate the Sub-Advisor to pay or
assume any similar Fund expenses on any subsequent occasions.
10. Term. This Agreement shall become effective at 12:01 a.m.
on the date hereof and shall remain in force and effect, subject to Section 12
hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial two-year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually:
-23-
<PAGE>
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities of the Fund
(as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the
Directors who are not parties to this Agreement or "interested persons"
of a party to this Agreement (other than as Directors of the Fund) by
votes cast in person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of Directors or
by vote of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days' written notice
to the Advisor and the Sub-Advisor. This Agreement may be terminated at any
time, without the payment of any penalty, by the Advisor or the Sub-Advisor on
sixty (60) days' written notice to the Fund and the other party. Upon the
termination of the Investment Advisory Agreement, this Agreement shall
automatically terminate on sixty (60) days' written notice. The notice provided
for herein may be waived by any person to whom such notice is required. This
Agreement shall automatically terminate in the event of its assignment (as
defined in Section 2(a)(4) of the 1940 Act).
13. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-Advisor
shall be free to render investment advisory or other services to others
(including other investment companies) and to engage in other activities, so
long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers or Directors of the Sub-Advisor may serve as
officers or Directors of the Fund, and that officers or Directors of the Fund
may serve as officers or Directors of the Sub-Advisor to the extent permitted by
law; and that the officers and Directors of the Sub-Advisor are not prohibited
from engaging in any other business activity or from rendering services to any
other person, or from serving as partners, officers, trustees or directors of
any other firm, trust or corporation, including other investment companies.
14. Liability of Sub-Advisor. In the performance of its duties
hereunder, the Sub-Advisor shall be obligated to exercise care and diligence and
to act in good faith and to use its best efforts within reasonable limits to
ensure the accuracy of all services performed under this Agreement, but the
Sub-Advisor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of the
Sub-Advisor or its officers, directors or employees, or reckless disregard by
the Sub-Advisor of its duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Sub-Advisor for this purpose shall be 19-21 South Street, Baltimore, Maryland
21202, and the address of the Advisor and the Fund shall be One South Street,
Baltimore, Maryland 21202.
16. Questions and Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.
[SEAL] FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
Attest: /s/Daniel O. Hirsch By: /s/Harry Woolf
------------------- --------------
Name: Harry Woolf
Title: President
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/Daniel O. Hirsch By: /s/Edward J. Veillieux
------------------- ----------------------
Name: Edward J. Veilleux
Title: Executive Vice President
[SEAL] BROWN INVESTMENT ADVISORY & TRUST COMPANY
Attest: /s/Daniel O. Hirsch By: /s/ Truman T. Semans
------------------- --------------------
Name: Truman T. Semans
Title: Vice Chairman
<PAGE>
EXPENSE LIMITATION AGREEMENT
THIS EXPENSE LIMITATION AGREEMENT is made as of the first day of May,
2000 by and between FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC., a
Maryland corporation (the " Fund") and INVESTMENT COMPANY CAPITAL CORP., a
Maryland corporation ("ICC" or the "Advisor"), with respect to the following:
WHEREAS, the Advisor serves as the Fund's investment advisor pursuant
to an Investment Advisory Agreement dated June 4, 1999; and
WHEREAS, the Advisor has voluntarily agreed to waive its fees and
reimburse expenses so that the Fund's total annual operating expenses 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; and
WHEREAS, the Fund and the Advisor desire to formalize this voluntary
fee waiver and expense reimbursement arrangement for the period beginning on May
1, 2000 and ending on April 30, 2001.
NOW THERETOFORE, 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. The Advisor agrees to waive its fees and reimburse expenses for the
period from May 1, 2000 and ending on April 30, 2001 to the extent
necessary so that the Fund's total annual operating expenses 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.
2. Upon the termination of the Investment Advisory Agreement, this
Agreement shall automatically terminate.
3. 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 Investment Company Act of 1940 as amended (the
"1940 Act") shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any,
by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
SEC issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this
Agreement is revised by rule, regulation or order of the SEC, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement
shall be interpreted in accordance with the laws of Maryland.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day and year first
above written.
[SEAL]
FLAG INVESTORS SHORT-
INTERMEDIATE INCOME FUND, INC.
Attest: /s/Kathy Churko /s/ Amy M. Olmert
Name: Kathy Churko By: Amy M. Olmert
Title: Secretary
INVESTMENT COMPANY
CAPITAL CORP.
Attest: /s/Kathy Churko /s/Edward J. Veilleux
Name: Kathy Churko By: Edward J. Veilleux
Title: Executive Vice President
<PAGE>
1701 Market Street MORGAN, LEWIS
Philadelphia, PA 19103 & BOCKIUS L L P
(215)963-5000 C O U N S E L O R S A T L A W
Fax: (215)963-5299
April 24, 2000
Flag Investors Short-Intermediate Income Fund, Inc.
One South Street
Baltimore, Maryland 21202
Re: Opinion of Counsel regarding Post-Effective Amendment No. 12 to the
Registration Statement filed on Form N-1A under the Securities Act
of 1933 (File No. 33-34275)
-------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Flag Investors Short-Intermediate Income
Fund, Inc. (the "Fund") a Maryland corporation, in connection with the
above-referenced Registration Statement which relates to the Fund's shares of
common stock, par value $.001 per share (the "Shares"). This opinion is being
delivered to you in connection with the Fund's filing of Post-Effective
Amendment No.12 to the Registration Statement (the "Amendment") to be filed with
the Securities and Exchange Commission pursuant to Rule 485(b) under the
Securities Act of 1933. With your permission, all assumptions and statements of
reliance herein have been made without any independent investigation or
verification on our part, except to the extent otherwise expressly stated, and
we express no opinion with respect to the subject matter or accuracy of such
assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the State of Maryland to the existence and good
standing of the Fund dated April 12, 2000;
(b) the Articles of Incorporation of the Fund and all amendments and
supplements thereto (the "Articles of Incorporation");
(c) a certificate executed by Amy M. Olmert, the Secretary of the Fund,
certifying as to the Fund's Articles of Incorporation and By-Laws
and certain resolutions adopted by the Board of Directors of the
Fund authorizing the issuance of the shares; and
<PAGE>
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Fund, we have examined the originals,
or certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of
the opinion that the Shares, when issued and sold in accordance with the
Articles of Incorporation and By-Laws, and for the consideration described in
the Registration Statement, will be legally issued, fully paid and nonassessable
under the laws of the State of Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in such Registration
Statement. In giving this consent, we do not concede that we are in the category
of persons whose consent is required under Section 7 of the 1933 Act.
Very truly yours,
/s/Morgan, Lewis & Bockius LLP
- ------------------------------
Morgan, Lewis & Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of our report dated
February 11, 2000, relating to the financial statements and financial highlights
which appears in the December 31, 1999 Annual Report to Shareholders of Flag
Investors Short-Intermediate Income Fund, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights" and "Independent Accountants" in
such Registration Statement.
