<PAGE>
As Filed With the Securities and Exchange Commission on September 30, 1999
File No. 33-86832
811-8886
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 7 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 10 [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
--------------
Daniel O. Hirsch, Esq.
One South Street
Baltimore, MD 21202
---------------------------------------
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
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It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on October 1, 1999 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on October 1, 1999 pursuant to paragraph (a) of Rule 485.
----
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<PAGE>
[FLAG INVESTORS LOGO]
EQUITY PARTNERS FUND, INC.
(Class A, Class B and Class C Shares)
Prospectus & Application -- October 1, 1999
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") seeks to achieve long-term growth of capital and,
secondarily, current income by investing primarily in a diversified portfolio of
common stocks.
The Fund offers shares through securities dealers and through financial
institutions that act as shareholder servicing agents. You may also buy shares
through the Fund's Transfer Agent. This Prospectus describes Flag Investors
Class A Shares ("Class A Shares"), Flag Investors Class B Shares ("Class B
Shares") and Flag Investors Class C Shares ("Class C Shares") of the Fund. These
separate classes give you a choice as to sales charges and fund expenses. (Refer
to the section on sales charges and the attached Application.)
TABLE OF CONTENTS
Page
Investment Summary.............................................................2
Fees and Expenses of the Fund..................................................4
Investment Program.............................................................5
The Fund's Net Asset Value.....................................................6
How to Buy Shares..............................................................7
How to Redeem Shares...........................................................8
Telephone Transactions.........................................................9
Sales Charges.................................................................10
How to Choose the Class That Is Right for You.................................14
Dividends and Taxes...........................................................15
Investment Advisor and Sub-Advisor............................................15
Financial Highlights..........................................................18
Application..................................................................A-1
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
The Securities and Exchange Commission has neither approved nor
disapproved these securities nor has it passed upon the adequacy of
this Prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
INVESTMENT SUMMARY
Objectives and Strategies
The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.
The Fund's investment advisor and sub-advisor (the "Advisors") use a
"flexible value" approach in choosing securities. With this approach, they try
to find securities that are undervalued in the marketplace based on such
characteristics as earnings, dividends, cash flow or asset values. In evaluating
a security's potential, they also consider other factors such as earnings
growth, industry position and the strength of management. The Advisors' strategy
gives them flexibility in selecting portfolio companies, which include
traditional value stocks as well as high growth rate companies. While the Fund
does not limit its investment to issuers in a particular capitalization range,
the Advisors currently focus on securities of larger companies.
Risk Profile
The Fund is best suited for investors who are willing to accept the
risks and uncertainties of the stock markets in the hope of achieving
above-average long-term capital appreciation.
General Stock Risk. The value of an investment in the Fund will vary
from day to day based on changes in the prices of the securities the Fund holds.
The price of common stocks purchased by the Fund will fluctuate based upon
investor perceptions of the economy, the markets and the companies represented
in the Fund's portfolio.
Style Risk. As with any investment strategy, the "flexible value"
strategy used in managing the Fund's portfolio will, at times, perform better
than or worse than other investment styles and the overall market. If the
Advisors overestimate the value or return potential of one or more common
stocks, the Fund may underperform the general equity market.
You may lose money by investing in the Fund. An investment in the Fund
is not a bank deposit and is not guaranteed by the FDIC or any other government
agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year-by-year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of investing in the
Fund. This is an historical record and does not necessarily indicate how the
Fund will perform in the future.
2
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Class A Shares*
For years ended December 31,
30% 28.62%
25.3%
25% 24.49%
20%
15%
10%
5%
0%
1996 1997 1998
* The bar chart does not reflect sales charges. If it did, returns would be less
than those shown. For the period from December 31, 1998 through June 30, 1999,
the year-to-date return for Class A Shares was 15.50%.
During the 3-year period shown in the bar chart, the highest return for a
quarter was 29.97% (quarter ended 12/31/98) and the lowest return for a quarter
was (0.65)% (quarter ended 6/30/98).
Average Annual Total Return (for periods ended December 31, 1998)
<TABLE>
<CAPTION>
Class A Shares(1) Class B Shares(1) S&P 500(2)
-------------------------- ---------------------- --------------------
<S> <C> <C> <C>
Past One Year ............... 19.67% 20.36% 28.58%
Since Inception.............. 22.58% (2/13/95) 22.87% (2/13/95) 30.36%(3)
</TABLE>
(1) These figures assume the reinvestment of dividends and capital gains
distributions and include the impact of the maximum sales charges.
(2) The Standard & Poor's 500 Index is an unmanaged index that is a widely
recognized benchmark of general equity market performance. The index does
not factor in the costs of buying, selling and holding securities--costs
which are reflected in the Fund's results.
(3) For the period from 1/31/95 through 12/31/98.
No performance information is provided for the Class C Shares because they
had not been offered for a full year at December 31, 1998. However, performance
of the Class C Shares is expected to be similar to that of the Fund's other
classes and will differ only to the extent that Class C Shares do not have the
same expenses.
3
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
Initial Sales Deferred Deferred Sales
Shareholder Fees: Charge Sales Charge Charge
(fees paid directly from your investment) Alternative Alternative Alternative
-------------- ------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)........................................ 4.50%* None None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, whichever is lower).......... 1.00%* 4.00%** 1.00%***
Maximum Sales Charge (Load) Imposed on Reinvested Dividends............. None None None
Redemption Fee.......................................................... None None None
Exchange Fee............................................................ None None None
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees......................................................... 0.77% 0.77% 0.77%
Distribution and/or Service (12b-1) Fees................................ 0.25% 0.75% 0.75%
Other Expenses (including a 0.25% shareholder servicing fee for
Class B and Class C Shares) ......................................... 0.11%**** 0.36%**** 0.36%****
----- ----- -----
Total Annual Fund Operating Expenses.................................... 1.13% 1.88% 1.88%
===== ===== =====
</TABLE>
* You will pay no sales charge on purchases of $1 million or more of Class A
Shares but, unless you are otherwise eligible for a sales charge waiver or
reduction, you may pay a contingent deferred sales charge when you redeem
your shares. (See "Sales Charges -- Redemption Price.")
** Contingent deferred sales charges decline over time and reach zero after
six years. At that time, Class B Shares convert automatically to Class A
Shares. (See "Sales Charges" and "How to Choose the Class That Is Right for
You.")
*** You will be required to pay a contingent deferred sales charge if you
redeem your Class C Shares within one year after purchase. (See "Sales
Charges -- Redemption Price.")
**** A portion of the shareholder servicing fee is allocated to your securities
dealer and qualified banks for services provided and expenses incurred in
maintaining your account, responding to your inquiries and providing you
with information about your investment.
Example:
This Example is intended to help you compare the cost of investing in each class
of the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
4
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<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares................................... $560 $793 $1,044 $1,763
Class B Shares................................... $591 $891 $1,216 $1,826
Class C Shares................................... $291 $591 $1,016 $2,215
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares................................... $560 $793 $1,044 $1,763
Class B Shares................................... $191 $591 $1,016 $1,826
Class C Shares................................... $191 $591 $1,016 $2,215
</TABLE>
Federal regulations require that the table above reflect the maximum
sales charge. However, you may qualify for reduced sales charges or no sales
charge at all. (Refer to the section on sales charges.) If you hold your shares
for a long time, the combination of the initial sales charge you paid and the
recurring 12b-1 fees may exceed the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
INVESTMENT PROGRAM
Investment Objective, Policies and
Risk Considerations
The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.
The Advisors are responsible for managing the Fund's investments.
(Refer to the section on Investment Advisor and Sub-Advisor.) In selecting
equity investments for the Fund, the Advisors use a "flexible value" approach.
With this approach, they try to find common stocks that are undervalued in the
marketplace based on such characteristics as earnings, cash flow, or asset
values. In evaluating a stock's potential, they also consider other factors such
as earnings growth, industry position and the strength of management. The
Advisor's strategy gives them flexibility to purchase traditional value stocks
as well as the stocks of high growth rate companies. While the Fund does not
limit its investments to issuers in a particular capitalization range, the
Advisors currently focus on securities of larger companies.
An investment in the Fund involves risk. Over time, common stocks have
shown greater potential for growth than other types of securities, but in the
short run stocks can be more volatile than other types of securities. Stock
prices are sensitive to developments affecting particular companies and to
general economic conditions that affect particular industry sectors or the
securities markets as a whole. No one can predict how the markets will behave in
the future. As with any investment approach, the Advisors' "flexible value"
strategy will, at times, perform better than or worse than other investment
styles and the overall market. If the Advisors overestimate the value or return
potential of one or more common stocks, the Fund
5
<PAGE>
may underperform the general equity market. There can be no guarantee that the
Fund will achieve its goals.
To reduce the Fund's risk, the Advisors may make temporary defensive
investments in high quality, short-term money market instruments and U.S.
Government obligations. While engaged in a temporary defensive strategy, the
Fund may not achieve its investment objective. The Advisors would follow such a
strategy only if they believed the risk of loss outweighed the opportunity for
gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in
almost every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition, and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its shareholders
may experience losses if these assurances prove to be incorrect or if issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others, with which the Fund does business experience difficulties as a result
of year 2000 issues.
THE FUND'S NET ASSET VALUE
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. When you buy Class A Shares,
the price you pay may be increased by a sales charge. When you redeem any class
of shares, the amount you receive may be reduced by a sales charge. Read the
section on sales charges for details on how and when these charges may or may
not be imposed.
The net asset value per share of the Fund is determined at the close of
regular trading on the New York Stock Exchange (ordinarily 4:00 p.m. Eastern
Time) on each day the Exchange is open for business. It is calculated by
subtracting the liabilities attributable to a class from its proportionate share
of the Fund's assets and dividing the result by the outstanding shares of the
class. Because the different classes have different distribution or service
fees, their net asset values may differ.
In valuing its assets, the Fund's investments are priced at their
market value. When price quotes for a particular security are not readily
available, investments are priced at their "fair value" using procedures
approved by the Fund's Board of Directors.
6
<PAGE>
You may buy or redeem shares on any day the New York Stock Exchange is
open for business (a "Business Day"). If your order is entered before the net
asset value per share is determined for that day, the price you pay or receive
will be based on that day's net asset value per share. If your order is entered
after the net asset value per share is determined for that day, the price you
pay or receive will be based on the next Business Day's net asset value per
share.
The following sections describe how to buy and redeem shares.
HOW TO BUY SHARES
You may buy any class of the Fund's shares through your securities
dealer or through any financial institution that is authorized to act as a
shareholder servicing agent. Contact them for details on how to enter and pay
for your order. You may also buy shares by sending your check (along with a
completed Application Form) directly to the Fund. The Application Form, which
includes instructions, is attached to this Prospectus.
You may invest in Class A Shares unless you are a defined contribution
plan with assets of $75 million or more.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental to
the interests of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment may
be as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your
initial investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan,
your initial investment may be as low as $250. If you participate
in the monthly plan, your subsequent investments may be as low as
$100. If you participate in the quarterly plan, your subsequent
investments may be as low as $250. Refer to the section on the
Fund's Automatic Investing Plan for details.
o There is no minimum investment requirement for qualified retirement
plans such as 401(k), pension or profit sharing plans.
7
<PAGE>
Investing Regularly
You may make regular investments in the Fund through any of the
following methods. If you wish to enroll in any of these programs or if you need
any additional information, complete the appropriate section of the attached
Application Form or contact your securities dealer, your servicing agent or the
Transfer Agent.
Automatic Investing Plan. You may elect to make a regular monthly or
quarterly investment in any class of shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
money is received by the Transfer Agent, it will be invested in the class of
shares selected at that day's offering price. Either you or the Fund may
discontinue your participation upon 30 days' notice.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares at net
asset value. You may elect to receive your distributions in cash or to have your
distributions invested in shares of other Flag Investors funds. To make either
of these elections or to terminate automatic reinvestment, complete the
appropriate section of the attached Application Form or notify the Transfer
Agent, your securities dealer or your servicing agent at least five days before
the date on which the next dividend or distribution will be paid.
Systematic Purchase Plan. You may also purchase any class of shares
through a Systematic Purchase Plan. Contact your securities dealer or servicing
agent for details.
HOW TO REDEEM SHARES
You may redeem any class of the Fund's shares through your securities
dealer or servicing agent. Contact them for details on how to enter your order
and for information as to how you will be paid. If you have an account with the
Fund that is in your name, you may also redeem shares by contacting the Transfer
Agent by mail or (if you are redeeming less than $50,000) by telephone. The
Transfer Agent will mail your redemption check within seven days after it
receives your order in proper form. Refer to the section on telephone
transactions for more information on this method of redemption.
Your securities dealer, your servicing agent or the Transfer Agent may
require the following documents before they redeem your shares:
1) A letter of instructions specifying your account number and the number
of shares or dollar amount you wish to redeem. The letter must be
signed by all owners of the shares exactly as their names appear on the
account.
8
<PAGE>
2) If you are redeeming more than $50,000, a guarantee of your signature.
You can obtain one from most banks or securities dealers.
3) Any stock certificates representing the shares you are redeeming. The
certificates must be either properly endorsed or accompanied by a duly
executed stock power.
4) Any additional documents that may be required if your account is in the
name of a corporation, partnership, trust or fiduciary.
Other Redemption Information
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time, the
dividend will be paid to you in cash whether or not that is the payment option
you have selected.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice. The Fund reserves the right to redeem shares in kind under certain
circumstances.
If you own Fund shares having a value of at least $10,000, you may
arrange to have some of your shares redeemed monthly or quarterly under the
Fund's Systematic Withdrawal Plan. Each redemption under this plan involves all
the tax and sales charge implications normally associated with Fund redemptions.
Contact your securities dealer, your servicing agent or the Transfer Agent for
information on this plan.
TELEPHONE TRANSACTIONS
If your shares are in an account with the Transfer Agent, you may
redeem them in any amount up to $50,000 or exchange them for shares in another
Flag Investors fund by calling the Transfer Agent on any Business Day between
the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are automatically
entitled to telephone transaction privileges but you may specifically request
that no telephone redemptions or exchanges be accepted for your account. You may
make this election when you complete the Application Form or at any time
thereafter by completing and returning documentation supplied by the Transfer
Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that it reasonably believes to be genuine. Your
telephone transaction request will be recorded.
9
<PAGE>
During periods of extreme economic or market changes, you may
experience difficulty in contacting the Transfer Agent by telephone. In such
event, you should make your request by mail. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
SALES CHARGES
Purchase Price
The price you pay to buy shares will be the Fund's offering price which
is calculated by adding any applicable sales charges to the net asset value per
share of the class you are buying. The amount of any sales charge included in
your purchase price will be according to the following schedule:
<TABLE>
<CAPTION>
Class A
Sales Charge
as % of
------------------------------------
Offering Net Amount Class B Class C
Amount of Purchase Price Invested Sales Charge Sales Charge
- -------------------------------------------- --------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Less than $ 50,000 ...................... 4.50% 4.71% None None
$ 50,000 - $ 99,999 ...................... 3.50% 3.63% None None
$ 100,000 - $249,999 ...................... 2.50% 2.56% None None
$ 250,000 - $499,999 ...................... 2.00% 2.04% None None
$ 500,000 - $999,999 ...................... 1.50% 1.52% None None
$1,000,000 and over ........................ None None None None
- -------------------------------------------- --------------- ------------------- ------------------- --------------------
</TABLE>
Although you do not pay an initial sales charge when you invest
$1,000,000 or more in Class A Shares or when you buy any amount of Class B or
Class C Shares, you may pay a sales charge when you redeem your shares. Refer to
the section on redemption price for details.
The sales charge you pay on a purchase of Class A Shares may be reduced
under the circumstances listed below.
Rights of Accumulation. If you are purchasing additional Class A Shares
of this Fund or Class A shares of any other Flag Investors fund or if you
already have investments in Class A shares, you may combine the value of your
purchases with the value of your existing investments to determine whether you
qualify for reduced sales charges. (For this purpose your existing investments
will be valued at the higher of cost or current value.) You may also combine
your purchases and investments with those of your spouse and your children under
the age of 21 for this purpose. You must be able to provide sufficient
information to verify that you qualify for this right of accumulation.
