<PAGE>
As Filed With the Securities and Exchange Commission on October 1, 1997
File No. 33-86832
811-8886
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 8 [X]
FLAG INVESTORS EQUITY PARTNERS 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) (Zip Code)
Registrant's Telephone Number, including Area Code: (410) 727-1700
--------------
Edward J. Veilleux
On South Street
Baltimore, MD 21202
---------------------------------------
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
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It is proposed that this filing will become effective (check appropriate box)
_X_ immediately upon filing pursuant to paragraph (b)
___ on October 1, 1997 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on [date] pursuant to paragraph (a) of Rule 485.
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Registrant has elected to maintain registration of an indefinite number of
shares of Common Stock, $.001 par value, pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed its Rule 24f-2 Notice for its
fiscal year ended May 31, 1997, on July 17, 1997.
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
(Class A and Class B Shares)
October 1, 1997
Cross Reference Sheet
<TABLE>
<CAPTION>
Items Required by Form N-1A
- ---------------------------
<S> <C> <C>
Part A Information Required in Prospectus Registration Statement Heading
- ------ ---------------------------------- ------------------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Investment Program;
General Information
Item 5. Management of the Fund Management of the Fund;
Investment Advisor and
Sub-Advisor; Distributor;
Custodian, Transfer
Agent and Accounting Services
Item 5A. Management's Discussion of Fund *
Performance
Item 6. Capital Stock and Other Securities Cover Page;
Dividends and Taxes;
General Information
Item 7. Purchase of Securities Being Offered How to Invest in
the Fund; Distributor
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Pending Legal Proceedings **
Information Required in a Statement
Part B of Additional Information
- ------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
and History
Item 13. Investment Objectives and Policies Investment Objectives,
Policies and Risk Considerations
Item 14. Management of the Fund Management of
the Fund
Item 15. Control Persons and Principal Holders Control Persons and
of Securities Principal Holders of
Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Custodian, Transfer Agent and
Accounting Services;
Independent Accountants
Item 17. Brokerage Allocation Brokerage
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 18. Capital Stock and Other Securities Capital Stock; Semi-Annual
Reports
Item 19. Purchase, Redemption and Pricing of Valuation of Shares
Securities Being Offered and Redemption
Item 20. Tax Status Federal Tax Treatment of
Dividends and
Distributions
Item 21. Underwriters Distribution of Fund
Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C Other Information
- ------ -----------------
Part C contains the information required by the items
contained therein under the items set forth in the form.
</TABLE>
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* Information required by Item 5A is contained in Registrant's 1996 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
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LOGO
FLAG INVESTORS
EQUITY PARTNERS FUND, INC.
(Class A and Class B Shares)
Prospectus & Application -- October 1, 1997
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This mutual fund (the "Fund") is designed to seek long-term growth of capital
and, secondarily, current income. The Fund seeks to achieve this objective
primarily through a policy of diversified investments in equity securities,
including common stocks and convertible securities.
Shares of the Fund are available through your securities dealer or the Fund's
transfer agent. This Prospectus relates to Flag Investors Class A Shares
("Class A Shares") and Flag Investors Class B Shares ("Class B Shares") of the
Fund. The separate classes provide investors with alternatives as to sales load
and fund expenses. (See "How to Invest in the Fund.")
This Prospectus sets forth basic information that investors should know about
the Fund prior to investing and should be retained for future reference. A
Statement of Additional Information dated October 1, 1997 has been filed with
the Securities and Exchange Commission (the "SEC") and is hereby incorporated
by reference. It is available upon request and without charge by calling the
Fund at (800) 767-FLAG.
TABLE OF CONTENTS
Fee Table ................................. 1
Financial Highlights ..................... 2
Investment Program ..................... 3
Investment Restrictions .................. 4
How to Invest in the Fund ............... 4
How to Redeem Shares ..................... 8
Telephone Transactions .................. 9
Dividends and Taxes ..................... 9
Management of the Fund .................. 10
Investment Advisor and Sub-Advisor ...... 10
Distributor .............................. 11
Custodian, Transfer Agent and
Accounting Services .................. 12
Performance Information .................. 12
General Information ..................... 12
Application .............................. A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY OR ANY OTHER BANK. THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE>
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FEE TABLE
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Shareholder Transaction Expenses:
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
Initial Sales Deferred
Charge Sales Charge
Alternative Alternative
--------------- ----------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .............................. 4.50%* None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) ........................... None None
Maximum Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ............... 0.50%* 4.00%**
Annual Fund Operating Expenses (net of fee waivers and reimbursements)
(as a percentage of average daily net assets):
Management Fees (net of fee waivers) .............................. 0.78%*** 0.78%***
12b-1 Fees ...................................................... 0.25% 0.75%
Other Expenses (including a 0.25% shareholder
servicing fee for Class B Shares) .............................. 0.32% 0.57%****
---- ----
Total Fund Operating Expenses (net of fee waivers) ............... 1.35%*** 2.10%***
==== ====
</TABLE>
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* Purchases of $1 million or more of Class A Shares by persons not otherwise
eligible for sales load waivers are not subject to an initial sales
charge; however, a contingent deferred sales charge of 0.50% may be
imposed upon redemption. (See "How to Invest in the Fund -- Offering
Price.")
** A declining contingent deferred sales charge will be imposed on redemptions
of Class B Shares made within six years of purchase. Class B Shares will
automatically convert to Class A Shares six years after purchase. (See
"How to Invest in the Fund -- Class B Shares.")
*** The Fund's investment advisor intends, but is not obligated, to waive its
fee to the extent required so that Total Fund Operating Expenses do not
exceed 1.35% of the Class A Shares' average daily net assets and 2.10% of
the Class B Shares' average daily net assets. Absent fee waivers,
Management Fees would be 0.91% of the Fund's average daily net assets and
Total Fund Operating Expenses would be 1.48% of the Class A Shares'
average daily net assets and 2.23% of the Class B Shares' average daily
net assets.
**** A portion of the shareholder servicing fee is allocated to member firms of
the National Association of Securities Dealers, Inc. and qualified banks
for services provided and expenses incurred in maintaining shareholder
accounts, responding to shareholder inquiries, and providing information
to shareholders about their investments.
<TABLE>
<CAPTION>
Example: 1 year 3 years 5 years 10 years
- -------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:*
Class A Shares .............................. $ 58 $ 86 $ 116 $ 200
Class B Shares .............................. $ 61 $ 96 $ 133 $ 206
</TABLE>
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on the same
investment, assuming no redemption:*
Class B Shares .............................. $ 21 $ 66 $ 113 $ 206
</TABLE>
- -----------
* The Example is based on Total Fund Operating Expenses, net of fee waivers.
Absent fee waivers, expenses would be higher.
<PAGE>
The Expenses and Example should not be considered a representation of
future expenses. Actual expenses may be greater or less than those shown.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Fund will bear directly and indirectly. A
person who purchases shares of either class through a financial institution may
be charged separate fees by the financial institution.
The rules of the SEC require that the maximum sales charge be reflected in
the above table. However, certain investors may qualify for reduced sales
charges or no sales charge at all. (See "How to Invest in the Fund -- Class A
Shares.") Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders of the Fund may pay more than the equivalent of the maximum
front-end sales charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD Rules").
1
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<PAGE>
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FINANCIAL HIGHLIGHTS
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The financial highlights included in the following tables are a part of
the Fund's financial statements for the periods indicated and have been audited
by Coopers & Lybrand L.L.P., independent accountants. The financial statements
and financial highlights for the fiscal year ended May 31, 1997 and the report
thereon of Coopers & Lybrand L.L.P. are included in the Statement of Additional
Information. Additional performance information is contained in the Fund's
Annual Report for the fiscal year ended May 31, 1997 which can be obtained at
no charge by calling the Fund at (800) 767-FLAG.
(For a share outstanding throughout each period)
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<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------
For the
Period
For the Year Feb. 13, 1995(1)
Ended May 31, through
1997 1996 May 31, 1995
-------------- ------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ...... $ 13.09 $ 10.77 $ 10.00
------------- ----------- ------------
Income from Investment Operations:
Net investment income ........................ 0.08 0.17 0.12
Net realized and unrealized gain on
investments ................................. 3.96 2.29 0.65
------------- ----------- ------------
Total from Investment Operations ............ 4.04 2.46 0.77
Less Distributions:
Distributions from net investment income
and net realized short-term gains ......... (0.13) (0.14) --
------------- ----------- ------------
Distributions from net realized long-term
gains .................................... (0.07) -- --
------------- ----------- ------------
Total distributions ........................ (0.20) (0.14) --
------------- ----------- ------------
Net asset value at end of period ............ $ 16.93 $ 13.09 $ 10.77
============= =========== ============
Total Return(2) ............................... 31.17% 23.05% 7.70%
Ratios to Average Daily Net Assets:
Expenses .................................... 1.35%(4) 1.35%(4) 1.35%(3,4)
Net investment income ........................ 0.61%(5) 1.52%(5) 3.74%(3,5)
Supplemental Data:
Net assets at end of period (000) ............ $ 113,030 $ 64,230 $ 38,612
Portfolio turnover rate ..................... 17.60% 0.73% --
Average commissions per share(8) ........... $ 0.068 -- --
------------- ----------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class B Shares
-----------------------------------------------
For the
Period
For the Year Feb. 13, 19951
Ended May 31, through
1997 1996 May 31, 1995
--------------- ------------- ---------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ...... $ 13.03 $ 10.75 $ 10.00
------------- ------------- ------------
Income from Investment Operations:
Net investment income ........................ (0.04) 0.07 0.07
Net realized and unrealized gain on
investments ................................. 3.96 2.31 0.68
------------- ------------- ------------
Total from Investment Operations ............ 3.92 2.38 0.75
Less Distributions:
Distributions from net investment income
and net realized short-term gains ......... (0.04) (0.10) --
------------- ------------- ------------
Distributions from net realized long-term
gains .................................... (0.07) -- --
------------- ------------- ------------
Total distributions ........................ (0.11) (0.10) --
------------- ------------- ------------
Net asset value at end of period ............ $ 16.84 $ 13.03 $ 10.75
============= ============= ============
Total Return(2) ............................... 30.28% 22.17% 7.50%
Ratios to Average Daily Net Assets:
Expenses .................................... 2.10%(6) 2.10%(6) 2.10%(3,6)
Net investment income ........................ (0.16)%(7) 0.71%(7) 1.97%(3,7)
Supplemental Data:
Net assets at end of period (000) ............ $ 15,670 $ 5,302 $ 2,159
Portfolio turnover rate ..................... 17.60% 0.73% --
Average commissions per share(8) ........... $ 0.068 -- --
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.
(4) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.48%, 1.77% and 3.76% (annualized) for Class A
Shares for the years ended May 31, 1997, 1996 and the period ended May 31,
1995, respectively.
(5) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.48%, 1.10% and 1.33% (annualized)
for Class A Shares for the years ended May 31, 1997, 1996 and the period
ended May 31, 1995, respectively.
(6) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 2.23%, 2.52% and 4.22% (annualized) for Class B
Shares for the years ended May 31, 1997, 1996 and the period ended May 31,
1995, respectively.
(7) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been (0.28)%, 0.29% and (0.15)%
(annualized) for Class B Shares for the years ended May 31, 1997, 1996 and
the period ended May 31, 1995, respectively.
(8) Disclosure is required for fiscal years beginning after September 1, 1995.
Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
2
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<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies
and Risk Considerations
The Fund's investment objective is to seek long-term growth of capital and,
secondarily, current income. The Fund seeks to achieve this objective primarily
through a policy of diversified investments in equity securities, including
common stocks and convertible securities. The Fund's investment objective is a
fundamental policy of the Fund and may not be changed without shareholder
approval. There can be no assurance, however, that the Fund will achieve its
investment objective.
The Fund's investment advisor (the "Advisor") and the Fund's sub-advisor
(the "Sub-Advisor") (collectively, the "Advisors") are responsible for managing
the Fund's investments. (See "Investment Advisor and Sub-Advisor.") The
Advisors consider both the opportunity for gain and the risk of loss in making
investments.
Under normal market conditions, the Fund will invest as fully as feasible
in common stocks and other equity investments (including preferred stocks,
convertible debt, warrants and other securities convertible into or
exchangeable for common stocks). At least 65% of the Fund's total assets will
be so invested. Convertible securities are securities that may be converted
either at a stated price or rate within a specified period of time into a
specified number of shares of common stock. Preferred stock is a class of
capital stock that pays dividends at a specified rate and that has preference
over common stock in the payment of dividends and the liquidation of assets.
Warrants are instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period. In
selecting securities for the Fund's portfolio, the Advisors expect to apply a
"flexible value" approach to the selection of equity investments. Under this
approach, the Advisors will attempt to identify securities that are undervalued
in the marketplace but will also consider such factors as current and expected
earnings, dividends, cash flows and asset values in their evaluation of a
security's investment potential.
The Fund may invest up to 10% of its total assets in non-convertible debt
securities. Up to all of any such investments may be in securities that are
rated below investment grade. (See "Investments in Non-Investment Grade
Securities" below.) Any remaining assets of the Fund not invested as described
above may be invested in high quality money market instruments. For temporary,
defensive purposes, the Fund may invest up to 100% of its assets in high
quality short-term money market instruments, including repurchase agreements,
and in bills, notes or bonds issued by the U.S. Treasury Department or by
agencies of the U.S. Government. In addition, the Fund may invest up to 10% of
its net assets in illiquid securities.
The Fund may purchase Rule 144A Securities. Rule 144A Securities are
restricted securities in that they have not been registered under the
Securities Act of 1933, but they may be traded between certain qualified
institutional investors, including investment companies. The presence or
absence of a secondary market may affect the value of the Rule 144A Secur-
ities. The Fund's Board of Directors has established guidelines and procedures
to be utilized to determine the liquidity of such securities.
Investments in Non-Investment Grade Securities
Where deemed appropriate by the Advisors, the Fund may invest up to 10%
of its total assets (measured at the time of the investment ) in lower quality
non-convertible debt securities [securities rated BB or lower by Standard &
Poor's Ratings Group ("S&P") or Ba or lower by Moody's Investors Service, Inc.
("Moody's") and unrated securities of comparable quality]. Lower rated debt
securities, also known as "junk bonds," are considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. Securities in the lowest rating category that the Fund may
purchase (securities rated C by either S&P or Moody's) may present a particular
risk of default, or may be in default and in arrears in payment of principal
and interest. In addition, C-rated securities may be regarded as having
extremely poor prospects of ever attaining investment standing. Yields and
market values of these bonds will fluctuate over time, reflecting changing
interest rates and the market's perception of credit quality and the outlook
for economic growth. When economic conditions appear to be deteriorating, lower
rated bonds may decline in value, regardless of prevailing interest rates.
Accordingly, adverse economic developments, including a recession or a
substantial period of rising interest rates, may disrupt the high yield bond
market, affecting both the value and liquidity of such bonds. An economic
downturn could adversely affect the ability of issuers of such bonds to make
payments of principal and interest to a greater extent than issuers of higher
rated bonds might be affected. The ratings categories of S&P and Moody's are
described more fully in the Appendix to the Statement of Additional
Information. During the fiscal year ended May 31, 1997, the Fund held no below
investment grade bonds.
3
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<PAGE>
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Investments in Repurchase Agreements
The Fund may agree to purchase U.S. Government securities from
creditworthy financial institutions, such as banks or broker-dealers, subject
to the seller's agreement to repurchase the securities at an established time
and price. Default by or bankruptcy proceedings with respect to the seller may,
however, expose the Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.
Investments in Securities of Foreign Issuers
From time to time, the Fund may invest in American Depositary Receipts,
which are interests in securities of foreign companies, and up to 10% of the
Fund's total assets in debt and equity securities of foreign issuers not
publicly traded in the United States when the Advisors believe that such
investments provide good opportunities for achieving income and capital gains
without undue risk.
Nevertheless, foreign investments involve different risks from
investments in the United States, including currency, market and political
risks.
Accordingly, the Advisors intend to seek securities of companies in, and
governments of, developed, stable nations.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund's investment program is subject to a number of restrictions that
reflect both self-imposed standards and federal regulatory limitations. The
investment restrictions recited below are matters of fundamental policy and may
not be changed without shareholder approval. 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 industry); or
2) With respect to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any single issuer or purchase more
than 10% of the outstanding voting securities of any one issuer, except
the U.S. Government, its agencies and instrumentalities.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
HOW TO INVEST IN THE FUND
- --------------------------------------------------------------------------------
Class A and Class B Shares may be purchased from the Fund's distributor
(the "Distributor"), through any securities dealer that is authorized to
service shareholder accounts ("Participating Dealers") or through any financial
institution that is authorized to service shareholder accounts ("Shareholder
Servicing Agents"). Shares of either class may also be purchased by completing
the Application Form attached to this Prospectus and returning it, together
with payment of the purchase price to the address shown on the Application
Form. Participating Dealers or Shareholder Servicing Agents and their
investment representatives may receive different levels of compensation
depending on which class of shares they sell.
The Class A and Class B alternatives permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and
other circumstances. Investors should consider whether, during the anticipated
life of their investment in the Fund, the combination of sales charge and
distribution fee on Class A Shares is more favorable than the combination of
distribution/service fees and contingent deferred sales charge on Class B
Shares. In almost all cases, investors planning to purchase $100,000 or more of
Fund shares will pay lower aggregate charges and expenses by purchasing Class A
Shares. Accordingly, the Fund will not accept purchases for Class B Shares in
excess of $100,000 per account. (See "Fee Table.")
The minimum initial investment in shares of either class is $2,000,
except that the minimum initial investment for shareholders of any other Flag
Investors fund or class is $500 and the minimum initial investment for
4
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<PAGE>
- --------------------------------------------------------------------------------
participants in the Fund's Automatic Investing Plan is $250. Each subsequent
investment must be at least $100 per class, except that the minimum subsequent
investment under the Fund's Automatic Investing Plan is $250 for quarterly
investments and $100 for monthly investments. (See "Purchases Through Automatic
Investing Plan" below.) There is no minimum investment requirement for
qualified retirement plans (i.e., 401(k) plans or pension and profit sharing
plans). IRA accounts are, however, subject to the $2,000 minimum initial
investment requirement. There is no minimum investment requirement for spousal
IRA accounts.
The Fund reserves the right to suspend the sale of shares at any time at
the discretion of the Distributor and the Advisors. Orders for purchases of
shares are accepted on any day on which the New York Stock Exchange is open for
business (a "Business Day"). Purchase orders for shares will be executed at a
per share purchase price equal to the net asset value next determined after
receipt of the purchase order plus any applicable front-end sales charge (the
"Offering Price") on the date such net asset value is determined (the "Purchase
Date"). Purchases made by mail must be accompanied by payment of the Offering
Price. Purchases made through the Distributor or a Participating Dealer or
Shareholder Servicing Agent must be in accordance with such entity's payment
procedures. The Distributor may, in its sole discretion, refuse to accept any
purchase order.
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
Business Day. Net asset value per share of a class is calculated by valuing its
share of the Fund's assets, deducting all liabilities attributable to that
class, and dividing the resulting amount by the number of then outstanding
shares of the class. For this purpose, portfolio securities are given their
market value where feasible. Securities or other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established from time to time and
monitored by the Fund's Board of Directors. Debt obligations with maturities of
60 days or less are valued at amortized cost, which constitutes fair value as
determined by the Fund's Board of Directors. Because of differences between the
classes of shares in distribution/service fees, the net asset value per share
of the classes differs at times.
Offering Price
Shares may be purchased from the Distributor, Participating Dealers or
Shareholder Servicing Agents at the Offering Price, which for Class A Shares
includes a sales charge that is calculated as a percentage of the Offering
Price and for Class B Shares is net asset value.
Class A Shares
The sales charge on Class A Shares, which decreases as the amount of
purchase increases, is shown below:
Sales Charge
as % of Dealer
------------------------- Retention
Offering Net Amount as % of
Amount of Purchase Price Invested Offering Price
- -----------------------------------------------------------------------
Less than $50,000......... 4.50% 4.71% 4.00%
$ 50,000 - $99,999... 3.50% 3.63% 3.00%
$ 100,000 -$249,999... 2.50% 2.56% 2.00%
$ 250,000 -$499,999... 2.00% 2.04% 1.50%
$ 500,000 -$999,999... 1.50% 1.52% 1.25%
$1,000,000 and over ... None* None* None*
- -----------
* Purchases of $1 million or more may be subject to a contingent deferred sales
charge. (See below.) The Distributor may make payments to Participating
Dealers and Shareholder Servicing Agents in the amount of up to 0.50% of
the Offering Price.
<PAGE>
A shareholder who purchases additional Class A Shares may obtain reduced
sales charges, as set forth in the table above, through a right of
accumulation. In addition, an investor may obtain reduced sales charges as set
forth above through a right of accumulation of purchases of Class A Shares and
purchases of shares of other Flag Investors funds with the same or higher sales
charge. The applicable sales charge will be determined based on the total of
(a) the shareholder's current purchase plus (b) an amount equal to the then
current net asset value or cost, whichever is higher, of all Class A Shares and
of all Flag Investors shares described above and any Flag Investors Class D
shares held by the shareholder. To obtain the reduced sales charge through a
right of accumulation, the shareholder must provide the Distributor, either
directly or through a Participating Dealer or Shareholder Servicing Agent, as
applicable, with sufficient information to verify that the shareholder has such
a right. The Fund may amend or terminate this right of accumulation at any time
as to subsequent purchases.
The term "purchase" refers to an individual purchase by a single
purchaser, or to concurrent purchases, which will be aggregated, by a
purchaser, the purchaser's spouse and their children under the age of 21 years
purchasing Class A Shares for their own account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of
5
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<PAGE>
- --------------------------------------------------------------------------------
Intent that states the investor's intention to invest at least $50,000 within a
13-month period in Class A Shares. Each purchase of Class A Shares under a
Letter of Intent will be made at the Offering Price applicable at the time of
such purchase to the full amount indicated on the Letter of Intent. A Letter of
Intent is not a binding obligation upon the investor to purchase the full
amount indicated. The minimum initial investment under a Letter of Intent is 5%
of the full amount. Shares purchased with the first 5% of the full amount will
be held in escrow (while remaining registered in the name of the investor) to
secure payment of the higher sales charge applicable to the Class A Shares
actually purchased if the full amount indicated is not invested. Such escrowed
shares will be involuntarily redeemed to pay the additional sales charge, if
necessary. When the full amount indicated has been purchased, the escrowed
shares will be released. An investor who wishes to enter into a Letter of
Intent in conjunction with an investment in Class A Shares may do so by
completing the appropriate section of the Application Form attached to this
Prospectus.
No sales charge will be payable at the time of purchase on investments of
$1 million or more of Class A Shares. However, a contingent deferred sales
charge may be imposed on such investments in the event of a redemption within
24 months following the purchase, at the rate of 0.50% on the lesser of the
value of the Class A Shares redeemed or the total cost of such shares. No
contingent deferred sales charge will be imposed on purchases of $3 million or
more of Class A Shares redeemed within 24 months of purchase if the
Participating Dealer and the Distributor have entered into an agreement under
which the Participating Dealer agrees to return any payments received on the
sale of such shares. In determining whether a contingent deferred sales charge
is payable, and, if so, the amount of the charge, it is assumed that shares not
subject to such charge are the first redeemed followed by other Class A Shares
held for the longest period of time.
The Fund may sell Class A Shares at net asset value (without sales
charge) to the following: (i) banks, bank trust departments, registered
investment advisory companies, financial planners and broker-dealers purchasing
shares on behalf of their fiduciary and advisory clients, provided such clients
have paid an account management fee for these services (investors may be
charged a fee if they effect transactions in Fund shares through a broker or
agent); (ii) qualified retirement plans; (iii) participants in a Flag Investors
fund payroll savings plan program; (iv) investors who have redeemed Class A
Shares, or shares of any other mutual fund in the Flag Investors family of
funds with the same or higher sales charges, in an amount that is not more than
the total redemption proceeds, provided that the purchase is within 90 days
after the redemption; and (v) current or retired Directors of the Fund and
directors and employees (and their immediate families) of the Advisor or
Distributor, Participating Dealers and their respective affiliates.
Class A Shares may also be purchased through a Systematic Purchase Plan.
An investor who wishes to take advantage of such a plan should contact the
Distributor, a Participating Dealer or Shareholder Servicing Agent.
Class B Shares
No sales charge will be payable at the time of purchase of Class B
Shares. However, a contingent deferred sales charge will be imposed on certain
Class B Shares redeemed within six years of purchase. The charge is assessed on
an amount equal to the lesser of the then-current market value of the Class B
Shares redeemed or the total cost of such shares. In addition, no charge is
assessed on redemptions of Class B Shares derived from reinvestment of
dividends or capital gains distributions.
In determining whether the contingent deferred sales charge is applicable
to a redemption, the calculation is made in the manner that results in the
lowest possible rate. Therefore, it is assumed that the redemption is first of
any Class B Shares in the shareholder's account that represent reinvested
dividends and distributions and second of Class B Shares held the longest
during the six-year period. The amount of the contingent deferred sales charge,
if any, will vary depending on the number of years from the time of payment for
the purchase of Class B Shares until the redemption of such shares (the
"holding period"). For purposes of determining this holding period, all
payments during a month are aggregated and deemed to have been made on the
first day of the month. The following table sets forth the rates of the
contingent deferred sales charge.
Contingent Deferred
Sales Charge
(as a percentage of
Year Since Purchas the dollar amount
Payment was Made subject to charge)
- ------------------------------------------------------------
First .......................... 4.0%
Second ....................... 4.0%
Third .......................... 3.0%
Fourth ....................... 3.0%
Fifth .......................... 2.0%
Sixth .......................... 1.0%
Thereafter .................... None*
- ------------------------------------------------------------
<PAGE>
* As described more fully below, Class B Shares automatically convert to Class
A Shares six years after the beginning of the calendar month in which the
purchase order was accepted.
Waiver of Contingent Deferred Sales Charge. The contingent deferred sales
charge will be
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waived on the redemption of Class B Shares (i) following the death or initial
determination of disability (as defined in the Internal Revenue Code of 1986,
as amended) of a shareholder; or (ii) to the extent that the redemption
represents a minimum required distribution from an individual retirement
account or other retirement plan to a shareholder who has attained the age of
70 1/2. The waiver with respect to (i) above is only applicable in cases where
the shareholder account is registered (a) in the name of an individual person,
(b) as a joint tenancy with rights of survivorship, (c) as community property
or (d) in the name of a minor child under the Uniform Gifts or Uniform
Transfers to Minors Acts. A shareholder, or his or her representative, must
notify the Fund's transfer agent (the "Transfer Agent") prior to the time of
redemption if such circumstances exist and the shareholder is eligible for this
waiver. For information on the imposition and waiver of the contingent deferred
sales charge, contact the Transfer Agent at (800) 553-8080.
Automatic Conversion to Class A Shares. Six years after the beginning of
the calendar month in which the purchase order for Class B Shares is accepted,
such Class B Shares will automatically convert to Class A Shares and will no
longer be subject to the higher distribution and service fees. Such conversion
will be on the basis of the relative net asset values of the two classes,
without the imposition of any sales load, fee or other charge. The conversion
is not a taxable event to the shareholder.
For purposes of conversion to Class A Shares, shares received as
dividends and other distributions paid on Class B Shares in the shareholder's
account will be considered to be held in a separate sub-account. Each time any
Class B Shares in the shareholder's account (other than those in the
sub-account) convert to Class A Shares, an equal pro rata portion of the Class
B Shares in the sub-account will also convert to Class A Shares.
Class B Shares may also be purchased through a Systematic Purchase Plan.
An investor who wishes to take advantage of such a plan should contact the
Distributor or a Participating Dealer or Shareholder Servicing Agent.
Purchases by Exchange
As permitted pursuant to any rule, regulation or order promulgated by the
SEC, shareholders of other Flag Investors funds may exchange their shares of
those funds for an equal dollar amount of Fund shares of the same class with
the same sales load structure. Shares issued pursuant to this offer will not be
subject to the sales charges described above or any other charge. In addition,
shareholders of Class A shares of any mutual fund in the Flag Investors family
of funds with a lower sales charge may exchange into Class A Shares upon
payment of the difference in sales charges except that the exchange will be
made at net asset value if the shares of such funds have been held for more
than 24 months. Shareholders of Flag Investors Cash Reserve Prime Class A
Shares may exchange into Class A Shares upon payment of the difference in sales
charges, as applicable, or into Class B Shares at net asset value, subject
thereafter to any applicable contingent deferred sales charge.
When a shareholder acquires Fund shares through an exchange from another
fund in the Flag Investors family of funds, the Fund will combine the period
for which the original shares were held prior to the exchange with the holding
period of the shares acquired in the exchange for purposes of determining what,
if any, contingent deferred sales charge is applicable upon a redemption of any
such shares.
The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day, provided
that the exchange request is received prior to 4:00 p.m. (Eastern Time) or the
close of the New York Stock Exchange, whichever is earlier. Exchange requests
received after 4:00 p.m. (Eastern Time) will be effected on the next Business
Day.
Shareholders of any mutual fund not affiliated with the Fund, who have
paid a sales charge, may exchange shares of such fund for an equal dollar
amount of Class A Shares by submitting to the Distributor or a Participating
Dealer the proceeds of the redemption of such shares, together with evidence of
the payment of a sales charge and the source of such proceeds. Class A Shares
issued pursuant to this offer will not be subject to the sales charges
described above or any other charge.
The exchange privilege with respect to other Flag Investors funds may
also be exercised by telephone. (See "Telephone Transactions" below.) The Fund
may modify or terminate this offer of exchange at any time upon 60 days' prior
written notice to shareholders.
<PAGE>
Purchases Through Automatic Investing Plan
Shareholders may purchase either Class A Shares or Class B Shares
regularly by means of an Automatic Investing Plan with a pre-authorized check
drawn on their checking accounts. Under this plan, the shareholder may elect to
have a specified amount invested monthly or quarterly in either Class A Shares
or Class B Shares. The amount specified by the shareholder will be withdrawn
from the shareholder's checking account using the pre-authorized check. This
amount will be
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<PAGE>
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invested in the class of shares selected by the shareholder at the applicable
Offering Price determined on the date the amount is available for investment.
Participation in the Automatic Investing Plan may be discontinued either by the
Fund or the shareholder upon 30 days' prior written notice to the other party.
A shareholder who wishes to enroll in the Automatic Investing Plan or who
wishes to obtain additional purchase information may do so by completing the
appropriate section of the Application Form attached to this Prospectus.
Purchases Through Dividend Reinvestment
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Fund shares of the
same class. Unless the shareholder elects otherwise, all income and capital
gains distributions will be reinvested in additional Fund shares at net asset
value, without a sales charge. Shareholders may elect to terminate automatic
reinvestment by giving written notice to the Transfer Agent at the address
listed on the inside back cover of this Prospectus, either directly or through
their Participating Dealer or Shareholder Servicing Agent, at least five days
before the next date on which dividends or distributions will be paid.
Alternately, shareholders may have their distributions invested in shares
of other funds in the Flag Investors family of funds. Shareholders who are
interested in this option should call the Transfer Agent at (800) 553-8080 for
additional information.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shareholders may redeem all or part of their investments on any Business
Day by transmitting a redemption order through the Distributor, a Participating
Dealer, a Shareholder Servicing Agent or by regular or express mail to the
Transfer Agent. Shareholders may also redeem shares of either class by
telephone (in any amount up to $50,000). (See "Telephone Transactions" below.)
A redemption order is effected at the net asset value per share (reduced by any
applicable contingent deferred sales charge) next determined after receipt of
the order (or, if stock certificates have been issued for the shares to be
redeemed, after the tender of the stock certificates for redemption).
Redemption orders received after 4:00 p.m. (Eastern Time) or the close of the
New York Stock Exchange, whichever is earlier, will be effected at the net
asset value next determined on the following Business Day. Payment for redeemed
shares will be made by check and will be mailed within seven days after receipt
of a duly authorized telephone redemption request or of a redemption order
fully completed and, as applicable, accompanied by the documents described
below:
1) A letter of instructions, specifying the shareholder's account number with a
Participating Dealer, if applicable, and the number of shares or dollar
amount to be redeemed, signed by all owners of the shares in the exact
names in which their account is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of each
registered owner by a member of the Federal Deposit Insurance Corporation,
a trust company, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
association;
3) If shares are held in certificate form, stock certificates either properly
endorsed or accompanied by a duly executed stock power for shares to be
redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of shares will be paid on
the next dividend payable date. If all of the shares in a shareholder's account
have been redeemed on a dividend payable date, the dividend will be remitted by
check to the shareholder.