PricewaterhouseCoopers LLP
Baltimore, Maryland
April 27, 2000
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to us under the heading "Financial Highlights" in
this Post-Effective - Amendment No. 12 to Registration Statement No. 33-34275 of
the Short-Intermediate Income Fund, Inc. in the Prospectus, which is a part of
such Registration Statement.
Deloitte & Touche LLP
Princeton, New Jersey
April 25, 2000
<PAGE>
Adopted December 14, 1994 and Amended March 18,
1996, September, 1997 and December 17, 1997
Flag Investors Funds
Consolidated Code of Ethics
I. General
Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act") makes it
unlawful for certain persons to engage in "fraudulent" practices in connection
with purchases or sales by those persons of securities when those securities are
held or to be acquired by an investment company. The rule also requires every
investment company and the investment company's investment advisor and, in
certain cases, principal underwriter to adopt a Code of Ethics containing
provisions "reasonably necessary to prevent" such fraudulent practices by so
called "Access Persons."
Flag Investors Communications Fund, Inc. ("Communications"), Flag Investors
International Fund, Inc. ("International"), Flag Investors Emerging Growth Fund,
Inc. ("Emerging Growth"), Flag Investors Short-Intermediate Income Fund, Inc.
("Short-Intermediate"), Flag Investors Value Builder Fund, Inc. ("Value
Builder") Flag Investors Real Estate Securities Fund, Inc. ("Real Estate") and
Flag Investors Equity Partners Fund, Inc. ("Equity Partners") are investment
companies covered by the rule. Communications, International, Emerging Growth,
Short-Intermediate, Value Builder, Real Estate and Equity Partners are also
referred to herein individually as a "Fund," and collectively as "Funds."
Investment Company Capital Corp. ("ICC") is the investment advisor to
Communications, International, Emerging Growth, Short-Intermediate, Value
Builder, Real Estate and Equity Partners. Alex. Brown Investment Management
("ABIM") is the sub-advisor to Communications, Value Builder and Equity
Partners; The Glenmede Trust Company ("Glenmede") is the sub-advisor to
International; Brown Investment Advisory & Trust Company ("Brown Trust") is the
sub-advisor to Emerging Growth and Short-Intermediate; LaSalle Investment
Management (Securities) L.P. ("LaSalle") is the sub-advisor to Real Estate.
ABIM, Glenmede, Brown Trust and LaSalle are referred to herein as the
Sub-Advisors. ICC Distributors, Inc. ("ICC Distributors") is the principal
underwriter for each of the Funds. This document constitutes the Code of Ethics
required by Rule l7j-1.
II. Definitions
For purposes of this Code, the following terms have the meanings, set forth as
follows:
A. "Access Person" means:
1. Every director and officer of a Fund;
2. Every "advisory person" of the Funds and of ICC and the
Sub-Advisors. An advisory person is an employee who, in connection with
his or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a security by a
Fund, or whose functions relate to the making of any recommendations
with respect to such purchases or sales; and any natural person in a
control relationship with a Fund or the Fund's investment advisor or
sub-advisor who obtains information concerning recommendations made to
the Fund with regard to the purchase or sale of a security;
3. Any director or officer of ICC or the Sub-Advisors who, with respect
to a Fund for which such entity acts as investment advisor or
sub-advisor, makes any recommendation, participates in the
determination of which recommendation shall be made, or whose principal
function or duties relate to the determination of which recommendation
shall be made; or who, in connection with his or her duties, obtains
any information concerning securities recommendations being made by
such investment advisor or sub-advisor to the Fund; and
4. Any director or officer of ICC Distributors who in the ordinary
course of his or her business makes, participates in or obtains
information regarding the purchase or sale of securities for the Funds
or whose functions or duties as part of the ordinary course of his or
her business relate to the making of any recommendation to the Funds
regarding any purchase or sale of securities.
<PAGE>
B. "Beneficial Ownership" of a security is to be determined in the same
manner as it is for purposes of Section 16 of the Securities Exchange Act
of 1934. This means that a person should generally consider himself or
herself the beneficial owner of any securities in which he or she has a
direct or indirect pecuniary interest. In addition, a person should
consider himself or herself the beneficial owner of securities held by his
or her spouse, his or her minor children, a relative who shares his or her
home, or other persons by reason of any contract, arrangement,
understanding or relationship that provides him or her with sole or shared
voting or investment power.
<PAGE>
C. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act. Section 2(a)(9) defines "control" as the power to
exercise a controlling influence over the management or policies of a
company, unless such power is solely the result of an official position
with such company. Ownership of 25% or more of a company's outstanding
voting securities is presumed to give the holder thereof control over the
company. Such presumption may be countered by the facts and circumstances
of a given situation.
D. "Covered Persons" means any officer, director or employee of the Funds,
ICC, the Sub-Advisors and ICC Distributors.
E. "Disinterested Director" means a Director of a Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of
the 1940 Act.
F. "Held or to be acquired" means (i) is or has been held by the Fund, or
(ii) is being or has been considered by such Fund or its investment
advisor or Sub-Advisor for purchase, within the most recent 15 days.
G. "Investment Personnel" means all Access Persons who occupy the position
of portfolio manager with respect to a Fund, all Access Persons who
provide or supply information and/or advice to any portfolio manager, or
who execute or help execute any portfolio manager's decisions, and all
Access Persons who, in connection with their regular functions, obtain
contemporaneous information regarding the purchase or sale of a security
by a Fund.
H. "Purchase or sale of a security" means obtaining or disposing of
"beneficial ownership" (see B above) of that security and includes, among
other things, the writing of an option to purchase or sell a security. A
person who has any questions about beneficial ownership should consult the
Secretary of the Fund.
I. "Security" shall have the same meaning as that set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include securities
issued by the Government of the United States or an agency thereof,
bankers' acceptances, bank certificates of deposit, commercial paper and
registered, unaffiliated open-end investment companies.
J. A security is "being purchased or sold" by a Fund from the time when a
purchase or sale program has been communicated to the person who places
the buy and sell orders for the Fund until the time when such program has
been fully completed or terminated.
III. General Principles
A. Covered Persons
All Covered Persons are subject to the prohibitions of Rule 17j-1 against
fraudulent practices and to the general fiduciary principles as set forth
in B and C below. Certain provisions of this Code of Ethics, for example,
the reporting requirements and certain other requirements and restrictions
contained herein apply to narrower classes of persons, e.g., Access
Persons or Investment Personnel.
However, everyone in the ICC, Sub-Advisor and ICC Distributors
organizations should appreciate the need to behave in an ethical manner
with respect to the Funds. In particular, all employees who are involved
in any way with the activities of a Fund should be wary of any potential
conflicts between their duty of loyalty to a Fund and their own financial
interests, particularly with respect to their own securities trading
activities. Employees should take care to preserve the confidentiality of
the Funds' business affairs. Employees who are not "Access Persons" but
who become aware of proposed Fund securities transactions should not
engage in transactions in those same securities without the permission of
the Secretary of the Fund. Otherwise, employees who are not Access Persons
are not limited in their personal securities transactions by this Code,
but such employees are encouraged to consult with the Secretary of the
Fund or with other officers of the Funds if they have any doubts about the
applicability of the Code to any proposed transaction.