10
<PAGE>
Letter of Intent. If you anticipate making additional purchases of Class
A Shares over the next 13 months, you may combine the value of your current
purchase with the value of your anticipated purchases to determine whether you
qualify for a reduced sales charge. You will be required to sign a letter of
intent specifying the total value of your anticipated purchases and to initially
purchase at least 5% of the total. When you make each purchase during the
period, you will pay the sales charge applicable to their combined value. If, at
the end of the 13-month period, the total value of your purchases is less than
the amount you indicated, you will be required to pay the difference between the
sales charges you paid and the sales charges applicable to the amount you
actually did purchase. Some of the shares you own will be redeemed to pay this
difference.
Purchases at Net Asset Value. You may buy Class A Shares without paying
a sales charge under the following circumstances:
1) If you are reinvesting some or all of the proceeds of a redemption of
Class A Shares made within the prior 90 days.
2) If you are exchanging an investment in another Flag Investors fund for
an investment in this Fund (see "Purchases by Exchange" for a
description of the conditions).
3) If you are a current or retired Fund Director, a director, an employee
or a member of the immediate family of an employee of any of the
following (or their respective affiliates): the Fund's distributor, the
Advisors or a broker-dealer authorized to sell shares of the Fund.
4) If you are buying shares in any of the following types of accounts:
(i) A qualified retirement plan;
(ii) A Flag Investors fund payroll savings plan program;
(iii) A fiduciary or advisory account with a bank, bank trust
department, registered investment advisory company, financial
planner or securities dealer purchasing shares on your behalf. To
qualify for this provision you must be paying an account
management fee for the fiduciary or advisory services. You may be
charged an additional fee by your securities dealer or servicing
agent if you buy shares in this manner.
Purchases by Exchange
You may exchange shares of any other Flag Investors fund with the same
sales charge structure for an equal dollar amount of Class A, B or C Shares, as
applicable, without payment of the sales charges described above or any other
charge. If you exchange Class A shares from
11
<PAGE>
any Flag Investors fund with a lower sales charge structure into Class A Shares,
you will be charged the difference in sales charges unless (with the exception
of Flag Investors Cash Reserve Prime Class A Shares) you have owned the shares
for at least 24 months. You may enter both your redemption and purchase orders
on the same Business Day or, if you have already redeemed the shares of the
other fund, you may enter your purchase order within 90 days of the redemption.
The Fund may modify or terminate these offers of exchange upon 60 days' notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
Redemption Price
The amount of any sales charge deducted from your redemption price will
be determined according to the following schedule.
Sales Charge as a Percentage of the Dollar Amount Subject to Charge
-------------------------------------------------------------------------------
Class A Sales Class B Sales Class C Sales
Charge (as % of Charge (as % of Charge (as % of
Years Since Purchase Cost or Value) Cost or Value) Cost or Value)
- ----------------------- --------------------------------------------------------
First ................. 1.00%* 4.00% 1.00%
Second ................ 0.50%* 4.00% None
Third ................. None 3.00% None
Fourth ................ None 3.00% None
Fifth ................. None 2.00% None
Sixth ................. None 1.00% None
Thereafter ............ None None None
- ----------------------- --------------------------------------------------------
- ---------------
* You will pay a sales charge when you redeem Class A Shares only if your
shares were purchased at net asset value because they were part of an
investment of $1,000,000 or more.
Determination of Sales Charge. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:
1) No sales charge will be applied to shares you own as a result of
reinvesting dividends or distributions.
2) If you have purchased shares at various times, the sales charge will be
applied first to shares you have owned for the longest period of time.
12
<PAGE>
3) If you acquired your shares through an exchange of shares of another
Flag Investors fund, the period of time you held the original shares
will be combined with the period of time you held the shares being
redeemed to determine the years since purchase.
4) The sales charge is applied to the lesser of the cost of the shares or
their value at the time of your redemption.
Waiver of Sales Charge. You may redeem shares without paying a sales
charge under any of the following circumstances:
1) If you are exchanging your shares for shares of another Flag Investors
fund with the same sales charge structure.
2) If your redemption represents the minimum required distribution from an
individual retirement account or other retirement plan.
3) If your redemption represents a distribution from a Systematic
Withdrawal Plan. This waiver applies only if the annual withdrawals
under your Plan are 12% or less of your share balance.
4) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under the
following conditions:
(i) The account is registered in your name either individually, as
a joint tenant with rights of survivorship, as a participant
in community property, or as a minor child under the Uniform
Gifts or Uniform Transfers to Minors Acts.
(ii) Either you or your representative notifies your securities
dealer, servicing agent or the Transfer Agent that such
circumstances exist.
5) If you are redeeming Class A Shares, your original investment was at
least $3,000,000 and your securities dealer has agreed to return to the
Fund's distributor any payments received when you bought your shares.
Automatic Conversion of Class B Shares. Your Class B Shares, along with
any reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares six years after your purchase. This
conversion will be made on the basis of the relative net asset values of the
classes and will not be a taxable event to you.
13
<PAGE>
HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU
Your decision as to which class of the Fund's shares is best for you
should be based upon a number of factors including the amount of money you
intend to invest and the length of time you intend to hold your shares.
If you choose Class A Shares, you will pay a sales charge when you buy
your shares but the amount of the charge declines as the amount of your
investment increases. You will pay lower expenses while you hold the shares and,
except in the case of investments of $1,000,000 or more, no sales charge if you
redeem them.
If you choose Class B Shares, you will pay no sales charge when you buy
your shares but your annual expenses will be higher than Class A Shares. You
will pay a sales charge if you redeem your shares within six years of purchase,
but the amount of the charge declines the longer you hold your shares and, at
the end of six years, your shares convert to Class A Shares thus eliminating the
higher expenses.
If you choose Class C Shares, you will pay no sales charge when you buy
your shares or if you redeem them after holding them for at least a year. On the
other hand, expenses on Class C Shares are the same as those on Class B Shares
and, since there is no conversion to Class A Shares at the end of six years, the
higher expenses continue for as long as you own your shares.
In general, if you intend to invest more than $100,000, your combined
sales charges and expenses are lower with Class A Shares. If you intend to
invest less than $100,000 and expect to hold your shares for more than six
years, your combined sales charges and expenses are lower with Class B Shares.
If you intend to invest less than $100,000 and expect to hold your shares for
less than six years, your combined sales charges and expenses are lower with
Class C Shares.
Your securities dealer is paid a fee when you buy your shares and an
annual fee for as long as you hold your shares. For Class A and Class B Shares,
the annual fee begins when you purchase your shares. For Class C Shares, the
annual fee begins one year after you purchase your shares. The total amount of
these fees may differ depending upon which class of shares you buy.
Distribution Plans
The Fund has adopted plans under Rule 12b-1 that allow the Fund to pay
your securities dealer or shareholder servicing agent distribution and other
fees for the sale of its shares and for shareholder service. Class A Shares pay
an annual distribution fee equal to 0.25% of average daily net assets. Class B
and Class C Shares pay an annual distribution fee of 0.75% of average daily net
assets of the respective class and an annual shareholder servicing fee of 0.25%
of average daily net assets of the respective class. Because these fees are paid
out of net assets on
14
<PAGE>
an on-going basis, they will, over time, increase the cost of your investment
and may cost you more than paying other types of sales charges.
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 and to
distribute taxable net capital gains on an annual basis.
Taxes
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its income and capital
gains. The dividends and distributions you receive are subject to federal, state
and local taxation, depending upon your tax situation. Distributions you receive
from the Fund may be taxable whether or not you reinvest them. Each sale or
exchange of the Fund's shares is a taxable event.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor regarding your specific questions
about federal, state and local income taxes.
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 Deutsche Banc Alex.
Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $10.2 billion of net assets as of August 31, 1999. ABIM is a
registered investment advisor with approximately $10.7 billion under management
as of August 31, 1999. 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. Deutsche Banc Alex. Brown Incorporated owns a 1%
general partnership interest in ABIM and BT Alex. Brown Holdings, Inc. owns the
remaining 49% limited partnership interest.
15
<PAGE>
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.
As compensation for its services for the fiscal year ended May 31,
1999, ICC received from the Fund a fee equal to 0.77% of the Fund's average
daily net assets. ICC compensates ABIM out of its advisory fee.
Prior to June 4, 1999, the Advisor was an indirect subsidiary of
Bankers Trust Corporation. On June 4, 1999, Bankers Trust Corporation merged
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. Because Deutsche Bank AG, as ICC's
new parent company, controls its operations as investment advisor, the Fund's
shareholders will be asked to approve a new investment advisory agreement
between ICC and the Fund. Shareholders also will be asked to approve a new
sub-advisory agreement among the Fund, ICC and ABIM. A Special Meeting of
Shareholders will be held for this purpose. ICC believes that, under this new
arrangement, the services provided to the Fund will be maintained at their
current level.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICC became a subsidiary of Bankers Trust Corporation after these
events took place. Pursuant to its agreement with the U.S. Attorney's Office,
Bankers Trust pleaded guilty to misstating entries in the bank's books and
records and agreed to pay a $63.5 million fine to state and federal authorities.
On July 26, 1999, the Federal criminal proceedings were concluded with Bankers
Trust's formal sentencing. The events leading up to the guilty pleas did not
arise out of the investment advisory or mutual fund management activities of
Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC and ABIM
would not be able to continue as Advisors. The SEC granted Bankers Trust a
temporary order under Section 9(c) of the 1940 Act to permit Bankers Trust and
its affiliates to continue to provide investment advisory services to registered
investment companies, and Bankers Trust, pursuant to Section 9(c) of the 1940
Act, has filed an application for a permanent order. On May 7, 1999, the SEC
extended the temporary order under Section 9(c) of the 1940 Act until the SEC
takes final action on the application for a permanent order or, if earlier,
November 8, 1999. However, there is no assurance that the SEC will grant a
permanent order.
Portfolio Manager
Lee S. Owen has been responsible for managing the Fund's assets since
inception. Mr. Owen, who has 27 years of investment experience, 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
16
<PAGE>
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, 1999
- -------------------------------------------------------------------------------
ABIM
Equity Accounts** S&P 500***
- -------------------------------------------------------------------------------
3 Years* .................................. 34.8% 29.1%
5 Years* .................................. 31.5% 27.9%
10 Years* ................................. 23.0% 18.8%
- -------------------------------------------------------------------------------
* 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, 1999, such accounts
totaled $4.3 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. Since 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 had a larger impact on
the results than would have been the case if the results had been 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 were reduced by 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 Internal Revenue Code, which, if applicable, might have
adversely affected the performance of such accounts.
*** Source: Capital Resource Advisors.
These results are unaudited.
Past results should not be interpreted as
indicative of future performance.
17
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance since it began operations. Certain information
reflects financial results for a single Fund share. The total returns in the
tables represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements are included in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
- -------------------------------------------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------------------
For the
Period
Feb. 13, 1995(1)
For the Years Ended May 31, through
------------------------------------------------- May 31,
1999 1998 1997 1996 1995
---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ....... $ 21.29 $ 16.93 $ 13.09 $ 10.77 $ 10.00
-------- --------- -------- ------- -------
Income from Investment Operations:
Net investment income
(expenses in excess of income)............ (0.01) 0.05 0.08 0.17 0.12
Net realized and unrealized gain on
investments................................ 4.70 4.60 3.96 2.29 0.65
-------- --------- -------- ------- -------
Total from Investment Operations.............. 4.69 4.65 4.04 2.46 0.77
Less Distributions:
Net investment income and net realized
short-term gains ........................... (0.03) (0.10) (0.13) (0.14) --
Net realized long-term gains................... (0.27) (0.19) (0.07) -- --
-------- --------- -------- ------- -------
Total distributions............................ (0.30) (0.29) (0.20) (0.14) --
-------- --------- -------- ------- -------
Net asset value at end of period .............. $ 25.68 $ 21.29 $ 16.93 $ 13.09 $ 10.77
======== ========= ======== ======= =======
Total Return(2).................................... 22.31% 27.76% 31.17% 23.05% 7.70%
Ratios to Average Daily Net Assets:
Expenses....................................... 1.20% 1.24% 1.35%(3) 1.35%(3) 1.35%(3,4)
Net investment income
(expenses in excess of income)............... (0.02)% 0.29% 0.61%(5) 1.52%(5) 3.74%(4,5)
Supplemental Data:
Net assets at end of period (000).............. $283,950 $198,387 $113,030 $64,230 $38,612
Portfolio turnover rate........................ 21.21% 7.94% 17.60% 0.73% --
</TABLE>
- ---------------------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) 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
the years ended May 31, 1997 and 1996 and the period ended May 31, 1995,
respectively.
(4) Annualized.
(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 the years ended May 31, 1997 and 1996 and the period
ended May 31, 1995, respectively.
18
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
--------------------------------------------------------------- ---------------
For the For the
Period Period
Feb. 13, 1995(1) Oct. 28, 1998(1)
For the Years Ended May 31, through through
---------------------------------------------- May 31, May 31,
1999 1998 1997 1996 1995 1999
--------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period... $ 21.10 $ 16.84 $ 13.03 $ 10.75 $ 10.00 $19.09
========= ======== ======== ======== ======== ======
Income from Investment Operations:
Net investment income/(expenses in
excess of income)...................... (0.14) (0.06) (0.04) 0.07 0.07 (0.03)
Net realized and unrealized gain on
investments............................ 4.60 4.54 3.96 2.31 0.68 6.48
--------- -------- -------- -------- -------- ------
Total from Investment Operations......... 4.46 4.48 3.92 2.38 0.75 6.45
Less Distributions:
Net investment income and net realized
short-term gains ...................... -- (0.03) (0.04) (0.10) -- --
Net realized long-term gains............. (0.27) (0.19) (0.07) -- -- (0.27)
--------- -------- -------- -------- -------- ------
Total distributions (0.27) (0.22) (0.11) (0.10) -- (0.27)
--------- -------- -------- -------- -------- ------
Net asset value at end of period $ 25.29 $ 21.10 $ 16.84 $ 13.03 $ 10.75 $25.27
========= ======== ======== ======== ======== ======
Total Return(2)................................. 21.39% 26.81% 30.28% 22.17% 7.50% 34.06%
Ratios to Average Daily Net Assets:
Expenses................................. 1.95% 1.98% 2.10%(3) 2.10%(3) 2.10%(3,4) 1.85%(4)
Net investment income/(expenses in
excess of income....................... (0.77)% (0.47)% (0.16)%(5) 0.71%(5) 1.97%(4,5) (0.73)%(4)
Supplemental Data:
Net assets at end of period (000)........ $ 52,603 $37,046 $15,670 $ 5,302 $2,159 $3,441
Portfolio turnover rate.................. 21.21% 7.94% 17.60% 0.73% -- 21.21%
</TABLE>
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) 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
the years ended May 31, 1997 and 1996 and the period ended May 31, 1995,
respectively.
(4) Annualized.
(5) 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 the years ended May 31, 1997 and 1996 and the period
ended May 31, 1995, respectively.
19
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Make check payable to "Flag Investors Equity Partners For assistance in completing this Application please call: 1-800-553-8080,
Fund, Inc." and mail with this Application to: Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
Flag Investors Funds To open an IRA account, please call 1-800-767-3524 for an IRA information
P.O. Box 219663 kit.
Kansas City, MO 64121-9663
Attn: Flag Investors Equity Partners Fund, Inc.
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.)
MINIMUM INITIAL INVESTMENT: $2,000 ($500 FOR SHAREHOLDERS WITH AN EXISTING FLAG INVESTORS ACCOUNT.)
|_| 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 $_______________________
|_| Class C Shares (1.0% maximum contingent deferred sales charge) in the amount of $_______________________
Your Account Registration (Please Print)
Existing Account No., if any: ____________________
Individual or Joint Tenant Gifts to Minors
___________________________________________________________ __________________________________________________________
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 Minor's Date of Birth
(Mo./Day/Yr.)
under the _____________________Uniform Gifts to Minors Act
(State of Residence)
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
Letter of Intent (Optional)
|_| I intend to invest at least the amount indicated below in Class A Shares of Flag Investors Equity Partners Fund, Inc. I
understand that if I satisfy the conditions described in the attached prospectus, this Letter of Intent entitles me to the
applicable level of reduced sales charges on my purchases.
|_|$50,000 |_|$100,000 |_|$250,000 |_|$500,000 |_|$1,000,000
Right of Accumulation (Optional)
List the Account numbers of other Class A Shares of Flag Investors Funds that you or your immediate family already own that qualify
for reduced sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
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.