The Fund has the power, under its Articles of Incorporation, to redeem
shareholder accounts amounting to less than $500 upon 60 days' written notice.
Shares will not be redeemed involuntarily as a result of a decline in account
value due to a decline in net asset value alone.
<PAGE>
Systematic Withdrawal Plan
Shareholders who hold Class A Shares or Class B Shares having a value of
$10,000 or more may arrange to have a portion of their shares redeemed monthly
or quarterly under the Fund's Systematic Withdrawal Plan. Such payments are
drawn from income dividends, and to the extent necessary, from share
redemptions (which would be a return of principal and, if reflecting a gain,
would be taxable). If redemptions continue, a shareholder's account may
eventually be exhausted. Because Class A Share purchases include a sales charge
that will not be recovered at the time of
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<PAGE>
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redemption, a shareholder should not have a withdrawal plan in effect at the
same time he is making recurring purchases of Class A Shares. In addition,
Class B Shares may be subject to a contingent deferred sales charge upon
redemption. (See "How to Invest in the Fund -- Class B Shares.") A shareholder
who wishes to enroll in the Fund's Systematic Withdrawal Plan may do so by
completing the appropriate section of the Application Form attached to this
Prospectus.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem shares of either class in amounts up to
$50,000, by notifying the Transfer Agent by telephone at (800) 553-8080 on any
Business Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time) or by
regular or express mail at its address listed on the inside back cover of this
Prospectus. Telephone transaction privileges are automatic. Shareholders may
specifically request that no telephone redemptions or exchanges be accepted for
their accounts. This election may be made on the Application Form or at any
time thereafter by completing and returning appropriate documentation supplied
by the Transfer Agent.
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or
the close of the New York Stock Exchange, whichever is earlier, is effective
that day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be
effected at the net asset value (less any applicable contingent deferred sales
charge on redemptions) as next determined on the following Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, all telephone
transaction requests will be recorded and investors may be required to provide
additional telecopied instructions of such transaction requests. If these
procedures are employed, neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for following instructions
received by telephone that either of them reasonably believes to be genuine.
During periods of extreme economic or market changes, shareholders may
experience difficulty in effecting telephone transactions. In such event,
requests should be made by regular or express mail. Shares held in certificate
form may not be exchanged or redeemed by telephone. (See "How to Invest in the
Fund -- Purchases by Exchange" and "How to Redeem Shares.")
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of semi-annual dividends. The
Fund may distribute to shareholders any taxable net capital gains on an annual
basis or, alternatively, may elect to retain net capital gains and pay tax
thereon.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences is based
on current tax laws and regulations, which may be changed by legislative,
judicial, or administrative action. No attempt has been made to present a
detailed explanation of the federal, state or local income tax treatment of the
Fund or the shareholders, and the discussion here is not intended as a
substitute for careful tax planning. Accordingly, shareholders are advised to
consult their tax advisors regarding specific questions as to federal, state
and local income taxes.
The Statement of Additional Information sets forth further information
concerning taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as the Fund qualifies for this tax treatment, it
will be relieved of federal income tax on amounts distributed to shareholders.
Shareholders, unless otherwise exempt, generally will be subject to income tax
on the amounts so distributed regardless of whether such distributions are paid
in cash or reinvested in additional shares.
Distributions from the Fund out of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, will be
taxed to shareholders as long-term capital gains regardless of the length of
time the shareholder has held the shares. All other income distributions will
be taxed to shareholders as ordinary income. Corporate shareholders may be
entitled to the dividends received deduction on a portion of dividends received
from the Fund.
9
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<PAGE>
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Shareholders will be advised annually as to the tax status of all distributions.
Ordinarily, shareholders will include all dividends declared by the Fund
as income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
The sale, exchange, or redemption of Fund shares is a taxable event for
the shareholder.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, sub-advisor, distributor, custodian and
transfer agent. A majority of the Directors of the Fund have no affiliation
with the Distributor or the Advisor.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the "Sub-
Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and BT Alex. Brown
Cash Reserve Fund, Inc., which funds had approximately $7.1 billion of net
assets as of August 31, 1997. ABIM is a registered investment advisor with
approximately $6.7 billion under management as of August 31, 1997.
Pursuant to the terms of the Investment Advisory Agreement, ICC is
responsible for supervising and managing all of the Fund's operations. Under
the Investment Advisory and Sub-Advisory Agreements, ICC delegates to ABIM
certain of its duties, provided that ICC continues to supervise the performance
of ABIM and report thereon to the Fund's Board of Directors. Pursuant to the
terms of the Sub-Advisory Agreement, ABIM is responsible for decisions to buy
and sell securities for the Fund, for broker-dealer selection, and for
negotiation of commission rates under standards established and periodically
reviewed by the Board of Directors. The Board has established procedures under
which ABIM may allocate transactions to certain affiliates and the Distributor,
provided that compensation to certain affiliates and the Distributor on each
transaction is reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other broker-dealers in connection
with comparable transactions involving similar securities during a comparable
period of time. In addition, consistent with NASD Rules, and subject to seeking
the most favorable price and execution available and such other policies as the
Board may determine, ABIM may consider services in connection with the sale of
shares as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
As compensation for its services for the fiscal year ended May 31, 1997,
ICC received from the Fund a fee (net of fee waivers) equal to 0.78% of the
Fund's average daily net assets. From such amounts and from its own resources,
ICC paid ABIM a fee (net of fee waivers) equal to 0.62% of the Fund's average
daily net assets.
ICC is an indirect subsidiary of Bankers Trust New York Corporation. ABIM
is a limited partnership affiliated with the Advisor. Buppert, Behrens & Owen,
Inc., a company organized and owned by three employees of ABIM, owns a 49%
limited partnership interest and a 1% general partnership interest in ABIM. BT
Alex. Brown Incorporated ("BT Alex. Brown") owns a 1% general partnership
interest in ABIM and BT Alex. Brown Holdings, Inc. owns the remaining limited
partnership interest.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent and
Accounting Services.")
Portfolio Manager
Lee S. Owen -- 25 Years' Investment Experience
Lee S. Owen has been responsible for managing the Fund's assets since
inception. Mr. Owen joined ABIM as a Vice President in 1983. From 1972 to 1983,
Mr. Owen was a Vice President and Portfolio Manager
10
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for T. Rowe Price Associates. Mr. Owen is a 1970 graduate of Williams College
and received his M.B.A. from the University of Virginia in 1972. He is a member
of the Baltimore Security Analysts Society and the Financial Analysts
Federation.
Past Performance of ABIM
Annualized Rates of Return
Of Equity Accounts
For Periods Ended June 30, 1997
ABIM
Equity Accounts** S&P 500***
------------------- -----------
3 Years* 30.7% 28.9%
5 Years* 23.9% 19.8%
10 Years* 18.3% 14.7%
- -----------
* Annualized.
** The ABIM performance results described above are based on a composite of
all institutional accounts not subject to tax that have investment
objectives and policies similar to those of the Fund and that were
advised by ABIM during the periods shown. As of June 30, 1997, such
accounts totaled $2.63 billion. Performance results for taxable accounts
are not included because the objectives and policies of such accounts
differ from those of the Fund. Data from all accounts have been
continuous from their inception to the present or to the cessation of the
client relationship with ABIM. Effective January 1, 1993, composites have
been calculated in accordance with standards of the Association for
Investment Management and Research ("AIMR") and have been weighted for
the size of each account. Prior to January 1, 1993, accounts were equal
weighted, that is, every account was given equal weight with every other
account, regardless of size. Therefore, the performance of small accounts
will have a larger impact on the results than would be the case if the
results were dollar weighted. In the period prior to January 1, 1993,
there were from 17 to 33 accounts, ranging in size from $1 million to
$104.6 million. The results for each period reflect the reduction of the
highest management fees (0.75%) charged to the composite accounts and
assume the reinvestment of dividends. The composite accounts are not
subject to the restrictions of the Investment Company Act or the Code,
which, if applicable, might have adversely affected the performance of
such accounts.
*** Source: SEI Corporation.
These results are unaudited.
Past performance should not be interpreted as
indicative of future performance.
DISTRIBUTOR
- --------------------------------------------------------------------------------
Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors"
or the "Distributor") acts as distributor of each class of the Fund's shares.
Prior to September 1, 1997, Alex. Brown & Sons Incorporated served as
distributor for each class of the Fund's shares for the same compensation and
on substantially the same terms and conditions as ICC Distributors. ICC
Distributors is a registered broker-dealer that offers distribution services to
a variety of registered investment companies including other funds in the Flag
Investors family of funds and BT Alex. Brown Cash Reserve Fund, Inc. ICC
Distributors is not affiliated with either the Advisor or the Sub-Advisor.
The Fund has adopted a Distribution Agreement and related Plans of
Distribution, one with respect to the Class A Shares and one with respect to
the Class B Shares (the "Plans"), pursuant to Rule 12b-1 under the Investment
Company Act. In addition, the Fund may enter into Shareholder Servicing
Agreements with certain financial institutions, such as 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. Such financial institutions may
impose separate fees in connection with these services and investors should
review this Prospectus in conjunction with any such institution's fee schedule.
As compensation for providing distribution services for the Class A
Shares, ICC Distributors receives a fee equal to 0.25% of the average daily net
assets of the Class A Shares. As compensation for providing distribution and
shareholder services for the Class B Shares, ICC Distributors receives a
distribution fee equal to 0.75% of the Class B Shares' average daily net assets
and a shareholder servicing fee equal to 0.25% of the Class B Shares' average
daily net assets. The distribution fee is used to compensate ICC Distributors
for its services and expenses in distributing the Class B Shares. The
shareholder servicing fee is used to compensate ICC Distributors, Participating
Dealers and Shareholder Servicing Agents for services provided and expenses
incurred in maintaining shareholder accounts, responding to shareholder
inquiries and providing information on their investments.
Payments under the Plans are made as described above regardless of ICC
Distributors' actual cost of providing distribution services and may be used to
pay ICC Distributors' overhead expenses. If the cost of providing distribution
services to the Fund is less than the payments received, the unexpended portion
of the distribution fees may be retained as profit by ICC Distributors. ICC
Distributors will from time to time and from its own resources pay or allow
additional discounts or promotional incentives in the form of cash or other
compensation (including merchandise or travel) to Participating Dealers.
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CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services to the Fund for the fiscal year ended May 31,
1997, ICC received a fee equal to 0.05% of the Fund's average daily net assets.
(See the Statement of Additional Information.) Bankers Trust Company, a
subsidiary of Bankers Trust New York Corporation and an affiliate of ICC, acts
as custodian of the Fund's assets.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise its performance, including
comparisons to other mutual funds with similar investment objectives and to
stock or other relevant indices. All such advertisements will show the average
annual total return, net of the Fund's maximum sales charge imposed on Class A
Shares or including the contingent deferred sales charge imposed on Class B
Shares redeemed at the end of the specified period covered by the total return
figure, over one-, five- and 10-year periods or, if such periods have not yet
elapsed, shorter periods corresponding to the life of the Fund. Such total
return quotations will be computed by finding average annual compounded rates
of return over such periods that would equate an assumed initial investment of
$1,000 to the ending redeemable value, net of the maximum sales charge and
other fees according to the required standardized calculation. The standardized
calculation is required by the SEC to provide consistency and comparability in
investment company advertising and is not equivalent to a yield calculation. If
the Fund compares its performance to other funds or to relevant indices, the
Fund's performance will be stated in the same terms in whichsuch comparative
data and indices are stated, which is normally total return rather than yield.
For these purposes, the performance of the Fund, as well as the performance of
such investment companies or indices, may not reflect sales charges, which, if
reflected, would reduce performance results.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar Inc.
and SEI Corporation, independent services that monitor the performance of
mutual funds. The performance of the Fund may also be compared to the Consumer
Price Index, the Standard & Poor's 500 Stock Index and other market indices
such as NASDAQ and the Wilshire 500. The Fund may also use total return
performance data as reported in the following national financial and industry
publications that monitor the performance of mutual funds: Money Magazine,
Forbes, Business Week, Barron's, Investor's Daily, IBC/Donoghue's Money Fund
Report and The Wall Street Journal.
Performance will fluctuate, and any statement of performance should not
be considered as representative of the future performance of the Fund.
Performance is generally a function of the type and quality of instruments held
by the Fund, operating expenses and market conditions. Any fees charged by
banks with respect to customer accounts through which shares may be purchased,
although not included in calculations of performance, will reduce performance
results.
GENERAL INFORMATION
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Capital Shares
The Fund is an open-end management investment company organized under the
laws of the State of Maryland on November 29, 1994 and is authorized to issue
75 million shares of capital stock, with a par value of $.001 per share. Shares
of the Fund have equal rights with respect to voting. Voting rights are not
cumulative, so the holders of more than 50% of the outstanding shares voting
together for the election of Directors may elect all the members of the Board
of Directors of the Fund. In the event of liquidation or dissolution of the
Fund, each share is entitled to its pro rata portion of the Fund's assets after
all debts and expenses have been paid.
The Board of Directors is authorized to establish additional series of
shares of capital stock, each of which would evidence interests in a separate
portfolio of securities, and separate classes of each series of the Fund. The
Shares offered by this Prospectus have been designated "Flag Investors Equity
Partners Fund
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Class A Shares" and "Flag Investors Equity Partners Fund Class B Shares." The
Board has no present intention of establishing any additional series of the
Fund but the Fund does have another class of shares in addition to the shares
offered hereby, "Flag Investors Equity Partners Fund Institutional Shares."
Additional information concerning the Fund's Institutional Shares may be
obtained by calling the Fund at (800) 767-FLAG. Different classes of the Fund
may be offered to certain investors and holders of such shares may be entitled
to certain exchange privileges not offered to Class A or Class B Shares. All
classes of the Fund share a common investment objective, portfolio of
investments and advisory fee, but the classes may have different
distribution/service fees or sales load structures and, accordingly, the net
asset value per share of classes may differ at times.
Annual Meetings
Unless required under applicable Maryland law, the Fund does not expect
to hold annual meetings of shareholders. However, shareholders of the Fund
retain the right, under certain circumstances, to request that a meeting of
shareholders be held for the purpose of considering the removal of a Director
from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting.
Reports
The Fund furnishes shareholders with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent accountants, Coopers & Lybrand L.L.P.
Shareholder Inquiries
Shareholders with inquiries concerning their shares should contact the
Fund at (800) 767-FLAG, the Transfer Agent at (800) 553-8080, or a
Participating Dealer or Shareholder Servicing Agent, as appropriate.
13
- --------------------------------------------------------------------------------
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "Flag Investors Equity Partners Fund, Inc." and mail with
this application to:
BT Alex. Brown Incorporated/Flag Investors Funds
P.O. Box 419663
Kansas City, MO 64141-6663
Attn: Flag Investors Equity Partners Fund, Inc.
For assistance in completing this application please call: 1-800-553-8080,
Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
To open an IRA account, please call 1-800-767-3524 for an IRA information kit.
I wish to purchase the following class of shares of the Fund, in the amount
indicated below. (Please check the applicable box and indicate the amount of
purchase.)
[ ] Class A Shares (4.5% maximum initial sales charge) in the amount of
$_____________________
[ ] Class B Shares (4.0% maximum contingent deferred sales charge) in the
amount of $________________
The minimum initial purchase for each class of shares is $2,000, except that
the minimum initial purchase for shareholders of any other Flag Investors Fund
or class is $500 and the minimum initial purchase for participants in the
Fund's Automatic Investing Plan is $250 per class. The Fund reserves the right
not to accept checks for more than $50,000 that are not certified or bank
checks.
Your Account Registration (Please Print)
Existing Account No., if any: ___________________
Individual or Joint Tenant Gifts to Minors
<TABLE>
<S> <C>
- --------------------------------------- ------------------------------------------
First Name Initial Last Name Custodian's Name (only one allowed by law)
- --------------------------------------- ---------------------------------------
Social Security Number Minor's Name (only one)
- --------------------------------------- ---------------------------------------
Joint Tenant Initial Last Name Social Security Number of Minor
under the _______________ Uniform Gifts
State of Residence
to Minors Act
Corporations, Trusts, Partnerships, etc. Mailing Address
- --------------------------------------- ---------------------------------------
Name of Corporation, Trust or Partnership Street
- --------------- ------------------- ---------------------------------------
Tax ID Number Date of Trust City State Zip
- --------------------------------------- ( )
Name of Trustees (if to be included in ---------------------------------------
the Registration) Daytime Phone
- ---------------------------------------
For the Benefit of
</TABLE>
<PAGE>
Letter of Intent -- Class A Shares only (Optional)
[ ] I agree to the Letter of Intent and Escrow Agreement set forth in the
accompanying prospectus. Although I am not obligated to do so, I intend to
invest over a 13-month period in Class A Shares of Flag Investors Equity
Partners Fund, Inc., in an aggregate amount at least equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
Right of Accumulation -- Class A Shares only (Optional)
[ ] I already own shares of the Flag Investors Fund(s) (except Class B shares)
set forth below to be applied for a reduced sales charge. List the Account
numbers of other Flag Investors Funds that you or your immediate family (spouse
and children under 21) already own that qualify for reduced sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional shares of the same class of the
Fund at no sales charge.
Income Dividends Capital Gains
| ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in Cash [ ] Paid in Cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
A-1
<PAGE>
Automatic Investing Plan (Optional)
[ ] I authorize you as Agent for the Automatic Investing Plan to automatically
invest $__________ in Class A Shares or $ ______ in Class B Shares for me, on
a monthly or quarterly basis, on or about the 20th of each month or if
quarterly, the 20th of January, April, July and October, and to draw a bank
draft in payment of the investment against my checking account. (Bank drafts
may be drawn on commercial banks only.)
Minimum Initial Investment: $250 per class
Please attach a voided check.
Subsequent Investments (check one): [ ] Monthly ($100 minimum per class)
[ ] Quarterly ($250 minimum per class)
- ---------------------------------- -------------------------------------------
Bank Name Depositor's Signature Date
- ---------------------------------- -------------------------------------------
Existing Flag Investors Fund Depositor's Signature Date
Account No., if any (if joint acct., both must sign)
Systematic Withdrawal Plan (Optional)
[ ] Beginning the month of __________ , 19___ please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of (complete
as applicable) $_______ from Class A Shares and/or $ __________ from Class
B Shares that I own, payable to the account registration address as shown
above. (Participation requires minimum account value of $10,000 per class.)
Frequency (check one): [ ] Monthly [ ] Quarterly
(January, April, July and October)
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect to
other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/We do not want: [ ] Telephone redemption privileges
[ ] Telephone exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a predesignated bank account, please
provide the following information:
Bank: _______________________ Bank Account No.:________________________
Address: _____________________ Bank Account Name:_______________________
<PAGE>
Signature and Taxpayer Certification
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service ("IRS") that
I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above, I
have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a
penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-553-8080).
[ ] Non-U.S. Citizen/Taxpayer;
Indicated country of residence for tax purposes: ________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
I have received a copy of the Fund's prospectus. I acknowledge that the
telephone redemption and exchange privileges are automatic and will be effected
as described in the Fund's current prospectus (see "Telephone Transactions"). I
also acknowledge that I may bear the risk of loss in the event of fraudulent
use of such privileges. If I do not want telephone redemption or exchange
privileges, I have so indicated on this Application.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to
avoid backup withholding.
- ------------------------------- -------------------------------------------
Signature Date Signature (if joint acct., Date
both must sign)
- --------------------------------------------------------------------------------
For Dealer Use Only
Dealer's Name: _______________________ Dealer Code: __________________________
Dealer's Address: ____________________ Branch Code: __________________________
Representative: ______________________ Rep. No.: _____________________________
A-2
<PAGE>
- --------------------------------------------------------------------------------
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
(Class A and Class B Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
One South Street P.O. Box 7558
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
One South Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 2000 One Logan Square
New York, New York 10006 Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
(Institutional Shares)
October 1, 1997
Cross Reference Sheet
<TABLE>
<CAPTION>
Items Required by Form N-1A
- ---------------------------
<S> <C> <C>
Part A Information Required in Prospectus Registration Statement Heading
- ------ ---------------------------------- ------------------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Investment Program;
General Information
Item 5. Management of the Fund Management of the Fund;
Investment Advisor and
Sub-Advisor; Distributor;
Custodian, Transfer
Agent and Accounting Services
Item 5A. Management's Discussion of Fund *
Performance
Item 6. Capital Stock and Other Securities Cover Page;
Dividends and Taxes;
General Information
Item 7. Purchase of Securities Being Offered How to Invest in
Institutional Shares; Distributor
Item 8. Redemption or Repurchase How to Redeem Institutional Shares
Item 9. Pending Legal Proceedings **
Information Required in a Statement
Part B of Additional Information
- ------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
and History
Item 13. Investment Objectives and Policies Investment Objectives,
Policies and Risk Considerations
Item 14. Management of the Fund Management of
the Fund
Item 15. Control Persons and Principal Holders Control Persons and
of Securities Principal Holders of
Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Custodian, Transfer Agent,
Accounting Services;
Independent Accountants
Item 17. Brokerage Allocation Brokerage
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 18. Capital Stock and Other Securities Capital Stock; Semi-Annual Reports
Item 19. Purchase, Redemption and Pricing of Valuation of Shares
Securities Being Offered and Redemption
Item 20. Tax Status Federal Tax Treatment of
Dividends and
Distributions
Item 21. Underwriters Distribution of Fund
Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C Other Information
- ------ -----------------
Part C contains the information required by the items
contained therein under the items set forth in the form.
</TABLE>
- -----------
* Information required by Item 5A is contained in Registrant's 1996 Annual
Report to Shareholders.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
- --------------------------------------------------------------------------------
LOGO
FLAG INVESTORS
EQUITY PARTNERS FUND, INC.
(Institutional Shares)
Prospectus & Application -- October 1, 1997
- -----------------------------------------------------------------
This mutual fund (the "Fund") is designed to seek long-term growth of capital
and, secondarily, current income. The Fund seeks to achieve this objective
primarily through a policy of diversified investments in equity securities,
including common stocks and convertible securities.
Flag Investors Institutional Shares of the Fund ("Institutional Shares") are
available through your securities dealer or the Fund's transfer agent and may
be purchased only by eligible institutions or by clients of investment advisory
affiliates of BT Alex. Brown Incorporated ("BT Alex. Brown"). (See "How to
Invest in Institutional Shares.")
This Prospectus sets forth basic information that investors should know about
the Fund prior to investing and should be retained for future reference. A
Statement of Additional Information dated October 1, 1997, has been filed with
the Securities and Exchange Commission (the "SEC") and is hereby incorporated
by reference. It is available upon request and without charge by calling the
Fund at (800) 767-FLAG.
TABLE OF CONTENTS
Fee Table ................................. 1
Financial Highlights ........................ 2
Investment Program ........................ 2
Investment Restrictions ..................... 4
How to Invest in Institutional Shares ...... 4
How to Redeem Institutional Shares ......... 5
Telephone Transactions ..................... 5
Dividends and Taxes ........................ 6
Management of the Fund ..................... 6
Investment Advisor and Sub-Advisor ......... 7
Distributor .............................. 8
Custodian, Transfer Agent and
Accounting Services ..................... 8
Performance Information .................. 8
General Information ........................ 9
Application ................................. A-1
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY OR ANY OTHER BANK. THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses:
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) ......... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower) ......................................................... None
</TABLE>
Annual Fund Operating Expenses (net of fee waivers and reimbursements)
(as a percentage of average daily net assets):
Management Fees (net of fee waivers) ..................... 0.78%
12b-1 Fees ............................................. None
Other Expenses .......................................... 0.32%
------
Total Fund Operating Expenses (net of fee waivers) ...... 1.10%*
======
- -----------
* The Fund's investment advisor intends, but is not obligated, to waive its fee
to the extent required so that Total Fund Operating Expenses do not exceed
1.10% of the Institutional Shares' average daily net assets. Absent fee
waivers, Management Fees would be 0.91% of the Fund's average daily net assets
and Total Fund Operating Expenses would be 1.23% of the Institutional Shares'
average daily net assets.
<TABLE>
<CAPTION>
Example: 1 year 3 years 5 years 10 years
- -------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period:* ..................... $ 11 $ 35 $ 61 $ 134
</TABLE>
- -----------
* The Example is based on Total Fund Operating Expenses, net of fee waivers.
Absent fee waivers, expenses would be higher.
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Fund will bear directly and indirectly. A
person who purchases Institutional Shares through a financial institution may
be charged separate fees by that institution.
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Fund has offered the Institutional Shares since February 12, 1996.
The financial highlights included in this table are a part of the Fund's
financial statements for the periods indicated and have been audited by Coopers
& Lybrand L.L.P., independent accountants. The financial statements and
financial highlights for the fiscal year ended May 31, 1997 and the report
thereon of Coopers & Lybrand L.L.P. are included in the Statement of Additional
Information. Additional performance information is contained in the Fund's
Annual Report for the fiscal year ended May 31, 1997, which can be obtained at
no charge by calling the Fund at (800) 767-FLAG.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional
Shares
-----------------------------------
For the
Period
For the Feb. 12, 1996(1)
Year Ended through
May 31, 1997 May 31, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .................. $13.10 $12.72
------------ ------------
Income from Investment Operations:
Net investment income ................................. 0.14 0.04
Net realized and unrealized gain on investments ......... 3.95 0.34
------------ ------------
Total from Investment Operations ........................ 4.09 0.38
Less Distributions:
Distributions from net investment income and net realized
short-term gains ....................................... (0.18) --
------------ ------------
Distributions from net realized long-term gains ......... (0.07) --
Total distributions .................................... (0.25) --
------------ ------------
Net asset value at end of period ........................ $16.94 $13.10
============ ============
Total Return ............................................. 31.58% 3.23%
Ratios to Average Daily Net Assets:
Expenses ................................................ 1.10%(3) 1.10%(2,3)
Net investment income ................................. 0.81%(4) 1.20%(2,4)
Supplemental Data:
Net assets at end of period (000) ..................... $42,115 $4,235
Portfolio turnover rate ................................. 17.60% 0.73%
Average commissions per share5 ........................ $0.068 --
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations.
(2) Annualized.
(3) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.23% and 1.55% (annualized) for the year ended
May 31, 1997 and the period ended May 31, 1996.
(4) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.70% and 0.75% (annualized) for
the year ended May 31, 1997 and for the period ended May 31, 1996.
(5) Disclosure is required for fiscal years beginning after September 1, 1995.
Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk
Considerations
The Fund's investment objective is to seek long-term growth of capital and,
secondarily, current income. The Fund seeks to achieve this objective primarily
through a policy of diversified investments in equity securities, including
common stocks and convertible securities. The Fund's investment objective is a
fundamental policy of the Fund and may not be changed without shareholder
approval. There can be no assurance, however, that the Fund will achieve its
investment objective.
The Fund's investment advisor (the "Advisor") and the Fund's sub-advisor
(the "Sub-Advisor") (collectively, the "Advisors") are responsible for managing
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
the Fund's investments. (See "Investment Advisor and Sub-Advisor.") The
Advisors consider both the opportunity for gain and the risk of loss in making
investments.
Under normal market conditions, the Fund will invest as fully as feasible
in common stocks and other equity investments (including preferred stocks,
convertible debt, warrants and other securities convertible into or
exchangeable for common stocks). At least 65% of the Fund's total assets will
be so invested. Convertible securities are securities that may be converted
either at a stated price or rate within a specified period of time into a
specified number of shares of common stock. Preferred stock is a class of
capital stock that pays dividends at a specified rate and that has preference
over common stock in the payment of dividends and the liquidation of assets.
Warrants are instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period. In
selecting securities for the Fund's portfolio, the Advisors expect to apply a
"flexible value" approach to the selection of equity investments. Under this
approach, the Advisors will attempt to identify securities that are undervalued
in the marketplace but will also consider such factors as current and expected
earnings, dividends, cash flows and asset values in their evaluation of a
security's investment potential.
The Fund may invest up to 10% of its total assets in non-convertible debt
securities. Up to all of any such investments may be in securities that are
rated below investment grade. (See "Investments in Non-Investment Grade
Securities" below.) Any remaining assets of the Fund not invested as described
above may be invested in high quality money market instruments. For temporary,
defensive purposes, the Fund may invest up to 100% of its assets in high
quality short-term money market instruments, including repurchase agreements,
and in bills, notes or bonds issued by the U.S. Treasury Department or by
agencies of the U.S. Government. In addition, the Fund may invest up to 10% of
its net assets in illiquid securities.
The Fund may purchase Rule 144A Securities. Rule 144A Securities are
restricted in that they have not been registered under the Securities Act of
1933, but they may be traded between certain qualified institutional investors,
including investment companies. The presence or absence of a secondary market
may affect the value of the Rule 144A Securities. The Fund's Board of Directors
has established guidelines and procedures to be utilized to determine the
liquidity of such securities.
Investments in Non-Investment Grade Securities
Where deemed appropriate by the Advisors, the Fund may invest up to 10%
of its total assets (measured at the time of the investment) in lower quality
non-convertible debt securities [securities rated BB or lower by Standard &
Poor's Ratings Group ("S&P") or Ba or lower by Moody's Investors Service, Inc.
("Moody's") and unrated securities of comparable quality]. Lower rated debt
securities, also known as "junk bonds," are considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. Securities in the lowest rating category that the Fund may
purchase (securities rated C by either S&P or Moody's) may present a
particular risk of default, or may be in default and in arrears in payment of
principal and interest. In addition, C-rated securities may be regarded as
having extremely poor prospects of ever attaining investment standing. Yields
and market values of these bonds will fluctuate over time, reflecting changing
interest rates and the market's perception of credit quality and the outlook
for economic growth. When economic conditions appear to be deteriorating, lower
rated bonds may decline in value, regardless of prevailing interest rates.
Accordingly, adverse economic developments, including a recession or a
substantial period of rising interest rates, may disrupt the high yield bond
market, affecting both the value and liquidity of such bonds. An economic
downturn could adversely affect the ability of issuers of such bonds to make
payments of principal and interest to a greater extent than issuers of higher
rated bonds might be affected. The ratings categories of S&P and Moody's are
described more fully in the Appendix to the Statement of Additional
Information. During the fiscal year ended May 31, 1997, the Fund held no below
investment grade bonds.
Investments in Repurchase Agreements
The Fund may agree to purchase U.S. Government securities from
creditworthy financial institutions, such as banks or broker-dealers, subject
to the seller's agreement to repurchase the securities at an established time
and price. Default by or bankruptcy proceedings with respect to the seller may,
however, expose the Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.
<PAGE>
Investments in Securities of Foreign Issuers
From time to time, the Fund may invest in American Depositary Receipts,
which are interests in securities of foreign companies, and up to 10% of the
Fund's total assets in debt and equity securities of foreign issuers not
publicly traded in the United States when the Advisors believe that such
investments provide good opportunities for achieving income and capital gains
without undue risk.
Nevertheless, foreign investments involve different risks from
investments in the United States, including currency, market and political
risks.
Accordingly, the Advisors intend to seek securities of companies in, and
governments of, developed, stable nations.
3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund's investment program is subject to a number of restrictions that
reflect both self-imposed standards and federal regulatory limitations. The
investment restrictions recited below are matters of fundamental policy and may
not be changed without shareholder approval. 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 industry); or
2) With respect to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any single issuer or purchase more
than 10% of the outstanding voting securities of any one
issuer, except the U.S. Government, its agencies and instrumentalities.
The Fund is subject to further investment restrictions that are set forth
in the Statement of Additional Information.
HOW TO INVEST IN INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Institutions (e.g., banks and trust companies, savings institutions,
corporations, insurance companies, investment counselors, pension funds,
employee benefit plans, trusts, estates and educational, religious and
charitable institutions) and clients of investment advisory affiliates of BT
Alex. Brown may purchase Institutional Shares through the Fund's distributor
(the "Distributor"), through any securities dealer that is authorized to
distribute Institutional Shares ("Participating Dealers"), or by completing the
Application Form attached to this Prospectus and returning it, together with
payment of the purchase price, as instructed in the Application.
The minimum initial investment in Institutional Shares is $500,000,
except that the minimum initial investment is $1,000,000 for qualified
retirement plans. There is no minimum for clients of investment advisory
affiliates of BT Alex. Brown or for subsequent investments. The Fund reserves
the right to suspend the sale of Institutional Shares at any time at the
discretion of the Distributor and the Advisors.
Orders for purchases of Institutional Shares are accepted on any day on
which the New York Stock Exchange is open for business (a "Business Day").
Purchase orders for Institutional Shares will be executed at a per share
purchase price equal to the net asset value next determined after receipt of
the purchase order. Purchases made through the Distributor or a Participating
Dealer must be in accordance with such entity's payment procedures. The
Distributor may, in its sole discretion, refuse to accept any purchase order.