<PAGE>
B. Statement of General Fiduciary Principles
The following principles are the policy of the Funds, ICC, he
Sub-Advisors and ICC Distributors and must be followed by all Covered
Persons:
1. It is the duty of all Covered Persons at all times to place the
interests of shareholders first;
2. All personal securities transactions must be conducted consistent
with this Code of Ethics and in such manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position
of trust and responsibility; and
3. Covered Persons must not take inappropriate advantage to the
detriment of shareholders of the Funds of their positions, or the
information they acquire, with or on behalf of the Funds, ICC, the
Sub-Advisors and ICC Distributors.
C. Fraudulent Practices
Rule 17j-1 makes it unlawful for any Covered Person, in connection with
a Fund with which such Covered Person has a relationship, to:
1. Employ any device, scheme or artifice to defraud the Fund;
2. Make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
3. Engage in any act, practice or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
4. Engage in any manipulative practice with respect to the Fund.
IV. Restrictions on Personal Transactions
A. Preclearance
As set forth below, Access Persons, Investment Personnel and, in certain
instances, Covered Persons are required to "preclear" personal securities
transactions. These preclearance requirements and procedures should be
reasonably designed to identify any prohibition or limitation applicable
to the proposed transaction.
1. A Disinterested Director of a Fund shall not purchase or sell a
security that the Director knows is to be sold or acquired by the Fund,
without first obtaining written authorization of the Fund's Secretary;
2. Covered Persons who, in connection with their regular functions or
duties do not make or participate in decisions regarding the purchase
or sale of securities for a Fund, obtain information (other than
publicly available information) regarding such purchases or sales, or
make or participate in the making of recommendations in connection with
such purchases or sales, shall not purchase or sell a security that the
Covered Person knows is to be sold or acquired by the Fund, without
first obtaining written authorization of the Fund's Secretary; and
3. Access Persons shall not purchase or sell a security (other than on
behalf of the Fund) without first obtaining written authorization of
the Fund's Secretary.
B. Exemptions
The requirements of paragraph A above shall not apply to the following
transactions:
1. Purchases or sales over which the person had no direct or indirect
influence or control;
2. Purchases or sales which are non-volitional on the part of either
the person or the Fund;
3. Purchases which are part of an automatic dividend reinvestment plan;
<PAGE>
4. Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer; or
5. Transactions in shares of any investment company.
Where a person has fiduciary responsibility which makes it inappropriate,
in the view of such person, to obtain prior authorization with respect to
a transaction, such person may complete the transaction but must promptly
notify the Secretary of the Fund or another appropriate person.
C. Blackout Periods
No Access Person may execute securities transactions on a day during which
any Fund in the Access Person's complex has a pending "buy" or "sell"
order in the same security until that order is executed or withdrawn. No
Investment Personnel may buy or sell a security within seven calendar days
before and three calendar days after the Fund, which the Investment
Personnel manages, trades in that security. Access Persons and Investment
Personnel of ICC, ABIM and Brown Trust (collectively Asset Management)
would be exempt from the blackout provisions of this Section IV.C.
provided that: 1) the market capitalization of a particular security
exceeds $2 billion; and 2) orders of the respective business unit of Asset
Management do not exceed ten (10) percent of the daily average trading
volume for the prior fifteen (15) days.
D. Prohibition Against Participation in IPOs
No Investment Personnel may acquire securities as a part of an initial
public offering by the issuer.
E. Private Placements
Investment Personnel may acquire securities in a private placement only
after prior approval by the Secretary of the Fund. The Secretary of the
Fund will consider the following factors, among others, in determining
whether to grant approval of the acquisition in a private placement by
Investment Personnel:
1. Whether the opportunity is being offered to the Investment Personnel
by virtue of his or her position with the Fund;
2. Whether the transaction appears upon reasonable inquiry and
investigation to present no reasonable likelihood of harm to the Funds
and which is otherwise in accordance with Rule l7j-l; and
3. Whether the security offered in the private placement is a security
that is eligible for purchase, and should be made available for
purchase, by any of the Funds.
F. Ban on Short-Term Trading Profits
No Investment Personnel may profit in the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within 60 calendar days.
Any profits realized on such short-term trades will be disgorged to the
benefit of the appropriate Fund, if practical.
V. Compliance Procedures
A. Reporting Requirements
1. Every Access Person shall report(1) to the Secretary of the Fund the
following information with respect to transactions in any security in
which such Access Person(2) has, or by reason of such transaction
- --------
(1) Any such report may contain a statement that the report shall not be
construed as an admission by the person making the report that he has any
direct or indirect beneficial ownership in the security to which the report
relates.
(2) No report is required if such person is a Disinterested Director, and such
person would be required to make such report solely by reason of being a
director, except where such director knew or, in the ordinary course of
fulfilling his official duties as a director of the Fund, should have known
that during the 15-day period immediately preceding or after the date of
the transaction in a security by the director, such security is or was
purchased or sold, or considered for purchase or sale by the Fund.
<PAGE>
acquires, any direct or indirect beneficial ownership in a security,
whether or not the security is held or to be acquired by the Fund:
a. The date of the transaction, title and number of shares, and the
principal amount of each security involved;
b. The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
c. The price at which the transaction was effected;
d. The name of the broker, dealer or bank with or through whom the
transaction was effected; and
e. The date the report was signed.
2. Every report shall be made not later than ten days after the end of
the calendar quarter in which the transaction to which the report
relates was effected, and shall be in the form of Appendix A hereto. In
the event no reportable transaction occurred during the quarter, the
report should be so noted and returned signed and dated.
3. Notwithstanding the provisions of Section 1 hereof, no person shall
be required to make a report with respect to transactions effected for
any account over which such person does not have any direct or indirect
influence or control.
B. Disclosure of Personal Holdings
Each Access Person must disclose to the Secretary of the Fund, all
personal securities holdings - irrespective of trading activity - upon
commencement of employment or within two weeks of receipt of this Code
of Ethics. Each Access Person must revise the list of such holdings
thereafter on an annual basis.
C. Records of Securities Transactions
Access Persons must direct each brokerage firm or bank at which such
person maintains a securities account to supply to the Secretary of the
Fund, on a timely basis, duplicate copies of confirmations of all
personal securities transactions and copies of periodic statements for
all securities accounts.
D. Certification of Compliance with Code of Ethics
Access Persons must certify annually that they have read and understand
this Code of Ethics and recognize that they are subject to the Code and
that they have complied with the Code and its reporting requirements.
E. Post-Trade Monitoring
Each Fund must implement procedures to monitor personal investment
activity by Access Persons after preclearance has been granted in order
to identify patterns of personal securities trading occurring before
Fund trades.
VI. Additional Restrictions
A. Prohibition Against Receiving Gifts
No Access Person may accept any gift or other thing of more than de
minimis value from any person or entity that does business with or on
behalf of the Funds, ICC, the Sub-Advisors and ICC Distributors.