<S> <C>
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.
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 or $___________________ in Class C 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.)
Please match a voided check.
Minimum Initial Investment: $250 per class
Subsequent Investments (check one): |_| Monthly ($100 minimum per class) |_| Quarterly ($250 minimum per class)
____________________________________________________ ____________________________________________________________________________
Bank Name Depositor's Signature Date
____________________________________________________ ____________________________________________________________________________
Existing Flag Investors Fund Account No., if any Depositor's Signature (if joint acct., both must sign) Date
Systematic Withdrawal Plan (Optional)
|_| Beginning the month of _______________________, ____ (year) 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 and/or $___________________ from Class C 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:_______________________________________
_______________________________________
Signature and Taxpayer Certification
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any taxable dividends, capital gains distributions and
redemption proceeds paid to any individual or certain other non-corporate shareholders who fail to provide the information and/or
certifications required below. This backup withholding is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that the information on this Application is complete and
correct and that as required by federal law: (Please check applicable boxes)
|_| U.S. Citizen/Taxpayer:
|_| I certify that (1) the number shown above on this form is the correct Social Security Number or Tax ID Number and (2) I am
not subject to any backup withholding 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 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 Tax
ID Number or Social Security 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 acknowledge that I am of legal age in the state of my residence. I have received a copy of the Fund's prospectus.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required
to avoid backup withholding.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
____________________________________________________________ __________________________________________________________________
Signature Date Signature (if joint acct., both must sign) Date
- -----------------------------------------------------------------------------------------------------------------------------------
For Dealer Use Only
Dealer's Name: _____________________________________ Dealer Code:____________________________________________
Branch Address:_____________________________________ Branch Code:____________________________________________
_____________________________________
Representative:_____________________________________ Rep. Phone No.:____________________________________________
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
<S> <C>
Sub-Advisor Distributor
ALEX. BROWN INVESTMENT MANAGEMENT ICC DISTRIBUTORS, INC.
One South Street Two Portland Square
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 21201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
</TABLE>
<PAGE>
[Flag Investors Logo]
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
(800) 767-FLAG
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling (800)
767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing
detailed financial information and, in the case of the annual report, a
discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal
year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-800-SEC-0330 to find out about the operation of the Public Reference
Room.) The Commission's Internet site at http.//www.sec.gov has reports and
other information about the Fund. You may get copies of this information by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-5009. You will be charged for duplicating fees.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800)767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-8886
EPPRS
10/99
<PAGE>
[FLAG INVESTORS LOGO]
EQUITY PARTNERS FUND, INC.
(Institutional Shares)
Prospectus & Application -- October 1, 1999
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") seeks to achieve long-term growth of capital and,
secondarily, current income by investing primarily in a diversified portfolio of
common stocks.
The Fund offers shares through securities dealers and financial institutions
that act as shareholder servicing agents. You may also buy shares through the
Fund's Transfer Agent. This Prospectus describes Flag Investors Institutional
Shares (the "Institutional Shares") of the Fund. Institutional Shares may be
purchased only by eligible institutions, certain qualified retirement plans or
by investment advisory affiliates of Deutsche Bank AG ("Deutsche Bank") on
behalf of their clients.
TABLE OF CONTENTS
Page
----
Investment Summary.............................................................2
Fees and Expenses of Institutional Shares......................................4
Investment Program.............................................................4
The Funds's Net Asset Value....................................................5
How to Buy Institutional Shares................................................6
How to Redeem Institutional Shares.............................................7
Telephone Transactions.........................................................8
Dividends and Taxes............................................................8
Investment Advisor and Sub-Advisor.............................................9
Financial Highlights..........................................................11
Application..................................................................A-1
Flag Investors Funds
P.O. Box 515
Baltimore, MD 21203
The Securities and Exchange Commission has neither approved nor
disapproved these securities nor has it passed upon the adequacy of
this Prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
INVESTMENT SUMMARY
Objectives and Strategies
The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.
The Fund's investment advisor and sub-advisor (the "Advisors") use a
"flexible value" approach in choosing securities. With this approach, they try
to find securities that are undervalued in the marketplace based on such
characteristics as earnings, dividends, cash flow or asset values. In evaluating
a security's potential, they also consider other factors such as earnings
growth, industry position and the strength of management. The Advisors' strategy
gives them flexibility in selecting portfolio companies, which include
traditional value stocks as well as high growth rate companies. While the Fund
does not limit its investment to issuers in a particular capitalization range,
the Advisors currently focus on securities of larger companies.
Risk Profile
The Fund is best suited for investors who are willing to accept the
risks and uncertainties of the stock markets in the hope of achieving
above-average long-term capital appreciation.
General Stock Risk. The value of an investment in the Fund will vary
from day to day based on changes in the prices of the securities the Fund holds.
The price of common stocks purchased by the Fund will fluctuate based upon
investor perceptions of the economy, the markets and the companies represented
in the Fund's portfolio.
Style Risk. As with any investment strategy, the "flexible value"
strategy used in managing the Fund's portfolio will, at times, perform better
than or worse than other investment styles and the overall market. If the
Advisors overestimate the value or return potential of one or more common
stocks, the Fund may underperform the general equity market.
You may lose money by investing in the Fund. An investment in the Fund
is not a bank deposit and is not guaranteed by the FDIC or any other government
agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year-by-year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of investing in the
Fund. This is an historical record and does not necessarily indicate how the
Fund will perform in the future.
2
<PAGE>
Institutional Shares*
for years ended December 31,
1997................23.43%
1998................25.63%
- --------------
* For the period from December 31,1998 through June 30, 1999, the year-to-date
return for the Institutional Shares was 15.64%.
During the 2-year period shown in the bar chart, the highest return for a
quarter was 30.03% (quarter ended 12/31/98) and the lowest return for a quarter
was (0.56)% (quarter ended 6/30/98).
Average Annual Total Return (for periods ended December 31, 1998)
Institutional Shares(1) S&P 500(2)
----------------------- -----------
Past One Year ......................... 25.63% 28.58%
Since Inception ....................... 25.03% (2/12/96) 27.64%(3)
- ---------------
(1) These figures assume the reinvestment of dividends and capital gains
distributions.
(2) The Standard & Poor's 500 Index is an unmanaged index that is a widely
recognized benchmark of general equity market performance. The index does
not factor in the costs of buying, selling and holding securities--costs
which are reflected in the Fund's results.
(3) For the period from 1/31/96 through 12/31/98.
3
<PAGE>
FEES AND EXPENSES OF INSTITUTIONAL SHARES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases.................................................. None
Maximum Deferred Sales Charge (Load).............................................................. None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends....................................... None
Redemption Fee.................................................................................... None
Exchange Fee...................................................................................... None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees................................................................................... 0.77%
Distribution and/or Service (12b-1) Fees.......................................................... None
Other Expenses.................................................................................... 0.11%
-----
Total Annual Fund Operating Expenses.............................................................. 0.88%
=====
</TABLE>
Example:
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Institutional Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Institutional Shares....... $89 $277 $476 $1,030
INVESTMENT PROGRAM
Investment Objective, Policies and Risk Considerations
The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.
The Advisors are responsible for managing the Fund's investments.
(Refer to the section on Investment Advisor and Sub-Advisor.) In selecting
equity investments for the Fund, the Advisors use a "flexible value" approach.
With this approach, they try to find common stocks
4
<PAGE>
that are undervalued in the marketplace based on such characteristics as
earnings, cash flow, or asset values. In evaluating a stock's potential, they
also consider other factors such as earnings growth, industry position and the
strength of management. The Advisor's strategy gives them flexibility to
purchase traditional value stocks as well as the stocks of high growth rate
companies. While the Fund does not limit its investment to issuers in a
particular capitalization range, the Advisors currently focus on securities of
larger companies.
An investment in the Fund involves risk. Over time, common stocks have
shown greater potential for growth than other types of securities, but in the
short run stocks can be more volatile than other types of securities. Stock
prices are sensitive to developments affecting particular companies and to
general economic conditions that affect particular industry sectors or the
securities markets as a whole. No one can predict how the markets will behave in
the future. As with any investment approach, the Advisors' "flexible value"
strategy will, at times, perform better than or worse than other investment
styles and the overall market. If the Advisors overestimate the value or return
potential of one or more common stocks, the Fund may underperform the general
equity market. There can be no guarantee that the Fund will achieve its goals.
To reduce the Fund's risk, the Advisors may make temporary defensive
investments in high quality, short-term money market instruments and U.S.
Government obligations. While engaged in a temporary defensive strategy, the
Fund may not achieve its investment objective. The Advisors would follow such a
strategy only if they believed the risk of loss outweighed the opportunity for
gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in
almost every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition, and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its shareholders
may experience losses if these assurances prove to be incorrect or if issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others, with which the Fund does business experience difficulties as a result
of year 2000 issues.
THE FUND'S NET ASSET VALUE
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. The net asset value per share
of the Fund is determined at the close of regular trading on the New York Stock
Exchange (ordinarily 4:00 p.m. Eastern Time). It is calculated by subtracting
the liabilities attributable to the Institutional Shares from their
5
<PAGE>
proportionate share of the Fund's assets and dividing the result by the
outstanding Institutional shares.
In valuing its assets, the Fund's investments are priced at their
market value. When price quotes for a particular security are not readily
available, investments are priced at their "fair value" using procedures
approved by the Fund's Board of Directors.
You may buy or redeem Institutional Shares on any day the New York
Stock Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that day,
the price you pay or receive will be based on the next Business Day's net asset
value per share.
The following sections describe how to buy and redeem Institutional
Shares.
HOW TO BUY INSTITUTIONAL SHARES
You may buy Institutional Shares if you are any of the following:
o An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or
charitable institution or a qualified retirement plan other than a
defined contribution plan).
o A defined contribution plan with assets of at least $75 million.
o An investment advisory affiliate of Deutsche Bank purchasing shares
for the accounts of your investment advisory clients.
You may buy Institutional Shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy Institutional Shares by sending your check (along with a
completed Application Form) directly to the Fund. The Application Form, which
includes instructions, is attached to this Prospectus.
Your purchase order may not be accepted if the sale of Fund shares has
been suspended or if it is determined that your purchase would be detrimental to
the interests of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $500,000.
6
<PAGE>
The following are exceptions to this minimum:
o There is no minimum initial investment for investment
advisory affiliates of Deutsche Bank purchasing shares for
the accounts of their investment advisory clients.
o There is no minimum initial investment for defined
contribution plans with assets of at least $75 million.
o The minimum initial investment for all other qualified
retirement plans is $1 million.
There are no minimums for subsequent investments.
Purchases by Exchange
You may exchange Institutional shares of any other Flag Investors fund
for an equal dollar amount of Institutional Shares. The Fund may modify or
terminate this offer of exchange upon 60 days' notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
HOW TO REDEEM INSTITUTIONAL SHARES
You may redeem Institutional Shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid. If your shares are in an account with
the Fund, you may also redeem them by contacting the Transfer Agent by mail or
(if you are redeeming less than $500,000) by telephone. You will be paid for
redeemed shares by wire transfer of funds to your securities dealer, servicing
agent or bank upon receipt of a duly authorized redemption request as promptly
as feasible and, under most circumstances, within three Business Days.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time, the
dividend will be remitted by wire to your securities dealer, servicing agent or
bank.
7
<PAGE>
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice. The Fund reserves the right to redeem shares in kind under certain
circumstances.
TELEPHONE TRANSACTIONS
If your shares are in an account with the Transfer Agent, you may
redeem them in any amount up to $500,000 or exchange them for Institutional
shares of another Flag Investors fund by calling the Transfer Agent on any
Business Day between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You
are automatically entitled to telephone transaction privileges but you may
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that it reasonably believes to be genuine. Your
telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may
experience difficulty in contacting the Transfer Agent by telephone. In such
event, you should make your request by mail. If you hold your shares in
certificate form, you may not exchange or redeem them by telephone.
DIVIDENDS AND TAXES
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of semi-annual dividends and to
distribute taxable net capital gains on an annual basis.
Taxes
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its income and capital
gains. The dividends and distributions you receive are subject to federal, state
and local taxation, depending upon your tax situation. Distributions you receive
from the Fund may be taxable whether or not you reinvest them. Each sale or
exchange of the Fund's shares is a taxable event.
8
<PAGE>
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor regarding your specific questions
about federal, state and local income taxes.
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 Deutsche Banc Alex.
Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $10.2 billion of net assets as of August 31, 1999. ABIM is a
registered investment advisor with approximately $10.7 billion under management
as of August 31, 1999. 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. Deutsche Banc Alex. Brown Incorporated owns a 1%
general partnership interest in ABIM and BT Alex. Brown Holdings, Inc. owns the
remaining 49% limited partnership interest.
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.
As compensation for its services for the fiscal year ended May 31,
1999, ICC received from the Fund a fee equal to 0.77% of the Fund's average
daily net assets. ICC compensates ABIM out of its advisory fee.
Prior to June 4, 1999, the Advisor was an indirect subsidiary of
Bankers Trust Corporation. On June 4, 1999, Bankers Trust Corporation merged
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. Because Deutsche Bank AG, as ICC's
new parent company, controls its operations as investment advisor, the Fund's
shareholders will be asked to approve a new investment advisory agreement
between ICC and the Fund. Shareholders also will be asked to approve a new
sub-advisory agreement among the Fund, ICC and ABIM. A Special Meeting of
Shareholders will be held for this purpose. ICC believes that, under this new
arrangement, the services provided to the Fund will be maintained at their
current level.
On March 11, 1999, Bankers Trust Company ("Bankers Trust"), a separate
subsidiary of Bankers Trust Corporation, announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. ICC became a subsidiary of Bankers Trust Corporation
9
<PAGE>
after these events took place. Pursuant to its agreement with the U.S.
Attorney's Office, Bankers Trust pleaded guilty to misstating entries in the
bank's books and records and agreed to pay a $63.5 million fine to state and
federal authorities. On July 26, 1999, the Federal criminal proceedings were
concluded with Bankers Trust's formal sentencing. The events leading up to the
guilty pleas did not arise out of the investment advisory or mutual fund
management activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC and ABIM
would not be able to continue as Advisors. The SEC granted Bankers Trust a
temporary order under Section 9(c) of the 1940 Act to permit Bankers Trust and
its affiliates to continue to provide investment advisory services to registered
investment companies, and Bankers Trust, pursuant to Section 9(c) of the 1940
Act, has filed an application for a permanent order. On May 7, 1999, the SEC
extended the temporary order under Section 9(c) of the 1940 Act until the SEC
takes final action on the application for a permanent order or, if earlier,
November 8, 1999. However, there is no assurance that the SEC will grant a
permanent order.
Portfolio Manager
Lee S. Owen has been responsible for managing the Fund's assets since
inception. Mr. Owen, who has 27 years of investment experience, 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, 1999
---------------------------------------------
ABIM
Equity Accounts** S&P 500***
- --------------------------------------------------------------------------------
3 Years* .................................. 34.8% 29.1%
5 Years* .................................. 31.5% 27.9%
10 Years* ................................. 23.0% 18.8%
- --------------------------------------------------------------------------------
* 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, 1999, such accounts
totaled $4.3 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. Since 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 had a larger impact on
the results than would have been the case if the results had been 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 were reduced by 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 Internal Revenue Code, which, if applicable, might have
adversely affected the performance of such accounts.
*** Source: Capital Resource Advisors.
10
<PAGE>
These results are unaudited.
Past results should not be interpreted as
indicative of future performance.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance since it began operations. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements are included in the Statement of Additional
Information, which is available upon request.