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
Business Day. Net asset value per share of a class is calculated by valuing its
share of the Fund's assets, deducting all liabilities attributable to that
class, and dividing the resulting amount by the number of then outstanding
shares of the class. For this purpose, portfolio securities are given their
market value where feasible. Securities or other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established from time to time and
monitored by the Fund's Board of Directors. Debt obligations with maturities of
60 days or less are valued at amortized cost, which constitutes fair value as
determined by the Fund's Board of Directors.
Purchases by Exchange
Shareholders of other Flag Investors funds that offer Institutional
shares may exchange their Institutional shares of those funds for an equal
dollar amount of Institutional Shares. The net asset value of shares purchased
and redeemed in an exchange request received on a Business Day will be
determined on the same day, provided that the exchange request is received
prior to 4:00 p.m. (Eastern Time) or the close of the New York Stock Exchange,
whichever is earlier. Exchange requests received after 4:00 p.m. (Eastern Time)
will be effected on the next Business Day.
4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
The exchange privilege may be exercised by notifying the Fund's transfer
agent (the "Transfer Agent") by telephone on any Business Day between the hours
of 8:30 a.m. and 5:30 p.m. (Eastern Time) (see "Telephone Transactions" below)
or by regular or express mail at its address listed on the inside back cover of
this Prospectus. The Fund may modify or terminate this offer of exchange at any
time upon 60 days' prior written notice to shareholders.
Other Information
Periodic statements of account from the Fund will reflect all dividends,
purchases and redemptions of Institutional Shares.
In the interest of economy and convenience and because of the operating
procedures for the Institutional Shares, certificates representing such shares
will not be issued. All purchases of Institutional Shares are confirmed and
credited to the shareholder's account on the Fund's books maintained by the
Transfer Agent or its agents. Shareholders will have the same rights and
ownership with respect to such shares as if certificates had been issued.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Shareholders may redeem all or part of their Institutional Shares on any
Business Day by transmitting a redemption order through the Distributor or a
Participating Dealer, or by regular or express mail to the Transfer Agent at
its address listed on the inside back cover of this Prospectus. Shareholders
may also redeem Institutional Shares by telephone (in amounts up to $500,000).
(See "Telephone Transactions" below.) A redemption request is effected at the
net asset value per share next determined after receipt of the order in proper
form. Redemption orders received after 4:00 p.m. (Eastern Time) or the close of
the New York Stock Exchange, whichever is earlier, will be effected at the net
asset value next determined on the following Business Day. Payment for redeemed
Institutional Shares will be made by wire transfer of funds to the
shareholder's bank, or to a Participating Dealer, as appropriate, upon receipt
of a duly authorized redemption request as promptly as feasible and, under most
circumstances, within three Business Days.
Dividends payable up to the date of redemption of Institutional Shares
will be paid on the next dividend payable date. If all of the Institutional
Shares in an account have been redeemed on a dividend payment date, the
dividend will be remitted by wire to the shareholder's bank or to a
Participating Dealer, as appropriate.
The Fund has the power, under its Articles of Incorporation, to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' written notice. Institutional Shares will not be redeemed
involuntarily as a result of a decline in account value due to a decline in net
asset value alone.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Institutional Shares in amounts up to $500,000,
by notifying the Transfer Agent by telephone on any Business Day between the
hours of 8:30 a.m. and 5:30 p.m. (Eastern Time) or by regular or express mail
at its address listed on the inside back cover of this Prospectus. Telephone
transaction privileges are automatic. Shareholders may specifically request
that no telephone redemptions or exchanges be accepted for their accounts. This
election may be made on the Application Form or at any time thereafter by
completing and returning appropriate documentation supplied by the Transfer
Agent.
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or
the close of the New York Stock Exchange, whichever is earlier, is effective
that day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be
effected at the net asset value as next determined on the following Business
Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, all telephone
transaction requests will be recorded and investors may be required to provide
additional telecopied instructions of such transaction requests. If these
procedures are employed, neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for following instructions
received by
5
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<PAGE>
- --------------------------------------------------------------------------------
telephone that either of them reasonably believes to be genuine. During periods
of extreme economic or market changes, shareholders may experience difficulty in
effecting telephone transactions. In such event, requests should be made by
express mail or facsimile. (See "How to Invest in Institutional Shares --
Purchases by Exchange" and "How to Redeem Institutional Shares.")
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of semi-annual dividends. The
Fund may distribute to shareholders any taxable net capital gains on an annual
basis or, alternatively, may elect to retain net capital gains and pay tax
thereon.
Unless the shareholder elects otherwise, all income and capital gains
distributions will be reinvested in additional Institutional Shares at net
asset value. Shareholders may elect to terminate automatic reinvestment by
giving written notice to the Transfer Agent at its address listed on the inside
back cover of this Prospectus, either directly or through a Participating
Dealer, at least five days before the next date on which dividends or
distributions will be paid.
Tax Treatment of Dividends and Distributions
The following summary of certain federal income tax consequences is based
on current tax laws and regulations, which may be changed by legislative,
judicial, or administrative action. No attempt has been made to present a
detailed explanation of the federal, state or local income tax treatment of the
Fund or the shareholders, and the discussion here is not intended as a
substitute for careful tax planning. Accordingly, shareholders are advised to
consult their tax advisors regarding specific questions as to federal, state
and local income taxes.
The Statement of Additional Information sets forth further information
concerning taxes.
The Fund has been and expects to continue to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as the Fund qualifies for this tax treatment, it
will be relieved of federal income tax on amounts distributed to shareholders.
Shareholders, unless otherwise exempt, generally will be subject to income tax
on the amounts so distributed regardless of whether such distributions are paid
in cash or reinvested in additional shares.
Distributions from the Fund out of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, will be
taxed to shareholders as long-term capital gains regardless of the length of
time the shareholder has held the Institutional Shares. All other income
distributions will be taxed to shareholders as ordinary income. Corporate
shareholders may be entitled to the dividends received deduction on a portion
of dividends received from the Fund. Shareholders will be advised annually as
to the tax status of all distributions.
Ordinarily, shareholders will include all dividends declared by the Fund
as income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
The sale, exchange, or redemption of Institutional Shares is a taxable
event for the shareholder.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, sub-advisor, distributor, custodian
and transfer agent. A majority of Directors of the Fund have no affiliation
with the Advisors or the Distributor.
6
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<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the "Sub-
Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and BT Alex. Brown
Cash Reserve Fund, Inc., which funds had approximately $7.1 billion of net
assets as of August 31, 1997. ABIM is a registered investment advisor with
approximately $6.7 billion under management as of August 31, 1997.
Pursuant to the terms of the Investment Advisory Agreement, ICC is
responsible for supervising and managing all of the Fund's operations. Under
the Investment Advisory and Sub-Advisory Agreements, ICC delegates to ABIM
certain of its duties, provided that ICC continues to supervise the performance
of ABIM and report thereon to the Fund's Board of Directors. Pursuant to the
terms of the Sub-Advisory Agreement, ABIM is responsible for decisions to buy
and sell securities for the Fund, for broker-dealer selection, and for
negotiation of commission rates under standards established and periodically
reviewed by the Board of Directors. The Board has established procedures under
which ABIM mayallocate transactions to certain affiliates or to the
Distributor, provided that compensation to certain affiliates or to the
Distributor on each transaction is reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
broker-dealers in connection with comparable transactions involving similar
securities during a comparable period of time. In addition, consistent with
NASD Rules, and subject to seeking the most favorable price and execution
available and such other policies as the Board may determine, ABIM may consider
services in connection with the sale of shares as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
As compensation for its services for the fiscal year ended May 31, 1997,
ICC received from the Fund a fee (net of fee waivers) equal to 0.78% of the
Fund's average daily net assets. From such amounts and from its own resources,
ICC paid ABIM a fee (net of fee waivers) equal to 0.62% of the Fund's average
daily net assets.
ICC is an indirect subsidiary of Bankers Trust New York Corporation. ABIM
is a limited partnership affiliated with the Advisor. Buppert, Behrens & Owen,
Inc., a company organized and owned by three employees of ABIM, owns a 49%
limited partnership interest and a 1% general partnership interest in ABIM. BT
Alex. Brown owns a 1% general partnership interest in ABIM and BT Alex. Brown
Holdings, Inc. owns the remaining limited partnership interest.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. (See "Custodian, Transfer Agent and
Accounting Services.")
Portfolio Manager
Lee S. Owen -- 25 Years' Investment Experience
Lee S. Owen has been responsible for managing the Fund's assets since
inception. Mr. Owen joined ABIM as a Vice President in 1983. From 1972 to 1983,
Mr. Owen was a Vice President and Portfolio Manager for T. Rowe Price
Associates. Mr. Owen is a 1970 graduate of Williams College and received his
M.B.A. from the University of Virginia in 1972. He is a member of the Baltimore
Security Analysts Society and the Financial Analysts Federation.
Past Performance of ABIM
Annualized Rates of Return
Of Equity Accounts
For Periods Ended June 30, 1997
ABIM
Equity Accounts** S&P 500***
------------------- -----------
3 Years* ...... 30.7% 28.9%
5 Years* ...... 23.9% 19.8%
10 Years* ...... 18.3% 14.7%
- -----------
*Annualized.
**The ABIM performance results described above are based on a composite of all
institutional accounts not subject to tax that have investment objectives
and policies similar to those of the Fund and that were advised by ABIM
during the periods shown. As of June 30, 1997, such accounts totaled $2.63
billion. Performance results for taxable accounts are not included because
the objectives and policies of such accounts differ from those of the
Fund. Data from all accounts have been continuous from their inception to
the present or to the cessation of the client relationship with ABIM.
Effective January 1, 1993, composites have been calculated in accordance
with standards of the Association for Investment Management and Research
("AIMR") and have been weighted for the size of each account. Prior to
January 1, 1993, accounts were equal weighted, that is, every account was
given equal weight with every other account, regardless of size.
Therefore, the performance of small accounts will have a larger impact on
the results than would be the case if the results were dollar weighted. In
the period prior to January 1, 1993, there were from 17 to 33 accounts,
ranging in size from $1 million to $104.6 million. The results for each
period reflect the reduction of the highest management fees (0.75%)
charged to the composite accounts and assume the reinvestment of
dividends. The composite accounts are not subject to the restrictions of
the Investment Company Act or the Code, which, if applicable, might have
adversely affected the performance of such accounts.
***Source: SEI Corporation.
These results are unaudited.
Past performance should not be interpreted as
indicative of future performance.
7
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<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTOR
- --------------------------------------------------------------------------------
Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors"
or the "Distributor") acts as distributor of each class of the Fund's shares.
Prior to September 1, 1997, Alex. Brown & Sons Incorporated served as
distributor for each class of the Fund's shares for the same compensation and
on substantially the same terms and conditions as ICC Distributors. ICC
Distributors is a registered broker-dealer that offers distribution services to
a variety of registered investment companies including other funds in the Flag
Investors family of funds and BT Alex. Brown Cash Reserve Fund, Inc. ICC
Distributors is not affiliated with either the Advisor or the Sub-Advisor.
ICC Distributors bears all expenses associated with advertisements,
promotional materials, sales literature and printing and mailing prospectuses
to other than Fund shareholders.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
- --------------------------------------------------------------------------------
Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Fund. As compensation
for providing accounting services to the Fund for the fiscal year ended May 31,
1997, ICC received a fee equal to 0.05% of the Fund's average daily net assets.
(See the Statement of Additional Information.) Bankers Trust Company, a
subsidiary of Bankers Trust New York Corporation and an affiliate of ICC, acts
as custodian of the Fund's assets.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its performance including
comparisons to other mutual funds with similar investment objectives and to
stock or other relevant indices. All such advertisements will show the average
annual total return over one-, five- and 10-year periods or, if such periods
have not yet elapsed, shorter periods corresponding to the life of the Fund.
Such total return quotations will be computed by finding average annual
compounded rates of return over such periods that would equate an assumed
initial investment of $1,000 to the ending redeemable value
according to the required standardized calculation. The standardized
calculation is required by the SEC to provide consistency and comparability in
investment company advertising and is not equivalent to a yield calculation. If
the Fund compares its performance to other funds or to relevant indices, the
Fund's performance will be stated in the same terms in which such comparative
data and indices are stated, which is normally total return rather than yield.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar Inc.
and SEI Corporation, independent services that monitor the performance of
mutual funds. The performance of the Fund may also be compared to the Consumer
Price Index, the Standard & Poor's 500 Stock Index and other market indices
such as NASDAQ and the Wilshire 500. The Fund may also use total return
performance data as reported in the following national financial and industry
publications that monitor the performance of mutual funds: Money Magazine,
Forbes, Business Week, Barron's, Investor's Daily, IBC/Donoghue's Money Fund
Report and The Wall Street Journal.
Performance will fluctuate, and any statement of performance should not
be considered as representative of the future performance of the Fund.
Performance is generally a function of the type and quality of instruments held
by the Fund, operating expenses and market conditions. Any fees charged by
banks with respect to customer accounts through which Institutional Shares may
be purchased, although not included in calculations of performance, will reduce
performance results.
8
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<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Capital Shares
The Fund is an open-end management investment company organized under the
laws of the State of Maryland on November 29, 1994 and is authorized to issue
75 million shares of capital stock, with a par value of $.001 per share. Shares
have equal rights with respect to voting. Voting rights are not cumulative, so
the holders of more than 50% of the outstanding shares voting together for the
election of Directors may elect all the members of the Board of Directors of
the Fund. In the event of liquidation or dissolution of the Fund, each share is
entitled to its pro rata portion of the Fund's assets after all debts and
expenses have been paid.
The Board of Directors is authorized to establish additional series of
shares of capital stock, each of which would evidence interests in a separate
portfolio of securities, and separate classes of each series of the Fund. The
shares offered by this Prospectus have been designated "Flag Investors Equity
Partners Fund Institutional Shares." The Board has no present intention of
establishing any additional series of the Fund but the Fund does have two other
classes of shares in addition to the shares offered hereby: "Flag Investors
Equity Partners Fund Class A Shares" and "Flag Investors Equity Partners Fund
Class B Shares." Additional information concerning the Fund's Class A Shares and
Class B Shares may be obtained by calling the Fund at (800) 767-FLAG. Different
classes of the Fund may be offered to certain investors and holders of such
shares may be entitled to certain exchange privileges not offered to
Institutional Shares. All classes of the Fund share a common investment
objective, portfolio of investments and advisory fee, but the classes may have
different distribution fees or sales load structures and, accordingly, the net
asset value per share of the classes may differ at times.
Annual Meetings
Unless required under applicable Maryland law, the Fund does not expect
to hold annual meetings of shareholders. However, shareholders of the Fund
retain the right, under certain circumstances, to request that a meeting of
shareholders be held for the purpose of considering the removal of a Director
from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting.
Reports
The Fund furnishes shareholders with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent accountants, Coopers & Lybrand L.L.P.
Shareholder Inquiries
Shareholders with inquiries concerning their Institutional Shares should
contact the Fund at (800) 767-FLAG, the Transfer Agent at (800) 553-8080, or a
Participating Dealer, as appropriate.
9
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<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Send completed Application by overnight carrier to:
BT Alex. Brown Incorporated/Flag Investors Funds
330 West 9th Street, First Floor
Kansas City, MO 64105
Attn: Flag Investors Equity Partners Fund, Inc.
For assistance in completing this application please call: 1-800-553-8080,
Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
If you are paying by check, make check payable to "Flag Investors Equity
Partners Fund, Inc." and mail the Application. If you are paying by wire, see
instructions below.
- --------------------------------------------------------------------------------
Your Account Registration (Please Print)
Name on Account Mailing Address
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Corporation, Trust or Partnership Name of Individual to Receive Correspondence
- -------------------------------------------- --------------------------------------------
Tax ID Number Street
[ ] Corporation [ ] Partnership [ ] Trust --------------------------------------------
[ ] Non-Profit or Charitable Organization City State Zip
[ ] Other _______________ ( )
If a Trust, please provide the following: --------------------------------------------
Daytime Phone
- --------------------------------------------
- ----------------------------------------------------------------------------------------
Date of Trust For the Benefit of
- ----------------------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
</TABLE>
<PAGE>
Initial Investment
The minimum initial purchase for the Institutional Shares of the Fund is
$500,000, except that the minimum initial purchase is $1,000,000 for qualified
retirement plans. There is no minimum for clients of investment advisory
affiliates of BT Alex Brown or for subsequent investments.
Indiciate the amount to be invested and the method of payment:
__A. By Mail: Enclosed is a check in the amount of $_____________ payable to
Flag Investors Equity Partners Fund, Inc.
__B. By Wire: A bank wire in the amount of $______________ has been sent from
____________________ ___________________
Name of Bank Wire Control Number
Wire Instructions:
Follow the instructions below to arrange for a wire transfer for
initial investment:
o Send completed Application by overnight carrier to BT Alex. Brown
Incorporated/Flag Investors Funds at the address listed above.
o Call 1-800-553-8080 to obtain new investor's Fund account number.
o Wire payment of the purchase price to Investors Fiduciary Trust Company
("IFTC"), as follows:
IFTC
a/c BT Alex Brown Incorporation/Flag Investors Funds
Acct. #7528353
ABA # 1010-0362-1
Kansas City, Missouri 64105
Please include the following in the wire:
o Flag Investors Equity Partners Fund, Inc. -- Institutional Shares
o The amount to be invested
o "For further credit to ________________________________."
(Investor's Fund Account Number)
<PAGE>
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Institutional Shares of the
Fund.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in cash [ ] Paid in cash
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $500,000) and exchange privileges (with respect to
Institutional Shares of other Flag Investors Funds) unless I mark one or both
of the boxes below:
No, I do not want: [ ] Telephone redemption privileges
[ ] Telephone exchange privileges
Redemptions effected by telephone will be wired to the bank account
designated below.
Bank Account Designation
(This Section Must Be Completed)
Please attach a blank, voided check to provide account and bank routing
information.
- ---------------------------------------------------------------------
Name of Bank Branch
- ---------------------------------------------------------------------
Bank Address City/State/Zip
- ---------------------------------------------------------------------
Name(s) on Account
- ---------------------------------------------------------------------
Account Number A.B.A. Number
A-1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Acknowledgment, Certificate and Signature
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Tax ID Number and (2) I am not subject to any backup withholding either
because (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup
withholding.
[ ] If no Tax ID Number has been provided above, I have applied, or intend to
apply, to the IRS for a Tax ID Number, and I understand that if I do not
provide such number to the Transfer Agent within 60 days of the date of
this Application or if I fail to furnish my correct Tax ID Number, I may
be subject to a penalty and a 31% backup withholding on distributions and
redemption proceeds. (Please provide your Tax ID Number on IRS Form W-9.
You may request such form by calling the Transfer Agent at 800-553-8080.)
[ ] Non-U.S. Citizen/Taxpayer: Indicated country of residence for tax
purposes: __________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
I have received a copy of the Fund's prospectus. I acknowledge that the
telephone redemption and exchange privileges are automatic and will be effected
as described in the Fund's current prospectus (see "Telephone Transactions"). I
also acknowledge that I may bear the risk of loss in the event of fraudulent
use of such privileges. If I do not want telephone redemption or exchange
privileges, I have so indicated on this Application.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
Person(s) Authorized to Conduct Transactions
The following person(s) ("Authorized Person(s)") are currently officers,
trustees, general partners or other authorized agents of the investor. Any ---
* of the Authorized Person(s) is, by lawful and appropriate action of the
investor, a person entitled to give instructions regarding purchases and
redemptions or make inquiries regarding the Account.
- ------------------------------- -----------------------------------
Name/Title Signature Date
- ------------------------------- -----------------------------------
Name/Title Signature Date
- ------------------------------- -----------------------------------
Name/Title Signature Date
- ------------------------------- -----------------------------------
Name/Title Signature Date
The signature appearing to the right of each Authorized Person is that person's
signature. Investment Company Capital Corp. ("ICC") may, without inquiry, act
upon the instructions (whether verbal, written, or provided by wire,
telecommunication, or any other process) of any person claiming to be an
Authorized Person. Neither ICC nor any entity on behalf of which ICC is acting
shall be liable for any claims or expenses (including legal fees) or for any
losses resulting from actions taken upon any instructions believed to be
genuine. ICC may continue to rely on the instructions made by any person
claiming to be an Authorized Person until it is informed through an amended
Application that the person is no longer an Authorized Person and it has a
reasonable period (not to exceed one week) to process the amended Application.
Provisions of this Application shall be equally Applicable to any successor of
ICC.
* If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from
any one Authorized Person. Written instructions will require signatures of
the number of Authorized Persons indicated in this space.
<PAGE>
Certificate of Authority
Investors must complete one of the following two Certificates of Authority.
Certificate A: FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS (With a Board
of Directors or Board of Trustees.)
I___________________ , Secretary of the above-named investor, do hereby certify
that at a meeting on ____________, at which a quorum was present throughout, the
Board of Directors (Board of Trustees) of the investor duly adopted a
resolution which is in full force and effect and in accordance with the
investor's charter and by-laws, which resolution did the following: (1)
empowered the officers/trustees executing this Application (or amendment) to do
so on behalf of the investor; (2) empowered the above-named Authorized
Person(s) to effect securities transactions for the investor on the terms
described above; (3) authorized the Secretary to certify, from time to time,
the names and titles of the officers of the investor and to notify ICC when
changes in officers occur; and (4) authorized the Secretary to certify that
such a resolution has been duly adopted and will remain in full force and
effect until ICC receives a duly-executed amendment to the Certification form.
Witness my hand and seal on behalf of the investor.
this __ day of ______________, 199__ Secretary____________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the investor.
- ------------------------------------------------------------------------------
Signature and title Date
Certificate B: FOR PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all general partners/trustees of the
investor and that they have done the following under the authority of the
investor's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application (or amendment) to do so on behalf of
the investor; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the investor on the terms described above; (3)
authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the investor and to notify ICC when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until ICC receives a further duly-executed certification. (If there
are not enough spaces here for all necessary signatures, complete a separate
certificate containing the language of this Certificate B and attach it to the
Application).
- ---------------------------------------------------------------------
Signature and title Date
- ---------------------------------------------------------------------
Signature and title Date
A-2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FLAG INVESTORS EQUITY PARTNERS, FUND, INC.
(Institutional Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
One South Street P.O. Box 7558
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
One South Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 2000 One Logan Square
New York, New York 10006 Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FLAG INVESTORS EQUITY PARTNERS 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 PARTICIPATING DEALER OR SHAREHOLDER
SERVICING AGENT OR BY WRITING OR CALLING THE FUND, ONE SOUTH
STREET, BALTIMORE, MARYLAND 21202, (800) 767-FLAG.
Statement of Additional Information Dated:
October 1, 1997
Relating to Prospectuses Dated:
October 1, 1997, relating to the Class A, Class B
and Institutional Shares
<PAGE>
TABLE OF CONTENTS
Page
----
1. General Information and History............................... 1
2. Investment Objectives, Policies and Risk Considerations....... 1
3. Valuation of Shares and Redemption............................ 5
4. Federal Tax Treatment of Dividends and
Distributions............................................... 6
5. Management of the Fund........................................ 9
6. Investment Advisory and Other Services........................ 13
7. Distribution of Fund Shares................................... 14
8. Brokerage..................................................... 18
9. Capital Stock................................................. 19
10. Semi-Annual Reports........................................... 20
11. Custodian, Transfer Agent and Accounting Services............. 20
12. Independent Accountants....................................... 21
13. Performance Information....................................... 21
14. Control Persons and Principal Holders of
Securities.................................................. 23
15. Financial Statements.......................................... 23
Appendix A.................................................... A-1
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Flag Investors Equity Partners Fund, Inc. (the "Fund") is an
open-end management investment company. Under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), all mutual funds are required to
furnish prospective investors with certain information concerning the activities
of the company being considered for investment. The Fund currently offers three
classes of shares: Flag Investors Equity Partners Fund Class A Shares (the
"Class A Shares"), Flag Investors Equity Partners Fund Class B Shares (the
"Class B Shares") and Flag Investors Equity Partners Fund Institutional Shares
(the "Institutional Shares") (collectively, the "Shares"). As used herein, the
"Fund" refers to Flag Investors Equity Partners 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 for the Class A Shares and the Class B
Shares 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 respecting the Fund and its Shares filed with the SEC.
Copies of the Registration Statement as filed, including such omitted items, may
be obtained from the SEC by paying the charges prescribed under its rules and
regulations.
The Fund was incorporated under the laws of the State of Maryland
on November 29, 1994. The Fund filed a registration statement with the SEC
registering itself as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") and its Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and commenced operations on February 13, 1995. The Fund has
offered the Institutional Shares since February 12, 1996.
Under a license agreement dated January 31, 1995 between the Fund
and Alex. Brown & Sons Incorporated (predecessor to 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.
2. INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The Fund has the investment objective of seeking long-term growth
of capital and, secondarily, current income. The Fund seeks to achieve this
objective primarily through a policy of diversified investments in equity
securities, including common stocks and convertible securities. Under normal
market conditions, the Fund will invest as fully as feasible in equity
securities and at least 65% of the Fund's total assets will be so invested, all
as more fully described in the Prospectus. There can be no assurance that the
Fund's investment objective will be achieved.
In addition, the Fund may purchase a limited amount, up to 10% of
its total assets in non-convertible debt securities. Up to all of any such
investments may be in securities that are rated below investment grade by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P") or are unrated and of similar quality. A description of the rating
categories of S&P and Moody's is set forth in Appendix A to this Statement of
Additional Information. Any remaining assets of the Fund not invested as
described above may be invested in high quality money market instruments. For
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temporary, defensive purposes, the Fund may invest up to 100% of its assets in
high quality short-term money market instruments, including repurchase
agreements, and in bills, notes or bonds issued by the U.S. Treasury Department
or by other agencies of the U.S. Government.
Additional information about certain of the Fund's investment
policies and practices are described below.
Convertible Securities
As described in the Prospectus, the Fund may invest in
convertible securities. In general, the market value of a convertible security
is at least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., the value of the
underlying shares of common stock if the security is converted). As a
fixed-income security, a convertible security tends to increase in market value
when interest rates decline and tends to decrease in value when interest rates
rise. However, the price of a convertible security also is influenced by the
market value of the security's underlying common stock. Thus, the price of a
convertible security tends to increase as the market value of the underlying
common stock increases, whereas it tends to decrease as the market value of the
underlying stock declines. Investments in convertible securities generally
entail less risk than investment in common stock of the same issuer.
Below Investment Grade Corporate Bonds
The Fund may purchase corporate bonds, including convertible
securities, that carry ratings lower than those assigned to investment grade
bonds by Moody's or S&P, or that are unrated if such bonds, in the fund's
investment advisor's and the fund's sub-advisor's judgment, meet the quality
criteria established by the Board of Directors. These bonds are generally known
as "junk bonds." These securities may trade at substantial discounts from their
face values. Accordingly, if the Fund is successful in meeting its objectives,
investors may receive a total return consisting not only of income dividends
but, to a lesser extent, capital gain distributions. Appendix A to this
Statement of Additional Information sets forth a description of the S&P and
Moody's rating categories, which indicate the rating agency's opinion as to the
probability of timely payment of interest and principal. These ratings range in
descending order of quality from AAA to D, in the case of S&P, and from Aaa to
C, in the case of Moody's. Generally, securities that are rated lower than BBB
by S&P or Baa by Moody's are described as below investment grade. Securities
rated lower than investment grade may be of a predominantly speculative
character and their future cannot be considered well-assured. The issuer's
ability to make timely payments of principal and interest may be subject to
material contingencies. Securities in the lowest rating categories may be unable
to make timely interest or principal payments and may be in default and in
arrears in interest and principal payments.
Ratings of S&P and Moody's represent their opinions of the
quality of bonds and other debt securities they undertake to rate at the time of
issuance. However, these ratings are not absolute standards of quality and may
not reflect changes in an issuer's creditworthiness. Accordingly, the Fund's
investment advisor (the "Advisor") and the Fund's sub-advisor (the
"Sub-Advisor") (collectively, the "Advisors") do not rely exclusively on ratings
issued by S&P or Moody's in selecting portfolio securities but supplement such
ratings with independent and ongoing review of credit quality. In addition, the
total return the Fund may earn from investments in high-yield securities will be
significantly affected not only by credit quality but by fluctuations in the
markets in which such securities are traded. Accordingly, selection and
supervision by the Advisors of investments in lower rated securities involves
continuous analysis of individual issuers, general business conditions,
activities in the high-yield bond market and other factors. The analysis of
issuers may include, among other things, historic and current financial
conditions, strength of management, responsiveness to business conditions,
credit standing and current and anticipated results of operations. Analysis of
general business conditions and other factors may
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include anticipated changes in economic activity in interest rates, the
availability of new investment opportunities and the economic outlook for
specific industries.
Investing in higher yield, lower rated bonds entails
substantially greater risk than investing in investment grade bonds, including
not only credit risk, but potentially greater market volatility and lower
liquidity. Yields and market values of high-yield bonds will fluctuate over
time, reflecting not only changing interest rates but also the bond market's
perception of credit quality and the outlook for economic growth. When economic
conditions appear to be deteriorating, lower rated bonds may decline in value
due to heightened concern over credit quality, regardless of prevailing interest
rates. In addition, in adverse economic conditions, the liquidity of the
secondary market for junk bonds may be significantly reduced. In addition,
adverse economic developments could disrupt the high-yield market, affecting
both price and liquidity, and could also affect the ability of issuers to repay
principal and interest, thereby leading to a default rate higher than has been
the case historically. Even under normal conditions, the market for high-yield
bonds may be less liquid than the market for investment grade corporate bonds.
There are fewer securities dealers in the high-yield market and purchasers of
high-yield bonds are concentrated among a smaller group of securities dealers
and institutional investors. In periods of reduced market liquidity, the market
for high-yield bonds may become more volatile and there may be significant
disparities in the prices quoted for high-yield securities by various dealers.
Under conditions of increased volatility and reduced liquidity, it would become
more difficult for the Fund to value its portfolio securities accurately because
there might be less reliable, objective data available.
Finally, prices for high-yield bonds may be affected by
legislative and regulatory developments. For example, from time to time,
Congress has considered legislation to restrict or eliminate the corporate tax
deduction for interest payments or to regulate corporate restructurings such as
takeovers, mergers or leveraged buyouts. Such legislation may significantly
depress the prices of outstanding high-yield bonds.
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic banks
or broker-dealers deemed to be creditworthy by the Advisors under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the purchaser's holding period. The value of
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. The Fund makes payment
for such securities only upon physical delivery or evidence of book-entry
transfer to the account of a custodian or bank acting as agent. The underlying
securities, which in the case of the Fund are securities of the U.S. Government
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 Investment Risk Considerations
From time to time, the Advisors may invest the Fund's assets in
American Depositary Receipts and other securities, which are traded in the
United States and represent interests in foreign issuers. The Advisors may also
invest up to 10% of the Fund's assets in securities of foreign companies, and in
debt and equity securities issued by foreign corporate and government issuers
and which are not traded in the United States when the Advisors believe that
such investments provide good opportunities
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for achieving income and capital gains without undue risk. Foreign investments
involve substantial and different risks which should be carefully considered by
any potential investor. Such investments are usually not denominated in dollars
so changes in the relative values of the dollar and other currencies will affect
the value of foreign investments. In general, less information is publicly
available about foreign companies than is available about companies in the
United States. Most foreign companies are not subject to uniform audit and
financial reporting standards, practices and requirements comparable to those in
the United States. In most foreign markets volume and liquidity are less than in
the United States and, at times, volatility of price can be greater than in the
United States. Fixed commissions on foreign stock exchanges are generally higher
than the negotiated commissions on United States exchanges. There is generally
less government supervision and regulation of foreign stock exchanges, brokers,
and companies in the United States. The settlement periods for foreign
securities, which are often longer than those for securities of U.S. issuers,
may affect portfolio liquidity. Portfolio securities held by the Fund which are
listed on foreign exchanges may be traded on days that the Fund does not value
its securities, such as Saturdays and the customary United States business
holidays on which the New York Stock Exchange is closed. As a result, the net
asset value of Shares may be significantly affected on days when shareholders do
not have access to the Fund.
Although the Fund intends to invest in securities of companies
and governments of developed, stable nations, there is also the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets,
political or social instability, or diplomatic developments that could adversely
affect investments, assets or securities transactions of the Fund in some
foreign countries. The dividends and interest payable on certain of the Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount available for distribution to the Fund's shareholders.
When the Fund invests directly in foreign securities, investors should
understand that the expense ratio of the Fund can be expected to be higher than
those of investment companies investing in domestic securities due to the
additional cost of custody of foreign securities. When considering whether to
invest in foreign equity or debt securities, the Advisor will consider the risk
of foreign investment in addition to the criteria it applies to all investments
in equity or debt securities, as described above.