B. Prohibition Against Serving as Director
No Investment Personnel may serve on the board of directors of a publicly
traded company, absent prior authorization from the Secretary of the Fund
based upon a determination that the board service would be consistent with
the interests of the Fund and its shareholders. If such authorization is
<PAGE>
granted, the Investment Personnel that is serving as a director must be
isolated from those making investment decisions through a "Chinese Wall"
or other procedures.
VII. Review and Enforcement
A. General
Access Persons who have supervisory responsibility should take reasonable
steps to protect against violations of Rule 17j-1 by employees for whom
they are responsible. Supervisors are not expected to guarantee the
conduct of their employees, but should be alert to possible problems. In
addition, Access Persons who become aware of violations of Rule 17j-1 or
actions inconsistent with this Code are expected to take steps to correct
such problems. Depending on the gravity of the situation, it may be
appropriate for an Access Person to bring a problem to the attention of
the Chairman of a Fund. The Chairman may agree to handle such matters in
confidence, subject to the right of the Board of Directors to obtain
information about any activities of the Chairman.
B. Review
The Secretary of each Fund shall notify all Access Persons of their
obligations under Rule 17j-1 and the Code. The Secretary of the Fund shall
review all reports and shall promptly consider all requests made by Access
Persons of ICC, the Sub-Advisors and ICC Distributors pursuant to the
provisions of the Code. If problems arise, the Secretary of each Fund may
attempt to resolve those problems informally, but he or she has the
authority to recommend sanctions to the Chairman of the Fund or to the
Board of Directors where appropriate. The Secretary of the Fund will make
a quarterly report to the Board of Directors concerning all reports
received. Subject to the authority of the Board of Directors, the
Secretary of each Fund shall have broad discretion to administer the Code
so as to achieve its purposes and prevent the problems that Rule 17j-1 was
designed to resolve.
C. Enforcement
1. The Secretary of the Fund shall compare all reported personal
securities transactions with completed portfolio transactions of the
Funds and a list of securities being considered for purchase or sale by
the Funds to determine whether a violation of this Code may have
occurred. Before making any determination that a violation has been
committed by any person, the Secretary of the Fund shall give such
person an opportunity to supply additional explanatory material.
2. If the Secretary of the Fund determines that a violation of this
Code may have occurred, he or she shall submit his or her written
determination, together with the confidential monthly report and any
additional explanatory material provided by the individual, to the
Chairman of the Fund and outside counsel, who shall make an independent
determination as to whether a violation has occurred.
3. If the Chairman and outside counsel find that a violation has
occurred, the Chairman shall impose upon the individual such sanctions
as he or she deems appropriate and shall report the violation and the
sanction imposed to the Board of Directors of the Fund.
4. No person shall participate in a determination of whether he or she
has committed a violation of the Code or of the imposition of any
sanction against himself or herself. If a securities transaction of the
Chairman is under consideration, the President shall act in all
respects in the manner prescribed herein for the Chairman.
In the event the Secretary of a Fund is absent or unable to serve, the
Treasurer or Vice Presidents of the Funds, respectively, shall assume the
responsibilities and perform the obligations of the Secretary of each Fund
under this Code.
VIII. Records
The Funds shall maintain records in the manner and to the extent set forth
below, which records may be maintained on microfilm under the conditions
described in Rule 31a-2 under the 1940 Act and shall be available for
examination by representatives of the Securities and Exchange Commission.
<PAGE>
A. A copy of this Code and any other code which is, or at any time within
the past five years has been, in effect shall be preserved in an easily
accessible place;
B. A record of any violation of this Code and of any action taken as a
result of such violation shall be preserved in an easily accessible place
for a period of not less than five years following the end of the fiscal
year in which the violation occurs;
C. A copy of each report made by a director pursuant to this Code shall be
preserved for a period of not less than five years from the end of the
fiscal year in which it is made, the first two years in an easily
accessible place; and
D. A list of all persons who are, or within the past five years have been,
required to make reports pursuant to this Code shall be maintained in an
easily accessible place.
IX. Investment Advisor's, Sub-Advisor's and Principal Underwriter's Code of
Ethics
A. The procedures for clearance and reporting of personal securities
transactions set forth in sections IV and V hereof shall not apply to any
Access Person who is subject to substantially similar requirements under
procedures established by ICC, the Sub-Advisors and ICC Distributors.
B. Each of ICC, the Sub-Advisors and ICC Distributors shall:
1. Submit to the Board of Directors of the Fund a copy of its code of
ethics adopted pursuant to Rule 17j-1;
2. Promptly report to the Fund in writing any material amendments to
such Code;
3. Promptly furnish to the Fund upon request copies of any reports made
pursuant to such Code by any person who is an Access Person as to the
Fund; and
4. Immediately furnish to the Fund, without request, all material
information regarding any violation of such Code by any person who is
an Access Person as to the Fund.
X. Miscellaneous
A. Confidentiality. All reports of securities transactions and any other
information filed with the Funds pursuant to this Code shall be treated as
confidential.
B. Interpretation of Provisions. The Board of Directors may from time to
time adopt such interpretations of this Code as it deems appropriate.
C. Periodic Review and Reporting. The Chairman of each Fund shall report
to the Board of Directors at least annually as to the operation, and any
violations, of this Code and shall address in any such report the need (if
any) for further changes or modifications to this Code.
Adopted this 14th day of December, 1994.
<PAGE>
APPENDIX A
FLAG INVESTORS FUNDS
Transaction Report
To: The Secretary, FLAG INVESTORS FUNDS
From: _______________________________________________________________
This Transaction Report (the "Report") is submitted pursuant to the Code
of Ethics of the Flag Investors Funds (the "Funds"), and supplies, on the table
on the reverse side, information with respect to a transaction in any security
in which I may be deemed to have, or by reason of such transaction acquire, any
direct or indirect beneficial ownership interest, whether or not such security
is a security held or to be acquired by any one or more of the Funds for the
calendar quarter ended ______________ 20__.* I understand that I may have
beneficial ownership of securities of which certain other persons are the record
owners as well as securities of which I am the record owner, and I have included
transactions in such securities in this Report where applicable. I also
understand that:
(i) If I am a "Disinterested" Director of the Funds, I am required to
report a transaction in a security only in such cases as I knew or, in the
ordinary course of fulfilling my official duties as a Director of the Fund,
should have known that, during the 15-day period immediately preceding or after
the date of my purchase or sale, the security was purchased or sold, or was
considered for purchase or sale by a Fund or its investment advisor for such
Fund; and
(ii) I am not required to include in this Report transactions effected for
any account over which I do not have any direct or indirect influence or
control.
I hereby certify that:
1. I am fully familiar with the Code of Ethics of the Fund;
2. To the best of my knowledge, the information furnished in this Report
is complete, true and correct; and
3. If, during the month indicated, I have obtained, through the
acquisition of securities or otherwise, ownership of 1/2% or more of the
outstanding voting securities of any issuer, I have reported such fact to the
Fund.
______________
Date Signature
*If you had no reportable transactions during the quarter, please enter "none"
in the table on the next page.