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Institutional Shares
For the Years For the Period
Ended Feb. 12, 1996(1)
May 31, through May 31,
--------------------------- ----------------
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period................... $ 21.32 $ 16.94 $ 13.10 $12.72
Income from Investment Operations:
Net investment income.................................... 0.04 0.10 0.14 0.04
Net realized and unrealized gain on investments.......... 4.70 4.61 3.95 0.34
-------- ---------- ------- ------
Total from Investment Operations......................... 4.74 4.71 4.09 0.38
Less Distributions:
Net investment income and net realized short-term gains.. (0.04) (0.14) (0.18) --
Net realized long-term gains............................. (0.27) (0.19) (0.07) --
-------- ---------- ------- ------
Total distributions...................................... (0.31) (0.33) (0.25) --
-------- ---------- ------- ------
Net asset value at end of period ........................ $ 25.75 $21.32 $ 16.94 $13.10
======== ========== ======= ======
Total Return................................................. 22.53% 28.14% 31.58% 3.23%
Ratios to Average Daily Net Assets:
Expenses................................................. 0.95% 0.98% 1.10%(2) 1.10%(2,3)
Net investment income.................................... 0.23% 0.54% 0.81%(4) 1.20%(3,4)
Supplemental Data:
Net assets at end of period (000)........................ $125,388 $94,354 $42,115 $4,235
Portfolio turnover rate.................................. 21.21% 7.94% 17.60% 0.73%
</TABLE>
- ------------
(1) Commencement of operations.
(2) 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, respectively.
(3) Annualized.
(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 the period ended May 31, 1996, respectively.
11
<PAGE>
<TABLE>
<CAPTION>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Send completed Application by overnight carrier to: For assistance in completing this application please call: 1-800-553-8080,
Flag Investors Funds Monday through Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
330 West 9th Street, First Floor
Kansas City, MO 64105
Attn: Flag Investors Equity Partners Fund, Inc.
If you are paying by check, make check payable to "Flag Investors Equity Partners Fund, Inc." and mail with this Application. If you
are paying by wire, see instructions below.
- ------------------------------------------------------------------------------------------------------------------------------------
Your Account Registration (Please Print)
----------------------------------------
Name on Account Mailing Address
- -------------------------------------------- ----------------------------------------------------------
Name of Corporation, Trust or Partnership Name of Individual to Receive Correspondence
- -------------------------------------------- ----------------------------------------------------------
Tax ID Number Street
[ ] Corporation [ ]Partnership [ ] Trust
[ ] Non-Profit or Charitable Organization [ ] Other__________ ----------------------------------------------------------
If a Trust, please provide the following: City State Zip
( )
----------------------------------------------------------
Daytime Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Trust For the Benefit of
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
- ------------------------------------------------------------------------------------------------------------------------------------
Initial Investment
----------------------------------------
Indicate the amount to be invested and the method of payment:
__A. By Mail: Enclosed is a check in the amount of $______________ payable to Flag Investors Equity Partners Fund, Inc.
__B. By Wire: A bank wire in the amount of $______________ has been sent from ____________________________ _____________________
Wire Instructions Name of Bank Wire Control Number
Follow the instructions below to arrange for a wire transfer for initial investment:
o Send completed Application by overnight carrier to Deutsche Banc 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 Flag Investors Funds
Acct. # 7528353
ABA #1010-0362-1
Kansas City, Missouri 64105
Please include the following information 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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution Options
----------------------------------------
<S> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature and Taxpayer Certification
----------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any taxable dividends, capital gains distributions and
redemption proceeds paid to any individual or certain other non-corporate shareholders who fail to provide the information and/or
certifications required below. This backup withholding is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that 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 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.
- ------------------------------------------------------------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required
to avoid backup withholding.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
Person(s) Authorized to Conduct Transactions
----------------------------------------------
The following person(s) ("Authorized Person(s)") are currently officers, trustees, general partners or other authorized agents of
the investor. Any______ * of the Authorized Person(s) is, by lawful and appropriate action of the investor, a person entitled to
givem 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Certificate of Authority
----------------------------------------------
<S> <C>
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 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 _____________, _____ (Day/Mo./Yr.) 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 the general partners/trustees of the investor and that they have done the following under the
authority of the investor's partnership agreement/trust agreement: (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
</TABLE>
A-2
<PAGE>
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 Two Portland Square
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 21201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
[Flag Investors Logo]
Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203
(800) 767-FLAG
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling (800)
767-FLAG:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-800-SEC-0330 to find out about the operation of the Public Reference
Room.) The Commission's Internet site at http.//www.sec.gov has reports and
other information about the Fund. You may get copies of this information by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-5009. You will be charged for duplicating fees.
For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.
Investment Company Act File No. 811-8886
EPIPRS
(10/99)
<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 SECURITIES 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, 1999
relating to Prospectuses Dated
October 1, 1999
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY................................................1
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS.........................1
VALUATION OF SHARES AND REDEMPTION.............................................6
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS...........................7
MANAGEMENT OF THE FUND.........................................................9
INVESTMENT ADVISORY AND OTHER SERVICES........................................14
DISTRIBUTION OF FUND SHARES...................................................15
BROKERAGE.....................................................................19
CAPITAL STOCK.................................................................21
SEMI-ANNUAL REPORTS...........................................................21
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES.............................21
INDEPENDENT ACCOUNTANTS.......................................................22
LEGAL MATTERS.................................................................22
PERFORMANCE INFORMATION.......................................................22
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................24
FINANCIAL STATEMENTS..........................................................25
APPENDIX A...................................................................A-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Flag Investors Equity Partners Fund, Inc. (the "Fund") is an open-end
diversified 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 four 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"), Flag Investors Equity Partners Fund Class C
Shares ("Class C 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 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 and the Class C Shares
since October 28, 1998.
Under a license agreement dated January 31, 1995 between the Fund and
Alex. Brown & Sons Incorporated (predecessor to Deutsche Banc Alex. Brown
Incorporated), Alex. Brown & Sons Incorporated licenses to the Fund the "Flag
Investors" name and logo but retains the rights to the name and logo, including
the right to permit other investment companies to use them.
INVESTMENT 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 common
stocks. The Fund may make other equity investments (including preferred stocks,
convertible securities, warrants and other securities convertible into or
exchangeable for common stocks). 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. There can be no assurance that the Fund's
investment objective will be achieved.
In addition, 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 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
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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 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.
Equity Securities
Equity securities include common stocks, preferred stocks, warrants,
and other securities that may be converted into or exchanged for common stocks.
Common stocks are equity securities that represent an ownership interest in a
corporation, entitling the shareholder to voting rights and receipt of dividends
based on proportionate ownership. 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. 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.
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 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 S&P or Ba or lower by 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. 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.
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
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<PAGE>
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 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. A repurchase agreement
is a short-term investment in which the Fund acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the Fund's holding period. The value of underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. The Fund makes payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of a custodian or bank acting as agent. The underlying
securities, which in the case of the Fund are securities of the U.S. 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.
3
<PAGE>
Foreign Investment Risk Considerations
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 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 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, 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.
Temporary Investments
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.
Rule 144A 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, but they may be traded between certain
4
<PAGE>
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.
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 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. 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.
3. 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;
4. Invest in real estate or mortgages on real estate;
5. Purchase or sell commodities or commodities contracts, including
financial futures contracts;
6. Act as an underwriter of securities within the meaning of the U.S.
federal securities laws except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities;
7. Issue senior securities;
8. 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;
9. Effect short sales of securities;
10. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
11. Purchase participations or other direct interests in oil, gas or
other mineral leases or exploration or development programs; or
12. 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
5
<PAGE>
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].
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. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund may enter into agreements that allow a third party, as agent
for the Fund, to accept orders from its customers up until the Fund's close of
business which is ordinarily 4:00 p.m. (Eastern Time). So long as a third party
receives an order prior to the Fund's close of business, the order is deemed to
have been received by the Fund and, accordingly, may receive the net asset value
computed at the close of business that day. These "late day" agreements are
intended to permit shareholders placing orders with third parties to place
orders up to the same time as other shareholders.
Redemption
The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC so that valuation of the net assets of the Fund is not
reasonably practicable.
Under normal circumstances, the Fund will redeem shares by check or by
wire transfer of funds, as described in the Prospectuses. However, if the Board
of Directors determines that it would be in the best interests of the remaining
shareholders to make payment of the redemption price in whole or in part by a
distribution in kind of 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.
6
<PAGE>
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional federal income
tax considerations generally affecting the Fund and its shareholders that are
not described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectus is not intended as a substitute for
careful tax planning. Shareholders are urged to consult with their tax advisors
with specific reference to their own tax situation, including their state and
local tax liabilities.
The following general discussion of certain federal income tax
consequences is based on the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
Qualification as a Regulated Investment Company
The Fund intends to qualify and elect to be treated as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code. By
following such a policy, the Fund expects to eliminate or reduce to a nominal
amount the federal taxes to which it may be subject.
In order to qualify as a RIC, the Fund must distribute at least 90% of
its net investment income (that generally includes dividends, taxable interest,
and the excess of net short-term capital gains over net long-term capital losses
less operating expenses) and at least 90% of its net tax exempt interest income,
for each tax year, if any, to its shareholders and also must meet several
additional requirements. Included among these requirements are the following:
(i) at least 90% of the Fund's gross income each taxable year must be derived
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock or securities, or certain other
income; (ii) at the close of each quarter of the Fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. Government securities, securities of other RICs and other securities, with
such other securities limited, in respect to any one issuer, to an amount that
does not exceed 5% of the value of the Fund's assets and that does not represent
more than 10% of the outstanding voting securities of such issuer; and (iii) at
the close of each quarter of the Fund's taxable year, not more than 25% of the
value of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses.
Although the Fund intends to distribute substantially all of its net
investment income and may distribute its capital gains for any taxable year, the
Fund will be subject to federal income taxation to the extent any such income or
gains are not distributed.
If the Fund fails to qualify for any taxable year as a RIC, all of its
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
the Fund's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
7
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Fund Distributions
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year.
The Fund may either retain or distribute to shareholders its excess of
net long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders who are individuals at a maximum rate of 20%, regardless
of the length of time the shareholder has held the shares. If any such gains are
retained, the Fund will pay federal income tax thereon.
In the case of corporate shareholders, Fund distributions (other than
capital gains distributions) generally qualify for the dividends-received
deduction to the extent of the gross amount of qualifying dividends received by
a Fund for the year. Generally, and subject to certain limitations, a dividend
will be treated as a qualifying dividend if it has been received from a domestic
corporation. Accordingly, distributions from the Fund generally will qualify for
the corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the
year of payment. However, dividends declared payable to shareholders of record
in October, November, or December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholder and paid by the Fund in the year in which the dividends were
declared.
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.
Sale or Exchange of Fund Shares
Generally, gain or loss on the sale or exchange of a Share will be
capital gain or loss that will be long-term if the Share has been held for more
than twelve months and otherwise will be short-term. For individuals, long-term
capital gains are currently taxed at a maximum rate of 20% and short-term
capital gains are currently taxed at ordinary income tax rates. However, if a
shareholder realizes a loss on the sale, exchange or redemption of a Share held
for six months or less and has previously received a capital gains distribution
with respect to the Share (or any undistributed net capital gains of a 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 a Fund that have been included in determining
such shareholder's long-term capital gains). In addition, any loss realized on a
sale or other disposition of Shares will be disallowed to the extent an investor
repurchases (or enters into a contract or option to repurchase) Shares within a
period of 61 days (beginning 30 days before and ending 30 days after the
disposition of the Shares). This loss disallowance rule will apply to Shares
received through the reinvestment of dividends during the 61-day period.
In certain cases, the Fund will be required to withhold, and remit to
the United States Treasury, 31% of any distributions paid to a shareholder who
(1) has failed to provide a correct taxpayer identification number, (2) is
subject to backup withholding by the Internal Revenue Service, or (3) has failed
to certify to the Fund that such shareholder is not subject to backup
withholding.
8
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Federal Excise Tax
If the Fund fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term capital gains over short and long term capital losses)
for the one-year period ending October 31 of that year (and any retained amount
from the prior calendar year), the Fund will be subject to a nondeductible 4%
Federal excise tax on the undistributed amounts. The Fund intends to make
sufficient distributions to avoid imposition of this tax, or to retain, at most
its net capital gains and pay tax thereon.
State and Local Taxes
The Fund is not liable for any income or franchise tax in Massachusetts
if it qualifies as a RIC for federal income tax purposes. Depending upon state
and local law, distributions by the Fund to shareholders and the ownership of
shares may be subject to state and local taxes. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Fund.
MANAGEMENT OF THE FUND
Directors and Officers
The 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.
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 (10/27/26)
Vice Chairman, Brown Investment Advisory & Trust Company (formerly,
Alex. Brown Capital Advisory & Trust Company); Director, Investment
Company Capital Corp. (registered investment advisor); and Director and
Chairman, Virginia Hot Springs, Inc. (property management). Formerly,
Managing Director, BT Alex. Brown Incorporated; and Vice Chairman, Alex.
Brown & Sons Incorporated (now BT Alex. Brown Incorporated).
*RICHARD T. HALE, Director (7/17/45)
Managing Director, Deutsche Asset Management Americas; Managing
Director, BT Alex. Brown Incorporated; Director and President,
Investment Company Capital Corp. (registered investment advisor); and
Chartered Financial Analyst.
JAMES J. CUNNANE, Director (3/11/38)
60 Seagate Drive, Unit P106, Naples, Florida 34103. 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).
JOSEPH R. HARDIMAN, Director (5/27/37)
8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor
and Capital Markets Consultant; and Director, Wit Capital Group
(registered broker dealer) and The Nevis Fund (registered investment
company). Formerly, Director, Circon Corp. (medical instruments),
November 1998-January 1999; President and Chief Executive Officer, The
National Association of
9
<PAGE>
Securities Dealers, Inc. and The NASDAQ Stock Market, Inc., 1987-1997;
Chief Operating Officer of Alex. Brown & Sons Incorporated, 1985-1987;
and General Partner, Alex. Brown & Sons Incorporated (now BT Alex. Brown
Incorporated), 1976-1985..
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). Formerly, Chairman of the Quality
Control Inquiry Committee, American Institute of Certified Public
Accountants, 1992-1998; Trustee, Merrill Lynch Funds for Institutions,
1991-1993; Adjunct Professor, Columbia University-Graduate School of
Business, 1991-1992; and Partner, KPMG Peat Marwick, retired 1990.
EUGENE J. McDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705. President, Duke Management
Company (investments); Executive Vice President, Duke University
(education, research and health care); Executive Vice Chairman and
Director, Central Carolina Bank & Trust (banking); and Director,
Victory Funds (registered investment companies). Formerly, Director,
AMBAC Treasurers Trust (registered investment company) 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 (charitable funds); and
Director and Executive Vice President, The Glenmede Trust Company
(investment trust and health management). Formerly, Executive Director,
The Pew Charitable Trusts.
CARL W. VOGT, ESQ., Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington,
D.C. 20004-2604; Senior Partner, Fulbright & Jaworski L.L.P. (law);
Director, Yellow Corporation (trucking) and American Science &
Engineering (x-ray detection equipment); Formerly, Chairman and member,
National Transportation Safety Board; Director, National Railroad
Passenger Corporation (Amtrak) and Member, Aviation System Capacity
Advisory Committee (Federal Aviation Administration).
HARRY WOOLF, President (8/12/23)
Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; and Director,
Family Health International (non-profit research and education) and
Research America (non-profit medical research). Formerly, Director, ATL
and Spacelabs Medical Corp. (medical equipment); Trustee, Reed College
(education) and Rockefeller Foundation; and Director, Merrill Lynch
Cluster C Funds and Flag Investors/ISI/ and Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. Fund Complex (registered investment companies).
AMY M. OLMERT, Secretary (5/14/63)
Vice President, Deutsche Asset Management Americas since 1999; and Vice
President, BT Alex. Brown Incorporated, 1997-1999. Formerly, Senior
Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP),
1988-1997.
10
<PAGE>
CHARLES A. RIZZO, Treasurer (8/5/57)
Vice President and Department Head, Deutsche Asset Management Americas
since 1999; and Vice President and Department Head, BT Alex. Brown
Incorporated, 1998-1999. Formerly, Senior Manager,
PricewaterhouseCoopers LLP 1993-1998.