Investment Restrictions
The Fund's investment program is subject to a number of
investment restrictions that reflect self-imposed standards as well as federal
and state 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 vote of a majority of the outstanding
Shares of the Fund means the lesser of: (i) 67% or more of the Shares present at
a shareholder meeting at which the holders of more than 50% of the Shares are
present or represented or (ii) more than 50% of the outstanding Shares of the
Fund. The Fund will not:
1. Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only from banks and in an amount not exceeding
10% of the value of the total assets of the Fund at the time of such borrowing,
provided that, while borrowings by the Fund equaling 5% or more of the Fund's
total assets are outstanding, the Fund will not purchase securities;
2. Invest in real estate or mortgages on real estate;
3. Purchase or sell commodities or commodities contracts,
including financial futures contracts;
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4. Act as an underwriter of securities within the meaning of the
U.S. federal securities laws except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities;
5. Issue senior securities;
6. Make loans, except that the Fund may purchase or hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies;
7. Effect short sales of securities;
8. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
9. Purchase participations or other direct interests in oil, gas
or other mineral leases or exploration or development programs; or
10. Invest more than 10% of its net assets in illiquid securities
(defined as securities that cannot be sold in the ordinary course of business
within seven days at approximately the value at which the Fund is carrying the
securities), including securities that the Fund is restricted from selling to
the public without registration under the Securities Act [excluding restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act
("Rule 144A Securities") that have been determined to be liquid by the Fund's
Board of Directors based upon the trading markets for such securities].
The following investment restriction may be changed by a vote of
the majority of the Board of Directors. The Fund will not:
1. Invest in shares of any other investment company registered
under the Investment Company Act, except as permitted by federal law.
3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined daily as of the close
of the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time)
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.'s Birthday, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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 Class A Shares
and Class B Shares by check and Institutional Shares by wire transfer of funds,
as described in the Prospectuses relating to such Shares. However, if the Board
of Directors determines that it would be in the best interests of the remaining
shareholders to make payment of the redemption price in whole or in part by a
distribution in
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kind of readily marketable securities from the portfolio of the Fund in lieu of
cash, in conformity with applicable rules of the SEC, the Fund will make such
distributions in kind. If Shares are redeemed in kind, the redeeming shareholder
will incur brokerage costs in later converting the assets into cash. The method
of valuing portfolio securities is described 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
Investment Company Act pursuant to which the Fund is obligated to redeem Shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund during any 90-day period for any one shareholder.
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectus is not intended as a substitute for
careful tax planning.
The summary of 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. Subsequent 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 expects to be taxed as a regulated investment company
under Subchapter M of the Code. However, in order to qualify as a regulated
investment company for any taxable year, the Fund generally must (1) derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, and other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
its business of investing in stocks, securities or currencies (the "Income
Requirement"), and (2) derive less than 30% of its gross income (exclusive of
certain gains from designated hedging transactions that are offset by realized
or unrealized losses on offsetting positions) from gains on the sale or other
disposition of any of the following investments if such investments are held for
less than three months (the "Short-Short Gain Test"): (a) stock or securities
(as defined in Section 2(a)(36) of the Investment Company Act); (b) options,
futures or forward contracts (other than options, futures, or forward contracts
on foreign currencies); and (c) foreign currencies (or options, futures, or
forward contracts on foreign currencies) but only if such currencies (or
options, futures, or forward contracts) are not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities).
In addition, at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its assets must consist of cash and cash
items, U.S. government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has not
invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and that are
engaged in the same or similar trades or businesses or related trades or
businesses (the "Asset Diversification Test"). Generally, the Fund will not lose
its status as a regulated investment company if it fails to meet the Asset
Diversification Test solely as a result of a fluctuation in value of portfolio
assets not attributable to a purchase.
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Under Subchapter M of the Code, the Fund is exempt from federal
income tax on its net investment income and capital gains which it distributes
to shareholders, provided that it distributes at least 90% of its investment
company taxable income (net investment income and the excess of net short-term
capital gains over net long-term capital losses) for the year (the "Distribution
Requirement") and complies with the other requirements of the Code described
above. Distributions of investment company taxable income made during the
taxable year or, under certain specified circumstances, within 12 months after
the close of the taxable year will satisfy the Distribution Requirement. The
Distribution Requirement for any year may be waived if a regulated investment
company establishes to the satisfaction of the Internal Revenue Service that it
is unable to satisfy the Distribution Requirement by reason of distributions
previously made for the purpose of avoiding liability for federal excise tax.
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 for any taxable year, the Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate income tax rates without any deduction for distributions to
shareholders, and all such distributions generally will be taxable to
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the 70% 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 invested in additional Shares. 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 as long-term capital gains, regardless of the
length of time the shareholder has held Shares. Conversely, if the Fund elects
to retain its net capital gains, it will be taxed thereon (except to the extent
of any available capital loss carryovers) at the applicable corporate capital
gains tax rate. In this event, it is expected that the Fund also will elect to
have shareholders treated as having received a distribution of such gains, with
the result that shareholders will be required to report such gains on their
returns as long-term capital gains, will receive a tax credit for their
allocable share of capital gains tax paid by the Fund on the gains, and will
increase the tax basis for their Shares by an amount equal to 65% of such gains.
In the case of corporate shareholders, Fund distributions (other
than capital gains distributions) generally qualify for the 70% 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. For purposes of the alternative minimum
tax and the environmental tax, corporate shareholders generally will be required
to take the full amount of any dividend received from the Fund into account in
determining their adjusted current earnings for purposes of computing
"alternative minimum taxable income."
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 purchasing just prior to an
ordinary income dividend or capital gains distribution will be taxable on the
entire amount of the dividend received, even though the net asset value per
Share on the date of such purchase
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reflected the amount of such distribution.
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 one year and otherwise will be short-term. 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.
The Fund will provide a statement annually to shareholders as to
the federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year, including the amount of dividends eligible for the corporate
dividends received deduction.
The Fund will be required in certain cases to withhold and remit
tax to the United States Treasury on distributions payable to any shareholder
who (1) has provided either an incorrect taxpayer identification number or no
number at all, (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 the shareholder is not subject to backup
withholding.
Federal Excise Tax; Miscellaneous Considerations
The Code imposes a nondeductible 4% excise tax on regulated
investment companies that do not distribute in each calendar year an amount
equal to 98% of their ordinary income for the calendar year plus 98% of their
capital gain net income for the one-year period ending on October 31 of such
calendar year. The excise tax is imposed on the undistributed part of this
required distribution. In addition, the balance of such income must be
distributed during the next calendar year to avoid liability for the excise tax
in that year. For the foregoing purposes, an investment company is treated as
having distributed any amount on which it is subject to income tax for any
taxable year ending in such calendar year. For this purpose, in determining its
capital gain net income for the one-year period ending on October 31 of such
calendar year, the Fund must reduce its capital gain net income by the amount of
any net ordinary loss for the calendar year (but not below the net capital gain
for the one-year period ending on October 31). Because the Fund intends to
distribute all of its income currently (or to retain, at most its net capital
gains and pay tax thereon), the Fund does not anticipate incurring any liability
for this excise tax. However, investors should note that the Fund may in certain
circumstances be required to liquidate portfolio investments in order to make
sufficient distributions to avoid excise tax liability and, in addition, that
the liquidation of such investments in such circumstances may affect the ability
of the Fund to satisfy the Short-Short Gain Test.
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.
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5. MANAGEMENT OF THE FUND
Directors and Officers
The Directors and executive officers of the Fund, their
respective dates of birth and their principal occupations during the last five
years are set forth below. Unless otherwise indicated, the address of each
Director and executive officer is One South Street, Baltimore, Maryland 21202.
*TRUMAN T. SEMANS, Chairman (10/27/27)
Managing Director, BT Alex. Brown Incorporated; Formerly, Vice Chairman,
Alex. Brown & Sons Incorporated (now BT Alex. Brown Incorporated);
Director, Investment Company Capital Corp. (registered investment
advisor).
*RICHARD T. HALE, Director (7/17/45)
Managing Director, BT Alex. Brown Incorporated; Director and President,
Investment Company Capital Corp. (registered investment advisor);
Chartered Financial Analyst.
JAMES J. CUNNANE, Director (3/11/38)
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141. Managing
Director, CBC Capital (merchant banking), 1993-Present; Formerly, Senior
Vice President and Chief Financial Officer, General Dynamics Corporation
(defense), 1989-1993, and Director, The Arch Fund (registered investment
company).
JOHN F. KROEGER, Director (8/11/24)
37 Pippins Way, Morristown, New Jersey 07960. Director/Trustee, AIM
Funds (registered investment companies); Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm); and General Manager, Shell
Oil Company.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director,
Kimberly-Clark Corporation (personal consumer products) and Household
International (banking and finance); Chairman of the Quality Control
Inquiry Committee, American Institute of Certified Public Accountants;
Formerly, Trustee, Merrill Lynch Funds for Institutions, 1991-1993;
Adjunct Professor, Columbia University-Graduate School of Business,
1991-1992; Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. McDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705. President, Duke Management Company
(investments); Executive Vice President, Duke University (education,
research and health care); Director, Central Carolina Bank & Trust
(banking), Key Funds (registered investment companies), AMBAC Treasurers
Trust (registered investment company) and DP Mann Holdings (insurance).
REBECCA W. RIMEL, Director (4/10/51)
The Pew Charitable Trusts, One Commerce Square, 2005 Market Street,
Suite 1700, Philadelphia, Pennsylvania 19103. President and Chief
Executive Officer, The Pew Charitable Trusts; Director and Executive
Vice President, The Glenmede Trust Company; Formerly, Executive
Director, The Pew Charitable Trusts.
CARL W. VOGT, ESQ., Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington,
D.C. 20004-2604; Senior Partner, Fulbright & Jaworski L.L.P. (law);
Formerly, Chairman, National Transportation Safety Board; Director,
National Railroad Passenger Corporation (Amtrak) and Member, Aviation
System Capacity Advisory Committee (Federal Aviation Administration).
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HARRY WOOLF, President (8/12/23)
Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; Director, ATL
and Spacelabs Medical Corp. (medical equipment) and Family Health
International (non-profit research and education); Director, Research
America (non-profit medical research); Formerly, Trustee, Reed College
(education); Trustee, Rockefeller Foundation and Director, Merrill Lynch
Cluster C Funds (registered investment companies).
JOSEPH A. FINELLI, Treasurer (1/24/57)
Vice President, BT Alex. Brown Incorporated and Vice President,
Investment Company Capital Corp. (registered investment advisor),
September 1995-Present; Formerly, Vice President and Treasurer, The
Delaware Group of Funds (registered investment companies) and Vice
President, Delaware Management Company Inc. (investments), 1980-August
1995.
AMY M. OLMERT, Secretary (5/14/63)
Vice President, BT Alex. Brown Incorporated, June 1997-Present.
Formerly, Senior Manager, Coopers & Lybrand, L.L.P., September 1988 -
June 1997.
LAURIE D. COLLIDGE, Assistant Secretary (1/1/66)
Asset Management Department, BT Alex. Brown Incorporated.
- ---------------------
* Messrs. Semans and Hale are directors who are "interested persons" as
defined in the Investment Company Act.
There are currently 13 funds in the Flag Investors/ISI Funds and
BT Alex. Brown Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr.
Semans serves as Chairman of five funds and as a Director of six other funds in
the Fund Complex. Mr. Hale serves as Chairman of four funds and as Director of
11 other funds in the Fund Complex. Messrs. Cunnane, Kroeger, Levy and McDonald
serve as Directors of each fund in the Fund Complex. Ms. Rimel and Mr. Vogt each
serve as a director of 11 funds in the Fund Complex. Mr. Woolf serves as
President of seven funds in the Fund Complex. Mr. Finelli serves as Treasurer,
Ms. Olmert serves as Secretary and Ms. Collidge serves as Assistant Secretary,
respectively, of each of the funds in the Fund Complex.
Some of the Directors of the Fund are customers of, and have had
normal brokerage transactions with, BT Alex. Brown in the ordinary course of
business. All such transactions were made on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated persons.
Additional transactions may be expected to take place in the future.
With the exception of the Fund's President, officers of the Fund
receive no direct remuneration in such capacity from the Fund. Officers and
Directors of the Fund who are officers or directors of BT Alex. Brown may be
considered to have received remuneration indirectly. Mr. Woolf receives an
annual fee for his services from each Flag Investors Fund for which he serves as
President and from BT Alex. Brown Cash Reserve Fund, Inc. As compensation for
his or her services, each Director who is not an "interested person" of the Fund
(as defined in the Investment Company Act) (an "Independent Director") receives
an aggregate annual fee (plus reimbursement for reasonable out-of-pocket
expenses incurred in connection with his or her attendance at board and
committee meetings) from each fund in the Fund Complex for which he or she
serves. In addition, the Chairman of the Fund Complex's Audit Committee receives
an aggregate annual fee from the Fund Complex. Payment of such fees and expenses
are allocated among all such funds described above in proportion to their
relative net assets. For the fiscal year ended May 31, 1997, Non-Interested
Directors' fees attributable to the assets of the Fund totaled approximately
$5,503.
10
<PAGE>
The following table shows aggregate compensation and retirement
benefits 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 May 31, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Name of Person, Position Aggregate Compensation Pension or Retirement Total Compensation
From the Fund Payable to Benefits Accrued as from the Fund
Directors for the Fiscal Year Part of Fund Expenses and Fund Complex
Ended May 31, 1997 Payable to Directors
in the Fiscal Year
Ended May 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truman T. Semans(1) $0 $0 $0
Chairman and Director
Richard T. Hale, Director(1) $0 $0 $0
Charles W. Cole, Jr., Director(1,2) $0 $0 $0
James J. Cunnane, Director $657(3) (4) $39,000 for service on 12
Boards in the Fund Complex
John F. Kroeger, Director $825(3) (4) $49,000 for service on 12
Boards in the Fund Complex
Louis E. Levy, Director $657(3) (4) $39,000 for service on 12
Boards in the Fund Complex
Eugene J. McDonald, Director $657(3) (4) $39,000 for service on 12
Boards in the Fund Complex
Rebecca W. Rimel, Director $743(3) (4) $39,000 for service on 10(5)
Boards in the Fund Complex
Carl W. Vogt, Director $753(3) (4) $39,000 for service on 9(5)
Boards in the Fund Complex
Harry Woolf, Director(6) $443(3) (4) $29,250 for service on 12
Boards in the Fund Complex
</TABLE>
(1) A Director who is an "interested person" as defined in the Investment
Company Act.
(2) Retired effective September 1, 1997.
(3) Of this amount, $657, $0, $0, $657, $753, $443, and $743 has been
deferred by Messrs. Cunnane, Kroeger, Levy, McDonald, Vogt and Woolf
and Ms. Rimel, respectively, pursuant to a deferred compensation plan.
(4) The Fund Complex has adopted a retirement plan for eligible Directors,
as described below. The actuarially computed pension expense for the
Fund for the year ended May 31, 1997 was approximately $3,765.
(5) Ms. Rimel and Mr. Vogt receive proportionately higher compensation from
each fund for which they serve.
(6) Retired as Director of the Fund on December 16, 1996 and was appointed
President of the Fund effective September 1, 1997.
The Fund Complex has adopted a Retirement Plan (the "Retirement
Plan") for Directors who are not employees of the Fund, the Fund's Advisor or
their respective affiliates (the "Participants"). After completion of six years
of service, each Participant will be entitled to receive an annual retirement
benefit equal to a percentage of the fee earned 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
11
<PAGE>
he or she serves. The Retirement Plan is unfunded and unvested. Mr. Kroeger has
qualified but has not received benefits. The Fund has two Participants, a
Director who retired effective December 31, 1994 and a Director who retired
effective December 31, 1996, who have qualified for the Retirement Plan by
serving 13 and 14 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. Another Participant, who retired on January 31, 1996 and died on
June 2, 1996, was paid fees of $8,090 by the Fund Complex under the Retirement
Plan in the period ended December 31, 1996. Such fees are allocated to each fund
in the Fund Complex based upon the relative net assets of such fund to the Fund
Complex.
Set forth in the table below are the estimated annual benefits
payable to a Participant upon retirement assuming various years of service and
payment of a percentage of the fee earned by such Participant in his or her last
year of service, as described above. The approximate credited years of service
are as follows: for Mr. Cunnane, 2 years; for Mr. Kroeger, 14 years; for Mr.
Levy, 2 years; for Mr. McDonald, 4 years; for Ms. Rimel, 1 year; and for
Mr. Vogt, 1 year.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- -----------------------------------------------------------------
Chairman of Audit Committee Other Participants
--------------------------- --------------------
<S> <C> <C>
6 years $4,900 $3,900
7 years $9,800 $7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>
Any Director who receives fees from the Fund is permitted to
defer a minimum of 50%, or up to all, of his or her annual compensation pursuant
to a Deferred Compensation Plan. Messrs. Cunnane, Kroeger, Levy, McDonald, Vogt
and Woolf and Ms. Rimel have each executed a Deferred Compensation Agreement.
Currently, the deferring Directors may select various Flag Investors Funds and
the BT Alex. Brown Cash Reserve Fund in which all or part of their deferral
account shall be deemed to be invested. Distributions from the deferring
Directors' deferral accounts will be paid in cash, in generally quarterly
installments over a period of 10 years.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of
Ethics pursuant to Rule 17j-1 under the Investment Company Act. The Code of
Ethics applies to the personal investing activities of all of the directors and
officers of the Fund, as well as to designated officers, directors and employees
of the Advisors and the Distributor. As described below, the Code of Ethics
imposes additional restrictions on the Advisor's investment personnel, including
the portfolio managers and employees who execute or help execute a portfolio
manager's decisions or who obtain contemporaneous information regarding the
purchase or sale of a security by the Fund.
The Code of Ethics requires that covered employees of the
Advisors, certain directors or officers of the Distributor, and all Fund
Directors who are "interested persons," preclear any personal securities
investments (with certain exceptions, such as non-volitional purchases or
purchases that are part of an automatic dividend reinvestment plan). The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and special preclearance of the
acquisition of securities in private placements. Furthermore, the Code of Ethics
provides for trading
12
<PAGE>
"blackout periods" that prohibit trading by investment personnel and certain
other employees within periods of trading by the Fund in the same security.
Officers, directors and employees of the advisors and the Distributor may comply
with codes instituted by those entities so long as they contain similar
requirements and restrictions.
6. INVESTMENT ADVISORY AND OTHER SERVICES
On June 17, 1997 the Board of Directors of the Fund, including
a majority of the Non-Interested Directors, approved an Investment Advisory
Agreement between the Fund and Investment Company Capital Corp. ("ICC" or the
"Advisor") and a Sub-Advisory Agreement among the Fund, ICC and Alex. Brown
Investment Management ("ABIM" or the "Sub-Advisor"), both of which contracts are
described in greater detail below. The Investment Advisory Agreement and the
Sub-Advisory Agreement were approved by a vote of shareholders of the Fund on
August 14, 1997. ICC, the investment advisor, is an indirect subsidiary of
Bankers Trust New York Corporation. ICC is also the investment advisor to BT
Alex. Brown Cash Reserve Fund, Inc., Flag Investors Telephone Income Fund, Inc.,
Flag Investors International Fund, Inc., Flag Investors Emerging Growth Fund,
Inc., Flag Investors Short-Intermediate Income Fund, Inc., Flag Investors Value
Builder Fund, Inc., Flag Investors Maryland Intermediate Tax-Free Income Fund,
Inc. and Flag Investors Real Estate Securities Fund, Inc.
ABIM, also the sub-advisor to Flag Investors Telephone Income
Fund, Inc. and Flag Investors Value Builder Fund, Inc., is a registered
investment advisor with approximately $6.7 billion under management as of August
31, 1997. ABIM is a limited partnership affiliated with the Advisor. Buppert,
Behrens & Owen, Inc., a company organized and owned by three employees of ABIM,
owns a 49% limited partnership interest and a 1% general partnership interest in
ABIM. BT Alex. Brown owns a 1% general partnership interest in ABIM and BT Alex.
Brown Holdings, Inc. owns the remaining limited partnership interest.
Under the Investment Advisory Agreement, ICC is responsible
for obtaining and evaluating economic, statistical and financial information to
formulate and implement investment policies for the Fund. ICC has delegated this
responsibility to ABIM, provided that ICC continues to supervise the performance
of ABIM and report thereon to the Fund's Board of Directors. Any investment
program undertaken by ICC or ABIM will at all times be subject to policies and
control of the Fund's Board of Directors. ICC will provide the Fund with office
space for managing its affairs, with the services of required executive
personnel and with certain clerical and bookkeeping services and facilities.
These services are provided by ICC without reimbursement by the Fund for any
costs. Neither ICC nor ABIM shall be liable to the Fund or its shareholders for
any act or omission by ICC or ABIM 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 ICC and ABIM to the
Fund are not exclusive and ICC and ABIM are free to render similar services to
others.
As compensation for its services, ICC is entitled to receive
an annual fee from the Fund, calculated daily and paid monthly, at the annual
rate of 1.00% of the first $50 million of the Fund's average daily net assets,
0.85% of the next $50 million of the Fund's average daily net assets, 0.80% of
the next $100 million of the Fund's average daily net assets and 0.70% of the
Fund's average daily net assets in excess of $200 million. As compensation for
its services, ABIM is entitled to receive a fee from ICC, payable from its
advisory fee, calculated daily and payable monthly, at the annual rate of 0.75%
of the first $50 million of the Fund's average daily net assets, 0.60% of the
next $150 million of the Fund's average daily net assets, and 0.50% of the
Fund's average daily net assets in excess of $200 million.
13
<PAGE>
Advisory fees paid by the Fund to ICC and sub-advisory fees
paid by ICC to ABIM for the last three fiscal years were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Year Ended
- ------------------------------------------------------------------------------------------
Fees Paid To: May 31, 1997 May 31, 1996 May 31, 1995(1)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ICC $853,103(2) $318,234 $0(4)
ABIM $680,636(5) $365,697 $10,044(5)
</TABLE>
- -----------------------
(1) For the period from February 13, 1995 (commencement of operations)
through May 31, 1995.
(2) Net of fee waivers. Absent such fee waiver, the Class A Shares total
operating expenses would have been 1.49% of average daily net assets;
the Class B Shares' total operating expenses would have been 2.24% of
average daily net assets, and the Institutional Shares' total operating
expenses would have been 1.24% of average daily net assets.
(3) Net of fee waivers. Absent such fee waiver, the Class A Shares total
operating expenses would have been 1.77% of average daily net assets;
the Class B Shares' total operating expenses would have been 2.52% of
average daily net assets, and the Institutional Shares' total operating
expenses would have been 1.55% (annualized) of average daily net
assets.
(4) Net of fee waivers. Absent such fee waivers, the Class A Shares' total
operating expenses would have been 3.76% (annualized) of average daily
net assets and the Class B Shares' total operating expenses would have
been 4.22% (annualized) of average daily net assets.
(5) Net of fee waivers for the fiscal years ended May 31, 1997 and May 31,
1996 and the period from February 13, 1995 (commencement of operations)
through May 31, 1995 of $49,796, $55,124, and $1,826, respectively.
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
Non-Interested Directors who have no direct or indirect financial interest in
such agreements, by votes cast in person at a meeting called for such purpose,
or by a vote of a majority of the outstanding Shares (as defined under "Capital
Stock"). The Fund or ICC may terminate the Investment Advisory Agreement on 60
days' written notice without penalty. The Investment Advisory Agreement will
terminate automatically in the event of assignment (as defined in the Investment
Company Act).
ICC also serves as the Fund's transfer and dividend disbursing
agent and provides accounting services to the Fund. (See "Custodian, Transfer
Agent Accounting Services.")
7. DISTRIBUTION OF FUND SHARES
ICC Distributors, Inc. ("ICC Distributors " or the
"Distributor") serves as the exclusive distributor of the Fund's Shares pursuant
to a Distribution Agreement ("Distribution Agreement") dated August 31, 1997.
Prior to August 31, 1997, Alex. Brown & Sons Incorporated ("Alex. Brown") served
as the Fund's distributor pursuant to three separate Distribution Agreements,
one for each class of the Fund's Shares ("prior Distribution Agreements") for
the same rate of compensation and on substantially the same terms as the current
Distribution Agreement.
The Distribution Agreement provides that ICC Distributors has
the exclusive right to distribute the classes of Flag Investors Equity Partners
Fund Shares either directly or through other
14
<PAGE>
broker-dealers and further provide that ICC Distributors will: (a) solicit and
receive orders for the purchase of Shares; (b) accept or reject such orders on
behalf of the Fund in accordance with the Fund's currently effective prospectus
and transmit such orders as are accepted to the Fund's transfer agent as
promptly as possible; (c) receive requests for redemptions and transmit such
redemption requests to the Fund's transfer agent as promptly as possible; and
(d) respond to inquiries from shareholders concerning the status of their
accounts and the operations of the Fund; (e) maintain such accounts, books, and
records as may be required by law or deemed appropriate by the Board of
Directors; and (f) take all actions necessary to carry into effect the
distribution of the Shares. ICC Distributors has not undertaken to sell any
specific number of Shares. The Distribution Agreement further provides that, in
connection with the distribution of Shares, ICC Distributors will be responsible
for all of the promotional expenses. The services provided by ICC Distributors
to the Fund are not exclusive, and ICC Distributors is free to provide similar
services to others. ICC Distributors shall not be liable to the Fund or its
shareholders for any act or omission by ICC Distributors 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 Distribution
Agreement further provides that the Fund and ICC Distributors will mutually
indemnify each other for losses relating to the 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 Non-Interested 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 assignment.
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, with respect to the Class A and Class B Shares,
the Fund may enter into Shareholder Servicing Agreements with certain financial
institutions, such as 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.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Fund, according to interpretations by
various bank regulatory authorities, financial institutions are not prohibited
from acting in other capacities for investment companies, such as the
shareholder servicing capacities described above. Should future legislative,
judicial or administrative action prohibit or restrict the activities of the
Shareholder Servicing Agents in connection with the Shareholder Servicing
Agreements, the Fund may be required to alter materially or discontinue its
arrangements with the Shareholder Servicing Agents. 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. In addition, state
securities laws on this issue may differ from the interpretations of federal law
expressed herein, and banks and financial institutions may be required to
register as dealers pursuant to state law.
As compensation for providing distribution services as
described above for the Class A Shares, ICC Distributors receives an annual fee,
paid monthly, equal to .25% of the average daily net assets of the Class A
Shares. As compensation for providing distribution services as described above
for the Class B Shares, ICC Distributors receives an annual fee, paid monthly,
equal to .75% of the average daily net assets of the Class B Shares. With
respect to the Class A Shares, ICC Distributors expects to allocate up to all of
its fee to Participating Dealers. With respect to the Class B Shares, ICC
Distributors expects to retain the entire distribution fee as reimbursement for
front-end payments to Participating Dealers.
15
<PAGE>
Distribution fees paid by the Fund to Alex. Brown, formerly the Fund's
distributor, for the last three fiscal years were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended
- ----------------------------------------------------------------------------------------------
Class May 31, 1997 May 31, 1996 May 31, 1995(1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A $206,936 $130,140 $15,976
B $ 65,473 $ 27,369 $ 4,220
</TABLE>
- -----------------
(1) February 13, 1995 (commencement of operations through) May 31, 1995.
In addition, with respect to the Class B Shares, the Fund pays
ICC Distributors a shareholder servicing fee at an annual rate of .25% of the
average daily net assets of the Class B Shares. (See the Prospectus.) For the
fiscal years ended May 31, 1997, May 31, 1996 and for the period from February
13, 1995 (commencement of operations) through May 31, 1995, Alex. Brown received
shareholder servicing fees of $21,824, $9,123 and $1,406, respectively, pursuant
to the prior Distribution Agreements.
ICC Distributors receives no compensation for distributing the
Institutional Shares. Under the prior Distribution Agreements, Alex. Brown
received no compensation for distributing the Institutional Shares.
The Distribution Plans
Pursuant to Rule 12b-1 under the Investment Company Act, which
provides that investment companies may pay distribution expenses, directly or
indirectly, only pursuant to a plan adopted by the investment company's board of
directors and approved by its shareholders, the Fund has adopted two separate
Plans of Distribution, one for the Class A Shares and one for the Class B Shares
(collectively, the "Plans"). Under the Plans, 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. The Plans will remain in
effect from year to year thereafter as specifically approved (a) at least
annually by the Fund's Board of Directors and (b) by the affirmative vote of a
majority of the Non-Interested Directors by votes cast in person at a meeting
called for such purpose. The Plans were initially approved by the Fund's Board
of Directors, including a majority of the Non-Interested Directors, on December
14, 1994 and by the sole shareholder of the respective classes on January 30,
1995. On August 4, 1997, the Fund's Board of Directors approved amended Plans
containing the same fees and substantially the same terms as the Plans.
In approving the Plans, the Directors concluded, in the
exercise of reasonable business judgment, that there was a reasonable likelihood
that the Plans would benefit the Fund and its shareholders. The Plans will be
renewed only if the Directors make a similar determination in each subsequent
year. The Plans 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 Plans may be terminated at any time by the vote of a majority
of the Fund's Non-Interested Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock").
16
<PAGE>
During the continuance of the Plans, 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, to broker-dealers pursuant to any
Sub-Distribution Agreements and to Shareholder Servicing Agents pursuant to
Shareholder Servicing Agreements. Such reports shall be made by the persons
authorized to make such payments. In addition, during the continuance of the
Plans, the selection and nomination of the Fund's Non-Interested Directors shall
be committed to the discretion of the Non-Interested Directors then in office.
For the fiscal year ended May 31, 1997, the Fund paid $294,223
to Alex. Brown, formerly the Fund's distributor, pursuant to the Plans. Alex.
Brown, in turn, paid the distribution-related expenses of the Fund including one
or more of the following: advertising expenses; printing and mailing of
prospectuses to other than current shareholders; compensation to dealers and
sales personnel; and interest, carrying or other financing charges.
Under the Plans, amounts allocated to Participating Dealers
and Shareholder Servicing Agents may not exceed amounts payable to ICC
Distributors under such Plans. Payments under the Plans are made as described
above regardless of ICC Distributors's actual cost of providing distribution
services and may be used to pay ICC Distributors's overhead expenses. If the
cost of providing distribution services to the Class A Shares is less than .25%
of the average daily net assets invested in that Class or Class B Shares is less
than .75% of the average daily net assets invested in that Class for any period,
the unexpended portion of the distribution fees may be retained by ICC
Distributors. The Plans do not provide for any charges to the Fund for excess
amounts expended by ICC Distributors and, if either of the Plans is terminated
in accordance with its terms, the obligation of the Fund to make payments to ICC
Distributors pursuant to such Plan will cease and the Fund will not be required
to make any payments past the date the Distribution Agreement terminates with
respect to such Plan.
General Information
For the fiscal years ended May 31, 1997 and May 31, 1996, and
for the period from February 13, 1995 through May 31, 1995, Alex. Brown,
formerly the Fund's distributor, received sales commissions on the Class A
Shares of $404,583, $173,816 and $167,000, respectively, and from such amounts
retained $386,114, $163,936 and $157,507 for each such period, respectively. For
the fiscal years ended May 31, 1997 and May 31, 1996 and for the period from
February 13, 1995 through May 31, 1995, Alex. Brown received contingent deferred
sales loads on the Class B Shares of $318,224, $114,113 and $109,638,
respectively, and from such amounts retained $313,208, $114,113 and $109,638,
respectively.
The Fund will pay all costs associated with its organization
and registration under the Securities Act of 1933 and the Investment Company
Act. Except as described elsewhere, the Fund pays or causes to be paid all
continuing expenses of the Fund, including, without limitation: investment
advisory and distribution fees; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing Shares; all costs and expenses in connection with the registration
and maintenance of registration of the Fund and its Shares with the SEC and
various states and other jurisdictions (including filing fees, legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders; all
17
<PAGE>
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 Non-Interested Directors, and of independent auditors,
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 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, ABIM or the Distributor.
The address of ICC Distributors is P.O. Box 7558, Portland, Maine 04101.
8. BROKERAGE
ABIM is responsible for decisions to buy and sell securities
for the Fund, for the broker-dealer selection and for negotiation of commission
rates, subject to the supervision of ICC. Purchases and sales of securities on a
securities exchange are effected through broker-dealers who charge a commission
for their services. Brokerage commissions are subject to negotiation between
ABIM and the broker-dealers. ABIM may direct purchase and sale orders to any
broker-dealer, including, to the extent and in the manner permitted by
applicable law, the Advisor, 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 the
Advisor or its affiliates in any transaction in which the Advisor or its
affiliates acts as a principal; that is, an order will not be placed with the
Advisor or its affiliates if execution of the trade involves the Advisor or its
affiliates serving as a principal with respect to any part of the Fund's order,
nor will the Fund buy or sell over-the-counter securities with the Advisor or
its affiliates acting as market maker.