<PAGE>
<TABLE>
<CAPTION>
Shares or Broker
Date of Title of Principal Nature of Price Dealer
Transaction Issuer Securities Amount Transaction* Per Unit Or Bank**
- ----------- ------ ---------- --------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
* Purchase, sale or other type of disposition or acquisition.
** Indicate in this column if you wish to disclaim beneficial ownership of any
security listed in this report.
<PAGE>
February, 2000
PERSONAL SECURITIES TRADING
POLICIES AND PROCEDURES
For: Alex. Brown Investment Management ("ABIM")
Investment Company Capital Corp. ("ICC")
- ----------------------------------------------------------------------------
I. INTRODUCTION
ABIM and ICC ("Asset Management") recognize the desirability of
permitting Employees and members of their immediate families the opportunity to
engage in normal investment practices for their personal accounts and accounts
in which they have a beneficial interest. The legitimate investment objectives
of Employees, however, must be balanced against the interests of clients as well
as Asset Management's regulatory responsibilities.
Asset Management's policies and procedures regarding personal
securities trading have been developed in response to various securities laws
and rules and regulations of self-regulatory agencies. These procedures include
many of the recommendations made by a special advisory group formed by the
Investment Company Institute to review practices and standards governing
personal investing. These procedures have been submitted to the Board of
Directors of the Flag Investors Family of mutual funds (the "Funds"), and shall
serve as the Code of Ethics required in connection with Asset Management's
services as investment advisor to the Funds.
Each Employee is expected to adhere to these policies and procedures so
as to avoid any actual or potential conflicts of interest, or situations in
which an individual may be accused of having abused a position of trust and
responsibility. Any questions regarding the application of these policies and
procedures should be directed to your appropriate senior officer or the
designated Asset Management compliance officer.
II. DEFINITIONS
Employee - For purposes of these policies and procedures, the term
Employee will refer to all Employees of Asset Management and members of
their immediate families.
Immediate Family - Immediate Family shall include spouse, minor
children, dependents and other relatives who share the same house and
depend on the Employee for support.
Employee Related Accounts - The term " Employee Related Account" shall
mean any account held in the name of an Employee or in which the
Employee has a Beneficial Interest. In addition, such accounts include
accounts held in the name(s) of any member(s) of the Employee's
Immediate Family as well as any account in which those persons have a
Beneficial Interest.
Beneficial Interest - An Employee or immediate family member shall be
considered to have a beneficial interest in an account if he or she
obtains benefits from the account substantially equivalent to whole or
partial ownership. Employee and immediate family members are also
deemed to have a beneficial interest in accounts in which they have the
power, directly or indirectly, to make investment decisions. Examples
include, but are not limited to, accounts for trusts, partnerships and
corporations in which an Employee or immediate family member maintains
an interest or derives a benefit.
4
<PAGE>
Discretionary Accounts - An Employee Related Account where full
investment discretion has been granted to an investment manager,
trustee or outside bank where neither the Employee nor a close relative
participates in the investment decisions or is informed in advance of
transactions in the account.
III. POLICIES/PROCEDURES
A. Substantive Restrictions on Personal Investing
1. Initial Public Offerings
Asset Management Employees are prohibited from acquiring shares of an
issuer in an initial public offering.
2. Private Securities Transactions
Asset Management Employees may engage in such
transactions after having obtained the prior written
approval of the appropriate senior officer of their
respective business unit and Mutual Funds Compliance.
Attached as Exhibit A is a copy of the general policy
and the appropriate form for making such request.
Among the factors in considering the request by a
senior officer are: 1) whether the opportunity is
being made available to the Employee due to the
Employee's position within Asset Management; 2)
whether the transaction would appear to conflict with
clients' interests; and, 3) whether the security
being offered is an appropriate investment to be made
on behalf of clients.
Employees who received approval to engage in a
private securities transaction must disclose that
investment in the event they become involved in any
subsequent consideration of the issuer as a potential
investment for the Funds or other clients. In such
circumstances, a final decision to invest on behalf
of clients should be made after independent review by
personnel with no personal interest in the issuer.
3. Blackout Periods
a. Pending Trades - Employees are prohibited
from executing a transaction in an Employee
Related Account when Asset Management
clients of their respective business unit
have pending "buy" or "sell" orders in the
same security. This prohibition will remain
in effect until such orders are executed or
withdrawn.
b. Fund Trades - Employees are prohibited from
trading in a security for a period of at
least seven calendar days before, and three
calendar days after, any transaction by a
Fund Account advised by that respective
business unit of Asset Management in the
same security. This blackout period would be
inapplicable where 1) the market
capitalization of the security exceeded $2
billion; and 2) trades of the respective
business unit of Asset Management do not
exceed 10% of the daily average trading
volume for the prior 15 days.
c. Discretionary Accounts - The Blackout
Periods described above do not apply to
Discretionary Accounts.
<PAGE>
4. Outside Securities Accounts
a. General
Except in extraordinary circumstances, Asset
Management prohibits the maintenance of
Employee Related Accounts with
broker/dealers outside of DBAB. The
appropriate senior officer for their
respective business units must approve any
requests by Employees for such accounts.
Attached as Exhibit B, is a copy of the
general policy and the appropriate form for
making such request. All such accounts are
subject to prior approval and record keeping
requirements as will be described below.
b. Exceptions
Asset Management has determined that the
following outside accounts are exempt from
the prior approval requirements:
5
<PAGE>
(i) accounts maintained directly with
an investment company in which
shares of open-end investment
companies only can be purchased;
and
(ii) Discretionary Accounts.
c. Transfer
Outside accounts which are not exempt under
Section 4.b. must be transferred to DBAB
within forty-five (45) days of the
Employee's hire date.
5. Ban on Short-Term Trading Profits
In addition to the blackout periods noted above, and
in the absence of appropriate extenuating
circumstances, Asset Management Employees are
prohibited from profiting in the purchase and sale,
or sale and purchase, of the same (or equivalent)
securities within 60 calendar days. Profits realized
from trades within the proscribed period will be
required to be forfeited to the appropriate Asset
Management business unit. Under limited and
appropriate circumstances, an Employee may request an
exception to this restriction. Such requests may only
be made to the appropriate senior officer of his or
her respective business unit.
6. Outside Business Affiliations, Employment or Compensation
Asset Management Employees may not maintain outside
affiliations (e.g. officer or director, governor,
trustee, etc.) without the prior written approval of
the appropriate senior officer of their respective
business units. Attached as Exhibit C is a copy of
the general policy and the appropriate form for
making such request. Service on Boards of publicly
traded companies should be limited to a small number
of instances. However, such service may be undertaken
based upon a determination that these activities are
consistent with the interest of Asset Management and
its clients. Employees serving as directors will not
be permitted to participate in the process of making
investment decisions on behalf of clients which
involve the subject company.
7. Gifts
Asset Management restricts the making or receiving of
gifts and gratuities to ensure the highest standards
of employee integrity and conduct, and to ensure
compliance with rules of the various self-regulatory
organizations. Asset Management Employees are
expected to report and receive prior approval for any
such gifts or gratuities, except for gifts of de
minimis value. De minimis is defined as the annual
receipt of gifts from the same source valued at $100
or less.