DANIEL O. HIRSCH, Assistant Secretary (3/27/54)
Director, Deutsche Asset Management Americas since 1999; and Principal,
BT Alex. Brown Incorporated, 1998-1999. Formerly, Assistant General
Counsel, United States Securities and Exchange Commission, 1993-1998.
- --------------------
* Messrs. Semans and Hale are directors who are "interested persons" as defined
in the Investment Company Act.
Directors and officers of the Fund are also directors and officers of
some or all of the other investment companies managed, advised, or administered
by Deutsche Banc Alex. Brown Incorporated ("Deutsche Banc Alex. Brown") or its
affiliates. There are currently 8 funds in the Flag Investors Funds and Deutsche
Banc Alex. Brown Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr.
Semans serves as Chairman of five funds and as a Director of three other funds
in the Fund Complex. Mr. Hale serves as Chairman of three funds and as Director
of four other funds in the Fund Complex. Messrs. Cunnane, Hardiman, Levy,
McDonald and Vogt serve as Directors of each fund in the Fund Complex. Ms. Rimel
serves as a Director of 7 funds in the Fund Complex. Mr. Woolf serves as
President of seven funds in the Fund Complex. Mr. Rizzo serves as Treasurer, Ms.
Olmert serves as Secretary and Mr. Hirsch 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, Deutsche Banc 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 Deutsche Asset Management
Americas or its affiliates may be considered to have received remuneration
indirectly. 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") and Mr. Woolf, the Fund's President, receives an
aggregate annual fee (plus reimbursement for reasonable out-of-pocket expenses
incurred in connection with his or her attendance at board and committee
meetings) from each fund in the Fund Complex for which he or she serves. In
addition, the Chairmen of the Fund Complex's Audit Committee and Executive
Committee receive an aggregate annual fee from the Fund Complex. Payment of such
fees and expenses is allocated among all such funds in direct proportion to
their relative net assets. For the fiscal year ended May 31, 1999, Independent
Directors' fees (including fees paid to the Fund's President) attributable to
the assets of the Fund totaled approximately $14,458.
The following table shows aggregate compensation payable to each of the
Fund's Directors by the Fund and the Fund Complex, respectively, and pension or
retirement benefits accrued as part of Fund expenses in the fiscal year ended
May 31, 1999.
11
<PAGE>
<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, 1999 Payable to Directors
in the Fiscal Year
Ended May 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truman T. Semans, Chairman(1) $ 0 $ 0 $ 0
Richard T. Hale, Director(1) $ 0 $ 0 $ 0
James J. Cunnane, Director $1,589(2) (3) $39,000 for service on 13(4) Boards
in the Fund Complex
Joseph R. Hardiman, Director(5) $1,239 (3) $ 29,250 for service on 11(6) Boards
in the Fund Complex
John F. Kroeger, Director(7) $1,492 (3) $ 36,750 for service on 13(4) Boards
in the Fund Complex
Louis E. Levy, Director $1,892 (3) $ 46,500 for service on 13(4) Boards
in the Fund Complex
Eugene J. McDonald, Director $1,790(2) (3) $ 44,000 for service on 13(4) Boards
in the Fund Complex
Rebecca W. Rimel, Director $1,614(2) (3) $ 39,000 for service on 12(4,6) Boards
in the Fund Complex
Carl W. Vogt, Esq., Director $1,624(2) (3) $ 39,000 for service on 13(4,6) Boards
</TABLE>
- -----------------
(1) Denotes an individual who is an "interested person" as defined in the 1940
Act.
(2) All of the amounts payable to Ms. Rimel and Messrs. Cunnane, McDonald and
Vogt were deferred pursuant to the Fund Complex's Deferred Compensation
Plan.
(3) The Fund Complex has adopted a Retirement Plan for eligible Directors and
the Fund's President, as described below. The actuarially computed pension
expense for the Fund for the fiscal year ended May 31, 1999 was $1,675.
(4) One of these Funds ceased operations on July 28, 1998.
(5) Appointed to the Board on September 27, 1998.
(6) Ms. Rimel receives and Messrs. Vogt and Hardiman received (prior to their
appointment or election as Director to all of the funds in the Fund Complex)
proportionately higher compensation from each fund for which they serve as a
Director.
(7) Retired, effective September 27, 1998. Deceased, November 26, 1998.
The Fund Complex has adopted a retirement plan (the "Retirement Plan")
for the Fund's President and 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 fees earned in his or
her last year of service. Upon retirement, each Participant will receive
annually 10% of such fee for each year that he or she served after completion of
the first five years, up to a maximum annual benefit of 50% of the fee earned in
his or her last year of service. The fee will be paid quarterly, for life, by
each fund for which the he or she serves. The Retirement Plan is unfunded and
unvested. The Fund has two Participants, a Director who retired effective
December 31, 1994 and Harry Woolf, the Fund's President, who retired as a
Director 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. Such fees are allocated to each fund in the Fund Complex based
upon the relative net assets of such fund to the Fund Complex.
12
<PAGE>
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 at
December 31, 1998 are as follows: for Mr. Cunnane, 4 years; for Mr. Levy, 4
years; for Mr. McDonald, 6 years; for Ms. Rimel, 3 years; for Mr. Vogt, 3 years;
and for Mr. Hardiman, 0 years.
Estimated Annual Benefits Payable By Fund Complex Upon Retirement
Years of Service Chairmen of Audit and Other Participants
Executive Committee
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
Any Director who receives fees from the Fund is permitted to defer 50%
to 100% of his or her annual compensation pursuant to a Deferred Compensation
Plan. Messrs. Cunnane, Levy, McDonald, and Vogt and Ms. Rimel have each executed
a Deferred Compensation Agreement. Currently, the deferring Directors may select
from among various Flag Investors Funds, Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc. and BT International Equity Fund in which all or part of their
deferral account shall be deemed to be invested. Distributions from the
deferring Directors' deferral accounts will be paid in cash, in generally equal
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 any officer, director, or employee of
the Fund or the Advisors 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 foregoing would apply to any
officer, director or employee of the Distributor that is an access person. The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and special preclearance of the
acquisition of securities in private placements. Furthermore, the Code of Ethics
provides for trading "blackout periods" that prohibit trading by investment
personnel and certain other employees within periods of trading by the Fund in
the same security. Trading by investment personnel and certain other employees
of the Advisor or Sub-Advisor, as appropriate, would be exempt from this
"blackout period" provided that (1) the market capitalization of a particular
security exceeds $2 billion; and (2) orders of such entity (including trades of
both clients and covered persons) do not
13
<PAGE>
exceed ten percent of the daily average trading volume of the security for the
prior 15 days. 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.
INVESTMENT ADVISORY AND OTHER SERVICES
On March 30, 1999, the Board of Directors of the Fund, including a
majority of the Independent Directors, approved a new investment advisory
agreement between the Fund and Investment Company Capital Corp ("ICC" or the
"Advisor") and a new sub-advisory agreement among the Fund, ICC and Alex. Brown
Investment Management ("ABIM" or the "Sub-Advisor") in anticipation of the
merger (the "Merger") between Deutsche Bank AG ("Deutsche Bank") and Bankers
Trust Corporation ("Bankers Trust"). The Merger arguably assigned and,
therefore, terminated the Fund's prior investment advisory and sub-advisory
agreements on June 4, 1999. Under an exemptive order issued by the SEC, ICC and
ABIM have been serving as the Fund's investment advisor and sub-advisor,
respectfully, pursuant to the new advisory and sub-advisory agreements since
June 4, 1999. If shareholders approve of the new advisory and sub-advisory
agreements at the Special Meeting of Shareholders to be held on October 7, 1999,
they will continue in effect for an initial two year term. On June 4, 1999,
Bankers Trust merged with and into a subsidiary of Deutsche Bank. Deutsche Bank
is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual funds, retail and
commercial banking, investment banking and insurance. Deutsche Asset Management
Americas is an operating unit of Deutsche Bank consisting of ICC and other asset
management affiliates of Deutsche Bank. 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. Deutsche Banc 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 advisor and ABIM
serves as sub-advisor to other funds in the Flag Investors family of funds.
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, 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 in
excess of $200 million. As compensation for its services, ABIM is entitled to
receive a fee from ICC, payable from its advisory fee, based on the Fund's
average daily net assets. This fee is calculated daily and payable monthly, at
the annual rate of 0.75% of the first $50 million, 0.60% of the next $150
million and 0.50% of the amount in excess of $200 million.
14
<PAGE>
The Investment Advisory Agreement and the Sub-Advisory Agreement will
continue for an initial term of two years, and thereafter, from year to year if
such continuance is specifically approved at least annually by the Fund's Board
of Directors, including a majority of the Independent Directors who have no
direct or indirect financial interest in such agreements, by votes cast in
person at a meeting called for such purpose, 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 sixty days' written notice
without penalty. The Investment Advisory Agreement will terminate automatically
in the event of assignment (as defined in the Investment Company Act). The
Sub-Advisory Agreement has similar termination provisions.
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:
- --------------------------------------------------------------------------------
Year Ended
- --------------------------------------------------------------------------------
Fees Paid To: May 31, 1999 May 31, 1998 May 31, 1997
- --------------------------------------------------------------------------------
ICC $2,864,847 $2,090,159 $853,103(1)
- --------------------------------------------------------------------------------
ABIM $2,089,053 $1,535,410 $680,636(2)
- --------------------------------------------------------------------------------
- -------------
(1) Net of fee waivers of $141,648.
(2) Net of fee waivers of $49,796.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. An affiliate of ICC serves as the
Fund's custodian. (See "Custodian, Transfer Agent and Accounting Services.")
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") effective August 31, 1997 which provides
for distribution of each class of shares..
The Distribution Agreement provides that ICC Distributors shall; (i)
use reasonable efforts to sell Shares upon the terms and conditions contained in
the Distribution Agreement and the Fund's then current Prospectus; (ii) use its
best efforts to conform with the requirements of all federal and state laws
relating to the sale of the Shares; (iii) adopt and follow procedures as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. and any other applicable self-regulatory organization;
(iv) perform its duties under the supervision of and in accordance with the
directives of the Fund's Board of Directors and the Fund's Articles of
Incorporation and By-Laws; and (v) provide the Fund's Board of Directors with a
written report of the amounts expended in connection with the Distribution
Agreement. ICC Distributors shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of ICC Distributors are not exclusive and ICC Distributors
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment, or for any action
or inaction of ICC Distributors in the absence of bad faith, willful
misfeasance, or gross negligence in the performance of its duties or obligations
under the Distribution Agreement or by reason of the reckless disregard of its
duties and obligations under the Distribution Agreement. The Distribution
Agreement further provides that the Fund and ICC Distributors will mutually
indemnify each other for losses relating to disclosures in the Fund's
registration statement.
15
<PAGE>
The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock") or
upon 60 days' written notice by the Distributor and shall automatically
terminate in the event of an assignment. The Distribution Agreement has an
initial term of one year from the date of effectiveness. It shall continue in
effect thereafter with respect to each class of the Fund provided that it is
approved at least annually by (i) a vote of a majority of the outstanding voting
securities of the related class of the Fund or (ii) a vote of a majority of the
Fund's Board of Directors including a majority of the Independent Directors and,
with respect to each class of the Fund for which there is a plan of
distribution, so long as such plan of distribution is approved at least annually
by the Independent Directors in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement, including the form of
Sub-Distribution Agreement, was initially approved by the Board of Directors,
including a majority of the Independent Directors, on August 4, 1997 and most
recently on September 28, 1999.
ICC Distributors and certain broker-dealers ("Participating Dealers")
have entered into Sub-Distribution Agreements under which such Participating
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
upon 10 days' notice by either party and shall automatically terminate in the
event of an assignment.
In addition, with respect to the Class A, Class B and Class C Shares,
the Fund may enter into Shareholder Servicing Agreements with certain financial
institutions, such as Deutsche Banc Alex. Brown and certain banks, to act as
Shareholder Servicing Agents, pursuant to which ICC Distributors will allocate a
portion of its distribution fee as compensation for such financial institutions'
ongoing shareholder services. The Fund may also enter into Shareholder Servicing
Agreements pursuant to which the Advisor or its affiliates will provide
compensation out of its own resources for 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, 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.
As compensation for providing distribution services as described above
for the Class A Shares, ICC Distributors receives an annual fee, paid monthly,
equal to 0.25% of the average daily net assets of the Class A Shares. With
respect to the Class A Shares, ICC Distributors expects to allocate up to all of
its fee to Participating Dealers and Shareholder Servicing Agents. As
compensation for providing distribution services as described above for the
Class B Shares, ICC Distributors receives an annual fee, paid monthly, equal to
0.75% of the average daily net assets of the Class B Shares. As compensation for
providing distribution services as described above for Class C Shares, ICC
Distributors receives an annual fee, paid monthly, equal to 0.75% of the average
daily net assets of the Class C Shares. In addition, with respect to the Class B
and Class C Shares, ICC Distributors receives a shareholder servicing fee at an
annual rate of 0.25% of the respective average daily net assets of the Class B
and the Class C Shares. ICC receives no compensation for distributing the
Institutional Shares.
16
<PAGE>
As compensation for providing distribution and shareholder services to the Fund
for the last three fiscal years, the Fund's distributor received aggregate fees
in the following amounts:
- --------------------------------------------------------------------------------
Fiscal Year Ended May 31,
-------------------------------------------------
Fee 1999 1998 1997
- --------------------------------------------------------------------------------
12b-1 Fee $871,064 $447,239(1) $206,936(3)
- --------------------------------------------------------------------------------
Shareholder Servicing Fee $101,631 $51,052(2) $65,473(3)
(Class B Shares)
- --------------------------------------------------------------------------------
Shareholder Servicing Fee $1,324 N/A N/A
(Class C Shares)
- --------------------------------------------------------------------------------
- ----------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $110,677 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $336,562.
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $11,761 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $39,291.
(3) Fees received by Alex. Brown, the Fund's distributor for the fiscal year
ended May 31, 1997.
Pursuant to Rule 12b-1 under the Investment Company Act, 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 plans of distribution for each of its
classes of Shares (except the Institutional Shares). Under each plan, the Fund
pays a fee to ICC Distributors for distribution and other shareholder servicing
assistance as set forth in the Distribution Agreement, and ICC Distributors is
authorized to make payments out of its fee to Participating Dealers and
Shareholder Servicing Agents. The 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 Independent
Directors, by votes cast in person at a meeting called for such purpose. The
Plans were most recently approved by the Fund's Board of Directors, including a
majority of the Independent Directors, on September 28, 1999.
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
Independent Directors or by a vote of a majority of the Fund's outstanding
Shares of the related class (as defined under "Capital Stock").
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 Plans to ICC Distributors pursuant to the
Distribution Agreement and to Participating Dealers pursuant to any
Sub-Distribution 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 Independent Directors shall be
committed to the discretion of the Independent Directors then in office.
17
<PAGE>
Under the Plans, amounts allocated to Participating Dealers and
Shareholder Servicing Agents may not exceed amounts payable to ICC Distributors
under the Plans. 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 Class A Shares is less than 0.25% of the Class A
Shares' average daily net assets for any period or if the cost of providing
distribution services to the Class B Shares and the Class C Shares is less than
0.75% of the classes' respective average daily net assets 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 any 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
that class. In return for payments received pursuant to the Plans, ICC
Distributors pays 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.
General Information
The Fund's distributor received commissions on the sale of Class A
Shares and contingent deferred sales charges on Class B and Class C Shares and
retained from such commissions and sales charges the following amounts.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended May 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Class Received Retained Received Retained Received Retained
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Commissions $431,662 $0 $571,016(1) $536,314(3) $404,583(5) $383,114(5)
- ------------------------------------------------------------------------------------------------------------------------
Class B Contingent
Deferred Sales
Charge $420,883 $0 $648,704(2) $632,376(4) $318,224(5) $313,208(5)
- ------------------------------------------------------------------------------------------------------------------------
Class C Contingent $29,085 $0 N/A N/A N/A N/A
Deferred Sales
Charge
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $111,345 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $459,671.
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $188,711 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $459,993.
(3) Of commissions received, Alex. Brown retained $106,124 and ICC Distributors
retained $431,090, respectively.
(4) Of sales charges retained, Alex. Brown retained $183,389 and ICC
Distributors retained $448,987, respectively.