If the Advisor or its affiliates is 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.
ABIM's primary consideration in effecting securities
transactions is to obtain best price and execution of orders on an overall
basis. As described below, however, ABIM may, in its discretion, effect agency
transactions with broker-dealers that furnish statistical, research or other
information or services that are deemed by ABIM to be beneficial to the Fund's
investment program. Certain research services furnished by broker-dealers may be
useful to ABIM with clients other than the Fund. Similarly, any research
services received by ABIM through placement of portfolio transactions of other
clients may be of value to ABIM in fulfilling its obligations to the Fund. No
specific value can be determined for research and statistical services furnished
without cost to ABIM by a broker-dealer. ABIM 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 ABIM's research and
analysis. Therefore, it may tend to benefit the Fund by improving ABIM's
investment advice. In over-the-counter transactions, ABIM will not pay any
commission or other remuneration for research services. ABIM's policy is to pay
a broker-dealer higher commissions effected on an agency (but not on a
principal) basis for particular transactions than might be
18
<PAGE>
charged if a different broker-dealer had been chosen when, in ABIM'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, ABIM is
also authorized to pay broker-dealers other than BT Alex. Brown higher
commissions on brokerage transactions for the Fund in order to secure research
and investment services described above. The allocation of orders among
broker-dealers and the commission rates paid by the Fund will be reviewed
periodically by the Board. The foregoing policy under which the Fund may pay
higher commissions to certain broker-dealers in the case of agency transactions,
does not apply to transactions effected on a principal basis.
Subject to the above considerations, the Board of Directors
has authorized the Fund to effect portfolio transactions, on an agency basis,
through the Advisor or its affiliates. At the time of such authorization, the
Board adopted certain policies and procedures incorporating the standards of
Rule 17e-1 under the Investment Company Act, which requires that the commissions
paid the Advisor or its affiliates must be "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." Rule 17e-1 also contains requirements for
the review of such transactions by the Board of Directors and requires ICC and
ABIM to furnish reports and to maintain records in connection with such reviews.
In the fiscal year ended May 31, 1997, the Fund paid no brokerage commissions to
the Advisor or its affiliates.
ABIM 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 ABIM. ABIM 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.
During the fiscal years ended May 31, 1997, May 31, 1996 and
the fiscal period ended May 31, 1995, ABIM directed $84,859,723, $25,187,450 and
$27,535,000, respectively, principal amount of transactions to broker-dealers
and paid $168,045, $64,808 and $17,724 in related commissions because of
research services provided.
The Fund is required to identify any securities of its
"regular brokers or dealers" (as such term is defined in the Investment Company
Act) that the Fund has acquired during its most recent fiscal year. As of May
31, 1997, the Fund held a 5.30% repurchase agreement issued by Goldman Sachs &
Co. valued at $26,759,870 and 70,000 shares of Travelers Group Inc., parent
company of Smith Barney, valued at $2,178,750.
9. CAPITAL STOCK
The Fund is authorized to issue 75 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
19
<PAGE>
has one Series and the Board has designated three classes of Shares: Flag
Investors Equity Partners Fund Class A Shares, Flag Investors Equity Partners
Fund Class B Shares and Flag Investors Equity Partners Fund Institutional
Shares. In the event separate series or classes are established, all 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. Each such 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, each series would be treated as separate
entities. Generally, each class of Shares issued by a particular series would be
identical to every other class and expenses of the Fund (other than 12b-1 and
any applicable service fees) are prorated between all classes of a series based
upon the relative net assets of each class. Any matters affecting any class
exclusively would 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. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.
There are no preemptive, conversion or exchange rights
applicable to any of the Shares. The issued and outstanding Shares are fully
paid and non-assessable. In the event of liquidation or dissolution of the Fund,
each Share is entitled to its portion of the Fund's assets (or the assets
allocated to a separate series of Shares if there is more than one series) after
all debts and expenses have been paid.
As used in this Statement of Additional Information the term
"majority of the outstanding Shares" means the vote of the lesser of (i) 67% or
more of the Shares present at a meeting, if the holders of more than 50% of the
outstanding Shares are present or represented by proxy, or (ii) more than 50% of
the outstanding Shares.
10. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-annual reports
containing information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
financial statements are audited by the Fund's independent accountants.
11. 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. Investment Company Capital Corp., One South Street, Baltimore,
Maryland 21202, has been retained to act as transfer and dividend disbursing
agent. As compensation for providing these services, the Fund pays ICC up to
$10.12 per account per year, plus reimbursement for out-of-pocket expenses
incurred in connection therewith. For the fiscal year ended May 31, 1997, ICC
received transfer agency fees of $59,840.
ICC also provides certain accounting services to the Fund. As
compensation for these services, ICC receives an annual fee, calculated daily
and paid monthly as shown below.
Average Daily Net Assets Incremental Fee
- ------------------------ ---------------
0 - $10,000,000 $13,000 (fixed fee)
20
<PAGE>
$10,000,000 - $20,000,000 .100%
$20,000,000 - $30,000,000 .080%
$30,000,000 - $40,000,000 .060%
$40,000,000 - $50,000,000 .050%
$50,000,000 - $60,000,000 .040%
$60,000,000 - $70,000,000 .030%
$70,000,000 - $100,000,000 .020%
$100,000,000 - $500,000,000 .015%
$500,000,000 - $1,000,000,000 .005%
over $1,000,000,000 .001%
For the fiscal year ended May 31, 1997, ICC received accounting
fees of $55,940.
In addition, the Fund will reimburse ICC for the following
out-of-pocket expenses incurred in connection with ICC's performance of its
services under the Master Services Agreement: express delivery service,
independent pricing and storage.
ICC also serves as the Fund's investment advisor.
12. INDEPENDENT ACCOUNTANTS
The annual financial statements of the Fund are audited by Coopers
& Lybrand L.L.P., whose report thereon appears elsewhere herein, and have been
included herein in reliance upon the report of such firm of accountants given on
their authority as experts in accounting and auditing. Coopers & Lybrand L.L.P.
has offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103.
13. 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 be stated in terms of total return rather than in
terms of yield. 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 10-year periods or a shorter period dating from the
effectiveness of the Fund's registration statement or the date the Fund (or a
class or series)
21
<PAGE>
commenced operations (provided such date is subsequent to the date the
registration statement became effective). In calculating the ending redeemable
value, the maximum sales load (for the Class A Shares: 4.5%, and for the Class B
Shares: 4.0% for the one-year period, 2.0% for the five-year period and no sales
charge thereafter) 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 prospectus 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. The
Institutional Shares are sold without a sales load.
Calculated according to SEC rules, the ending redeemable value
and average annual total return of a hypothetical $1,000 payment for the periods
ended May 31, 1997 were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
One-Year Period Since Inception*
Ended May 31, 1997
- --------------------------------------------------------------------------------------------------------------
Class Ending Average Annual Ending Average Annual
Redeemable Total Return Redeemable Total Return
Value Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 1252.70 25.27% 1660.08 24.70%
Class B 1262.80 26.28% 1671.08 25.06%
Institutional 1315.80 31.58% 1358.36 26.79%
</TABLE>
- -------------------
*February 13, 1996 for Class A and B Shares; February 12, 1996 for Institutional
Shares.
The Fund may also from time to time include in such advertising
total return figures that are not calculated according to the formula set forth
above to compare more accurately the Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., CDA Investment Technologies Inc.,
Morningstar Inc., or SEI Corporation or with the performance of the Consumer
Price Index, the Standard and Poor's 500 Stock Index and other market indices
such as NASDAQ and the Wilshire 5000, 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 (as distinguished from the computation required by the
SEC where the $1,000 payment is reduced by sales charges before being invested
in Shares). 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.
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,
22
<PAGE>
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. In the fiscal year ended May 31, 1997, the Fund's portfolio
turnover rate was 17.60%.
14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, the following persons held
beneficially or of record 5% or more of the Fund's outstanding shares, as of
August 29, 1997. BT Alex. Brown Incorporated 9.54%
7BO 250-10766-16
P.O. Box 1346
Baltimore, MD 21203-1346
[As of such date, Directors and officers as a group owned less
than 1% of the Fund's total outstanding Shares.]
15. FINANCIAL STATEMENTS
See next page.
23
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Net Assets May 31, 1997
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCK: 85.2%
Banking: 5.0%
30,600 Citicorp $ 3,499,875
19,500 Wells Fargo & Company 5,138,250
- --------------------------------------------------------------------------------
8,638,125
- --------------------------------------------------------------------------------
Basic Industry: 3.9%
84,100 Hercules, Inc. 3,942,187
60,000 Monsanto Co. 2,640,000
- --------------------------------------------------------------------------------
6,582,187
- --------------------------------------------------------------------------------
Business Services: 3.7%
90,000 First Data Corp. 3,600,000
80,000 Heritage Media Corp.* 1,460,000
58,000 SEI Corporation 1,305,000
- --------------------------------------------------------------------------------
6,365,000
- --------------------------------------------------------------------------------
Capital Goods: 3.8%
29,900 Briggs & Stratton Corporation 1,543,587
24,200 Caterpillar, Inc. 2,362,525
32,500 Eaton Corporation 2,591,875
- --------------------------------------------------------------------------------
6,497,987
- --------------------------------------------------------------------------------
Consumer Durables/Non-Durables: 12.0%
100,000 Blyth Industries, Inc.* 4,450,000
160,000 Ford Motor Company 6,000,000
97,500 Philip Morris Companies, Inc. 4,290,000
115,000 Richfood Holdings, Inc. 2,659,375
93,000 Sunbeam Corp. 3,138,750
- --------------------------------------------------------------------------------
20,538,125
- --------------------------------------------------------------------------------
Consumer Services: 5.1%
80,000 America Online, Inc.* 4,420,000
25,000 Gannett Company, Inc. 2,312,500
36,000 Times Mirror Company - Class A 2,020,500
- --------------------------------------------------------------------------------
8,753,000
- --------------------------------------------------------------------------------
Defense/Aerospace: 5.2%
58,700 Lockheed Martin Corp. 5,495,787
51,600 McDonnell Douglas Corp. 3,321,750
- --------------------------------------------------------------------------------
8,817,537
- --------------------------------------------------------------------------------
24
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCK (continued)
Energy: 2.8%
48,000 MAPCO, Inc. $ 1,524,000
75,500 Noble Affiliates, Inc. 3,180,437
- --------------------------------------------------------------------------------
4,704,437
- --------------------------------------------------------------------------------
Financial Services: 7.4%
60,200 American Express Company 4,183,900
108,000 Federal Home Loan Mortgage Corporation 3,564,000
11,000 Transamerica Corp. 999,625
70,000 Travelers Group, Inc. 3,841,250
- --------------------------------------------------------------------------------
12,588,775
- --------------------------------------------------------------------------------
Health Care: 1.8%
25,000 Amgen, Inc.* 1,671,875
22,000 Johnson & Johnson 1,317,250
- --------------------------------------------------------------------------------
2,989,125
- --------------------------------------------------------------------------------
Hotels/Gaming: 3.0%
130,000 Harrah's Entertainment, Inc.* 2,421,250
61,600 Hilton Hotels Corporation 1,740,200
16,400 ITT Corporation* 977,850
- --------------------------------------------------------------------------------
5,139,300
- --------------------------------------------------------------------------------
Housing: 6.6%
327,500 Champion Enterprises, Inc.* 6,017,813
148,300 USG Corporation* 5,171,963
- --------------------------------------------------------------------------------
11,189,776
- --------------------------------------------------------------------------------
Insurance: 5.2%
130,000 Conseco Inc. 5,200,000
82,200 Mid Ocean Limited 3,729,825
- --------------------------------------------------------------------------------
8,929,825
- --------------------------------------------------------------------------------
Multi-Industry: 4.5%
56,000 American Standard Co., Inc.* 2,807,000
25,000 Loews Corporation 2,431,250
24,200 Tenneco, Inc. 1,082,950
17,800 United Technologies Corp. 1,430,675
- --------------------------------------------------------------------------------
7,751,875
- --------------------------------------------------------------------------------
25
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) - May 31, 1997
Shares/ Market Value
Par (000) (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCK (concluded)
Retail: 4.2%
82,550 J.C. Penney Co., Inc. $ 4,251,325
210,000 Kmart Corporation* 2,940,000
- --------------------------------------------------------------------------------
7,191,325
- --------------------------------------------------------------------------------
Technology: 8.7%
56,000 International Business Machines Corporation 4,844,000
97,500 Millipore Corporation 4,204,688
34,000 Varian Associates, Inc. 1,802,000
59,500 Xerox Corporation 4,031,125
- --------------------------------------------------------------------------------
14,881,813
- --------------------------------------------------------------------------------
Transportation: 2.3%
95,800 Canadian National Railway Company 3,999,650
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $106,416,210) 145,557,862
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT: 15.4%
$26,235 Goldman Sachs & Co., 5.30%
Dated 5/30/97, to be repurchased on
6/2/97, collateralized by U.S. Treasury
Notes with a market value of $26,759,870.
(Cost $26,235,000) 26,235,000
- --------------------------------------------------------------------------------
26
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment in Securities: 100.6%
(Cost $132,651,210)** $171,792,862
Liabilities in Excess of Other Assets, Net: (0.6%) (977,793)
- --------------------------------------------------------------------------------
Net Assets: 100.0% $170,815,069
================================================================================
Net Asset Value and Redemption Price Per:
Class A Share
($113,029,663 / 6,677,416 shares outstanding) $16.93
================================================================================
Class B Share
($15,670,213 / 930,703 shares outstanding) $16.84***
================================================================================
Institutional Share
($42,115,193 / 2,486,105 shares outstanding) $16.94
================================================================================
Maximum Offering Price Per:
Class A Share
($16.93 / .955) $17.73
================================================================================
Class B Share $16.84
================================================================================
Institutional Share $16.94
================================================================================
- ----------
* Non-income producing security.
** Also aggregate cost for federal tax purposes.
*** Redemption value is $16.17 following a 4% maximum contingent deferred sales
charge.
See Notes to Financial Statements.
27
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the
Year Ended
May 31,
- --------------------------------------------------------------------------------
1997
Investment Income (Note 1):
Dividends $ 1,495,289
Interest 636,462
- --------------------------------------------------------------------------------
Total income 2,131,751
- --------------------------------------------------------------------------------
Expenses:
Investment advisory fee (Note 2) 994,751
Distribution fee (Note 2) 294,233
Registration fees 72,607
Transfer agent fee (Note 2) 59,840
Accounting fee (Note 2) 55,940
Legal 52,053
Printing and postage 36,499
Audit 29,785
Custodian fee 20,170
Organizational expense (Note 1) 10,209
Directors' fees 5,503
Miscellaneous 4,870
Insurance 1,910
- --------------------------------------------------------------------------------
Total expenses 1,638,370
Less: Fees waived (Note 2) (141,648)
- --------------------------------------------------------------------------------
Net expenses 1,496,722
- --------------------------------------------------------------------------------
Net investment income 635,029
- --------------------------------------------------------------------------------
Realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 2,887,321
Change in unrealized appreciation or depreciation of
investments 27,900,712
- --------------------------------------------------------------------------------
Net gain on investments 30,788,033
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $31,423,062
================================================================================
See Notes to Financial Statements.
28
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the Year Ended May 31,
- --------------------------------------------------------------------------------
1997 1996
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 635,029 $ 821,246
Net realized gain/(loss)
from security transactions 2,887,321 (24,094)
Change in unrealized appreciation or
depreciation of investments 27,900,712 10,744,023
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 31,423,062 11,541,175
- --------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
Class A Shares (551,174) (598,906)
Class B Shares (5,815) (27,629)
Institutional Shares (112,532) --
Net realized short-term gains:
Class A Shares (168,249) --
Class B Shares (17,444) --
Institutional Shares (36,622) --
Net realized long-term gains:
Class A Shares (392,581) --
Class B Shares (40,703) --
Institutional Shares (85,452) --
- --------------------------------------------------------------------------------
Total distributions (1,410,572) (626,535)
- --------------------------------------------------------------------------------
Capital Share Transactions (Note 3):
Proceeds from sale of shares 73,706,538 28,046,908
Value of shares issued in reinvestment
of dividends 1,249,105 560,846
Cost of shares repurchased (7,920,313) (6,525,825)
- --------------------------------------------------------------------------------
Increase in net assets derived from
capital share transactions 67,035,330 22,081,929
- --------------------------------------------------------------------------------
Total increase in net assets 97,047,820 32,996,569
Net Assets:
Beginning of year 73,767,249 40,770,680
- --------------------------------------------------------------------------------
End of year $170,815,069 $73,767,249
================================================================================
See Notes to Financial Statements.
29
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)
For the Period
Feb. 13, 1995(1)
For the Year through
Ended May 31, May 31,
- ------------------------------------------------------------------------------
1997 1996 1995
Per Share Operating Performance:
Net asset value at beginning of period $ 13.09 $ 10.77 $ 10.00
------- ------- -------
Income from Investment Operations:
Net investment income 0.08 0.17 0.12
Net realized and unrealized gain
on investments 3.96 2.29 0.65
------- ------- -------
Total from Investment Operations 4.04 2.46 0.77
Less Distributions:
Distributions from net investment income
and net realized short-term gains (0.13) (0.14) --
Distributions from net realized
long-term gains (0.07) -- --
------- ------- -------
Total distributions (0.20) (0.14) --
------- ------- -------
Net asset value at end of period $ 16.93 $ 13.09 $ 10.77
======= ======= =======
Total Return(2) 31.17% 23.05% 7.70%
Ratios to Average Daily Net Assets:
Expenses(3) 1.35% 1.35% 1.35%(5)
Net investment income(4) 0.61% 1.52% 3.74%(5)
Supplemental Data:
Net assets at end of period (000) $113,030 $64,230 $38,612
Portfolio turnover rate 17.60% 0.73% --
Average commissions per share(6) $ 0.0677 -- --
- ---------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 1.48%, 1.77% and 3.76%
(annualized) for the years ended May 31, 1997, 1996 and the period ended
May 31, 1995, respectively.
(4) Without the waiver of advisory fees (Note 2), the ratio of net
investment income to average daily net assets would have been 0.48%,
1.10% and 1.33% (annualized) for the years ended May 31, 1997, 1996 and the
period ended May 31, 1995, respectively.
(5) Annualized.
(6) Disclosure is required for fiscal years beginning after September 1, 1995.
Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
See Notes to Financial Statements.
30
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- -------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
Feb. 13, 1995(1)
For the Year through
Ended May 31, May 31,
- --------------------------------------------------------------------------------------
1997 1996 1995
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period $ 13.03 $10.75 $10.00
------- ------ ------
Income from Investment Operations:
Net investment income/(expenses in
excess of income) (0.04) 0.07 0.07
Net realized and unrealized gain
on investments 3.96 2.31 0.68
------- ------ ------
Total from Investment Operations 3.92 2.38 0.75
Less Distributions:
Distributions from net investment income
and net realized short-term gains (0.04) (0.10) --
Distributions from net realized
long-term gains (0.07) -- --
------- ------ ------
Total distributions (0.11) (0.10) --
------- ------ ------
Net asset value at end of period $ 16.84 $13.03 $10.75
======= ====== ======
Total Return(2) 30.28% 22.17% 7.50%
Ratios to Average Daily Net Assets:
Expenses(3) 2.10% 2.10% 2.10%(5)
Net investment income/(expenses in
excess of income)(4) (0.16)% 0.71% 1.97%(5)
Supplemental Data:
Net assets at end of period (000) $15,670 $5,302 $2,159
Portfolio turnover rate 17.60% 0.73% --
Average commissions per share(6) $ 0.0677 -- --
</TABLE>
- ---------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 2.23%, 2.52% and 4.22%
(annualized) for the years ended May 31, 1997, 1996 and the period ended
May 31, 1995, respectively.
(4) Without the waiver of advisory fees (Note 2), the ratio of net
investment income to average daily net assets would have been (0.28)%,
0.29% and (0.15)% (annualized) for the years ended May 31, 1997, 1996 and
the period ended May 31, 1995, respectively.
(5) Annualized.
(6) Disclosure is required for fiscal years beginning after September 1, 1995.
Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
See Notes to Financial Statements.
31
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Institutional Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
For the Feb. 12, 1996(1)
Year Ended through
May 31, May 31,
- --------------------------------------------------------------------------------------
1997 1996
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period $ 13.10 $12.72
------- ------
Income from Investment Operations:
Net investment income 0.14 0.04
Net realized and unrealized gain on investments 3.95 0.34
------- ------
Total from Investment Operations 4.09 0.38
Less Distributions:
Distributions from net investment income
and net realized short-term gains (0.18) --
Distributions from net realized long-term gains (0.07) --
------- ------
Total distributions (0.25) --
------- ------
Net asset value at end of period $ 16.94 $13.10
======= ======
Total Return 31.58% 3.23%
Ratios to Average Daily Net Assets:
Expenses(2) 1.10% 1.10%(4)
Net investment income(3) 0.81% 1.20%(4)
Supplemental Data:
Net assets at end of period (000) $42,115 $4,235
Portfolio turnover rate 17.60% 0.73%(4)
Average commissions per share(5) $ 0.0677 --
</TABLE>
- ---------
(1) Commencement of operations.
(2) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 1.23% and 1.55% (annualized) for
the year ended May 31, 1997 and the period ended May 31, 1996,
respectively.
(3) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 0.70% and 0.75%
(annualized) for the year ended May 31, 1997 and the period ended May 31,
1996, respectively.
(4) Annualized.
(5) Disclosure is required for fiscal years beginning after September 1, 1995.
Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
See Notes to Financial Statements.
32
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1 -- Significant Accounting Policies
Flag Investors Equity Partners Fund, Inc. (the "Fund"), which was
organized as a Maryland Corporation on November 30, 1994, commenced operations
February 13, 1995. The Fund is registered under the Investment Company Act of
1940 as a diversified, open-end Investment Management Company. Its objective is
to seek long-term growth of capital and, secondarily, current income primarily
through a policy of diversified investments in equity securities, including
common stocks and convertible securities.
The Fund consists of three share classes: Class A Shares and Class B
Shares, which both commenced February 13, 1995, and Institutional Shares, which
commenced February 12, 1996.
The Class A and Class B Shares are subject to different sales charges. The
Class A Shares have a 4.50% maximum front-end sales charge and the Class B
Shares have a 4.00% maximum contingent deferred sales charge. The Institutional
Shares have neither a front-end sales charge nor a contingent deferred sales
charge. In addition, each class has a different distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. The Fund's significant accounting policies are:
A. Security Valuation--The Fund values a portfolio security that is
primarily traded on a national exchange by using the last price reported for the
day. If there are no sales or the security is not traded on a listed exchange,
the Fund values the security at its last bid price in the over-the-counter
market. When a market quotation is unavailable, the Investment Advisor
determines a fair value using procedures that the Board of Directors establishes
and monitors. The Fund values short-term obligations with maturities of 60 days
or less at amortized cost.
33
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 1 -- concluded
B. Repurchase Agreements--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the broker defaults.
The Fund's access to the collateral may be delayed or limited if the
broker defaults and the value of the collateral declines or if the
broker enters into an insolvency proceeding.
C. Federal Income Taxes--The Fund determines its distributions according
to income tax regulations, which may be different from generally
accepted accounting principles. As a result, the Fund occasionally
makes reclassifications within its capital accounts to reflect income
and gains that are available for distribution under income tax
regulations.
The Fund is organized as a regulated investment company. As long as
it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net realized
capital gains, it will be exempt from most, if not all, federal income
and excise taxes. As a result, the Fund has made no provisions for
federal income taxes.
D. Securities Transactions, Investment Income, Distributions and Other--
The Fund uses the trade date to account for security transactions and
the specific identification method for financial reporting and income
tax purposes to determine the cost of investments sold or redeemed.
Interest income and expenses are recorded on an accrual basis. Income
and common expenses are allocated to each class based on its respective
average net assets. Class specific expenses are charged directly to
each class. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. The Fund has deferred the costs
incurred by its organization and the initial public offering of shares.
These costs are being amortized on the straight-line method over a
five-year period, which began when the Fund commenced investment
activities.
34
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
NOTE 2 -- Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown
Financial Corp., is the Fund's investment advisor and Alex. Brown Investment
Management ("ABIM") is the Fund's subadvisor. As compensation for its advisory
services, the Fund pays ICC an annual fee based on the Fund's average daily net
assets. This fee is calculated daily and paid monthly at the following annual
rates: 1.00% of the first $50 million, 0.85% of the next $50 million, 0.80% of
the next $100 million and 0.70% of the amount over $200 million.
As compensation for its subadvisory services, ICC pays ABIM a fee from its
advisory fee based on the Fund's average daily net assets. This fee is
calculated daily and paid monthly at the following annual rates: 0.75% of the
first $50 million, 0.60% of the next $150 million and 0.50% of the amount over
$200 million.
ICC has agreed to waive a portion of its fees and reimburse expenses so
that the Fund's total operating expenses for any fiscal year do not exceed 1.35%
of the Class A Shares' average daily net assets, 2.10% of the Class B Shares'
average daily net assets and 1.10% of the Institutional Shares' average daily
net assets. ICC waived fees of $141,648 for the year ended May 31, 1997.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly based on the Fund's average daily
net assets. The Fund paid ICC $55,940 for accounting services for the year ended
May 31, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $59,840 for
transfer agent services for the year ended May 31, 1997.
As compensation for providing distribution services, the Fund pays Alex.
Brown & Sons Incorporated ("Alex. Brown") an annual fee that is calculated daily
and paid monthly. This fee is paid at an annual rate equal to 0.25% of the Class
A Shares' average daily net assets and 1.00% (including a 0.25% shareholder
servicing fee) of the Class B Shares' average daily net assets. For the year
ended May 31, 1997, distribution fees aggregated $294,233, of which $206,936
were attributable to the Class A Shares and $87,297 were attributable to the
Class B Shares. The Fund did not pay Alex. Brown any commissions for the year
ended May 31, 1997.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
May 31, 1997 was $3,765, and the accrued liability was $7,114.
35
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 3 -- Capital Share Transactions
The Fund is authorized to issue up to 35 million shares of $.001 par value
capital stock (20 million Class A, 5 million Class B, 5 million Institutional
and 5 million undesignated). Transactions in shares of the Fund were as follows:
Class A Shares
------------------------------
For the For the
Year Ended Year Ended
May 31, 1997 May 31, 1996
-------------- -------------
Shares sold 2,175,983 1,801,793
Shares issued to shareholders on
reinvestment of dividends 71,468 46,324
Shares redeemed (477,782) (526,068)
----------- -----------
Net increase in shares outstanding 1,769,669 1,322,049
=========== ===========
Proceeds from sale of shares $32,665,187 $21,242,051
Value of reinvested dividends 1,040,589 537,705
Cost of shares redeemed (7,100,783) (6,296,438)
----------- -----------
Net increase from capital share transactions $26,604,993 $15,483,318
=========== ===========
Class B Shares
------------------------------
For the For the
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------------------------
Shares sold 545,380 221,303
Shares issued to shareholders on
reinvestment of dividends 3,986 2,003
Shares redeemed (25,717) (17,025)
----------- -----------
Net increase in shares outstanding 523,649 206,281
=========== ===========
Proceeds from sale of shares $8,263,270 $2,641,798
Value of reinvested dividends 60,224 23,141
Cost of shares redeemed (375,286) (208,673)
----------- -----------
Net increase from capital share transactions $7,948,208 $2,456,266
=========== ===========
36
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
NOTE 3 -- concluded
Institutional Shares
------------------------------
For the Period
For the Feb. 12, 1996*
Year Ended through
May 31, 1997 May 31, 1996
------------ -------------
Shares sold 2,182,989 324,964
Shares issued to shareholders on
reinvestment of dividends 9,854 --
Shares redeemed (30,115) (1,587)
----------- ----------
Net increase in shares outstanding 2,162,728 323,377
=========== ==========
Proceeds from sale of shares $32,778,081 $4,163,059
Value of reinvested dividends 148,292 --
Cost of shares redeemed (444,244) (20,714)
----------- ----------
Net increase from capital share transactions $32,482,129 $4,142,345
=========== ==========
- ---------
*Commencement of operations.
NOTE 4 -- Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $65,969,366 and sales of investment securities aggregated $17,571,900
for the year ended May 31, 1997.
On May 31, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $39,257,851
and aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over value was $116,199.
37
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 5 -- Net Assets
On May 31, 1997, net assets consisted of:
Paid-in capital:
Class A Shares $ 80,226,147
Class B Shares 12,442,655
Institutional Shares 36,624,474
Accumulated net realized gain from security transactions 2,122,176
Unrealized appreciation of investments 39,141,652
Undistributed net investment income 257,965
------------
$170,815,069
============
NOTE 6 -- Merger Agreement
On April 6, 1997, Bankers Trust New York Corporation and Alex. Brown
Incorporated announced that they had signed a definitive agreement to merge. The
merger, which is expected to be completed by the fourth quarter of 1997, is
subject to customary closing conditions, including certain regulatory and
shareholder approvals.
38
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Shareholders and Directors of
Flag Investors Equity Partners Fund, Inc.
We have audited the accompanying statement of net assets of Flag Investors
Equity Partners Fund, Inc. as of May 31, 1997 and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the respective periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of May
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Flag Investors Equity Partners Fund, Inc. as of May 31, 1997, the results of its
operations for the year then ended, and the changes in its net assets and its
financial highlights for each of the respective periods presented, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
June 20, 1997
39
<PAGE>
APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
Standard & Poor's Commercial Paper Ratings
S & P - Commercial paper rated A-1+ or A-1 by S&P has the
following characteristics. Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better, although in some
cases "BBB" credits may be allowed. The issuer has access to at least two
channels of borrowing. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances. Typically, the issuer's industry is
well established and the issuer has a strong position within the industry. The
reliability and quality of management is unquestioned. Relative strength or
weakness of the above factors determines whether the issuer's commercial paper
is rated A-1, A-2 or A- 3.
Moody's Commercial Paper Ratings
Moody's - The rating Prime-1 (P-1) is the highest commercial
paper rating assigned by Moody's. Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks that may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of 10 years; (7) financial strength of a parent
company and the relationship that exists with the issuer; and (8) recognition by
the management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
P-1, P-2 or P-3.
CORPORATE BOND RATINGS
Standard & Poor's Bond Ratings
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and
A-1
<PAGE>
protective characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
CI -- The rating CI is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in default. The D rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Moody's Bond Ratings
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
"high-grade" bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in the case of Aaa securities, or the
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterize bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
A-2
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of
the Registration Statement.
(a) Financial statements:
(1) Included in Parts A and B of the Registration
Statement:
-- Financial Highlights for the period
February 13, 1995 (commencement of
operations) through May 31, 1995 and the
fiscal years ended May 31, 1996 and May 31,
1997.
-- Statement of Net Assets for the fiscal year
ended May 31, 1997
-- Statement of Operations for the fiscal year
ended May 31, 1997
-- Statement of Changes in Net Assets for the
period February 13, 1995 (commencement of
operations) through May 31, 1995 and the
fiscal years ended May 31, 1996 and May 31,
1997
-- Notes to Financial Statements
-- Report of Independent Accountants
(2) All required financial statements are
included in parts A and B hereof. All other
financial statements and schedules are
inapplicable.
(b) Exhibits:
(1) (a) Registrant's Articles of
Incorporation.(1)
(b) Registrant's Articles
Supplementary.(2)
(c) Registrant's Articles Supplementary
dated June 17, 1997, filed herewith.
(2) By-Laws, as amended through December 18, 1996,
filed herewith.
(3) Not Applicable.
(4) Incorporated by reference to Exhibit (1)(a)
Articles of Incorporation and Exhibit (2)
By-Laws.
(5) (a) Form of Investment Advisory Agreement
between Registrant and Investment
Company Capital Corp., filed
herewith.
<PAGE>
(b) Form of Sub-Advisory Agreement among
Registrant, Investment Company
Capital Corp. and Alex. Brown
Investment Management filed herewith.
(6) (a) Distribution Agreement between
Registrant and ICC Distributors, Inc.
filed herewith.
(b) Form of Sub-Distribution Agreement
between ICC Distributors, Inc. and
Participating Broker-Dealers, filed
herewith.
(c) Form of Shareholder Servicing
Agreement between ICC Distributors,
Inc. and Shareholder Servicing
Agents, filed herewith.
(7) Not Applicable.