6
<PAGE>
B. Procedures for Personal Investing
1. Transaction Approval
All Asset Management Employees must receive prior
approval of personal securities transactions in
Employee Related Accounts. All prior approval
requests must be made in writing to the appropriate
person designated for such approvals. Approvals of
transactions are good for the day they are given and
must be reinstated the next day if not executed or
withdrawn. Attached as Exhibit D is a copy of the
Personal Securities Transaction Approval Form to be
completed by Asset Management Employees. Only after
receiving approval may the Asset Management Employees
contact their registered representative to enter the
order.
Requests for approval of trades by ABIM Employees
(and the accompanying approval form) are to be
directed to the Chief Executive Officer, or his
designee, and a copy of the completed form will be
maintained centrally at ABIM.
Requests for approval of trades by ICC Employees (and
the accompanying approval form) are to be directed to
Mutual Funds Compliance. After approval, ICC
employees must receive approval from Corporate
Compliance and forward the Corporate pre-clearance
number to Mutual Funds Compliance. One copy of the
completed form will be maintained with Mutual Funds
Compliance.
Asset Management has determined that certain
securities transactions are exempt from the prior
approval requirements as follows:
o Trading activity in Discretionary Accounts;
o Shares of open-end investment companies
registered under the Investment Company Act of
1940; o Shares purchased under an issuer
sponsored dividend reinvestment program;
o Purchases and sales of securities issued or
guaranteed by the U.S. government or its agencies
and bank certificates of deposit;
o To the extent acquired from the issuer, purchases
effected upon the exercise of rights issued pro
rata to holders of a class of securities; and
o Securities purchased under an employer sponsored
stock purchase plan or upon the exercise of
employee stock options. Any sale of securities
acquired pursuant to the exercise of employee
stock options remains subject to the
pre-clearance procedures.
7
<PAGE>
2. Records of Securities Transactions
a. General
Each Asset Management Employee is
responsible for confirming that all Employee Related
Accounts are set up in such a way that designated
supervisory personnel receive records of securities
transactions as follows:
(i) In the case of accounts maintained
at DBAB, a report system (the Firm
Insider Trade Report System) has
been developed which will provide
designated supervisory personnel a
monthly summary report of
securities transactions in Employee
Related Accounts. At the time an
account is approved, Employees must
provide the account name and number
to the person in their respective
business unit responsible for
maintaining the report system.
(ii) In the case of outside securities
accounts, Asset Management must
receive duplicate copies of
confirmations and statements.
Before engaging in any
transactions, the Employee must
confirm that: i) the account has
been approved; and, ii) that firm
has been instructed to provide
duplicate confirmations and
statements.
b. Exemptions
(i) Accounts maintained directly with
an investment company in which
shares of open-end investment
companies only can be purchased are
exempt from the records
requirements, provided that the
requisite information regarding the
account is disclosed in the
Employee's Initial Holdings Report
and Annual Holdings Report, as
described in paragraph 4.a. below.
(ii) Discretionary Accounts are exempt
from the records requirements,
provided that the requisite
information regarding the account
is disclosed as described in
paragraph 4.b. below.
3. Post-Trade Monitoring
Asset Management supervisory personnel will conduct periodic reviews of
the trading activities of Asset Management Employees to monitor compliance with
these procedures so as to ensure that the interests of Asset Management and its
clients are not compromised.
4. Certification/Disclosure of Accounts and Holdings
a. Employee Related Accounts
All Asset Management Employees will, at time of hire and annually
thereafter, be provided with a copy of these policies and procedures and will be
requested to certify annually that they have read and understand them.
(i) Initial Holdings Report
8
<PAGE>
Within 10 days of the Employee's hire date, each
Employee shall make an Initial Holdings Report in the
form of Exhibit E.
(ii) Annual Holdings Report
On an annual basis, each Employee shall make an
Annual Holdings Report in the form of Exhibit E. The
Annual Holdings Report shall contain information
which is current as of a date which is no more than
30 days before the report is submitted.
b. Discretionary Accounts
Each Asset Management Employee with an outside Discretionary
Account will, at the time of hire and annually thereafter,
provide Mutual Funds Compliance with a certification from
their investment manager, trustee or outside bank, as
applicable, as to the discretionary status of the account. The
certification form is attached as Exhibit F.
C. Sanctions
Persons violating the provisions of these Personal Trading
Policies and Procedures may be subject to the following
sanctions:
1. Upon the first violation within a one-year period,
the Employee will be subject to a monetary penalty of
$100, or such other penalty as may be determined in
the discretion of the committee referenced in
paragraph 3.
2. Upon the second violation within a one-year period,
the Employee will be subject to a monetary penalty of
$500, or such other penalty as may be determined in
the discretion of the committee referenced in
paragraph 3 (assuming that the first violation was
brought to the Employee's attention).
3. Upon the third violation within a one-year period,
the matter shall be reviewed by a committee
consisting of the Head of the Business Unit, the Head
of Legal and the Head of Compliance. The committee
will determine appropriate sanctions, which may
include (but are not limited to) a letter of censure,
further monetary penalties, restrictions on the
violator's personal securities transactions,
unwinding of the transaction and disgorgement of
profits and suspension or termination of employment.
The proceeds of any monetary penalties recovered in connection
with the sanctions described above shall be donated to the
United Way.
9
<PAGE>
EXHIBIT A
PRIVATE SECURITIES TRANSACTIONS
Private Securities Transactions are those which are not transacted
through a brokerage firm and/or not reflected on records of accounts maintained
at such brokerage firms. Asset Management Employees and members of their
immediate family may not purchase or sell any security (except those exempt
under these Personal Securities Policies and Procedures) in a private securities
transaction unless the Employee has received the prior written approval of the
senior officer of their respective business unit. Requests for approval must be
made on the Request for Approval of Private Securities Transaction Form (a copy
of which is provided with this Code).
The definition of a private securities transaction should be construed
broadly. Any questions regarding such transactions should be directed to the
senior officer of the respective business unit.
PLEASE SEE THE REQUEST FOR APPROVAL OF PRIVATE SECURITIES TRANSACTION FORM
BEGINNING ON THE FOLLOWING PAGE
REQUEST FOR APPROVAL OF
PRIVATE SECURITIES TRANSACTION
To: ________________________________________________ (Branch/Department Manager)
The undersigned requests approval of the following securities transaction:
Issuer:
Is Issuer a publicly traded company? Yes __________ No
Buy: __________ Sell: __________ Anticipated Date of Transaction:
Description of Securities:
10
<PAGE>
Number of Shares/Units: __________________________________________ Cost/Proceeds
Name of person from whom I propose to purchase or to whom I propose to sell:
Is this person a client of the Firm? Yes __________ No
If yes, what is nature of the client relationship between that person and the
firm?
To your knowledge, is this investment being offered to others? Yes _________ No
Are you providing any service or advice to this Issuer? Yes _________ No
If yes, please describe the service or advice:
(Name of Person Requesting Approval)
_____________
(Date) (Signature)
................................................................................