(5) By Alex. Brown, the Fund's distributor for the fiscal year ended May 31,
1997.
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
18
<PAGE>
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing Shares; all costs
and expenses in connection with the registration and maintenance of registration
of the Fund and its Shares with the SEC and various states and other
jurisdictions (including filing fees, legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Directors' meetings and of preparing, printing and
mailing proxy statements and reports to shareholders; fees and travel expenses
of Directors and Director members of any advisory board or committee; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in Shares or in cash; charges and expenses of any outside
service used for pricing of the Shares; fees and expenses of legal counsel,
including counsel to the Independent Directors, and of independent auditors, in
connection with any matter relating to the Fund; 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 assumed by ICC Distributors, ICC or ABIM.
The address of ICC Distributors is Two Portland Square, Portland, Maine
04101.
BROKERAGE
ABIM is responsible for decisions to buy and sell securities for the
Fund, for 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, its affiliates, and ICC Distributors.
In over-the-counter transactions, orders are placed directly with a
principal market maker and such purchases normally include a mark up over the
bid to the broker-dealer based on the spread between the bid and asked price for
the security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. The Fund will not deal with
affiliates of the Advisors in any transaction in which they act as a principal.
If affiliates of the Advisors are participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with rules of the SEC. The Fund believes that the limitation will
not affect its ability to carry out its present investment objective.
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 transactions with
broker-dealers that furnish statistical, research or other information or
services which 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
19
<PAGE>
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
for particular transactions than might be 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 affiliates of the Advisors higher commissions than another broker
might have charged on brokerage transactions for the Fund for brokerage or
research services. The allocation of orders among broker-dealers and the
commission rates paid by the Fund will be reviewed periodically by the Board.
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 through affiliates of the
Advisors. 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 affiliates of the Advisors
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.
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 which it seeks to purchase or sell.
ABIM directed transactions to broker-dealers and paid related
commissions because of research services in the following amounts:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Fiscal Year Ended May 31,
- ----------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transactions Directed $168,139,103 $127,658,887 $84,859,723
- ----------------------------------------------------------------------------------------------------------------
Commissions Paid $305,094 $249,526 $ 168,045
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The increasing amounts of commissions reflects the growth of the Fund.
20
<PAGE>
The Fund is required to identify any securities of its "regular brokers
or dealers" (as such term is defined in the Investment Company Act) which the
Fund has acquired during its most recent fiscal year. As of May 31, 1999, the
Fund held a 4.50% repurchase agreement issued by Goldman Sachs & Co. valued at
$50,191,000. Goldman Sachs & Co. is a "regular broker or dealer" of the Fund.
CAPITAL STOCK
The Fund is authorized to issue 90 million Shares of common stock, par
value $.001 per share. The Board of Directors may increase or decrease the
number of authorized Shares without shareholder approval.
The Fund's Articles of Incorporation provide for the establishment of
separate series and separate classes of Shares by the Directors at any time
without shareholder approval. The Fund currently has one Series and the Board
has designated four classes of Shares: Flag Investors Equity Partners Fund Class
A Shares, Flag Investors Equity Partners Fund Class B Shares, Flag Investors
Equity Partners Fund Class C Shares and Flag Investors Equity Partners Fund
Institutional Shares. The Flag Investors Equity Partners Fund Institutional
Shares are offered only to certain eligible institutions and to clients of
investment advisory affiliates of Deutsche Banc Alex. Brown. 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,
the 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 will be voted on by the
holders of such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding Shares voting together
for election of Directors may elect all the members of the Board of Directors of
the Fund. 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.
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.
21
<PAGE>
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Bankers Trust Company ("Bankers Trust"), 130 Liberty Street, New York,
New York 10006, serves as custodian of the Fund's investments. Bankers Trust
receives such compensation from the Fund for its services as custodian as may be
agreed to from time to time by Bankers Trust and the Fund. For the fiscal year
ended May 31, 1999, Bankers Trust was paid $55,913 as compensation for providing
custody services to 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 $16.07 per account per year, plus reimbursement for
out-of-pocket expenses incurred in connection therewith. For the fiscal year
ended May 31, 1999, such fees totaled $145,421.
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)
$10,000,000 - $20,000,000 0.100%
$20,000,000 - $30,000,000 0.080%
$30,000,000 - $40,000,000 0.060%
$40,000,000 - $50,000,000 0.050%
$50,000,000 - $60,000,000 0.040%
$60,000,000 - $70,000,000 0.030%
$70,000,000 - $100,000,000 0.020%
$100,000,000 - $500,000,000 0.015%
$500,000,000 - $1,000,000,000 0.005%
over $1,000,000,000 0.001%
For the fiscal years ended May 31, 1999, 1998, and 1997 ICC received
accounting fees of $94,427, $77,864 and $55,940, respectively.
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.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland
21201, are independent accountants to the Fund.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
22
<PAGE>
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 use or submission of the advertising for publication,
and will cover one-, five-, and ten-year periods or a shorter period dating from
the effectiveness of the Fund's registration statement or the date the Fund (or
the later commencement of operations of a series or class) commenced operations.
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, 1999 were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
One-Year Period Since Inception*
Ended May 31, 1999
- -----------------------------------------------------------------------------------------------------------------
Class Ending Average Annual Ending Average Annual
Redeemable Total Return Redeemable Total Return
Value Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $1,223 16.81% $2,716 24.86%
- -----------------------------------------------------------------------------------------------------------------
Class B $1,174 17.39% $2,614 25.08%
- -----------------------------------------------------------------------------------------------------------------
Institutional $1,226 22.57% $2,707 25.90%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------
Since Inception*
- ------------------------------------------------------------------
Class Ending Total Return
Redeemable
Value
- ------------------------------------------------------------------
Class C $1,331 33.06%
- ------------------------------------------------------------------
- -------------------
*February 13, 1995 for Class A and B Shares; February 12, 1996 for Institutional
Shares; and October 28, 1998 for Class C Shares.
23
<PAGE>
The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth above
to compare more accurately the Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Inc., CDA 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. 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, 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, 1999 the Fund's portfolio turnover rate was 21.21% and in the fiscal
year ended May 31, 1998, the Fund's portfolio turnover rate was 7.94%.
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 outstanding shares of a class of the Fund, as of
September 2, 1999*:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Owned of Beneficially
Name and Address Record Owned Percentage of Ownership
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bankers Trust Corp & Affil 401K X 12.37% of Class A Shares
Savings Plan
The Partnershare Plan of
Bankers Trust NY Corp & Affil
100 Plaza One
Jersey City, NJ 07311-3999
- ---------------------------------------------------------------------------------------------------------
BT Alex. Brown Incorporated X 5.64% of Class A Shares
FBO 223-05575-10
P.O. Box 1346
Baltimore, MD 21203-1346
- ---------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT Alex. Brown Inc X 6.98% of Institutional Shares
FBO 259-11251-13
P.O. Box 1346
Baltimore, MD 21203-1346
- ---------------------------------------------------------------------------------------------------------
BT Alex. Brown Inc X 6.95% of Institutional Shares
FBO 210-90710-15
P.O. Box 1346
Baltimore, MD 21203-1346
- ---------------------------------------------------------------------------------------------------------
BT Alex. Brown Inc X 5.84% of Institutional Shares
FBO 210-23281-15
P.O. Box 1346
Baltimore, MD 21203-1346
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
*As of such date, Deutsche Banc Alex. Brown Incorporated owned less than 5% of
the Fund's total outstanding Shares.
As of September 2, 1999, Directors and officers as a group beneficially
owned an aggregate of less than 1% of the Fund's total outstanding shares.
FINANCIAL STATEMENTS
See next page.
25
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Net Assets May 31, 1999
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCK: 90.3%
Banking: 1.7%
195,000 Wells Fargo Company ....................... $ 7,800,000
-----------
Basic Industry: 1.0%
216,000 Georgia Gulf Corporation .................. 3,226,500
100,000 Olin Corporation .......................... 1,325,000
-----------
4,551,500
-----------
Business Services: 0.9%
90,000 First Data Corporation .................... 4,044,375
-----------
Consumer Durables/Non - Durables: 11.7%
959,100 Blyth Industries, Inc.(1) ................. 26,854,803
240,500 Callaway Golf ............................. 3,953,219
250,000 Ford Motor Company ........................ 14,265,625
207,500 Philip Morris Companies, Inc. ............. 8,001,719
115,000 Richfood Holdings, Inc. ................... 1,473,437
-----------
54,548,803
-----------
Consumer Services: 19.5%
338,000 America Online, Inc.(1) ................... 40,348,754
853,950 Cendant Corporation(1) .................... 15,744,703
50,000 Gannett Company, Inc. ..................... 3,612,500
917,520 Mattel, Inc. .............................. 24,256,935
322,500 Sinclair Broadcasting -- Group A(1) ....... 4,474,688
36,000 Times Mirror Co. -- Class A ............... 2,121,750
-----------
90,559,330
-----------
Defense/Aerospace: 1.0%
117,400 Lockheed Martin Corporation ............... 4,747,362
-----------
Energy: 0.9%
120,000 Midamerican Energy Hldgs.(1) .............. 4,050,000
-----------
-26 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) May 31, 1999
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (continued)
Financial Services: 7.8%
60,200 American Express Company ..................... $ 7,295,487
131,042 Associates First Capital Corp. -- Class A .... 5,372,722
181,500 Citigroup, Inc. .............................. 12,024,375
108,000 Freddie Mac .................................. 6,297,750
72,000 Transamerica Corp. ........................... 5,283,000
-----------
36,273,334
-----------
Health Care Services: 8.3%
254,000 Amgen, Inc.(1) ............................... 16,065,500
80,000 Cardinal Health, Inc. ........................ 4,830,000
220,000 Columbia/HCA Healthcare Corporation .......... 5,183,750
41,000 Johnson & Johnson ............................ 3,797,625
110,000 Wellpoint Health Networks, Inc.(1) ........... 9,068,125
-----------
38,945,000
-----------
Hotels/Gaming: 2.4%
530,000 Harrah's Entertainment, Inc.(1) .............. 11,461,250
-----------
Housing: 4.1%
516,900 Champion Enterprises, Inc.(1) ................ 10,564,150
148,300 USG Corporation .............................. 8,397,487
-----------
18,961,637
-----------
Insurance: 6.9%
670,387 Conseco, Inc. ................................ 20,488,707
188,908 XL Limited-- Class A ......................... 11,487,968
-----------
31,976,675
-----------
Multi-Industry: 5.1%
164,000 American Standard Companies, Inc.(1) ......... 7,585,000
4,000 Berkshire Hathaway-- Class B(1) .............. 9,272,000
57,000 Loews Corp. .................................. 4,634,812
35,600 United Technologies Corporation .............. 2,209,425
-----------
23,701,237
-----------
- 27 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Net Assets May 31, 1999
Shares/Par (000) Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (concluded)
Retail: 1.4%
425,000 Kmart Corporation(1) ......................... $ 6,534,375
------------
Technology: 9.7%
257,500 Cognex Corporation1 .......................... 6,920,312
172,000 International Business Machines Corporation .. 20,005,750
490,300 Novell Inc.(1) ............................... 11,522,050
119,000 Xerox Corporation ............................ 6,686,312
------------
45,134,424
------------
Telecommunications: 3.2%
174,146 MCI Worldcom, Inc.(1) ........................ 15,041,861
------------
Transportation: 4.7%
339,800 Canadian National Rail Co. ................... 21,747,204
------------
Total Common Stock
(Cost $260,122,176) ......................... 420,078,367
------------
REPURCHASE AGREEMENT: 10.8%
$50,191 Goldman Sachs & Co., 4.50%
Dated 5/28/99, to be repurchased
on 6/1/99 at $50,216,096,
collateralized by U.S. Treasury Note
with a market value of $24,276,904 and
U.S. Treasury Note with a market value
of $26,918,460.
(Cost $50,191,000) ........................... 50,191,000
------------
Total Investments
(Cost $310,313,176)(2) ................................. 101.1% $470,269,367
Liabilities in Excess of Other Assets ................... (1.1)% (4,886,906)
------ ------------
Net Assets--100.0% ...................................... 100.0% $465,382,461
====== ============
- 28 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) May 31, 1999
Shares Market Value
- --------------------------------------------------------------------------------
Net Asset Value and Redemption Price Per:
Class A Share
($283,950,179 divided by 11,059,354 shares) ............. $25.68
======
Class B Share
($52,602,990 divided by 2,080,403 shares) ............... $25.29(3)
======
Class C Share
($3,440,816 divided by 136,145 shares) .................. $25.27(4)
======
Institutional Share
($125,388,476 divided by 4,868,511 shares) .............. $25.75
======
Maximum Offering Price Per:
Class A Share
($25.68 divided by .955) ................................ $26.89
======
Class B Share ............................................. $25.29
======
Class C Share ............................................. $25.27
======
Institutional Share ....................................... $25.75
======
(1) Non-income producing security.
(2) Also aggregate cost for federal tax purposes.
(3) Redemption value is $24.28 following a 4% maximum contingent deferred sales
charge.
(4) Redemption value is $25.02 following a 1% maximum contingent deferred sales
charge.
See Accompanying Notes to Financial Statements.
- 29 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the
Year Ended
May 31,
- --------------------------------------------------------------------------------
1999
Investment Income:
Dividends ................................................ $ 3,116,912
Interest ................................................. 1,187,579
Less: Foreign taxes withhold ............................. (22,551)
-----------
Total income ........................................ 4,281,940
-----------
Expenses:
Investment advisory fee .................................. 2,864,847
Distribution fees ........................................ 974,019
Transfer agent fee ....................................... 145,421
Professional fees ........................................ 138,444
Accounting fee ........................................... 94,427
Registration fees ........................................ 79,325
Custodian fee ............................................ 55,913
Directors' fees .......................................... 14,458
Miscellaneous ............................................ 63,527
-----------
Total expenses ...................................... 4,430,381
-----------
Expenses in excess of income ............................. (148,441)
-----------
Realized and unrealized gain on investments:
Net realized gain from security transactions ............. 14,945,270
Change in unrealized appreciation/depreciation
of investments ......................................... 66,359,649
-----------
Net gain on investments ............................. 81,304,919
-----------
Net increase in net assets resulting from operations ........ $81,156,478
===========
See Accompanying Notes to Financial Statements.
- 30 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended May 31,
- --------------------------------------------------------------------------------
1999 1998
Increase in Net Assets:
Operations:
Net investment income/(expenses
in excess of income) ....................... $ (148,441) $ 713,905
Net realized gain from security transactions . 14,945,270 5,232,557
Change in unrealized appreciation/
depreciation of investments ................ 66,359,649 54,454,890
------------ ------------
Net increase in net assets resulting
from operations ............................ 81,156,478 60,401,352
------------ ------------
Distributions to Shareholders from:
Net investment income and net realized
short-term gains:
Class A Shares ............................. (93,263) (752,668)
Class B Shares ............................. -- (42,361)
Class C Shares ............................. -- --
Institutional Shares ....................... (58,366) (517,867)
Net realized long-term gains:
Class A Shares ............................. (2,930,694) (1,489,329)
Class B Shares ............................. (498,363) (268,284)
Class C Shares ............................. (394) --
Institutional Shares ....................... (1,271,314) (755,157)
------------ ------------
Total distributions ...................... (4,852,394) (3,825,666)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares ................. 116,694,761 123,536,819
Value of shares issued in
reinvestment of dividends .................. 4,540,061 3,468,071
Cost of shares repurchased ................... (61,943,145) (24,608,945)
------------ ------------
Increase in net assets derived from capital
share transactions ......................... 59,291,677 102,395,945
------------ ------------
Total increase in net assets ................. 135,595,761 158,971,631
Net Assets:
Beginning of year ............................ 329,786,700 170,815,069
------------ ------------
End of year (including distributions in excess
of net investment income of $(17,473) and
undistributed net investment income of
$55,727, respectively) ..................... $465,382,461 $329,786,700
============ ============
See Accompanying Notes to Financial Statements.