(8) Form of Custodian Agreement between
Registrant and Bankers Trust Company,
filed herewith.
(9) Master Services Agreement between
Registrant and Investment Company
Capital Corp.(1)
(10) Opinion of Counsel.(1)
(11) Consent of Coopers & Lybrand L.L.P.,
filed herewith.
(12) Not Applicable.
(13) Subscription Agreement.(1)
(14) Not Applicable.
(15) (a) Distribution Plan with respect to
Flag Investors Class A Shares, filed
herewith.
(b) Distribution Plan with respect to
Flag Investors Class B Shares, filed
herewith.
(16) Schedule of Computation of Performance
Quotations.(1)
(18) (a) 18f-3 Plan, as amended through March
26, 1997, filed herewith.
(24) Powers of Attorney, filed herewith.
(27) Financial Data Schedule, filed herewith.
- ------------------------
-2-
<PAGE>
(1) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via EDGAR on
September 22, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via Edgar on
September 26, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
Furnish a list or diagram of all persons directly or
indirectly controlled by or under common control with the Registrant and as to
each such person indicate (1) if a company, the state or other sovereign power
under the laws of which it is organized, and (2) the percentage of voting
securities owned or other basis of control by the person, if any, immediately
controlling it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number of record
holders of each class of securities of the Registrant.
The following information is given as of September 20, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
Shares of Capital Stock
Class A 2,967
Class B 781
Institutional 56
Item 27. Indemnification
State the general effect of any contract, arrangements or
statute under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified in any manner against any liability
which may be incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own protection.
Sections 1, 2, 3 and 4 of Article VIII of Registrant's
Articles of Incorporation, included as Exhibit 1 to this Registration Statement
and incorporated herein by reference, provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of
the Corporation shall have any liability to the Corporation or
its shareholders 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.
-3-
<PAGE>
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 to its directors and to such
further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents
in the By-Laws of the Corporation or by resolution or
agreement to the fullest extent permitted by the Maryland
General Corporation Law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time
amended. No further amendment to the Charter of the
Corporation shall decrease, but may expand, any right of any
person under this Article VIII based on any event, omission or
proceeding prior to such amendment.
Sections 1, 2, 3, 4 and 5 of Article XIII of Registrant's
By-Laws, included as Exhibit 2 to this Registration Statement and
incorporated herein by reference, provide as follows:
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, the Securities Act of 1933
(the "1933 Act") 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
-4-
<PAGE>
the Maryland General Corporation Law, the 1933 Act 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.
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. In the absence of
a determination by a court of competent jurisdiction, the determinations that
indemnification against such liabilities is proper, and advances can be made,
are made by a majority of a quorum of the disinterested, non-party directors of
the Fund, or an independent legal counsel in a written opinion, based on review
of readily available facts.
Item 28. Business and Other Connections of Investment Advisor.
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment advisor of the
Registrant, and each director, officer or partner of any such investment
advisor, is or has been, at any time during the past two fiscal years, engaged
for his own account or in the capacity of director, officer, employee, partner
or trustee.
During the last two fiscal years, no director or officer of
Investment Company Capital Corp., the Registrant's investment advisor, has
engaged in any other business, profession, vocation or employment of a
substantial nature other than that of the business of investment management and,
through affiliates, investment banking.
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment sub-advisor of the
Registrant, and each director, officer or partner of any such investment
sub-advisor, is or has been, at any time during the past two fiscal years,
engaged for his own account or in the capacity of director, officer, employee,
partner or trustee.
-5-
<PAGE>
The list required by this Item 28 of officers and directors of
Alex. Brown Investment Management ("ABIM"), together with information as to any
other business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV, filed by ABIM
pursuant to the Investment Advisors Act of 1940 (SEC File No. 801-21616).
Item 29. Principal Underwriters
Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal underwriter, depositor or
investment advisor:
(a) ICC Distributors, Inc. acts as distributor for BT Alex. Brown
Cash Reserve Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Total Return U.S.
Treasury Fund Shares of Total Return U.S. Treasury Fund, Inc.,
Flag Investors Managed Municipal Fund Shares of Managed Municipal
Fund, Inc., Flag Investors Short-Intermediate Income Fund, Inc.
(formerly Flag Investors Intermediate-Term Income Fund, Inc.),
Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax Free Income Fund, Inc. and Flag Investors Real
Estate Securities Fund, Inc., all registered open-end management
investment companies.
Furnish information with respect to each director, officer or
partner of each principal underwriter named in answer to Item 21 of Part B
(Underwriters):
(b) Position and
Offices Position and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
----------------- ----------- ----------
John Y. Keffer President None
Two Portland Square
Portland, ME 04101
Sara M. Morris Treasurer None
Two Portland Square
Portland, ME 04101
David I. Goldstein Secretary None
Two Portland Square
Portland, ME 04101
Richard C. Butt Vice President None
Two Portland Square
Portland, ME 04101
Margaret J. Fenderson Assistant Treasurer None
Two Portland Square
Portland, ME 04101
-6-
<PAGE>
Dana L. Lukens Assistant Secretary None
Two Portland Square
Portland, ME 04101
Nanette K. Chern Chief Compliance Officer None
Two Portland Square
Portland, ME 04101
(c) Not applicable.
Item 30. Location of Accounts and Records
With respect to each account, book or other document required
to be maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the
Rules [17 CFR 270.31a-1 to 31a-3] promulgated thereunder, furnish the name and
address of each person maintaining physical possession of each such account,
book or other document
Investment Company Capital Corp. ("ICC"), Registrant's
investment advisor, transfer agent and dividend disbursing agent, One South
Street, Baltimore, Maryland 21202, maintains physical possession of each such
account, book or other document of the Fund, except for those maintained by
ABIM, the Registrant's sub-advisor, One South Street, Baltimore, Maryland 21202,
and by Bankers Trust Company, the Registrant's custodian, 130 Liberty Street,
New York, New York 10006.
In particular, with respect to the records required by Rule
31a-1(b)(1), ICC and ABIM 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 all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash, and all other debts and
credits.
Item 31. Management Services
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
Not Applicable.
Item 32. Undertakings
Furnish the following undertakings in substantially the
following form in all initial Registration Statements filed under the 1933 Act:
(a) Not Applicable.
(b) Not Applicable.
-7-
<PAGE>
(c) Registrant hereby undertakes to furnish each prospective
person to whom a prospectus will be delivered with a copy of
the Registrant's latest annual report to shareholders, when
such annual report is issued containing information called for
by Item 5A of Form N-1A, upon request and without charge.
-8-
<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 Post- Effective Amendment No. 5 to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this amendment to the Registration Statement to be
signed on its behalf by the undersigned thereto duly authorized in the City of
Baltimore, in the State of Maryland, on the 29th day of September,1997.
FLAG INVESTORS EQUITY
PARTNERS FUND, INC.
By: /s/ Harry Woolf
--------------------------------
Harry Woolf
President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
* Director
- ----------------------------- ------------------------
Truman T. Semans Date
* Director
- ----------------------------- ------------------------
Richard T. Hale Date
* Director
- ----------------------------- ------------------------
James J. Cunnane Date
* Director
- ----------------------------- ------------------------
John F. Kroeger Date
* Director
- ----------------------------- ------------------------
Louis E. Levy Date
* Director
- ----------------------------- ------------------------
Eugene J. McDonald Date
* Director
- ----------------------------- -------------------------
Rebecca W. Rimel Date
* Director
- ----------------------------- -------------------------
Carl W. Vogt Date
/s/ Harry Woolf President September 29, 1997
- ----------------------------- --------------------------
Harry Woolf Date
/s/ Joseph A. Finelli Chief Financial and September 29, 1997
- ----------------------------- Accounting Officer --------------------------
Joseph A. Finelli Date
* By: /s/ Scott J. Liotta
------------------------
Scott J. Liotta
Attorney-In-Fact
</TABLE>
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
INDEX OF EXHIBITS
EDGAR
Exhibit
Number Document
------ --------
(1) (a) Registrant's Articles of Incorporation.(2)
(1) (b) Registrant's Articles Supplementary, filed herewith.
EX-99.B (1) (c) Registrant's Articles Supplementary dated
June 17, 1997, filed herewith.
(2) Registrant's By-Laws, as amended through December
18, 1996, filed herewith.
(4) Incorporated by reference to Exhibit (1)(a) Articles of
Incorporation and Exhibit (2) By-Laws.
EX-99.B (5) (a) Form of Investment Advisory Agreement between Registrant
and Investment Company Capital Corp., filed herewith.
EX-99.B (5) (b) Form of Sub-Advisory Agreement among Registrant,
Investment Company Capital Corp. and Alex. Brown
Investment Management, filed herewith.
EX-99.B (6) (a) Distribution Agreement between Registrant and ICC
Distributors, Inc., filed herewith.
EX-99.B (6) (b) Registrant's Form of Sub-Distribution Agreement
between ICC Distributors, Inc. and Participating Broker-
Dealers, filed herewith.
EX-99.B (6) (c) Registrant's Form of Shareholder Servicing Agreement
between ICC Distributors, Inc. and Shareholder Servicing
Agents, filed herewith.
EX-99.B (8) Form of Custodian Agreement between Registrant and
Bankers Trust Company, filed herewith.
(9) Master Services Agreement between Registrant and
Investment Company Capital Corp.(1)
(10) Opinion of Counsel.(1)
EX-99.B (11) Consent of Coopers & Lybrand L.L.P., filed herewith.
(13) Subscription Agreement.(1)
<PAGE>
(15) (a) Registrant's Distribution Plan with respect
to Flag Investors Class A Shares, filed herewith.
(15) (b) Registrant's Distribution Plan with respect
to Flag Investors Class B Shares, filed herewith.
(16) Schedule of Computation of Performance Quotations.(1)
EX-99.B (18) (a) 18f-3 Plan, as amended through March 26,
1997, filed herewith.
(24) (a) Powers of Attorney, filed herewith.
EX-27 Financial Data Schedule, filed herewith.
- ------------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via EDGAR on
September 22, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832) filed with the Securities and Exchange Commission via Edgar on
September 26, 1996.
<PAGE>
EX-99.B(1)(b)
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
ARTICLES SUPPLEMENTARY
FLAG INVESTORS EQUITY PARTNERS FUND, INC. (the "Corporation"), having
its principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with Section
2-105(c) of the Maryland General Corporation Law has adopted a resolution
increasing the total number of shares of capital stock which the Corporation has
the authority to issue to seventy-five million (75,000,000) shares of Common
Stock, of the par value of 1 mil ($.001) per share and of the aggregate par
value of seventy-five thousand dollars ($75,000), all of which shares are
designated as follows: forty million (40,000,000) shares are designated "Flag
Investors Equity Partners Fund Class A Shares," fifteen million (15,000,000)
shares are designated "Flag Investors Equity Partners Fund Class B Shares,"
fifteen million (15,000,000) shares are designated "Flag Investors Equity
Partners Fund Institutional Shares" and five million (5,000,000) shares remain
undesignated.
SECOND: Immediately before the increase, the Corporation was authorized
to issue thirty-five million (35,000,000) shares of Common Stock, of the par
value of 1 mil ($.001) per share and of the aggregate par value of thirty-five
thousand dollars ($35,000), all of which shares were designated as follows:
twenty million (20,000,000) shares were designated "Flag Investors Equity
Partners Fund Class A Shares," five million (5,000,000) shares were designated
"Flag Investors Equity Partners Fund Class B Shares," five million (5,000,000)
shares were designated "Flag Investors Equity Partners Fund Institutional
Shares" and five million (5,000,000) shares remained undesignated.
THIRD: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, Flag Investors Equity Partners Fund, Inc. has
caused these Articles Supplementary to be executed by one of its Vice Presidents
and its corporate seal to be affixed and attested by its Secretary on this 17th
day of June, 1997.
[CORPORATE SEAL]
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
By: /s/ Edward J. Veilleux
----------------------------
Edward J. Veilleux
Vice President
Attest: /s/ Scott J. Liotta
-------------------------------
Scott J. Liotta
Vice President and Secretary
The undersigned, Vice President of FLAG INVESTORS EQUITY PARTNERS FUND,
INC., who executed on behalf of said corporation the foregoing Articles
Supplementary to the Articles of Incorporation of which this certificate is made
a part, hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
By: /s/ Edward J. Veilleux
------------------------------
Edward J. Veilleux
Vice President
<PAGE>
EX-99.B(2)
As Amended Through
December 18, 1996
BY-LAWS
OF
FLAG INVESTORS EQUITY PARTNERS 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, as amended (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 properly be brought before the Annual Meeting.
- 1 -
<PAGE>
Section 2. Special Meetings. Special meetings of the
shareholders, unless otherwise provided by law or by the Charter or 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 for him
by a proxy signed by such shareholder or his attorney-in-fact. 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.
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.
- 3 -
<PAGE>
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.
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.
- 4 -
<PAGE>
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 of 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.
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
- 5 -
<PAGE>
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.
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; provided, however, that for so long as
the Corporation is registered as an investment company under the 1940 Act, this
Section shall be inapplicable to the approval of any investment advisory
agreement, sub-advisory agreement or any plan (or agreement containing a plan)
pursuant to Rule 12b-1 under the 1940 Act.
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; provided, however, that for so
long as the Corporation is registered as an investment
- 6 -
<PAGE>
company under the 1940 Act, this Section shall be inapplicable to the approval
of any investment advisory agreement, sub-advisory agreement or any plan (or
agreement containing a plan) pursuant to Rule 12b-1 under the 1940 Act.
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.
Section 3. Limitation of Committee Powers. No committee of the
Board shall have power or authority to:
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(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. 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.
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.
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
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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.
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,
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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
(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;
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(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.
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.
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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.
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.
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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.
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 May in each year.
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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.
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.
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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.
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, the Securities Act of 1933 (the "1933 Act") 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
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determine, or cause to be determined, in a manner consistent with the Maryland
General Corporation Law, the 1933 Act 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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EX-99.B(5)(a)
FORM OF INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the_____ day of
______________, 1997 by and between FLAG INVESTORS EQUITY PARTNERS 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 Advisors 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 November 29, 1994 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");
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(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 November
30, 1994;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-86832) and
under the 1940 Act as filed with the SEC on November 30, 1994 relating to the
shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are herein
called "Prospectus").
The Fund will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Fund's operations,
except for distribution services;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Fund;
(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;
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(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
reliability, integrity and financial condition of the broker-dealer; the size
of and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on
a continuing basis. Accordingly, the price to the Fund in any transaction may
be less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. Subject to such policies as the Board of Directors may
determine, the Advisor shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
its having caused the Fund to pay a broker-dealer that provides brokerage and
research services to the Advisor an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the
Advisor determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by
such broker-dealer, viewed in terms of either that particular transaction or
the Advisor's overall responsibilities with respect to the Fund. The Advisor
is further authorized to allocate the orders placed by it on behalf of the
Fund to such broker-dealers other than Alex. Brown & Sons Incorporated ("Alex.
Brown") who also provide research
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or statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the
Board of Directors of the Fund, indicating the broker-dealers to whom such
allocations have been made and the basis therefor.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine,
the Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct Alex. Brown to execute
portfolio transactions for the Fund on an agency basis. The commissions paid
to Alex. Brown must be, as required by Rule 17e-1 under the 1940 Act,
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
If the purchase or sale of securities consistent with the investment policies
of the Fund or one or more other account of the Advisor is considered at or
about the same time, transactions in such securities will be allocated among
the accounts in a manner deemed equitable by the Advisor. Alex. Brown and the
Advisor may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable
execution.
The Fund will not deal with the Advisor or Alex. Brown in any
transaction in which the Advisor or Alex. Brown acts as a principal with
respect to any part of the Fund's order. If Alex. Brown is participating in an
underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.
5. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Advisor on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the
Board of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
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(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 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 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 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.
-5-
<PAGE>
8. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors including
a majority of the Fund's Directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund and shareholders of the Fund, the Advisor may
delegate to a sub-advisor its duties enumerated in Section 3, hereof. The
Advisor shall continue to supervise the performance of any such sub-advisor and
shall report regularly thereon to the Fund's Board of Directors, but shall not
be responsible for the sub-advisor's performance under the sub-advisory
agreement.
(b) 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, the Fund shall pay to the Advisor monthly compensation
at an annual rate of 1.00% of the first $50 million of the Fund's average
daily net assets, .85% of the next $50 million of the Fund's average daily net
assets, .80% of the next $100 million of the Fund's average daily net assets
and .70% of the Fund's average daily net assets exceeding $200 million.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for the part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Advisor's compensation for the preceding month shall be
made as promptly as possible.
10. Non-Exclusivity. The services of the Advisor to the Fund are
not to be deemed to be exclusive, and the Advisor shall be free to render
investment advisory or other services to others (including other investment
companies) and to engage in other activities, so long as its services under
this Agreement are not impaired thereby. It is understood and agreed that
officers or directors of the Advisor may serve as officers or Directors of the
Fund, and that officers or Directors of the Fund may serve as officers or
directors of the Advisor to the extent permitted by law; and that the officers
and directors of the Advisor are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, trustees or directors of any other firm, trust
or corporation, including other investment companies.
-6-
<PAGE>
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.
-7-
<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 EQUITY PARTNERS
FUND, INC.
Attest: __________________ By: _____________________________________
Name:
Title:
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: ___________________ By: _____________________________________
Name:
Title:
-8-
<PAGE>
EX-99.B(5)(b)
FORM OF SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the ______ day of
______________, 1997 by and among FLAG INVESTORS EQUITY PARTNERS FUND, INC., a
Maryland corporation (the "Fund"), INVESTMENT COMPANY CAPITAL CORP., a
Maryland corporation (the "Advisor"), and ALEX. BROWN INVESTMENT MANAGEMENT, a
Maryland limited partnership (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 State of Maryland on November 29, 1994 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;
<PAGE>
(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 November 30, 1994;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File
No. 33-86832) and under the 1940 Act as filed with the SEC on
November 30, 1994 relating to the shares of the Fund, and all
amendments thereto; and
(f) The Fund's most recent prospectus (such
prospectus, as presently in effect, and all amendments and
supplements thereto are herein called "Prospectus").
The Fund will furnish the 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:
(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; and
(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.
-2-
<PAGE>
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 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.
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 Advisor may direct Alex.
Brown & Sons Incorporated ("Alex. Brown") to execute portfolio transactions
for the Fund on an agency basis. The commissions paid to Alex. Brown must be,
as required by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar
securities during a comparable period of time." If the purchase or sale of
securities consistent with the investment policies of the Fund or one or more
other 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
-3-
<PAGE>
by the Sub-Advisor. 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 Alex. Brown
in any transaction in which the Sub-Advisor or Alex. Brown acts as a principal
with respect to any part of the Fund's order. If Alex. Brown is participating
in an underwriting or selling group, the Fund may not buy portfolio securities
from the group except in accordance with policies established by the Board of
Directors in compliance with rules of the SEC.
5. Control by Fund's Board of Directors. Any recommendations
concerning the Fund's investment program for the Fund proposed by the
Sub-Advisor to the Fund and the Advisor pursuant to this Agreement, as well as
any other 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 between 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 the President and certain
Vice Presidents of the Fund, to the extent that such officers may be
required by the Fund for the proper conduct of its affairs.
(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.
-4-
<PAGE>
(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 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' commission chargeable to the Fund in connection
with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to Federal, State or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection
with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the
costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of
the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Directors' meetings and of preparing,
printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any
advisory board or committee; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not
"interested persons" (as defined in the 1940 Act) of the Fund and of
independent certified public 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. 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: .75% of the
first $50 million of the Fund's average daily net assets, .60% of the next
$150 million of the Fund's average daily net assets, and .50% of the Fund's
average daily net assets in excess of $200 million. 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
-5-
<PAGE>
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:
(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 Sub-Advisor
on sixty (60) days' written notice to the Fund and the Advisor. 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 partners 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 partners of the Sub-Advisor to the extent permitted by law;
and that the partners of the Sub-Advisory are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers or directors of any other firm or
corporation, including other investment companies.
-6-
<PAGE>
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, of the Advisor and of the Fund for this purpose 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.
-7-
<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.
Attest: FLAG INVESTORS EQUITY PARTNERS FUND, INC.
__________________ By:______________________________________
Name:
Title:
Attest: INVESTMENT COMPANY CAPITAL CORP.
__________________ By:_______________________________________
Name:
Title:
Attest: ALEX. BROWN INVESTMENT MANAGEMENT
By BT Alex. Brown Incorporated,
a General Partner
__________________ By:_______________________________________
Name:
Title:
-8-
<PAGE>
EX-99B(6)(a)
FLAG INVESTORS FAMILY OF FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 31st day of August, 1997, by and between
each of the entities constituting the Flag Investors Family of Funds executing
this Agreement below, each with its principal office and place of business at
One South Street, Baltimore, Maryland 21202 (each a "Company"), and ICC
Distributors, Inc., a Delaware corporation with its principal office and place
of business at Two Portland Square, Portland, Maine 04101 (the "Distributor").
WHEREAS, each Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company, may issue its shares of common stock (the "Shares") in separate
series and classes and continuously offers for sale its Shares to the public;
and
WHEREAS, the Distributor is registered under the Securities Exchange Act
of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the
business of selling shares of registered investment companies either directly
to purchasers or through other securities dealers;
WHEREAS, each Company offers Shares in one or more series as listed
in Appendix A hereto (each such series, together with all other series
subsequently established by a Company and made subject to this Agreement in
accordance with Section 16, being herein referred to as a "Fund," and
collectively as the "Funds") and each Company offers shares of one or more
classes of each Fund as listed in Appendix A hereto (each such class together
with all other classes subsequently established by a Company in a Fund being
herein referred to as a "Class," and collectively as the "Classes");
WHEREAS, each Company desires that the Distributor offer the Shares of
each Fund and Class thereof to the public and the Distributor is willing to
provide those services on the terms and conditions set forth in this Agreement
in order to promote the growth of the Funds and facilitate the distribution of
the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, each Company individually and separately and the
Distributor hereby agree as follows:
-1-
<PAGE>
SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT
(a) Each Company has delivered to the Distributor properly certified or
authenticated copies of its Articles of Incorporation and Bylaws
(collectively, as amended from time to time, "Organic Documents"), the
Company's Notification of Registration filed with the U.S. Securities and
Exchange Commission ("SEC") pursuant to Section 8(a) of the 1940 Act on Form
N-8A under the 1940 Act, the Company's Registration Statement and all
amendments thereto filed with the SEC pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), or the 1940 Act (the "Registration
Statement") and the current Prospectus and Statement of Additional Information
of each Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus") and shall promptly furnish the Distributor
with all amendments of or supplements to the foregoing, each properly
certified or authenticated. In addition, each Company shall furnish the
Distributor with properly certified or authenticated copies of all documents,
notices and reports filed with the SEC.
(b) Each Company has delivered to the Distributor certified resolutions
of the Company's Board of Directors (each a "Board") of the resolutions of its
Board authorizing the appointment of the Distributor as distributor and
approving this Agreement.
(c) Each Company hereby appoints the Distributor as the principal
underwriter and distributor of its Funds to sell the Shares of the Funds to
the public and hereby agrees during the term of this Agreement to sell Shares
of its Funds to the Distributor upon the terms and conditions herein set
forth.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of each Company to
act as principal underwriter and distributor of the Company's Funds except
that the rights given under this Agreement to the Distributor shall not apply
to Shares issued in connection with the merger, consolidation or
reorganization of any other investment company with a Fund; a Fund's
acquisition by purchase or otherwise of all or substantially all of the assets
or stock of any other investment company; or the reinvestment in Shares by a
Fund's shareholders of dividends or other distributions or any other offering
by a Company of securities to its shareholders.
SECTION 3. PURCHASE OF SHARES; OFFERING OF SHARES
(a) The Distributor shall have the right to buy from each Company the
Shares needed to fill unconditional orders for unsold Shares of the Funds as
shall then be effectively registered under the
2
<PAGE>
Securities Act placed with the Distributor by investors or securities dealers
or depository institutions or other financial intermediaries acting as agent
for their customers or on their own behalf. Alternatively, the Distributor may
act as a Company's agent, to offer, and to solicit offers to subscribe to,
unsold Shares of the Funds as shall then be effectively registered under the
Securities Act. The Distributor will promptly forward all orders and
subscriptions for Shares of a Company to the Company. The price which the
Distributor shall pay for Shares purchased from a Company and the price that
the Distributor shall offer Shares shall be the net asset value, determined as
set forth in Section 3(c) hereof, used in determining the public offering
price on which the orders are based. Shares purchased by the Distributor are
to be resold by the Distributor to investors at the public offering price, as
set forth in Section 3(b) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as agent for their
customers that have entered into agreements with the Distributor pursuant to
Section 9 hereof or acting on their own behalf. The Companies reserve the
right to sell Shares of their Funds directly to investors through
subscriptions received by the Company, but no such direct sales shall affect
the sales charges due to the Distributor hereunder.
(b) The public offering price of the Shares of a Fund, i.e., the price
per Share at which the Distributor or selected dealers or selected agents
(each as defined in Section 11 hereof) may sell Shares to the public or to
those persons eligible to invest in Shares as described in the applicable
Prospectus, shall be the public offering price determined in accordance with
the then currently effective Prospectus of the Fund or Class thereof under the
Securities Act, relating to such Shares, but not to exceed the net asset value
at which the Distributor, when acting as principal, is to purchase such
Shares, plus, in the case of Shares for which an initial sales charge is
assessed, an initial charge equal to a specified percentage or percentages of
the public offering price of the Shares as set forth in the current Prospectus
relating to the Shares. In the case of Shares for which an initial sales
charge may be assessed, Shares may be sold to certain classes of persons at
reduced sales charges or without any sales charge as from time to time set
forth in the current Prospectus relating to the Shares. Each Company will
advise the Distributor of the net asset value per Share at each time as the
net asset value per Share shall have been determined by the Company.
(c) The net asset value per Shares of each Fund or Class thereof shall be
determined by the applicable Company, or an agent of the Company, as of the
close of the New York Stock Exchange or such other time as set forth in the
applicable Prospectus on each Fund business day in accordance with the method
set forth in the Prospectus and guidelines established by the Company's Board.
(d) Each Company reserves the right to suspend the offering of Shares of
any or all of its Funds or of any class thereof at any time in the absolute
discretion of the Company's Board, and upon notice of such suspension the
Distributor shall cease to offer Shares of the Funds or Classes thereof
specified in the notice.
(e) Each Company, or any agent of the Company designated in writing to
the Distributor by the Company, shall be promptly advised by the Distributor
of all purchase orders for Shares received by the Distributor and all
subscriptions for Shares obtained by the Distributor as agent shall be
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directed to the Company for acceptance and shall not be binding until accepted
by the Company. Any order or subscription may be rejected by the Company;
provided, however, that a Company will not arbitrarily or without reasonable
cause refuse to accept or confirm orders or subscriptions for the purchase of
Shares. Each Company (or its agent) will confirm orders and subscriptions upon
their receipt, will make appropriate book entries and, upon receipt by the
Company (or its agent) of payment thereof, will issue such Shares in
certificated or uncertificated form pursuant to the instructions of the
Distributor. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Company (or its agent).
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES
(a) Any of the outstanding Shares of a Fund or Class thereof may be
tendered for redemption at any time, and the applicable Company agrees to
redeem or repurchase the Shares so tendered in accordance with its obligations
as set forth in the Company's Organic Documents and the Prospectus relating to
the Shares. The price to be paid to redeem or repurchase the Shares of a Fund
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(b) hereof less, in the case of Shares for which a
deferred sales charge is assessed, a deferred sales charge equal to a
specified percentage or percentages of the net asset value of those Shares as
from time to time set forth in the Prospectus relating to those Shares (or, in
the case of Flag Investors Cash Reserve Prime Shares Class A Shares and Flag
Investors Cash Reserve Prime Shares Class B Shares (collectively "Exchange
Shares"), relating to Exchange Shares and the Original Shares, as defined
below) or their cost (or, in the case of Exchange Shares, the cost of the
Class A Shares or Class B Shares of a Fund that were first purchased by the
shareholder and then exchanged, either directly or indirectly through a series
of exchanges, for the Exchange Shares (the "Original Shares")), whichever is
less. Shares of a Fund or Class thereof for which a deferred sales charge may
be assessed and that have been outstanding for a specified period of time may
be redeemed without payment of a deferred sales charge as from time to time
set forth in the Prospectus relating to those Shares (or, in the case of
Exchange Shares, relating to the Original Shares).
(b) Each Company or its designated agent shall pay (i) the total amount
of the redemption price consisting of the redemption price less any applicable
deferred sales charge to the redeeming shareholder or its agent and (ii)
except as may be otherwise required by the Conduct Rules (the "Rules") of the
National Association of Securities Dealers, Inc. (the "NASD")and any
interpretations thereof, any applicable deferred sales charges to the
Distributor in accordance with the Distributor's instructions on or before the
third business day subsequent to the Company or its agent having received the
notice of redemption in proper form.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than its
customary weekend or holiday closings,
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<PAGE>
when trading thereon is restricted, when an emergency exists as a result of
which disposal by a Company of securities owned by a Fund of that Company is
not reasonably practicable or it is not reasonably practicable for the Company
fairly to determine the value of a Fund's net assets, or during any other
period when the SEC so permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the
Funds upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Companies hereunder are not to
be deemed exclusive, and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment
companies so long as the performance of its obligations hereunder is not
impaired thereby.
(b) In selling Shares of the Funds, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by any Company to give any information or to make any
representations other than as is contained in a Fund's Prospectus or any
advertising materials or sales literature specifically approved in writing by
the applicable Company or its agents.
(c) The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers or selected agents,
the collection of amounts payable by investors and selected dealers or
selected agents on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the NASD and any other
applicable self-regulatory organization.
(d) The Distributor will perform its duties hereunder under the
supervision of and in accordance with the directives of the applicable Board.
The Distributor will perform its duties hereunder in accordance with the
applicable Company's Organic Documents and Prospectuses and with the
instructions and directions of the Boards and will conform to and comply with
the requirements of the 1940 Act, the Securities Act and other applicable
laws.
(e) The Distributor shall provide each Company's Board with a written
report of the amounts expended in connection with this Agreement as requested
by the applicable Board.
(f) The Distributor represents and warrants to each Company that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
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<PAGE>
(ii) It is empowered under applicable laws and by its
Articles of Incorporation to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement;
(v) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Distributor,
enforceable against the Distributor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies
of creditors and secured parties;
(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify
each Company if its membership in the NASD is terminated or
suspended; and
(vii) The performance by the Distributor of its obligations
hereunder does not and will not contravene any provision of its
Articles of Incorporation.
(g) Notwithstanding anything in this Agreement, including the Appendices,
to the contrary, the Distributor makes no warranty or representation as to the
number of selected dealers or selected agents with which it has entered into
agreements in accordance with Section 11 hereof, as to the availability of any
Shares to be sold through any selected dealer, selected agent or other
intermediary or as to any other matter not specifically set forth herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF A COMPANY
(a) Each Company shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other
papers or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. Each Company shall make available
to the Distributor the number of copies of the Prospectuses of the Fund's of
that Company as the Distributor shall reasonably request.
(b) Each Company shall take, from time to time, subject to the approval
of its Board and any required approval of the shareholders of the Company, all
action necessary to fix the number of authorized Shares (if such number is not
limited) and to register the Shares under the Securities Act,
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<PAGE>
to the end that there will be available for sale the number of Shares as
reasonably may be expected to be sold pursuant to this Agreement.
(c) Each Company shall execute any and all documents, furnish to the
Distributor any and all information and otherwise take all actions that may be
reasonably necessary and cooperate with the Distributor and all other parties
in taking any action as may be necessary to register or qualify the Company's
Shares for sale under the securities laws of the various states of the United
States and other jurisdictions ("States"). Any registration or qualification
may be withheld, terminated or withdrawn by the applicable Company at any time
in its discretion. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by each
Company in connection with such registration or qualification.
(d) Each Company represents and warrants to the Distributor that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the State of Maryland;
(ii) It is empowered under applicable laws and by its
Organic Documents to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have
been taken to authorize it to enter into and perform its duties under
this Agreement;
(iv) It is registered as an open-end management investment
company with the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully
paid and non-assessable;
(vi) This Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of creditors
and secured parties;
(vii) The performance by the Company of its obligations
hereunder does not and will not contravene any provision of its
Articles of Incorporation.