IMPORTANT NOTICE
IT IS THE FIRM'S POLICY THAT EMPLOYEES MAY NOT SOLICIT OR RECOMMEND TO
ANY CLIENT OF THE FIRM THE PURCHASE OF ANY SECURITY UNLESS SUCH PURCHASE IS MADE
THROUGH THE FIRM. MOREOVER, THE RECEIPT BY ANY EMPLOYEE OF A "FINDER'S FEE" OR
OTHER COMPENSATION FROM A PERSON OR COMPANY UNRELATED TO THE FIRM FOR REFERRALS
OF PROSPECTIVE INVESTORS IS PROHIBITED.
To: Mutual Funds Compliance
I have reviewed and approved this request for permission to engage in
the private securities transaction described. In connection with this request, I
have the following comments:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________
(Name of Branch/Department Manager)
______________ ________________________________________
(Date) (Signature of Branch/Department Manager)
................................................................................
To: _______________________________________________ (Person Requesting Approval)
Your request for permission to engage in the private securities
transaction described on the front of this form has been approved. If any of the
details of that transaction change, please advise Mutual Funds Compliance before
the transaction is completed.
______________
(Date) (Mutual Funds Compliance)
11
<PAGE>
EXHIBIT B
OUTSIDE SECURITIES ACCOUNTS
It is the Firm's policy that all Employee Related Accounts be
maintained at DBAB. Such accounts may be maintained at outside firms only in
extraordinary circumstances. Any such requests for an outside securities account
must be made in writing on a Request for Approval of an Outside Brokerage
Account Form (a copy of which is provided with these procedures) and approved in
advance by the appropriate senior officer of the respective business unit.
Approval will be granted only if:
|X| The other firm offers products of services not available through DBAB; or,
|X| Other extenuating needs or circumstances exist and are demonstrated.
PLEASE SEE THE REQUEST FOR APPROVAL OF OUTSIDE BROKERAGE ACCOUNT FORM BEGINNING
ON THE FOLLOWING PAGE
12
<PAGE>
REQUEST FOR APPROVAL OF AN OUTSIDE BROKERAGE ACCOUNT
To:__________________________________ From:__________________________________
Branch/Department Manager
The undersigned requests approval to maintain the outside brokerage account
described below.
Name & Address__________________________________________________________________
of Broker Dealer________________________________________________________________
Investment Representative for A/C:______________________________________________
A/C #:________________________________ A/C Title:_____________________________
Reason for Request:_____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
I understand that if my request is approved, I must:
1) Comply with the Firm's procedures requiring prior approval by
my supervisor of All transactions in this account; and
2) Make the necessary arrangements for my supervisor to receive
duplicate confirmations and monthly statements for this
account.
____________________________________ _________________________________________
(Name of Person Requesting Approval) (Signature of Person Requesting Approval)
................................................................................
To: Mutual Funds Compliance Date:______________________
I have reviewed and approved this request for the above outside
brokerage account.
___________________________________ ________________________________________
(Name of Branch/Department Manager) (Signature of Branch/Department Manager)
13
<PAGE>
EXHIBIT C
OUTSIDE BUSINESS AFFILIATIONS,
EMPLOYMENT AND COMPENSATION
General Policy
No Asset Management Employee may maintain outside affiliations
(directorships, governorships or trusteeships) with business organizations,
outside employment or receive compensation from any source, without the prior
approval of the senior officer of their respective business unit. In addition,
some instances may require approval by the New York Stock Exchange as well.
Requests for approval must be made on the Outside Business Affiliation,
Employment or Compensation Form (a copy of which is provided with these
procedures). Termination of such affiliations must also be reported.
Service on Board of Eleemosynary Organizations
Asset Management Employees are encouraged not only to provide monetary
support to charitable and civic organizations in their communities, but also to
be generous with their time and effort. Asset Management is justifiably proud
that many Employees serve as officers, directors, trustees or fund-raisers for
numerous eleemosynary organizations.
From time to time, such organizations may need to procure, either
directly or indirectly, brokerage or investment management services that DBAB
provides, and the Employee associated with such an organization may expect
either to provide those services on behalf of DBAB, or be compensated by DBAB as
a result of the use of these services, or to be directed business by an
unrelated service provider recommended by the Employee to that organization.
For the benefit of the eleemosynary organization, DBAB and the Asset
Management Employee associated with the eleemosynary organization, the following
guidelines apply whenever DBAB is providing or is expected to provide services,
directly or indirectly, to the organization with which the employee is
associated:
1. The Employee must disclose his or her employment by DBAB; and,
2. If the Employee expects to be compensated by DBAB in
connection with or as a result of, the services provided by
DBAB or an unrelated service provider recommended by the
Employee, the Employee must disclose this fact; and,
3. If the Employee is a member of the body which decides whether
to employ DBAB, the Employee must abstain from participating
in the selection of the service provider; and,
4. All of the foregoing must be memorialized in writing to the
appropriate officer of the board of the eleemosynary
organization or in the minutes of the applicable meeting(s) of
the governing body at which the selection of the service
provider is made.
PLEASE SEE THE APPROVAL OF OUTSIDE BUSINESS AFFILIATION, EMPLOYMENT OR
COMPENSATION FORM ON THE FOLLOWING PAGE
14
<PAGE>
OUTSIDE BUSINESS AFFILIATION, EMPLOYMENT OR COMPENSATION
FIRM POLICY
No Employee may maintain any outside affiliations (e.g. officer or
director, governor, or trustee etc.) with any business organization, outside
employment, or receive compensation from any source without prior approval of
the individual's Branch/Department Manager and Mutual Funds Compliance.
Outside affiliation relationships with non-business organizations (e.g.
church, civic organization, etc.) do not require prior approval unless the
Employee wants to establish and handle an account for the organization.
Generally, Employee's may not serve as trustee for any such accounts while they
also serve as IR.
Please provide the information requested below, sign on the back, and
submit the form to you Branch/Department Manager for approval. You will be
informed if approval is granted.
1. Employee Name:_________________________________________________________
2. Organization with which you wish to become affiliated, or organization
or person by whom you wish to be employed or compensated:
a. Name:_________________________________________________________
b. Address:______________________________________________________
c. Nature of Business:___________________________________________
d. Does the organization have publicly traded securities?________
e. If so, where are they traded?_________________________________
f. Does the organization have a brokerage account at the Firm?___
g. If so, what is the account number and who is the IR?__________
3. State the nature of your proposed affiliation or employment, or the
nature of the services for which you will be compensated, and briefly
describe your duties:__________________________________________________
_______________________________________________________________________
_______________________________________________________________________
4. On what date will your proposed affiliation, employment or compensation
begin?_____________________
5. a. Will you be compensated?____________________________________________
b. If so, how much?____________________________________________________
6. State the nature and extent of your financial interest, if any, in the
organization:__________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
7. State the amount of time you will devote to the organization's business
and indicate whether you will devote any time to the organization's
business during normal working hours:
_______________________________________________________________________
8. State the reasons why you have been asked to become affiliated with the
organization (social contact, knowledge of the industry,
etc.)__________________________________________
_______________________________________________________________________
................................................................................