- 31 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)
For the Period
Feb. 13, 1995(1)
For the Years Ended May 31, through May 31,
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............... $ 21.29 $ 16.93 $ 13.09 $ 10.77 $ 10.00
--------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income/(expenses in excess of income) . (0.01) 0.05 0.08 0.17 0.12
Net realized and unrealized gain on investments ...... 4.70 4.60 3.96 2.29 0.65
--------- -------- -------- -------- --------
Total from Investment Operations ..................... 4.69 4.65 4.04 2.46 0.77
Less Distributions:
Net investment income and net realized short-term
gains ............................................... (0.03) (0.10) (0.13) (0.14) --
Net realized long-term gains ......................... (0.27) (0.19) (0.07) -- --
--------- -------- -------- -------- --------
Total distributions .................................. (0.30) (0.29) (0.20) (0.14) --
--------- -------- -------- -------- --------
Net asset value at end of period ..................... $ 25.68 $ 21.29 $ 16.93 $ 13.09 $ 10.77
========= ======== ======== ======== ========
Total Return(2) ......................................... 22.31% 27.76% 31.17% 23.05% 7.70%
Ratios to Average Daily Net Assets:
Expenses(3) .......................................... 1.20% 1.24% 1.35% 1.35% 1.35%(5)
Net investment income/(expenses in excess
of income)(4) ....................................... (0.02)% 0.29% 0.61% 1.52% 3.74%(5)
Supplemental Data:
Net assets at end of period (000) .................... $283,950 $198,387 $113,030 $64,230 $38,612
Portfolio turnover rate .............................. 21.21% 7.94% 17.60% 0.73% --
</TABLE>
- ------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) 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 the years
ended May 31, 1997 and 1996 and for the period ended May 31, 1995,
respectively.
(4) 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 the years ended May 31, 1997 and 1996 and for the period ended May 31,
1995, respectively.
(5) Annualized.
See Accompanying Notes to Financial Statements.
- 32 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)
For the Period
Feb. 13, 1995(1)
For the Years Ended May 31, through May 31,
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............. $ 21.10 $ 16.84 $ 13.03 $ 10.75 $ 10.00
--------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income/
(expenses in excess of income) ................... (0.14) (0.06) (0.04) 0.07 0.07
Net realized and unrealized gain on
investments ...................................... 4.60 4.54 3.96 2.31 0.68
--------- -------- -------- -------- --------
Total from Investment Operations ................... 4.46 4.48 3.92 2.38 0.75
Less Distributions:
Net investment income and
net realized short-term gains .................... -- (0.03) (0.04) (0.10) --
Net realized long-term gains ....................... (0.27) (0.19) (0.07) -- --
--------- -------- -------- -------- --------
Total distributions ................................ (0.27) (0.22) (0.11) (0.10) --
--------- -------- -------- -------- --------
Net asset value end of period ...................... $ 25.29 $ 21.10 $ 16.84 $ 13.03 $ 10.75
========= ======== ======== ======== ========
Total Return(2) ....................................... 21.39% 26.81% 30.28% 22.17% 7.50%
Ratios to Average Daily Net Assets:
Expenses(3) ........................................ 1.95% 1.98% 2.10% 2.10% 2.10%(5)
Net investment income/(expenses in excess of
income(4) ........................................ (0.77)% (0.47)% (0.16)% 0.71% 1.97%(5)
Supplemental Data:
Net assets at end of period (000) .................. $ 52,603 $37,046 $15,670 $5,302 $2,159
Portfolio turnover rate ............................ 21.21% 7.94% 17.60% 0.73% --
</TABLE>
- ------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) 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 the years
ended May 31, 1997 and 1996 and for the period ended May 31, 1995,
respectively.
(4) Without the waiver of advisory fees , the ratio of net investment
income/(expenses in excess of income) to average daily net assets would have
been (0.28)%, 0.29% and (0.15%) (annualized) for the years ended May 31,
1997 and 1996, and for the period ended May 31, 1995, respectively.
(5) Annualized.
See Accompanying Notes to Financial Statements.
- 33 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)
For the Period
Oct. 28, 1998(1)
through
May 31,
- --------------------------------------------------------------------------------
1999
Per Share Operating Performance:
Net asset value at beginning of period ................. $ 19.09
---------
Income from Investment Operations:
Expenses in excess of income ........................... (0.03)
Net realized and unrealized gain on investments ........ 6.48
---------
Total from Investment Operations ....................... 6.45
Less Distributions:
Net realized long-term gains ........................... (0.27)
---------
Total distributions .................................... (0.27)
---------
Net asset value at end of period ....................... $ 25.27
=========
Total Return(2) ........................................... 34.06%
Ratios to Average Daily Net Assets:
Expenses ............................................... 1.85%(3)
Expenses in excess of income ........................... (0.73)%(3)
Supplemental Data:
Net assets at end of period (000) ...................... $ 3,441
Portfolio turnover rate ................................ 21.21%
- ------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.
See Accompanying Notes to Financial Statements.
- 34 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Financial Highlights -- Institutional Shares
(For a share outstanding throughout each period)
For the Period
Feb. 12, 1996(1)
For the Years Ended May 31, through May 31,
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning
of period ........................................ $ 21.32 $ 16.94 $ 13.10 $ 12.72
--------- -------- -------- --------
Income from Investment Operations:
Net investment income .............................. 0.04 0.10 0.14 0.04
Net realized and unrealized
gain on investments .............................. 4.70 4.61 3.95 0.34
--------- -------- -------- --------
Total from Investment Operations ................... 4.74 4.71 4.09 0.38
Less Distributions:
Net investment income and net
realized short-term gains ........................ (0.04) (0.14) (0.18) --
Net realized long-term gains ....................... (0.27) (0.19) (0.07) --
--------- -------- -------- --------
Total Distributions ................................ (0.31) (0.33) (0.25) --
--------- -------- -------- --------
Net asset value at end of period ................... $ 25.75 $ 21.32 $ 16.94 $ 13.10
========= ======== ======== ========
Total Return .......................................... 22.53% 28.14% 31.58% 3.23%
Ratios to Average Daily Net Assets:
Expenses(2) ........................................ 0.95% 0.98% 1.10% 1.10%(4)
Net investment income(3) ........................... 0.23% 0.54% 0.81% 1.20%(4)
Supplemental Data:
Net assets at end of period (000) .................. $125,388 $94,354 $42,115 $ 4,235
Portfolio turnover rate ............................ 21.21% 7.94% 17.60% 0.73%
</TABLE>
- ------------
(1) Commencement of operations.
(2) 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, respectively.
(3) 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 the period ended May 31, 1996,
respectively.
(4) Annualized.
See Accompanying Notes to Financial Statements.
- 35 -
<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 May 31, 1994 and began operations
February 13, 1995, 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 four share classes: Class A Shares and Class B
Shares, which both began operations February 13, 1995, Class C Shares which
began operations October 28, 1998 and Institutional Shares, which began
operations February 12, 1996.
The Class A, Class B, and Class C Shares are subject to different sales
charges. The Class A Shares have a 4.50% maximum front-end sales charge, the
Class B Shares have a 4.00% maximum contingent deferred sales charge and the
Class C Shares have a 1.00% maximum contingent deferred sales charge. In
addition each of the classes has a different distribution fee. The Institutional
Shares do not have a front-end sales charge, a contingent deferred sales charge
or a distribution fee.
When preparing the Fund's financial statements, management makes
estimates and assumptions to comply with generally accepted accounting
principles. These estimates affect 1) the assets and liabilities that we report
at the date of the financial statements; 2) the contingent assets and
liabilities that we disclose at the date of the financial statements; and 3) the
revenues and expenses that we report for the period. Our estimates could be
different from the actual results. The Fund's significant accounting policies
are:
A. Security Valuation -- The Fund values a 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 the
average of the last bid and asked prices in the over-the-counter
market. When a market quotation is not readily available, 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.
- 36 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
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 is recorded on an accrual basis and
includes the amortization of premiums and accretion of discounts
when appropriate. Income and common expenses are allocated to each
class based on its respective average net assets. Class specific
expenses are charged directly to each class. 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 began investment activities.
- 37 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2 -- Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust
Corporation, is the Fund's investment advisor. 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.
For the year ended May 31, 1999 ICC's advisory fee was $2,864,847 of
which $304,759 was payable at the end of the period.
ICC also provides accounting services to the Fund for which the Fund
pays ICC an annual fee that is calculated daily and paid monthly based on the
Fund's average daily net assets. For the year ended May 31, 1999, ICC's fee was
$94,427 of which $9,336 was payable at the end of the period.
ICC also provides transfer agent services to the Fund for which the
Fund pays ICC a per account fee that is calculated and paid monthly. For the
year ended May 31, 1999, ICC's fee was $145,421 of which $35,747 was payable at
the end of the period.
Bankers Trust Company, an affiliate of ICC, provides custody services
to the Fund for which the Fund pays Bankers Trust an annual fee. For the year
ended May 31, 1999, Bankers Trust's fee was $55,913 of which $8,518 was payable
at the end of the period.
Certain officers and directors of the Fund are also officers or
directors of ICC.
- 38 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
NOTE 2 -- concluded
Alex. Brown Investment Management ("ABIM") is the Fund's sub-advisor.
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.
The Fund did not pay BT Alex. Brown any commissions for the year ended
May 31, 1999.
ICC Distributors, Inc., a member of the Forum Group of companies,
provides distribution services to the Fund for which the Fund pays ICC
Distributors an annual fee that is calculated daily and paid monthly at the
following annual rates; 0.25% of the Class A Shares' average daily net assets
and 1.00% of the Class B and Class C Shares' average daily net assets. The fees
for the Class B and Class C Shares include a 0.25% shareholder servicing fee.
Distribution fee expenses for the year ended May 31, 1999 amounted to $562,203,
$406,522, and $5,294 for Class A, Class B, and Class C Shares, respectively, of
which $60,769, $44,523 and $2,291 was payable at the end of the period.
The Fund complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
May 31, 1999 was $1,675, and the accrued liability was $6,932.
- 39 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 3 -- Capital Share Transactions
The Fund is authorized to issue up to 90 million shares of $.001 par
value capital stock (40 million Class A, 15 million Class B, 15 million Class C,
15 million Institutional and 5 million undesignated). Transactions in shares of
the Fund as follows:
Class A Share
------------------------------
For the For the
Year Ended Year Ended
May 31, 1999 May 31, 1998
------------ -------------
Shares sold .................................... 3,166,847 3,375,853
Shares issued to shareholders on
reinvestment of dividends ................... 132,532 117,061
Shares redeemed ................................ (1,557,812) (852,542)
----------- -----------
Net increase in shares outstanding ............. 1,741,567 2,640,372
=========== ===========
Proceeds from sale of shares ................... $67,677,756 $66,318,519
Value of reinvested dividends .................. 2,838,498 2,136,952
Cost of shares redeemed ........................ (33,714,414) (16,794,448)
----------- -----------
Net increase from capital share
transactions ................................ $36,801,840 $51,661,023
=========== ===========
Class B Shares
------------------------------
For the For the
Year Ended Year Ended
May 31, 1999 May 31, 1998
------------ -------------
Shares sold .................................... 563,765 860,902
Shares issued to shareholders on
reinvestment of dividends ................... 22,835 16,617
Shares redeemed ................................ (261,968) (52,451)
----------- -----------
Net increase in shares outstanding ............. 324,632 825,068
=========== ===========
Proceeds from sale of shares ................... $12,547,072 $16,336,267
Value of reinvested dividends .................. 482,952 302,586
Cost of shares redeemed ........................ (5,608,819) (1,036,796)
----------- -----------
Net increase from capital share
transactions ................................ $ 7,421,205 $15,602,057
=========== ===========
- 40 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
NOTE 3 -- continued
Class C Shares
----------------
For the Period
Oct. 28, 1998(1)
through
May 31, 1999
----------------
Shares sold ............................................... 137,892
Shares issued to shareholders on
reinvestment of dividends .............................. 16
Shares redeemed ........................................... (1,763)
----------
Net increase in shares
outstanding ............................................ 136,145
==========
Proceeds from sale of shares .............................. $3,342,768
Value of reinvested dividends ............................. 336
Cost of shares redeemed ................................... (39,485)
----------
Net increase from capital share
transactions ........................................... $3,303,619
==========
Institutional Shares
----------------------------
For the For the
Year Ended Year Ended
May 31, 1999 May 31, 1998
------------- ------------
Shares sold 1,542,660 2,238,106
Shares issued to shareholders on
reinvestment of dividends 56,796 56,263
Shares redeemed (1,157,545) (353,873)
------------ -----------
Net increase in shares outstanding 441,911 1,940,496
============ ===========
Proceeds from sale of shares $ 33,127,165 $40,882,033
Value of reinvested dividends 1,218,275 1,028,533
Cost of shares redeemed (22,580,427) (6,777,701)
------------ -----------
Net increase from capital
share transactions $ 11,765,013 $35,132,865
============ ===========
- -----------
(1) Commencement of operations.
- 41 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 3 -- concluded
At May 31, 1999, the amounts payable for fund shares redeemed amounted
to $145,009, of which $75,187 were attributable to the Class A Shares and
$69,822 were attributable to the Class B Shares.
NOTE 4 -- Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $96,050,023 and sales of investment securities aggregated $72,089,080
for the year ended May 31, 1999. At May 31, 1999, the payable for securities
purchased was $7,042,157.
On May 31, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $169,352,861
and aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over value was $9,396,670.
NOTE 5 -- Net Assets
On May 31, 1999, net assets consisted of:
Paid-in capital:
Class A Shares ............................................... $168,607,833
Class B Shares ............................................... 35,448,850
Class C Shares ............................................... 3,302,028
Institutional Shares ......................................... 83,482,159
Accumulated net realized gain from security transactions ....... 14,602,873
Unrealized appreciation of investments ......................... 159,956,191
Distributions in excess of net investment income ............... (17,473)
------------
$465,382,461
============
NOTE 6 -- Subsequent Event
On June 4, 1999, Bankers Trust Corporation merged with Deutsche Bank
AG. As a result, Deutsche Bank AG became the parent company to ICC, investment
advisor to the Fund, and a control person of ABIM, subadvisor to the Fund.
Deutsche Bank AG, as ICC's new parent company, controls its operations as
investment advisor. ICC believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level. Shareholders
will be asked to vote whether to approve new advisory and subadvisory contracts
at a shareholder's meeting to be held October 8, 1999.
- 42 -
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Shareholders and Directors of
Flag Investors Equity Partners Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Equity Partners Fund, Inc. (the "Fund") at May 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 14, 1999
- 43 -
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE 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.
Moody's Investors Services, Inc.'s corporate bond ratings:
Aaa - Judged to be of the best quality. Carries the smallest
degree of investment risk and generally referred to as "gilt-edged." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa - Judged to be of high quality by all standards. Together with
the Aaa group comprise what are generally known as high-grade bonds. Rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk appear
somewhat larger than Aaa securities.
A - Possess many favorable investment attributes and 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 - Considered as medium-grade obligations i.e., 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
A-1
<PAGE>
time. Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Judged to have speculative elements; 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 characterizes bonds in
this class.
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 - Of poor standing. May be in default or there may be present
elements of danger with respect to principal or interest.
Ca - Speculative in a high degree. Often in default or have other
marked shortcomings.
C - The lowest rated class of bonds. Issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a rating in the lower end of
that generic rating category.
Standard & Poor's Corporation's corporate bond ratings:
AAA - The highest rating assigned by Standard & Poor's to a debt
obligation. Indicates an extremely strong capacity to pay principal and
interest.
AA - High-quality debt obligations. Capacity to pay principal and
interest is very strong, and in the majority of instances differs from AAA
issues only to a small degree.
A - A strong capacity to pay interest and repay principal
although somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Regarded as having an adequate capacity to pay interest and
repay principal. Normally exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds in this category
than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these may be
outweighed by large uncertainties or major risk exposures to adverse conditions.
A-2
<PAGE>
The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.
Debt rated D is in payment default. The D rating category is used
when payments on an obligation 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 of the taking of a similar action if payments on
a obligation are jeopardized.
A-3
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a)(1) Registrant's Articles of Incorporation, incorporated by
reference to Exhibit 1(a) 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 (Accession No. 950116- 95-000433) on
September 22, 1995.