(viii) The Company's Registration Statement is currently
effective and will remain effective with respect to all Shares of the
Company's Funds and Classes thereof being offered for sale;
(ix) It will use its best efforts to ensure that its
Registration Statement and Prospectuses have been or will be, as the
case may be, carefully prepared in conformity with the requirements
of the Securities Act and the rules and regulations thereunder;
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<PAGE>
(x) It will use its best efforts to ensure that (A) its
Registration Statement and Prospectuses contain or will contain all
statements required to be stated therein in accordance with the
Securities Act and the rules and regulations thereunder, (B) all
statements of fact contained or to be contained in the Registration
Statement or Prospectuses are or will be true and correct at the time
indicated or on the effective date as the case may be and (C) neither
the Registration Statement nor any Prospectus, when they shall become
effective or be authorized for use, will include an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares;
(xi) It will from time to time file such amendment or
amendments to its Registration Statement and Prospectuses as, in the
light of then-current and then-prospective developments, shall, in
the opinion of its counsel, be necessary in order to have the
Registration Statement and Prospectuses at all times contain all
material facts required to be stated therein or necessary to make any
statements therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to its Registration
Statement or Prospectuses without giving the Distributor reasonable
advance notice thereof (which shall be at least three Fund business
days); provided, however, that nothing contained in this Agreement
shall in any way limit a Company's right to file at any time such
amendments to its Registration Statement or Prospectuses, of whatever
character, as the Company may deem advisable, such right being in all
respects absolute and unconditional; and
(xiii) It will use its best efforts to ensure that (A) any
amendment to its Registration Statement or Prospectuses hereafter
filed will, when it becomes effective, contain all statements
required to be stated therein in accordance with the 1940 Act and the
rules and regulations thereunder, (B) all statements of fact
contained in the Registration Statement or Prospectuses will, when be
true and correct at the time indicated or on the effective date as
the case may be and (C) no such amendment, when it becomes effective,
will include an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading to a purchaser of the
Shares.
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<PAGE>
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and efforts in rendering
services to each Company under this Agreement but shall be under no duty to
take any action except as specifically set forth herein or as may be
specifically agreed to by the Distributor in writing. The Distributor shall
not be liable to any Company or any of a Company's shareholders for any error
of judgment or mistake of law, for any loss arising out of any investment, or
for any action or inaction of the Distributor in the absence of bad faith,
willful misfeasance or gross negligence in the performance of the
Distributor's duties or obligations under this Agreement or by reason or the
Distributor's reckless disregard of its duties and obligations under this
Agreement
(b) The Distributor shall not be liable to a Company for any action taken
or failure to act in good faith reliance upon:
(i) the advice of the Company or of counsel, who may be
counsel to the Company or counsel to the Distributor;
(ii) any oral instruction which the Distributor receives and
which it reasonably believes in good faith was transmitted by the
person or persons authorized by the Company's Board to give such oral
instruction (the Distributor shall have no duty or obligation to make
any inquiry or effort of certification of such oral instruction);
(iii) any written instruction or certified copy of any
resolution of the Company's Board, and the Distributor may rely upon
the genuineness of any such document or copy thereof reasonably
believed in good faith by the Distributor to have been validly
executed; or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement, instrument,
report, notice, consent, order, or other document reasonably believed
in good faith by the Distributor to be genuine and to have been
signed or presented by the Company or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order,
or any other document or instrument which the Distributor reasonably believes
in good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical
breakdowns, flood or catastrophe,
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<PAGE>
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply. In addition, to the extent the Distributor's
obligations hereunder are to oversee or monitor the activities of third
parties, the Distributor shall not be liable for any failure or delay in the
performance of the Distributor's duties caused, directly or indirectly, by the
failure or delay of such third parties in performing their respective duties
or cooperating reasonably and in a timely manner with the Distributor.
SECTION 8. INDEMNIFICATION
(a) Each Company will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section 15 of the Securities Act or section
20 of the 1934 Act ("Distributor Indemnitees") free and harmless from and
against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses of
every nature and character (including the cost of investigating or defending
such claims, demands, actions, suits or liabilities and any reasonable counsel
fees incurred in connection therewith) which any Distributor Indemnitee may
incur, under the Securities Act, or under common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact contained in
the Company's Registration Statement or Prospectuses or arising out of or
based upon any alleged omission to state a material fact required to be stated
in any one thereof or necessary to make the statements in any one thereof not
misleading, unless such statement or omission was made in reliance upon, and
in conformity with, information furnished in writing to the Company in
connection with the preparation of the Registration Statement or exhibits to
the Registration Statement by or on behalf of the Distributor ("Distributor
Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Company shall indemnify and hold each Distributor Indemnitee free
and harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor
Claim related to the matters for which the Distributor has requested amendment
to the Company's Registration Statement and for which the Company has not
filed a Required Amendment, regardless of with respect to such matters whether
any statement in or omission from the Registration Statement was made in
reliance upon, or in conformity with, information furnished to the Company by
or on behalf of the Distributor.
(b) A Company may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the
Company and approved by the Distributor, which approval shall not be withheld
unreasonably. The Company shall advise the Distributor that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Company assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Company does not
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<PAGE>
assume the defense of any such suit, or if Distributor does not approve of
counsel chosen by the Company or has been advised that it may have available
defenses or claims that are not available to or conflict with those available
to the Company, the Company will reimburse any Distributor Indemnitee named as
defendant in such suit for the reasonable fees and expenses of any counsel
that person retains. A Distributor Indemnitee shall not settle or confess any
claim without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed.
(c) The Distributor will indemnify, defend and hold each Company and its
several officers and directors (collectively, the "Company Indemnitees"), free
and harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel
fees and other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact
contained in the Company's Registration Statement or Prospectus or
any alleged omission of a material fact required to be stated or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon, and in conformity
with, information furnished to the Company in writing in connection
with the preparation of the Registration Statement or Prospectus by
or on behalf of the Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set
forth in Section 7 of this Agreement (collectively, "Company
Claims").
(d) The Distributor may assume the defense of any suit brought to enforce
any Company Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Company, which approval shall not be withheld
unreasonably. The Distributor shall advise the Company that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if Company does not approve of counsel chosen by
the Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to the
Distributor, the Distributor will reimburse any Company Indemnitee named as
defendant in such suit for the reasonable fees and expenses of any counsel that
person retains. A Company Indemnitee shall not settle or confess any claim
without the prior written consent of the Distributor, which consent shall not be
unreasonably withheld or delayed.
(e) A Company's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Company or the
Distributor receiving notice of any action brought
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<PAGE>
against a Distributor Indemnitee or Company Indemnitee, respectively, by the
person against whom such action is brought within twenty (20) days after the
summons or other first legal process is served. Such notice shall refer to the
person or persons against whom the action is brought. The failure to provide
such notice shall not relieve the party entitled to such notice of any
liability that it may have to any Distributor Indemnitee or Company Indemnitee
except to the extent that the ability of the party entitled to such notice to
defend such action has been materially adversely affected by the failure to
provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Company Indemnitee and shall survive the sale and redemption of
any Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the
benefit of each person that may be a Distributor Indemnitee or Company
Indemnitee at any time and their respective successors and assigns (it being
intended that such persons be deemed to be third party beneficiaries under
this Agreement).
(g) The Distributor agrees promptly to notify each Company of the
commencement of any litigation or proceeding of which it becomes aware arising
out of or in any way connected with the issuance or sale of Shares. Each
Company agrees promptly to notify the Distributor of the commencement of any
litigation or proceeding of which it becomes aware arising out of or in any
way connected with the issuance or sale of its Shares.
(h) Nothing contained herein shall require a Company to take any action
contrary to any provision of its Organic Documents or any applicable statute
or regulation or shall require the Distributor to take any action contrary to
any provision of its Articles of Incorporation or Bylaws or any applicable
statute or regulation; provided, however, that no Company nor the Distributor
may amend their Organic Documents or Articles of Incorporation and Bylaws,
respectively, in any manner that would result in a violation of a
representation or warranty made in this Agreement, except if required by any
applicable statute or regulation.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to a Company or the security holders of the
Company to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.
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<PAGE>
SECTION 9. NOTIFICATION TO THE DISTRIBUTOR
A Company shall advise the Distributor immediately: (i) of any
request by the SEC for amendments to the Company's Registration Statement or
Prospectus or for additional information; (ii) in the event of the issuance by
the SEC of any stop order suspending the effectiveness of the Company's
Registration Statement or any Prospectus or the initiation of any proceedings
for that purpose; (iii) of the happening of any material event which makes
untrue any statement made in the Company's then current Registration Statement
or Prospectus or which requires the making of a change in either thereof in
order to make the statements therein not misleading; and (iv) of all action of
the SEC with respect to any amendments to the Company's Registration Statement
or Prospectus which may from time to time be filed with the Commission under
the 1940 Act or the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with the
distribution of Shares of each Fund and Class thereof, the Distributor shall
receive: (i) any applicable sales charge assessed upon investors in connection
with the purchase of Shares; (ii) from the applicable Company, any applicable
contingent deferred sales charge ("CDSC") assessed upon investors in
connection with the redemption of Shares; (iii) from the applicable Company,
the distribution service fees with respect to the Shares of those Classes as
designated in Appendix A for which a plan under Rule 12b-1 under the 1940 Act
(a "Plan") is effective (the "Distribution Fee"); and (iv) from the applicable
Company, the shareholder service fees with respect to the Shares of those
Classes as designated in Appendix A (the "Service Fee"). The Distribution Fee
and Service Fee shall be accrued daily by each applicable Fund or Class
thereof and shall be paid monthly as promptly as possible after the last day
of each calendar month but in any event on or before the fifth (5th) Fund
business day after month-end, at the rate or in the amounts set forth in
Appendix A and, as applicable, the Plan(s). Each Company grants and transfers
to the Distributor a general unperfected lien and security interest in any and
all securities and other assets of the Company's Fund now or hereafter
maintained in an account at the Fund's custodian on behalf of the Fund to
secure any Distribution Fees and Service Fees owed the Distributor by the
Company under this Agreement.
(b) Each Company shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Funds
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after the settlement date for each redemption of Shares.
(c) Except as specified in Sections 8 and 10(a), the Distributor shall be
entitled to no compensation or reimbursement of expenses for the services
provided by the Distributor pursuant to this Agreement. The Distributor may
receive compensation from a Fund's investment adviser, other service providers
or their respective affiliates (collectively, the "Adviser") for its services
hereunder or for additional services all as may be agreed to between the
Adviser and the Distributor.
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<PAGE>
Notwithstanding anything in this Agreement to the contrary, to the extent the
Distributor receives compensation from the Adviser that is disclosed to the
Board of a Company, the Company will indemnify, defend and hold each
Distributor Indemnitees free and harmless from and against any and all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such claims,
demands, actions, suits or liabilities and any reasonable counsel fees
incurred in connection therewith) related in any way to such payment.
(d) Each Company shall be responsible and assumes the obligation for
payment of all the expenses of the Company's Funds, including fees and
disbursements of its counsel and auditors, in connection with the preparation
and filing of the Registration Statement and Prospectuses (including but not
limited to the expense of setting in type the Registration Statement and
Prospectuses and printing sufficient quantities for internal compliance,
regulatory purposes and for distribution to current shareholders).
(e) A Company shall bear the cost and expenses (i) of the registration of
its Shares for sale under the Securities Act; (ii) of the registration or
qualification of its Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Company, or its the Funds or the Classes thereof (but not the Distributor)
as an issuer or as a broker or dealer, in such States as shall be selected by
the Company and the Distributor pursuant to Section 6(c) hereof; and (iv)
payable to each State for continuing registration or qualification therein
until the Company decides to discontinue registration or qualification
pursuant to Section 6(c) hereof. The Distributor shall pay all expenses
relating to the Distributor's broker-dealer qualification.
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
(a) The Distributor shall have the right to enter into sub-distribution
agreements with securities dealers of its choice ("selected dealers") and with
depository institutions and other financial intermediaries of its choice
("selected agents") for the sale of Shares and to fix therein the portion of
the sales charge, if any, that may be allocated to the selected dealers or
selected agents; provided, that all such agreements shall be in substantially
the form of agreement as set forth in Appendix B hereto. Shares of each Fund
or Class thereof shall be resold by selected dealers or selected agents only
at the public offering price(s) set forth in the Prospectus relating to the
Shares. The Distributor shall offer and sell Shares of the Funds only to such
selected dealers as are members in good standing of the NASD. The Distributor
shall have the right to enter into shareholder servicing agreements with
financial intermediaries of its choice; provided, that all such agreements
shall be in substantially the form of agreement as set forth in Appendix C
hereto.
14
<PAGE>
(b) The Distributor will supervise each Fund's relationship with selected
dealers and agents and may make payments to those selected dealers and agents
in such amounts as the Distributor may determine from time to time in its sole
discretion. The amount of payments to selected dealers and agents by the
Distributor may be reviewed by the various Boards from time to time; provided,
however, that no payment by the Distributor to any selected dealer or agent
with respect to a Share shall exceed the amount of payments made to the
Distributor hereunder with respect to that Share.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information related
to a Company as proprietary information of that Company and, on behalf of
itself and its employees, to keep confidential all such information, except
that the Distributor may:
(i) prepare or assist in the preparation of periodic reports
to shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the
investment company industry to companies that track or report price,
performance or other information regarding investment companies; and
(iii) release such other information as approved in writing
by the Company, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding a
Company without the consent of the Company if the Distributor reasonably
believes that it may be exposed to civil or criminal legal proceedings for
failure to comply, when requested to release any information by duly constituted
authorities or when so requested by the Company.
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each series or
class listed in Appendix A on the later of (i) August 31, 1997 or (ii) the
date on which a Company's Registration Statement relating to Shares of the
Fund becomes effective. Upon effectiveness of this Agreement, it shall
supersede all previous agreements between the parties hereto covering the
subject matter hereof insofar as such Agreement may have been deemed to relate
to the Funds.
(b) This Agreement shall continue in effect with respect to a Fund for a
period of one year from its effectiveness and thereafter shall continue in
effect with respect to a Fund until terminated; provided, that continuance is
specifically approved at least annually (i) by the applicable Board or by a
vote of a majority of the outstanding voting securities of the Fund and (ii)
by a vote of a majority of Directors of the applicable Company (I) who are not
parties to this Agreement or interested persons of any such party (other than
as Directors of the Company) and (II) with respect to each
- 15 -
<PAGE>
Class of a Fund for which there is an effective Plan, who do not have any
direct or indirect financial interest in any such Plan applicable to the Class
or in any agreements related to the Plan, cast in person at a meeting called
for the purpose of voting on such approval.
(c) This Agreement may be terminated at any time with respect to a series
or class, without the payment of any penalty, (i) by the applicable Board or
by a vote of a majority of the outstanding voting securities of the Fund or,
with respect to each Class of a Fund for which there is an effective Plan, a
majority of Directors of the Company who do not have any direct or indirect
financial interest in any such Plan or in any agreements related to the Plan,
on 60 days' written notice to the Distributor or (ii) by the Distributor on 60
days' written notice to the applicable Company.
(d) This Agreement shall automatically terminate upon its assignment and
upon the termination of the Distributor's membership in the NASD.
(e) If a Company shall not file a Required Amendment within fifteen days
following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement with that Company
immediately.
(f) The obligations of Sections 5(e), 6(d), 8, 9 and 10 shall survive any
termination of this Agreement with respect to a Fund or Company.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by the Distributor
to a Company or a Company to the Distributor shall be deemed sufficiently
given if personally delivered or sent by telegram, facsimile or registered,
certified or overnight mail, postage prepaid, addressed by the party giving
such notice to the other party at the last address furnished by the other
party to the party giving such notice, and unless and until changed pursuant
to the foregoing provisions hereof each such notice shall be addressed to the
Company or the Distributor, as the case may be, at their respective principal
places of business.
16
<PAGE>
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the
Distributor's right, or the right of any of the Distributor's employees,
agents, officers or directors who may also be a director, officer or employee
of a Company, or affiliated persons of a Company to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, trust, firm, individual or
association.
SECTION 16. ADDITIONAL FUNDS AND CLASSES
In the event that a Company establishes one or more series of Shares
or one or more classes of Shares after the effectiveness of this Agreement,
such series of Shares or classes of Shares, as the case may be, shall become
Funds and Classes under this Agreement upon approval of this Agreement by the
applicable Company with respect to the series of Shares or class of Shares and
the execution of an amended Appendix A reflecting the applicable names and
terms. The Distributor may elect not to make any such series or classes
subject to this Agreement.
SECTION 17. MISCELLANEOUS
(a) The Distributor shall not be liable to any Company and no Company
shall be liable to the Distributor for consequential damages under any
provision of this Agreement.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Distributor and the applicable Company.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of New York.
(d) This Agreement constitutes the entire agreement between the
Distributor and each Company and supersedes any prior agreement with respect
to the subject matter hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any
number of counterparts, and all of the counterparts taken together shall be
deemed to constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
- 17 -
<PAGE>
(g) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(h) Notwithstanding any other provision of this Agreement, the Distributor
and each Company agree that the assets and liabilities of each Fund are separate
and distinct from the assets and liabilities of each other Fund and that no Fund
shall be liable or shall be charged for any debt, obligation or liability of any
other Fund, whether arising under this Agreement or otherwise.
(i) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(j) Each Company shall be liable to the Distributor only with respect to
those Funds and Classes of that Company and the Distributor shall look solely
to the applicable Company to satisfy any liability of a Fund or Class thereof
to the Distributor.
(k) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated
and that their signature will bind the party indicated to the terms hereof.
(l) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
FLAG INVESTORS FAMILY OF FUNDS
Flag Investors Telephone Income Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors International Fund, Inc.
18
<PAGE>
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors Emerging Growth Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Total Return U.S. Treasury Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
BT Alex. Brown Cash Reserve Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Managed Municipal Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors Short-Intermediate Income Fund,
Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors Value Builder Fund, Inc.
- 19 -
<PAGE>
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors Real Estate Securities Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors Equity Partners Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
Flag Investors Maryland Intermediate Tax-Free
Income Fund, Inc.
By: /s/ Amy M. Olmert, Secretary
--------------------------------
[Officer name]
[Title]
ICC DISTRIBUTORS, INC.
By: /s/ John Y. Keffer
--------------------------------
John Y. Keffer
President
20
<PAGE>
FLAG INVESTORS FAMILY OF FUNDS
DISTRIBUTION AGREEMENT
Appendix A
as of August 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distribution Service
Company/Fund Class Fee Fee
- ---------------------------------------------------------------------------------------------------------------------
Flag Investors Telephone Income Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Class D 0.60% --
- ---------------------------------------------------------------------------------------------------------------------
Flag Investors International Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
- ---------------------------------------------------------------------------------------------------------------------
Flag Investors Emerging Growth Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Institutional Class -- --
ABCAT Class(3) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Return U.S. Treasury Fund, Inc. Flag Investors Class A 0.25% --
Flag Investors Class B 0.35% 0.25%
- ---------------------------------------------------------------------------------------------------------------------
BT Alex. Brown Cash Reserve Fund, Inc.
Prime Series Portfolio Flag Investors Cash Reserves
Prime Shares - Class A 0.25% --
Flag Investors Cash Reserves
Prime Shares - Class B(1) 0.75% 0.25%
Prime Class 0.25% --
Institutional Class -- --
Quality Cash Reserves Class 0.60% --
Tax Free Portfolio 0.25% --
Treasury Portfolio Institutional Class -- --
General unnamed class 0.25% --
- ---------------------------------------------------------------------------------------------------------------------
Managed Municipal Fund, Inc. Flag Investors Class A 0.25% --
Flag Investors Class B(1) 0.75% 0.25%
- ---------------------------------------------------------------------------------------------------------------------
Flag Investors Short-Intermediate Income Fund,
Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Institutional Class -- --
ABCAT Class(3) -- --
- ---------------------------------------------------------------------------------------------------------------------
Flag Investors Value Builder Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Class D 0.60% --
Institutional Class -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- A1 -
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flag Investors Real Estate Securities Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Institutional Class -- --
- ---------------------------------------------------------------------------------------------------------------------
Flag Investors Equity Partners Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Institutional Class -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- A2 -
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Distribution Service
Company/Fund Class Fee Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flag Investors Maryland Intermediate Tax-Free
Income Fund, Inc. Class A 0.25% --
Class B(1) 0.75% 0.25%
Institutional Class -- --
ABCAT Class(2) -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not currently offered.
(2) ABCAT Class means Alex Brown Advisory Capital and Trust Class.
(3) Only available through exchange.
- A3 -
<PAGE>
Flag Investors Family of Funds
Distribution Agreement
Appendix B
[Form of Sub-Distribution Agreement]
<PAGE>
FLAG INVESTORS FAMILY OF FUNDS
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
- C1 -
<PAGE>
EX-99.B(6)(b)
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
August 12, 1997
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares
("Shares") to the public in accordance with the terms and conditions contained
in the Prospectus of each Fund. The term "Prospectus" as used herein refers to
each prospectus on file with the Securities and Exchange Commission which is
part of the registration statement of each Fund under the Securities Act of
1933 (the "Securities Act"). In connection with the foregoing you may serve as
a participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other
related functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating Dealer
and as such are authorized (i) to accept orders for the purchase of Shares and
to transmit to the Funds such orders and the payment made therefore, (ii) to
accept orders for the redemption of Shares and to transmit to the Funds such
orders and all additional material, including any certificates for Shares, as
may be required to complete the redemption and (iii) to assist shareholders
with the foregoing and other matters relating to their investments in each
Fund, in each case subject to the terms and conditions set forth in the
Prospectus of each Fund. You are to review each Share purchase or redemption
order submitted through you or with your assistance for completeness and
accuracy. You further agree to undertake from time to time certain shareholder
servicing activities for customers of yours who have purchased Shares and who
use your facilities to communicate with the Funds or to effect redemptions or
additional purchases of the Shares.
- 1 -
<PAGE>
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in
the Prospectus of each Fund and in such printed information as the Distributor
may subsequently prepare. No person is authorized to distribute any sales
material relating to any Fund without the prior written approval of the
Distributor.
3. Compensation. As compensation for such services, you will look solely
to the Distributor, and you acknowledge that the Funds shall have no direct
responsibility for any compensation. In addition to any sales charge payable
to you by your customer pursuant to a Prospectus, the Distributor will pay you
no less often than annually a shareholder processing and service fee (as we
may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $25,000 in the fund family for which
you are to be compensated, and provided that in all cases your name is
transmitted with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of
the Funds. We agree to furnish to you as many copies of each Prospectus,
annual and interim reports and proxy solicitation materials as you may
reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree
that you will not offer Shares to persons in any jurisdiction in which you may
not lawfully make such offer due to the fact that you have not registered
under, or are not exempt from, the applicable registration or licensing
requirements of such jurisdiction. You agree that in performing the services
under this Agreement, you at all times, will comply with the Conduct Rules
(formerly the Rules of Fair Practice) of the NASD, including, without
limitation, the provisions of Rule 2830 (formerly Section 26) of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commission for any purposes whatsoever unless authorized by the then current
Prospectus in respect of a particular class of Shares or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the relevant
prospectus and provisions of the Agreement.
- 2 -
<PAGE>
6. Blue Sky. The Funds have registered an indefinite number of Shares
under the Securities Act. The Funds intend to make appropriate notice filings
in certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund shall have full authority to take such
action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any
Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by it hereunder.
In carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions of the
Investment Company Act, the Securities Act, the Securities Exchange Act of
1934, as amended, or the rules and regulations promulgated by the Securities
and Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party,
without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment, as defined in the
Investment Company Act. This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members
of the Board of Directors or Trustees of such Fund who are not "interested
persons" (as such phrase is defined in the Investment Company Act) and who
have no direct or indirect financial interest in the operation of the
Distribution Agreement between such Fund and the Distributor or by the vote of
a majority of the outstanding voting securities of the Fund.
- 3 -
<PAGE>
11. Communications. All communications to us should be sent to the
address listed below. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
Confirmed and accepted:
Firm Name:
By:
Signature
Printed Name and Title
Date:
Address:
Clears Through:
Phone No.:
- 4 -
<PAGE>
EX-99.B(6)(c)
FLAG INVESTORS FUNDS
One South Street
Baltimore, Maryland 21202-3220
SHAREHOLDER SERVICING AGREEMENT
______________, 19__
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you
concerning the provision of support services to your clients and customers
("Customers") who may from time to time beneficially own shares of our common
stock ("Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. (a) You agree to provide the following services to
Customers who may from time to time beneficially own Shares: (i) aggregating
and processing purchase and redemption requests for Shares from Customers and
placing net purchase and redemption orders with our distributor; (ii)
processing dividend payments from us on behalf of Customers; (iii) providing
information periodically to Customers showing their positions in Shares; (iv)
arranging for bank wires; (v) responding to Customer inquiries relating to the
services performed by you; (v) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Customers; and (viii) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under
applicable statutes, rules or regulations. You will provide to Customers a
schedule of any fees that you may charge directly to them for such services.
You hereby represent that such fees are not unreasonable or excessive. Shares
purchased by you on behalf of Customers will be registered with our transfer
agent in your name or in the name of your nominee. The Customer will be the
beneficial owner of Shares purchased and held by you in accordance with the
Customer's instructions ("Customers' Shares") and the Customer may exercise
all rights of a shareholder of the Fund.
(b) You agree that you will (i) maintain all
records required by law relating to transactions in Shares and, upon our
request, promptly make such of these records available to us as we may
reasonably request in connection with our operations, and (ii) promptly notify
us if you experience any difficulty in maintaining the records described in
the foregoing clauses in an accurate and complete manner.
- 1 -
<PAGE>
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be a part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services to Customers.
Section 3. Neither you nor any of your officers, employees, agents or
assignees are authorized to make any representations concerning us or Shares
except those contained in our then current prospectus for such Shares, copies
of which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement, you will be deemed to
be an independent contractor and will have no authority to act as agent for us
in any matter or in any respect. You may, upon prior written notice to us,
delegate your responsibilities hereunder to another person or persons;
provided, however, that notwithstanding any such delegation, you will remain
responsible for the performance of all your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree and do
release, indemnify and hold us harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions, actions or
inactions of or by you and your offices, employees, agents or assigns
regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Shares by or on behalf of Customers. You and your
employees will, upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided
by you hereunder, we will cause our distributor to pay you, and you will
accept as full payment therefore, a fee (as we may determine from time to time
in writing) computed as a percentage of the average daily net assets of the
Customers' Shares held of record by you from time to time, which fee will be
computed daily and payable no less often than annually. For purposes of
determining the fees payable under this Section 5, the average daily net
assets of the Customer's Shares will be computed in the manner specified in
our registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes
of purchases and redemptions. The fee rate stated above may be prospectively
increased or decreased by us or by our distributor, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or
withdraw the sale of Shares, including the sale of such shares to you for the
account of any Customer or Customers.
Section 6. You will furnish us or our designees with such information
relating to your performance under this Agreement as we or they may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and shall otherwise
cooperate with us and our designees (including, without limitation, any
auditors designated by us), in connection with the preparation of reports to
our Board of
- 2 -
<PAGE>
Directors concerning this Agreement and the monies paid or payable by us
pursuant hereto, as well as any other reports or filings that may be required
by law.
Section 7. We may enter into other similar services agreements with
any other person or persons without your consent.
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or by our distributor, and
is terminable, without penalty, at any time by us or by you upon ten days'
notice to the other party hereto and shall automatically terminate in the
event of its assignment, as that term is defined in the Investment Company Act
of 1940, as amended.
Section 9. This Agreement will be construed in accordance with the
laws of the State of Maryland.
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed, or transmitted by similar
telecommunications device, if to us at the address below, and if to you, at
the address specified by you after your signature below:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at the address set forth in Section 10 above.
Very truly yours,
ICC DISTRIBUTORS, INC.
By: ___________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name: _____________________
By: _____________________
Address: _____________________
_____________________
Date: _____________________
- 3 -
<PAGE>
EX-99.B(8)
FORM OF
CUSTODIAN AGREEMENT
AGREEMENT dated as of ___________________, 199_ between BANKERS TRUST
COMPANY (the "Custodian") and _______________________________ (the "Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desire to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
noncash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instruction to settle Securities transactions in any country
shall be deemed to authorize the holding of such Securities and Cash in that
country.
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions (as herein defined in Section
14), specifically indicate which
1
<PAGE>
Portfolio such Property belongs or if such Property belongs to more than one
Portfolio shall allocate such Property to the appropriate Portfolio. The
Custodian shall allocate such Property to the Accounts in accordance with the
Instructions; provided that the Custodian shall have the right, in its sole
discretion, to refuse to accept any Property that is not in proper form for
deposit for any reason. The Customer on behalf of each Portfolio, acknowledges
its responsibility as a principal for all of its obligations to the Custodian
arising under or in connection with this Agreement warrants its authority to
deposit in the appropriate Account any Property received therefor by the
Custodian or a Subcustodian and to give, and authorize others to give,
instructions relative thereto. The Custodian may deliver securities of the same
class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property,
as the same become payable and credit the same to the
appropriate Account;
(b) present for payment all Securities held in an Account which
are called, redeemed or otherwise become payable and all
coupons and other income items which call for payment upon
presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and
hold the cash received in such Account pursuant to this
Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Custodian
to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Custodian to take timely
action or if actual notice of such actions was received too
late to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby authorizes the
Custodian to make) such rights entitlement or fractional
interest and credit the Account with the net proceeds of such
sale:
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(e) execute in the Customer's name for an Account whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with the
payment of any such taxes to cooperate with the Custodian in
furnishing information, executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.,
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions: provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any Subcustodian or
Securities System has been proper under the 1940 Act or any rule or regulation
thereunder.
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Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement Subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities as may reasonably be requested by the
Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5 requires
the Customer's Board of Trustees to directly approve its foreign custody
arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the nominal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f- 5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which
is maintained by the Custodian in the custody of a Subcustodian employed
pursuant to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such
Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its
agents.
(c) Property deposited with a Subcustodian will be maintained in
an account holding only assets for customers of the
Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall
require that (i) the Account will be adequately indemnified or
its losses adequately insured; (ii) the Securities are not
subject to any right, charge, security interest, lien or claim
of any kind in favor of such Subcustodian or its creditors
except a claim for payment in accordance with such agreement
for their safe custody or administration and expenses related
thereto, (iii) beneficial ownership of such Securities be
freely transferable without the payment of money or value
other than for safe custody or administration and expenses
related thereto, (iv)
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adequate records will be maintained identifying the Property
held pursuant to such Agreement as belonging to the Custodian,
on behalf of its customers and (v) to the extent permitted by
applicable law, officers of or auditors employed by, or other
representatives of or designated by, the Custodian, including
the independent public accountants of or designated by, the
Customer be given access to the books and records of such
Subcustodian relating to its actions under its agreement
pertaining to any Property held by it thereunder or
confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by
the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required
by its agreement with the Custodian to, identify on its books
such Property as being held for the account of the Custodian
or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or
other property, and whether held by the Custodian or a
Subcustodian or in a Securities System as authorized herein,
shall be clearly recorded on the Custodian's books as
belonging to the appropriate Account and not for the
Custodian's own interest. The Custodian shall keep accurate
and detailed accounts of all investments, receipts,
disbursements and
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other transactions for each Account. All accounts, books and
records of the Custodian relating thereto shall be open to
inspection and audit at all reasonable times during normal
business hours by any person designated by the Customer. All
such accounts shall be maintained and preserved in the form
reasonably requested by the Customer. The Custodian will
supply to the Customer from time to time, as mutually agreed
upon, a statement in respect to any Property in an Account
held by the Custodian or by a Subcustodian. In the absence of
the filing in writing with the Custodian by the Customer of
exceptions or objections to any such statement within sixty
(60) days of the mailing thereof, the Customer shall be deemed
to have approved such statement and in such case or upon
written approval of the Customer of any such statement, such
statement shall be presumed to be for all purposes correct
with respect to all information set forth therein.
(b) The Custodian shall take all reasonable action as the
Customer may request to obtain from year to year favorable
opinions from the Customer's independent certified public
accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Customer's
Form N1-A and the Customer's Form N-SAR or other periodic
reports to the SEC and with respect to any other requirements
of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to
the Customer a written report prepared by the Custodian's
independent certified public accountants with respect to the
services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for
safeguarding Cash and Securities, including Cash and
Securities deposited and/or maintained in a securities system
or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required
by the Customer and as may reasonably be obtained by the
Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the
Custodian which can provide the Customer, on a daily basis,
with the ability to view on-line or to print on hard copy
various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such
service shall include market values of Securities in an
Account, the Customer hereby acknowledges that the Custodian
now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be
reliable and the Customer agrees that the Custodian (i) does
not verify or represent or warrant either the reliability of
such service nor the accuracy or completeness of any such
information furnished or obtained by or through such service
and (ii) shall be without liability in selecting and utilizing
such service or furnishing any information derived therefrom.