To: __________________________________________ (Branch/Department Manager)
15
<PAGE>
The undersigned requests approval of the outside business affiliation,
employment or compensation described on the reverse side of this request.
_________________________________________
(Name of Person Requesting Approval)
_________________ _________________________________________
(Date) (Signature of Person Requesting Approval)
................................................................................
To: Mutual Funds Compliance
I have reviewed and approved this request for the outside business
affiliation, employment or compensation described on the reverse side of this
request. In connection with this request, I have the following comments:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________________________________
(Name of Branch/Department Manager)
_________________ _________________________________________
(Date) (Signature of Branch/Department Manager)
................................................................................
To: _______________________________________________ (Person Requesting Approval)
The outside business affiliation, employment or compensation described
on the reverse side of this request has been approved. Please advise your
Manager and the Legal/Compliance Department in writing if any of the information
on the reverse side of this request changes materially.
_________________ _________________________________________
(Date) (Mutual Funds Compliance)
16
<PAGE>
EXHIBIT D
ICC EMPLOYEE TRANSACTION APPROVAL FORM
- --------------------------------------------------------------------------------
EMPLOYEE NAME
- --------------------------------------------------------------------------------
NAME OF SECURITY
- --------------------------------------------------------------------------------
BUY or SELL/ # OF SHARES
- --------------------------------------------------------------------------------
TRADE DATE
- --------------------------------------------------------------------------------
ACCOUNT #
- --------------------------------------------------------------------------------
BROKER / BROKERAGE
- --------------------------------------------------------------------------------
Are you aware of any fund trades of the securities named above in the past 3
days or of the intention of any fund manager to trade the securities named above
within the next 7 days? [ ] YES [ ] NO
If the transaction described above is a purchase, does it involve the
acquisition of shares of an issuer in an initial public offering? [ ] YES [ ] NO
(Purchases of shares of an issuer in an initial public offering are prohibited.)
If the transaction described above is a transaction for profit, have you held
your position in the securities for more than 60 days? [ ] YES [ ] NO
(If transaction is for profit, position must be held a minimum of sixty (60)
days prior to sale.)
Approval ___________________________
Corporate Compliance 212-469-8787 Corporate Pre-Clearance # ____
- --------------------------------------------------------------------------------
FOR COMPLIANCE DEPARTMENT USE ONLY
- -Market cap: ____ over $2 billion ____ under $2 billion
- -Fund trades do not exceed 10% of Issuer's average daily trading volume for last
15 days: ____ yes ____ no
- -Blackout period applies: ____ yes ____ no
_____ Initials
17
<PAGE>
EXHIBIT E
ALEX. BROWN INVESTMENT MANAGEMENT
INVESTMENT COMPANY CAPITAL CORP.
INITIAL/ANNUAL HOLDINGS REPORT
NAME: ________________________
DATE:
I hereby certify that I have read, understand and have complied with the
memorandum entitled: Personal Securities Trading Policies and Procedures.
Furthermore, I am providing/confirming below certain additional information.
IF MORE SPACE IS NEEDED, ATTACH AN ADDITIONAL FORM
1. Provided below is a description of all Employee Related Accounts (including
open-end investment company accounts), as described in these procedures,
which I maintain or in which I have a beneficial interest.
PLEASE ATTACH A COPY OF THE MOST RECENT STATEMENT FOR ALL ACCOUNTS LISTED
BROKER/DEALER OR BANK
ACCOUNT NAME ACCOUNT NUMBER AT WHICH MAINTAINED
------------ -------------- -------------------
____________ ______________ ____________________________
____________ ______________ ____________________________
____________ ______________ ____________________________
____________ ______________ ____________________________
____________ ______________ ____________________________
____________ ______________ ____________________________
____________ ______________ ____________________________
18
<PAGE>
2. Provided below is a description of securities in which I have any
direct or indirect beneficial interest.
NAME OF CLASS SHARE/ PRINCIPAL AMOUNT
ISSUER OF SECURITIES UNIT AMOUNT (IF DEBT SECURITY)
- ------ ------------- ----------- ------------------
- ----------------------- ------------------- ------------ ------------------
- ----------------------- ------------------- ------------ ------------------
- ----------------------- ------------------- ------------ ------------------
- ----------------------- ------------------- ------------ ------------------
- ----------------------- ------------------- ------------ ------------------
- ----------------------- ------------------- ------------ ------------------
3. I have engaged in the following private securities transactions during
the calendar year.
NAME OF ISSUER DATE OF TRANSACTION NATURE OF INVESTMENT
-------------- ------------------- --------------------
-------------- ------------------- --------------------
-------------- ------------------- --------------------
-------------- ------------------- --------------------
-------------- ------------------- --------------------
-------------- ------------------- --------------------
-------------- ------------------- --------------------
___________
(Date) (Signature)
- --------------------------------------------------------------------------------
FOR COMPLIANCE DEPARTMENT USE ONLY
Reviewed by:
Name: ________________________________
Signature: ___________________________
EXHIBIT F
DISCRETIONARY ACCOUNT CERTIFICATION FORM
I, ____________________ hereby certify that I am a representative of
the investment manager, trustee or outside bank at which the account described
below is maintained:
ACCOUNT NAME: ___________________________________________
ACCOUNT NUMBER: ___________________________________________
FIRM AT WHICH
MAINTAINED: ___________________________________________
BENEFICIARY(IES): ___________________________________________
19
<PAGE>
I further certify that neither the Beneficiary named above nor any
close relative of the Beneficiary exercises investment discretion over the
account, participates in investment decisions with respect to the account or is
informed in advance of transactions in the account.
- ----------------------------------
(Signature)
- ----------------------------------
(Name)
- ----------------------------------
(Title)
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard R. Burt, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, 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/ Richard R. Burt
---------------------------
Richard R. Burt
Date: April 15, 2000
<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,
Amy M. Olmert and Daniel O. Hirsch, 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 15, 2000
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph R. Hardiman, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, 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/ Joseph R. Hardiman
---------------------------
Joseph R. Hardiman
Date: April 15, 2000
<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,
Amy M. Olmert and Daniel O. Hirsch, 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 15, 2000
<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,
Amy M. Olmert and Daniel O. Hirsch, 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 15, 2000
<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,
Amy M. Olmert and Daniel O. Hirsch, 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 15, 2000
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOMEFUND, 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, Amy M.
Olmert and Daniel O. Hirsch, 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/ Carl W. Vogt
---------------------------
Carl W. Vogt
Date: April 15, 2000
<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,
Amy M. Olmert and Daniel O. Hirsch, 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 15, 2000
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Robert H. Wadsworth, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, 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/ Robert H. Wadsworth
---------------------------
Robert H. Wadsworth
Date: April 15, 2000
<PAGE>
FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Charles A. Rizzo, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, 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
Treasurer 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/ Charles A. Rizzo
---------------------------
Charles A. Rizzo
Date: April 15, 2000