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9. Holding of Securities, Nominees, etc. Securities in an Account
which are held by the Custodian or any Subcustodian may be held by such entity
in the name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. The
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called portion of the respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged
or delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the Jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
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purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. The
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Global Guide provided to the Customer by the Custodian, the Custodian may,
at its sole option, reverse such credits or debits to the appropriate Account in
the event that the transaction does not settle, or the income is not received in
a timely manner, and the Customer agrees to hold the Custodian harmless from any
losses which may result therefrom.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the
Custodian shall not be required to comply with any
Instructions to settle the purchase of any securities for the
Account, unless there are sufficient immediately available
funds in the relevant currency in the Account, provided that
if, after all expenses, debits and withdrawals of Cash in
the relevant currency ("Debits") applicable to the Account
have been made and if after all Conditional Credits, as
defined below, applicable to the Account have been made final
entries as set forth in (c) below, the amount of immediately
available funds of the relevant currency in such Account is at
least equal to the aggregate purchase price of all securities
for which the Custodian has received Instructions to settle on
that date ("Settlement Date"), the Custodian, upon settlement,
shall credit the Securities to the Account by making a final
entry on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable
to the Account have been made, there remains outstanding any
Conditional Credit (as defined below) applicable to the
Account or the amount of immediately available funds in a
given currency in such Account are less than the aggregate
purchase price in such currency of all securities for which
the Custodian has received Instructions to settle on the
Settlement Date, the Custodian, upon settlement, may credit
the securities to the Account by making a conditional entry on
its books and records ("Conditional Credit"), pending receipt
of sufficient immediately available funds in the relevant
currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have
been made, immediately available funds in the relevant
currency at least equal to the aggregate purchase price in
such currency of all securities subject to a Conditional
Credit on a Settlement Date are deposited into the Account,
the Custodian shall make the Conditional Credit a final entry
on its books and records. In such case, the Customer shall be
liable to the Custodian only for late
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<PAGE>
charges at a rate which the Custodian customary charges for
similar extensions of credit.
(d) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have
been made, immediately available funds in the relevant
currency at least equal to the aggregate purchase price in
such currency of all securities subject to a Conditional
Credit on a Settlement Date are not deposited into the
Account, the Customer authorizes the Custodian, as agent, to
sell the securities and credit the Account with the proceeds
of such sale. In such case, the Customer shall be liable to
the Custodian for any deficiencies, out-of-pocket costs and
expenses associated with the sale of the securities, including
but not limited to, shortfalls in the sales proceeds and the
Custodian is hereby authorized to sell such other securities
to the extent necessary to satisfy such shortfalls with the
net proceeds of such sales.
(e) The Customer agrees that it will not use the Account to
facilitate the purchase of securities without sufficient funds
in the Account (which funds shall not include the expected
proceeds of the sale of the purchased securities).
14. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance with Section 15 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or
readjustment.
(d) Upon conversion of Securities pursuant to their terms into
other securities.
(e) Upon exercise of subscription, purchase or other similar
rights represented by Securities.
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring
a pledge of Securities, but only against receipt of amounts
borrowed.
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(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of
the Customer against delivery of the shares to be redeemed
to the Custodian, a Subcustodian or the Customer's transfer
agent.
(j) For the purpose of redeeming in kind shares of the Customer
against delivery of the shares to be redeemed to the
Custodian, a Subcustodian or the Customer's transfer agent.
(k) For delivery in accordance with the provisions of any
agreement among the Customer, on behalf of a Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association
of Securities Dealers, Inc., relating to compliance with the
rules of The Options Clearing Corporation, the Commodities
Futures Trading Commission and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to the Custodian of monies for the
premium due and a receipt for the Securities which are to be
held in escrow. Upon exercise of the option, or at expiration,
the Custodian will receive the Securities previously deposited
from broker. The Custodian will act strictly in accordance
with Instructions in the delivery of Securities to be held in
escrow and will have no responsibility or liability for any
such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to
facilitate security trading or receipt of income from
Securities related transactions.
(n) Upon the termination of this Agreement as set forth in
Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 22 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular
class of Instructions in question and whose
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name and (if applicable) signature and office address have been filed with the
Custodian, or (ii) which have been transmitted electronically through an
electronic on-line service and communications system offered by the Custodian or
other electronic instruction system acceptable to the Custodian, or (iii) a
telephonic or oral communication by one or more persons as the Customer shall
have from time to time authorized to give the particular class of Instructions
in question and whose name has been filed with the Custodian; or (iv) upon
receipt of such other form of instructions as the Customer may from time to time
authorize in writing and which the Custodian has agreed in writing to accept.
Instructions in the form of oral communications shall be confirmed by the
Customer by tested telex or writing in the manner set forth in clause (i) above,
but the lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions prior to the Custodian's
receipt of such confirmation. Instructions may relate to specific transactions
or to types or classes of transactions, and may be in the form of standing
instructions.
The Custodian shall have the night to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
16. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be
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counsel for the Customer) on all matters and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have
no liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution, strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage
or expense suffered by the Customer, insofar as such loss, damage or expense
arises from the performance of the Custodian's duties hereunder by reason of
the Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under
this Agreement.
The provisions of this Section shall survive termination of this
Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
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<PAGE>
18. Fees and Expenses. The Customer agrees to pay to the Custodian
such compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit C. The Customer hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expense related thereto, which may be imposed, or assessed with respect to
any Property in an Account and also agrees to hold the Custodian, its
Subcustodians, and their respective nominees harmless from any liability as a
record holder of Property in such Account. The Custodian is authorized to charge
the applicable Account for such items and the Custodian shall have a lien on the
Property in the applicable Account for any amount payable to the Custodian under
this Agreement, including but not limited to amounts payable pursuant to Section
13 and pursuant to indemnities granted by the Customer under this Agreement. The
provisions of this Section shall survive the termination of this Agreement.
19. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
21. Termination.
(a) Termination of Entire Agreement. This Agreement may be
terminated by the Customer or the Custodian by ninety (90)
days' written notice to the other; provided that notice by the
Customer shall specify the names of the persons to whom the
Custodian shall deliver the Securities in each Account and to
whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall,
within ninety (90) days following the giving of such notice,
deliver to the Custodian a written notice specifying the names
of the persons to whom the Custodian shall deliver the
Securities in each Account and to whom the Cash in such
Account shall be paid. In either case, the Custodian will
deliver such Securities and Cash to the persons so specified,
after deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 13, 18, and 24. In
addition, the Custodian may in its discretion withhold from
such delivery such Cash and Securities as may be necessary
13
<PAGE>
to settle transactions pending at the time of such delivery.
The Customer grants to the Custodian a lien and right of
setoff against the Account and all Property held therein from
time to time in the full amount of the foregoing obligations.
If within ninety (90) days following the giving of a notice of
termination by the Custodian, the Custodian does not receive
from the Customer a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities in
each Account and to whom the Cash in such Account shall be
paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or may continue
to hold such Securities and Cash until a written notice as
aforesaid is delivered to the Custodian, provided that the
Custodian's obligations shall be limited to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may
be terminated by the Customer or the Custodian as to one or
more Portfolios (but less than all of the Portfolios) by
delivery of an amended Exhibit A deleting such Portfolios, in
which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery,
or such earlier time as mutually agreed. The execution and
delivery of an amended Exhibit A which deletes one or more
Portfolios shall constitute a termination of this Agreement
only with respect to such deleted Portfolio(s), shall be
governed by the preceding provisions of Section 21 as to the
identification of a successor custodian and the delivery of
Cash and Securities of the Portfolio(s) so deleted to such
successor custodian and shall not affect the obligations of
the Custodian and the Customer hereunder with respect to the
other Portfolios set forth in Exhibit A, as amended from time
to time.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by
registered mail, telex or facsimile addressed to such other address as shall
have been furnished by the receiving party pursuant to the provisions hereof and
(b) shall be deemed effective when received, or, in the case of a telex, when
sent to the proper number and acknowledged by a proper answerback.
23. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
24. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations;
14
<PAGE>
provided that, if there is more than one Account and the obligations secured
pursuant to this Section can be allocated to a specific Account or the Portfolio
related to such Account, such security interest and right of setoff will be
limited to Property held for that Account only and its related Portfolio. Should
the Customer fail to pay promptly any amounts owed hereunder, Custodian shall be
entitled to use available Cash in the Account or applicable Account, as the case
may be, and to dispose of Securities in the Account or such applicable Account
as is necessary. In any such case and without limiting the foregoing, Custodian
shall be entitled to take such other action(s) or exercise such other options,
powers and rights as Custodian now or hereafter has as a secured creditor under
the New York Uniform Commercial Code or any other applicable law.
25. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian
that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any
obligation by which the Customer is bound, whether arising by contract,
operation of law or otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian a duly
executed Secretary's Certificate in the form of Exhibit E hereto or such other
evidence of such authorization as the Custodian may reasonably require, whether
by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer
that:
(i) the terms of this Agreement do not violate any
obligation by which the Custodian is bound, whether
arising by contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding
upon the Custodian in accordance with its terms;
(iii) the Custodian will deliver to the Customer such
evidence of such authorization as the Customer may
reasonably require, whether by way of a certified
resolution or otherwise; and
15
<PAGE>
(iv) Custodian is qualified as a custodian under Section
26(a) of the 1940 Act and warrants that it will remain
so qualified or upon ceasing to be so qualified shall
promptly notify the Customer in writing.
26. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Custodian.
27. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 22 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement.
28. Representative Capacity and Binding Obligation. A copy of the
Articles of Incorporation of the Customer are on file with The Secretary of the
State of Maryland, and notice is hereby given that this Agreement is not
executed on behalf of the Directors of the Customer as individuals, and the
obligations of this Agreement are not binding upon any of the Directors,
officers or shareholders of the Customer individually but are binding only upon
the assets and property of the Portfolios.
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
29. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the
16
<PAGE>
parties hereto, by judicial or administrative process or otherwise by applicable
law or regulation. The provisions of this Section shall survive the termination
of this Agreement.
31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
32. Entire Agreement. This Agreement together with any exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior writings
with respect thereto.
33. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
34. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
IN WITNESS WHEREOF, each of the parties has caused its duly authorized
signatories to execute this Agreement as of the date first written above.
__________________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
BANKERS TRUST COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
17
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of ______________,199__ between
Bankers Trust Company and _______________________________.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above-referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Dated as of:
__________________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
BANKERS TRUST COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of ________________, 199__ between
Bankers Trust Company and ______________________________.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in the countries specified in the Global Guide]. For the United
States and Canada, the term "corporate communications" means the proxy
statements or meeting agenda, proxy cards, annual reports and any other meeting
materials received by the Custodian. For countries other then the United States
and Canada, the term "corporate communications" means the meeting agenda only
and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
<PAGE>
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian wall not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
Global Guide. The Custodian will notify the Customer as
<PAGE>
to the inclusion of additional countries or deletion of existing countries after
their inclusion or deletion and this Exhibit B will be deemed to be
automatically amended to include or delete such countries as the case may be.
Dated as of __________________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
BANKERS TRUST COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of _____________, 199__ between
Bankers Trust Company and _____________________________________.
CUSTODY FEE SCHEDULE
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of _____________, 199__ between
Bankers Trust Company and ________________________________.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When Withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian
shall be entitled to apply categorical treatment of the Customer according to
the Customer's nationality, the particulars of its organization and other
relevant details that shall be supplied by the Customer. It shall be the duty of
the Customer to inform the Custodian of any change in the organization, domicile
or other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian,
<PAGE>
counsel or other professional tax advisers and shall be without liability to the
Customer for any action reasonably taken or omitted pursuant to information
contained in such services or such advice.
Dated as of __________________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
BANKERS TRUST COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
<PAGE>
EXHIBIT E
[Name of Entity]
Certificate of the Secretary
I, [Name of Secretary], hereby certify that I am the Secretary
of _____________________ an open-end investment company organized under the laws
of the State of Maryland (the "Company"), and as such I am duly authorized to,
and do hereby, certify that:
1. Organizational Documents. The Company's organizational documents,
and all amendments thereto, have been filed with the appropriate governmental
officials of Maryland, the Company continues to be in existence and is in good
standing, and no action has been taken to repeal such organizational documents,
the same being in full force and effect on the date hereof.
2. Bylaws. The Company's Bylaws have been duly adopted and no action
has been taken to repeal such Bylaws, the same being in full force and effect.
3. Resolutions. Resolutions have been duly adopted on behalf of the
Company, which resolutions (i) have not in any way been revoked or rescinded,
(ii) have been in full force and effect since their adoption, to and including
the date hereof, and are now in full force and effect, and (iii) are the only
corporate proceedings of the Company now in force relating to or affecting the
matters referred to therein, including, without limitation, confirming that the
Company is duly authorized to enter into a certain custody agreement with
Bankers Trust Company (the "Agreement"), and that certain designated officers,
including those identified in paragraph 4 of this Certificate, are authorized to
execute said Agreement on behalf of the Company, in conformity with the
requirements of the Company's organizational documents, Bylaws, and other
pertinent documents to which the Company may be bound.
4. Incumbency. The following named individuals are duly elected (or
appointed), qualified, and acting officers of the Company holding those offices
set forth opposite their respective names as of the date hereof, each having
full authority, acting individually, to bind the Company as a legal matter, with
respect to all matters pertaining to the Agreement, and to execute and deliver
said Agreement on behalf of the Company, and the signatures set forth opposite
the respective names and titles of said officers are their true, authentic
signatures:
Name Title Signature
[Name] [Position] ______________________________________
[Name] [Position] ______________________________________
[Name] [Position] ______________________________________
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
[Date], 19__.
By:_______________________________________
Name:_____________________________________
Title: Secretary__________________________
I, [Name of Confirming Officer], [Title] of the Company, hereby
certify that on this ___ day of [Date], 19__, [Name of Secretary] is the duly
elected Secretary of the Company and that the signature above is his genuine
signature.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our report dated June 20, 1997 on our
audit of the financial statements and financial highlights of Flag Investors
Equity Partners Fund, Inc. in the Statement of Additional Information with
respect to Post-Effective Amendment No. 5 to the Registration Statement on Form
N-1A (No. 33-86832) under the Securities Act of 1933 of Flag Investors Equity
Partners Fund, Inc. We also consent to the references to our Firm under the
headings "Financial Highlights" and "General Information" in the Prospectus and
"Independent Accountants" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
October 1, 1997
<PAGE>
EX-99.B(15)(a)
Amended
August 4, 1997
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
FLAG INVESTORS CLASS A SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Class A Shares (the
"Shares") of Flag Investors Equity Partners Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement which is an annual fee, calculated
on an average daily net basis and paid monthly, equal to .25% of the average
daily net assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement,
to purchase advertising for the Shares, to pay for promotional or sales
literature and to make payments to sales personnel affiliated with it for
their efforts in connection with sales of Shares. Any such advertising and
sales material may include references to other open-end investment companies
or other investments, provided that expenses relating to such advertising and
sales material will be allocated among such other investment companies or
investments in an equitable manner, and any sales personnel so paid are not
required to devote their time solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the
Distributor is authorized to pay or cause to be paid on its behalf and such
payments shall not be included in the limitations contained in this Plan.
These expenses include: the fees of the Fund's Advisor and the Distributor;
the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of its cash, portfolio securities
and other property, and any 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 maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund 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
<PAGE>
1940 Act) of the Fund and of independent certified public 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.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors,
and the Board shall review, the following: (i) the amounts of all payments
under the Plan, the identity of the recipients of each such payment; (ii) the
basis on which the amount of the payment to such recipient was made; (iii) the
amounts of expenses authorized under this Plan and the purpose of each such
expense; and (iv) all costs of each item specified in Section 4 of this Plan
(making estimates of such costs where necessary or desirable), in each case
during the preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
(a) This Plan has been approved by a vote of the Board of Directors of the
Fund and of a majority of the Directors who are not interested persons (as
defined in the 1940 Act), cast in person at a meeting called for the purpose
of voting on this Plan. This Plan shall, unless terminated as hereinafter
provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by the vote of the
Fund's Board of Directors and by the vote of a majority of the Directors of
the Fund who are not interested persons (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
EX-99.B(15)(b)
Amended
August 4, 1997
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
FLAG INVESTORS CLASS B SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Class B Shares (the
"Shares") of Flag Investors Equity Partners Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the Distribution Agreement and to make payments on behalf of
the Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement with respect to distribution of the
Shares which is an annual fee, calculated on an average daily net basis and paid
monthly, equal to .75% of the average daily net assets of the Shares of the
Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement,
to purchase advertising for the Shares, to pay for promotional or sales
literature and to make payments to sales personnel affiliated with it for
their efforts in connection with sales of Shares. Any such advertising and
sales material may include references to other open-end investment companies
or other investments, provided that expenses relating to such advertising and
sales material will be allocated among such other investment companies or
investments in an equitable manner, and any sales personnel so paid are not
required to devote their time solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the
Distributor is authorized to pay or cause to be paid on its behalf and such
payments shall not be included in the limitations contained in this Plan.
These expenses include: the fees of the Fund's investment advisor and the
Distributor; the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any 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 maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund 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
<PAGE>
interested persons (as defined in the 1940 Act) of the Fund and of independent
certified public 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.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort.
Alex. Brown will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors,
and the Board shall review, the following: (i) the amounts of all payments
under the Plan, the identity of the recipients of each such payment; (ii) the
basis on which the amount of the payment to such recipient was made; (iii) the
amounts of expenses authorized under this Plan and the purpose of each such
expense; and (iv) all costs of each item specified in Section 4 of this Plan
(making estimates of such costs where necessary or desirable), in each case
during the preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
(a) This Plan has been approved by a vote of the Board of Directors of the
Fund and of a majority of the Directors who are not interested persons (as
defined in the 1940 Act), cast in person at a meeting called for the purpose
of voting on this Plan. This Plan shall, unless terminated as hereinafter
provided, continue in effect from year to year only so long as such
continuance is specifically approved at least annually by the vote of the
Fund's Board of Directors and by the vote of a majority of the Directors of
the Fund who are not interested persons (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
EX-99.B(18)
Flag Investors Equity Partners Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A, Flag Investors Class B and Institutional Class
Adopted December 13, 1995
Amended through March 26, 1997
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has
been adopted by the Board of Directors (the "Board") of Flag Investors Equity
Partners Fund, Inc. (the "Fund"), including a majority of the Directors of the
Fund who are not "interested persons" of the Fund (the "Independent
Directors") pursuant to Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"),
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co.
Act Releases Nos. IC-20813, IC-14695 and IC-15592, respectively)
(collectively, the "Order"). At its organizational meeting held on December
13, 1995, the Fund elected to rely on Rule 18f-3 rather than the Order, as
permitted by Rule 18f-3 subject to certain conditions, and created a multiple
class distribution arrangement for three classes of shares of the common stock
of the Fund's one existing series (the "Series"). The multiple class
distribution arrangement will be effective on the date of effectiveness of the
post-effective amendment to the Fund's registration statement that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing (Flag Investors Class A, Flag Investors Class B and
Institutional Class) and future classes of Fund shares. The Flag Investors
Class A Shares and Class B Shares have been offered since the Fund's inception
on February 13, 1995. The Institutional Shares have been offered since
February 12, 1996.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors,
must periodically review the Plan for its continued appropriateness, and must
approve any material amendment of the Plan as it relates to any class of any
Series covered by the Plan. For each additional class of shares approved by
the Fund's Board of Directors after the date hereof, the appropriate officers
of the Fund will attest the resolutions approving such class as an exhibit
hereto. Before any material amendment of the Plan, the Fund is required to
obtain a finding by a majority of the Board, and a
<PAGE>
majority of the Independent Directors, that the Plan as proposed to be
amended, including the expense allocations, is in the best interests of each
class individually and the Fund as a whole.
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being
changed hereby, and the rights, obligations and features of each of the
classes of the Fund shall be as set forth in the Fund's Articles of
Incorporation and Bylaws, as each such document is amended or restated to
date, the resolutions that are adopted with respect to the classes of the Fund
and that are adopted pursuant to the Plan to date, and related materials of
the Board, as set forth in Exhibit A hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting,
dividend, liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions, except
that (i) each class shall have a different class designation (e.g., Class A,
Class B, Class C, etc.); (ii) each class of shares shall separately bear any
distribution expenses in connection with the plan adopted pursuant to Rule
12b-1 under the 1940 Act (a "Rule 12b-1 Plan"), if any, for such class (and
any other costs relating to obtaining shareholder approval of the Rule 12b-1
Plan for such class, or an amendment of such plan) and shall separately bear
any expenses associated with any non-Rule 12b-1 Plan service payments
("service fees") that are made under any servicing agreement, if any, entered
into with respect to that class; (iii) holders of the shares of the class
shall have exclusive voting rights regarding the Rule 12b-1 Plan relating to
such class (e.g., the adoption, amendment or termination of a Rule 12b-1
Plan), regarding the servicing agreements relating to such class and regarding
any matter submitted to shareholders in which the interests of that class
differ from the interests of any other class; (iv) each new class of shares
may bear, to the extent consistent with rulings and other published statements
of position by the Internal Revenue Service, the expenses of the Fund's
operation that are directly attributable to such class ("Class Expenses")1/;
and (v) each class may have conversion features unique to such class,
permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
III. Expense Allocations
1/ Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares,
(ii) stationery, printing, postage, and delivery expenses related to preparing
and distributing materials such as shareholder reports, prospectuses, and
proxy statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to
a class of shares, (vii) account expenses relating solely to a class of
shares, (viii) auditors' fees, litigation expenses, and legal fees and
expenses relating solely to a class of shares, and (ix) expenses incurred in
connection with shareholder meetings as a result of issues relating solely to
a class of shares.
<PAGE>
Expenses of each class created after the date hereof must be
allocated as follows: (i) distribution and shareholder servicing payments
associated with any Rule 12b-1 Plan or servicing agreement, if any, relating
to each respective class of shares (including any costs relating to
implementing such plans or any amendment thereto) will be borne exclusively by
that class; (ii) any incremental transfer agency fees relating to a particular
class will be borne exclusively by that class; and (iii) Class Expenses
relating to a particular class will be borne exclusively by that class.
The methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes of shares of the
Fund and the proper allocation of income and expenses among the various
classes of shares of the Fund are required to comply with the Fund's internal
control structure pursuant to applicable auditing standards, including
Statement on Auditing Standards No. 55, and to be reviewed as part of the
independent accountants' review of such internal control structure. The
independent accountants' report on the Fund's system of internal controls
required by Form N-SAR, Item 77B, is not required to refer expressly to the
procedures for calculating the classes' net asset values.
<PAGE>
Date Approved: December 14, 1994
Approval of Distribution Agreements,
Plans of Distribution and Sub-Distribution Agreement
Class A Shares and Class B Shares
RESOLVED, that the proposed Distribution Agreement, between the Fund
and Alex. Brown & Sons Incorporated ("Alex. Brown") for distribution of the
Fund's Flag Investors Class A Shares (the "Class A Shares") be, and the same
hereby is, approved, in substantially the form presented to this meeting, and
that the appropriate officers of the Fund be, and they hereby are, authorized
and directed to enter into and execute such Distribution Agreement with such
modifications as said officers shall deem necessary or appropriate or as may
be required to conform with the requirements of any applicable statute,
regulation or regulatory body;
FURTHER RESOLVED, that the proposed Plan of Distribution for the
Class A Shares (the "Class A Plan") is determined to be reasonably likely to
benefit the Fund and its shareholders;
FURTHER RESOLVED, that the expenditures contemplated by the Class A
Plan are comparable to other expenditures for similar funds;
FURTHER RESOLVED, that the Class A Plan be, and the same hereby is,
approved;
FURTHER RESOLVED, that the proposed Distribution Agreement between
the Fund and Alex. Brown for distribution of the Fund's Flag Investors Class B
Shares (the "Class B Shares") be, and the same hereby is, approved, in
substantially the form presented to this meeting, and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to enter
into and execute such Distribution Agreement with such modifications as said
officers shall deem necessary or appropriate or as may be required to conform
with the requirements of any applicable statute, regulation or regulatory
body;
FURTHER RESOLVED, that the proposed Plan of Distribution for the
Class B Shares (the "Class B Plan") is determined to be reasonably likely to
benefit the Fund and its shareholders;
FURTHER RESOLVED, that the expenditures contemplated by the Class B
Plan are comparable to other expenditures for similar funds;
FURTHER RESOLVED, that the Class B Plan be, and the same hereby is,
approved;
FURTHER RESOLVED, that the proposed form of Sub-Distribution Agreement
be, and the same hereby is, approved; and
<PAGE>
Approved: December 13, 1995
Resolution of Board Creating Flag Investors
Equity Partners Fund Institutional Shares
RESOLVED, that the total number of shares of common stock , par value
$.001 per share, that Flag Investors Equity Partners Fund, Inc. (The "Fund")
is authorized to issue is hereby increased from thirty million (30,000,000) to
thirty-five million (35,000,000) and that from such amount, five million
(5,000,000) authorized and unissued shares be, and hereby are, designated and
classified as the "Flag Investors Equity Partners Fund Institutional Shares";
FURTHER RESOLVED, that the proper officers of the Fund be, and each
of them hereby is, authorized and directed to file Articles Supplementary to
the Fund's Articles of Incorporation to effectuate the increase in authorized
shares and to designate and classify the new class;
RESOLVED, that the Distribution Agreement between Flag Investors Equity
Partners Fund, Inc. (The "Fund") and Alex. Brown & Sons Incorporated for the
Flag Investors Institutional Shares of the Fund be, and the same hereby is,
approved;
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed to enter into and execute said
Distribution Agreement on behalf of the Fund, and to take all other actions
that such officer deems necessary or appropriate in connection with the
execution of such agreement, the taking of any action to establish
conclusively such officer's authority therefore and the approval and
ratification thereof by the Fund.
Approved: March 26, 1997
Resolutions of Board Approving Amended
18f-3 Plan
RESOLVED, based upon information presented to the Board of Directors of
Flag Investors Equity Partners Fund, Inc. (the "Fund"), that the Directors,
including a majority of the Directors who are not "interested persons" of the
Fund, have determined that the Fund's amended Rule 18f-3 Plan, including the
expense allocations described therein, is in the best interests of the Fund
and each of its classes;
FURTHER RESOLVED, that the amended Rule 18f-3 Plan for the Fund be, and
hereby is approved, in substantially the form presented to this meeting; and
FURTHER RESOLVED, that the proper officers of the Fund, be, and they
hereby are, authorized and directed to take any and all actions necessary or
appropriate to cause the amended Rule 18f-3 Plan to be filed with the Securities
and Exchange Commission.
Approved: August 4, 1997
Resolutions of Board Approving
a New Distribution Agreement and
Amended Distribution Plans
RESOLVED, that the proposed Distribution Agreement between Flag
Investors Equity Partners Fund, Inc. and ICC Distributors, Inc. for the Flag
Investors Class A Shares of such Fund be, and the same hereby is, approved in
substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to enter
into and execute such Distribution Agreement with such modifications as said
officers shall deem necessary or appropriate or as may be required to conform
with the requirements of any applicable statute, regulation, or regulatory body;
FURTHER RESOLVED, that the Plan of Distribution for the Flag Investors
Class A Shares of said Fund be, and hereby is, amended to reflect the change in
distributor effected by the foregoing resolution, such amendment to be effective
upon the consummation of the Merger, or such other time as the proper officers
of the Fund shall determine;
FURTHER RESOLVED that the amended Plan is determined to be reasonably
likely to benefit such class and its shareholders; and that based on information
reasonably available to the Directors, expenditures contemplated by such Plan
are comparable to expenditures for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan, as amended, be,
and the same hereby is, approved;
<PAGE>
FURTHER RESOLVED, that the proposed Distribution Agreement between Flag
Investors Equity Partners Fund, Inc. and ICC Distributors, Inc. for the Flag
Investors Class B Shares of such Fund be, and the same hereby is, approved in
substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are authorized and directed to enter
into and execute such Distribution Agreement with such modifications as said
officers shall deem necessary or appropriate or as may be required to conform
with the requirements of any applicable statute, regulation, or regulatory body;
FURTHER RESOLVED, that the Plan of Distribution for the Investors Class
B Shares of said Fund be, and hereby is, amended to reflect the change in
distributor effected by the foregoing resolutions, such amendment to be
effective upon the consummation of the Merger, or such other time as the proper
officers of the Fund shall determine;
FURTHER RESOLVED, that the amended Plan is determined to be reasonably
likely to benefit such class and its shareholders; and that based on information
reasonably available to the Directors, expenditurSes contemplated by such Plan
are comparable to expenditures for other similar plans;
FURTHER RESOLVED, the continuation of said Plan, as amended, be, and
the same hereby is, approved; and
FURTHER RESOLVED, that the proposed Distribution Agreement between Flag
Investors Equity Partners Fund, Inc. and ICC Distributors, Inc. for the Flag
Investors Institutional Shares of said Fund be, and the same hereby is, approved
in substantially the form presented to this meeting and that the appropriate
officers of the Fund be, and they hereby are, authorized and directed to enter
into and execute such Distribution Agreement with such modifications as said
officers shall deem necessary or appropriate or as may be required to conform
with the requirements of any applicable statute, regulation or regulatory body.
<PAGE>
Exhibits to Registrants 18f-3 Plan
1. Articles of incorporation filed as Exhibit (1)(a) to Post Effective
Amendment No. 1 to Registrants's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and Exchange Commission
via EDGAR on September 22, 1995 is incorporated herein by reference.
2. Articles Supplementary dated June 17, 1997 are filed as Exhibit (1)(c) to
this Registration Statement on Form N-1A (Registration No. 33-86832) and are
incorporated herein by reference.
3. By-Laws, as amended through December 18, 1996 are filed as Exhibit (2) to
this Registration Statement on Form N-1A (Registration No. 33-86832) and are
incorporated herein by reference.
4. Distribution Agreement between Registrant and ICC Distributors, Inc. filed as
Exhibit (6)(a) to this Registration Statement on Form N-1A (Registration No.
33-86832) and is incorporated herein by reference.
5. Form of Sub-Distribution Agreement between ICC Distributors and
Participating Broker-Dealers filed as Exhibit (6)(b) to this Registration
Statement on Form N-1A (Registration No. 33-86832) and is incorporated herein
by reference.
6. Registrant's Amended Distribution Plan with respect to Class A Shares filed
as Exhibit (15)(a) to this Registration Statement on Form N-1A (Registration
No. 33-86832) is incorporated herein by reference.
7. Registrant's Amended Distribution Plan with respect to Class B Shares filed
as Exhibit (15)(b) to this Registration Statement on Form N-1A (Registration
No. 33-86832) is incorporated herein by reference.
8. Prospectus Relating to Flag Investors Equity Partners Fund Class A and
Class B Shares is filed as part of this Registration Statement on Form N-1A
(Registration No. 33-86832) and, as amended from time to time, is incorporated
herein by reference.
9. Prospectus Relating to Flag Investors Equity Partners Fund Institutional
Shares is filed as part of this Registration Statement on Form N-1A
(Registration No. 33-86832) and, as amended from time to time, is incorporated
herein by reference.
<PAGE>
EX-99.B(24)(a)
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 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: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 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: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal as of the date set forth below.
/s/ James J. Cunnane
---------------------
James J. Cunnane
Date: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal as of the date set forth below.
/s/ John F. Kroeger
----------------------
John F. Kroeger
Date: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Scott
J. Liotta, 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 Equity Partners Fund, Inc.
(the "Fund") to comply with the Securities Act of 1933, as amended (the "1933
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-14 pursuant to the 1933 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 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: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 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: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 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/ Rebecca W. Rimel
--------------------
Rebecca W. Rimel
Date: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Joseph A. Finelli, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 Chief Financial and Accounting Officer 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 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: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Carl W. Vogt, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal as of the date set forth below.
/s/ Harry Woolf
----------------
Harry Woolf
Date: September 24, 1997
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Scott J. Liotta, 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
Equity Partners Fund, Inc. (the "Fund") to comply with the Securities Act of
1933, as amended (the "1933 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-14 pursuant to the 1933 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 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/ Joseph A. Finelli
--------------------
Joseph A. Finelli
Date: September 24, 1997
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<TABLE> <S> <C>
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<NAME> EQUITY PARTNER CLASS B
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<NAME> EQUITY PARTNER CLASS B
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 132,651,210
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<PAID-IN-CAPITAL-COMMON> 12,442,655
<SHARES-COMMON-STOCK> 930,703
<SHARES-COMMON-PRIOR> 407,054
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<DISTRIBUTIONS-OF-GAINS> 58,147
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<TABLE> <S> <C>
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<PERIOD-END> MAY-31-1997
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<SHARES-COMMON-PRIOR> 323,377
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