(a)(2) Registrant's Articles Supplementary, incorporated by reference
to Exhibit 1(b) 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 (Accession No. 950116- 96-001012) on
September 26, 1996.
(a)(3) Registrant's Articles Supplementary dated June 17, 1997,
incorporated by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A (Registration
No. 33-86832), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116- 98-001595) on July
31, 1998.
(a)(4) Registrant's Articles Supplementary dated September 28, 1998,
filed herewith.
(b) By-Laws, as amended through July 28, 1999, filed herewith.
(c) Instruments Defining Rights of Securities Holders,
incorporated by reference to Exhibits (1)(a) and 2 to
Post-Effective Amendment Nos. 1 and 5, respectively, to
Registrant's Registration Statement on Form N-1A (Registration
No. 33-86832), filed with the Securities and Exchange
Commission via EDGAR (Accession Nos. 950116-95-000433 and
950116- 97-001816) on September 22, 1995 and October 1, 1997.
(d)(1) Form of Investment Advisory Agreement between Registrant and
Investment Company Capital Corp., filed herewith.
(d)(2) Form of Sub-Advisory Agreement among Registrant, Investment
Company Capital Corp. and Alex. Brown Investment Management
filed herewith.
(e)(1) Distribution Agreement dated August 31, 1997 between
Registrant and ICC Distributors, Inc., incorporated by
reference to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission
via EDGAR (Accession No. 950116-98-001595) on July 31, 1998.
(e)(2) Form of Sub-Distribution Agreement between ICC Distributors,
Inc. and Participating Broker-Dealers, incorporated by
reference to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A
-1-
<PAGE>
(Registration No. 33-86832), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-98-001595)
on July 31, 1998.
(e)(3) Form of Shareholder Servicing Agreement between ICC
Distributors, Inc. and Shareholder Servicing Agents,
incorporated by reference to Post-Effective Amendment No. 6
to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-98-001595)
on July 31, 1998.
(f) Not Applicable.
(g) Custodian Agreement between Registrant and Bankers Trust
Company, dated June 5, 1998, incorporated by reference to
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-86832), filed with
the Securities and Exchange Commission via EDGAR (Accession
No. 950116-98-001595) on July 31, 1998.
(h) Master Services Agreement between Registrant and Investment
Company Capital Corp., incorporated by reference to Exhibit 9
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 (Accession
No. 950116-95-000433) on September 22, 1995.
(i) Opinion of Counsel, filed herewith.
(j) Consent of PricewaterhouseCoopers LLP, filed herewith.
(k) Not Applicable.
(l) Subscription Agreement, incorporated by reference to Exhibit
13 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 (Accession No. 950116-95-000433) on September 22,
1995.
(m)(1) Distribution Plan with respect to Flag Investors Class A
Shares, incorporated by reference to Exhibit 15(a) to
Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-86832), filed with
the Securities and Exchange Commission via EDGAR (Accession
No. 950116-97-001816) on October 1, 1997.
(m)(2) Distribution Plan with respect to Flag Investors Class B
Shares, incorporated by reference to Exhibit 15(b) to
Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-86832), filed with
the Securities and Exchange Commission via EDGAR (Accession
No. 950116-97-001816) on October 1, 1997.
-2-
<PAGE>
(m)(3) Distribution Plan with respect to Flag Investors Class C
Shares, filed herewith.
(n) Not applicable.
(o) 18f-3 Plan, with exhibits through September 28, 1998, filed
herewith.
(p) Powers of Attorney, filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant. For any person
controlled by another person, disclose the percentage of voting securities owned
by the immediately controlling person or other basis of that person's control.
For each company, also provide the state or other sovereign power under the laws
of which the company is organized.
None.
Item 25. 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 against any liability incurred in their
official 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 (a) to this Registration Statement and
incorporated herein by reference, provide as follows:
Section 1. To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall have
any liability to the Corporation or its 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.
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.
-3-
<PAGE>
Section 3. No provision of this Article VIII shall be effective to
protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law in this
Article VIII are to such law as from time to time amended. No further
amendment to the Charter of the Corporation shall decrease, but may
expand, any right of any person under this Article VIII based on any
event, omission or proceeding prior to such amendment.
Sections 1, 2, 3, 4 and 5 of Article XIII of Registrant's By-Laws,
included as Exhibit (b) 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 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
-4-
<PAGE>
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 26. Business and Other Connections of the Investment Advisor.
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment advisor and each director, officer or
partner of the investment advisor, is or has been, engaged within the last two
fiscal years, for his or her own account or in the capacity of director,
officer, employee, partner or trustee. (Disclose the name and principal business
address of any company for which a person listed above serves in the capacity of
director, officer, employee, partner or trustee, and the nature of the
relationship.)
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, and each director,
officer or partner of the investment sub-advisor, is or has been, engaged within
the last two fiscal years, for his or her own account or in the capacity of
director, officer, employee, partner or trustee. (Disclose the name and
principal business address of any company for which a person listed above serves
in the capacity of director, officer, employee, partner or trustee, and the
nature of the relationship.)
During the last two fiscal years, no director or officer of Alex.
Brown Investment Management, the Registrant's investment sub-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.
-5-
<PAGE>
Item 27. Principal Underwriters
(a) State 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.
ICC Distributors, Inc. acts as distributor for Deutsche Banc Alex.
Brown Cash Reserve Fund, Inc.,(formerly, BT Alex. Brown Cash Reserve
Fund, Inc.), Flag Investors Communications Fund, Inc.,(formerly 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 Real Estate
Securities Fund, Inc., The Glenmede Fund, Inc., The Glenmede
Portfolios, BT Advisor Funds, BT Institutional Funds, BT Investment
Funds and BT Pyramid Mutual Funds, all registered open-end management
investment companies.
(b) Provide the information with respect to each director, officer or
partner of each principal underwriter named in answer to Item 20.
<TABLE>
<CAPTION>
Position and
Offices Position and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
----------------- -------------- ------------
<S> <C> <C>
John Y. Keffer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Richard C. Butt Vice President None
Benjamin L. Niles Vice President None
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
---------------------------------
Two Portland Square
Portland, ME 04101
</TABLE>
(c) Not applicable.
-6-
<PAGE>
Item 28. Location of Accounts and Records
State the name and address of each person maintaining principal
possession of 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 under that
section.
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, and,
in the case of ICC, 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 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B disclosing
the parties to the contract and the total amount paid and by whom, for the
Fund's last three fiscal years.
Not Applicable.
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Fund intends to raise
its initial capital under section 14(a)(3)[15 U.S.C. 80a-14(a)(3)].
(a) Not Applicable.
-7-
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 7 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, 1999.
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.
* September 29, 1999
- ------------------------- Chairman and ------------------
Truman T. Semans Director Date
* September 29, 1999
- ------------------------- Director ------------------
Richard T. Hale Date
* September 29, 1999
- ------------------------- Director ------------------
James J. Cunnane Date
* September 29, 1999
- ------------------------- Director ------------------
Joseph R. Hardiman Date
* September 29, 1999
- ------------------------- Director ------------------
Louis E. Levy Date
* September 29, 1999
- ------------------------- Director ------------------
Eugene J. McDonald Date
* September 29, 1999
- ------------------------- Director ------------------
Rebecca W. Rimel Date
* September 29, 1999
- ------------------------- Director ------------------
Carl W. Vogt Date
/s/ Harry Woolf September 29, 1999
- ------------------------- President ------------------
Harry Woolf Date
/s/ Charles A. Rizzo Chief Financial and September 29, 1999
- ------------------------- Accounting Officer ------------------
Charles A. Rizzo Date
*By: /s/ Amy M. Olmert
--------------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
INDEX OF EXHIBITS
EDGAR
Exhibit
Number Document
- ------ --------
(a)(1) Registrant's Articles of Incorporation, incorporated by
reference to Exhibit 1(a) 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 (Accession No.
950116-95-000433) on September 22, 1995.
(a)(2) Registrant's Articles Supplementary, incorporated by
reference to Exhibit 1(b) 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 (Accession No.
950116-96-001012) on September 26, 1996.
(a)(3) Registrant's Articles Supplementary dated June 17, 1997,
incorporated by reference to Post-Effective Amendment No. 6
to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and
Exchange Commission via EDGAR (Accession No.
950116-98-001595) on July 31, 1998.
EX-99.B (a)(4) Registrant's Articles Supplementary dated September 28, 1998,
filed herewith.
EX-99.B (b) By-Laws, as amended through July 28, 1999, filed herewith.
(c) Instruments Defining Rights of Securities Holders,
incorporated by reference to Exhibits (1)(a) and 2 to
Post-Effective Amendment Nos. 1 and 5, respectively, to
Registrant's Registration Statement on Form N-1A
(Registration No. 33- 86832), filed with the Securities and
Exchange Commission via EDGAR (Accession Nos.
950116-95-000433 and 950116-97-001816) on September 22, 1995
and October 1, 1997.
EX-99.B (d)(1) Form of Investment Advisory Agreement between Registrant and
Investment Company Capital Corp., filed herewith.
EX-99.B (d)(2) Form of Sub-Advisory Agreement among Registrant, Investment
Company Capital Corp. and Alex. Brown Investment Management,
filed herewith.
<PAGE>
(e)(1) Distribution Agreement dated August 31, 1997 between
Registrant and ICC Distributors, Inc., incorporated by
reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities
and Exchange Commission via EDGAR (Accession No.
950116-98-001595) on July 31, 1998.
(e)(2) Form of Sub-Distribution Agreement between ICC
Distributors, Inc. and Participating Broker-Dealers,
incorporated by reference to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities
and Exchange Commission via EDGAR (Accession No.
950116-98-001595) on July 31, 1998.
(e)(3) Form of Shareholder Servicing Agreement between ICC
Distributors, Inc. and Shareholder Servicing Agents,
incorporated by reference to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities
and Exchange Commission via EDGAR (Accession No.
950116-98-001595) on July 31, 1998.
(f) Not Applicable.
(g) Custodian Agreement between Registrant and Bankers Trust
Company, dated June 5, 1998, incorporated by reference to
Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-98-001595) on
July 31, 1998.
(h) Master Services Agreement between Registrant and
Investment Company Capital Corp., incorporated by
reference to Exhibit 9 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 (Accession No.
950116-95-000433) on September 22, 1995.
EX-99.B (i) Opinion of Counsel, filed herewith.
EX-99.B (j) Consent of PricewaterhouseCoopers LLP, filed herewith.
(k) Not Applicable.
(l) Subscription Agreement, incorporated by reference to
Exhibit 13 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 (Accession No.
950116-95-000433) on September 22, 1995.
<PAGE>
(m)(1) Distribution Plan with respect to Flag Investors Class A
Shares, incorporated by reference to Exhibit 15(a) to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-97-001816) on
October 1, 1997.
(m)(2) Distribution Plan with respect to Flag Investors Class B
Shares, incorporated by reference to Exhibit 15(b) to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-97-001816) on
October 1, 1997.
EX-99.B (m)(3) Distribution Plan with respect to Flag Investors Class C
Shares, filed herewith.
(n) Not applicable.
EX-99.B (o) 18f-3 Plan, with exhibits through September 28, 1998,
filed herewith.
EX-99.B (p) Powers of Attorney, filed herewith.
<PAGE>
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 at a meeting duly
convened and held on September 28, 1998 has adopted a resolution designating a
new class of shares and increasing the total number of shares of capital stock
which the Corporation has the authority to issue to ninety million (90,000,000)
shares of Common Stock, par value $.001 per share and having an aggregate par
value of ninety thousand dollars ($90,000.00), 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 Class C Shares" (the "Class C 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 in authorized shares
and the designation of the Class C Shares, the Corporation was authorized to
issue seventy-five million (75,000,000) shares of Common Stock, par value of
$.001 per share and having an aggregate par value of seventy-five thousand
dollars ($75,000.00), all of which shares were designated as follows: forty
million (40,000,000) shares were designated "Flag Investors Equity Partners Fund
Class A Shares," fifteen million (15,000,000) shares were designated "Flag
Investors Equity Partners Fund Class B Shares," fifteen million (15,000,000)
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 its President and its
corporate seal to be affixed and attested by its Secretary on this 28th day of
September, 1998.
[CORPORATE SEAL]
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
By: /s/ Harry Woolf
----------------------
Harry Woolf
President
Attest: /s/ Amy M. Olmert
---------------------
Amy M. Olmert
Secretary
The undersigned 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/ Harry Woolf
-------------------
Harry Woolf
President
<PAGE>
As Amended Through
July 28, 1999
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.
<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
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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.
Section 6. Voting. (a) Except as otherwise provided by statute or the
Charter of the Corporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any meeting of
shareholders may authorize another person or persons to act as proxy for the
shareholder by (1) a written authorization signed by such shareholder or the
shareholder's authorized agent; or (2) by telephone, a telegram, cablegram,
datagram or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. No proxy shall be valid after the expiration of eleven
months from the date thereof, unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the shareholder executing it, except
in those cases where such proxy states that it is irrevocable and where an
irrevocable proxy is permitted by law. Except as otherwise provided by statute,
the Charter of the Corporation or these By-Laws, any corporate action to be
taken by vote of the shareholders shall be authorized by a majority of the total
votes cast at a meeting of shareholders at which a quorum is present by the
holders of shares present in person or represented by proxy and entitled to vote
on such action, except that a plurality of all the votes cast at a meeting at
which a quorum is present is sufficient to elect a director.
(c) If a vote shall be taken on any question other than the
election of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the shareholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
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.
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The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
Section 8. Consent of Shareholders in Lieu of Meeting. Except as
otherwise provided by statute any action required to be taken at any regular or
special meeting of shareholders, or any action which may be taken at any annual
or special meeting of shareholders, may be taken without a meeting, without
prior notice and without a vote, if the following are filed with the records of
shareholders' meetings: (i) a unanimous written consent which sets forth the
action and is signed by each shareholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each shareholder entitled to
notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. Except as otherwise provided in the Charter
of the Corporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the shareholders by law or by the Charter of the Corporation
or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (except for any period during which shares
of the Corporation are held by fewer than three shareholders) nor more than
fifteen. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be shareholders.
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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.
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.
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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 Imeeting need not
state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than three
members, of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter of the Corporation, these By-Laws, the 1940 Act or other applicable
statute, the act of a majority of the Directors present at any meeting at which
a quorum is present shall be the act of the Board; provided, however, that the
approval of any contract with an investment adviser or principal underwriter, as
such terms are defined in the 1940 Act, which the Corporation enters into or any
renewal or amendment thereof, the approval of the fidelity bond required by the
1940 Act, and the selection of the Corporation's independent public accountants
shall each require the affirmative vote of a majority of the Directors who are
not interested persons, as defined in the 1940 Act, of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the Directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the Directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other Directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time appoint
one of its members as Chairman of the Board, who shall serve at the pleasure of
the Board and who shall perform and execute such duties and powers as may be
conferred upon or assigned to him by the Board or these By-Laws, but who shall
not by reason of performing and executing these duties and powers be deemed an
officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if one has been selected and is present, shall
preside. In the absence or inability of the Chairman of the Board to preside at
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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 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.
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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:
(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
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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 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
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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, 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;
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(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;
(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.
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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.
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
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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.
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
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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.
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.
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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.
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
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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 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.
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<PAGE>
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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<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 4th day of
June, 1999 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");
(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").
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<PAGE>
The Fund will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Fund's operations,
except for distribution services;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Fund;
(c) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Fund with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, utilities, stationery, supplies and similar items for the Fund's
principal office;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund's
portfolio or the activities in which they engage, or with respect to securities
which the Advisor considers desirable for inclusion in the Fund's portfolio;
(f) determine which issuers and securities shall be represented
in the Fund's portfolio and regularly report thereon to the Fund's Board of
Directors;
(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs;
(h) supervise the operations of the Fund's transfer and dividend
disbursing agent;
(i) provide the Fund with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the Fund's shareholders and reports to and filings with the SEC and state Blue
Sky authorities.
4. Broker-Dealer Relationships. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Fund, broker-dealer
selection, and negotiation of its brokerage commission rates, the Advisor's
primary consideration in effecting securities transactions will be to obtain the
best price and execution on an overall basis. In performing this function the
Advisor shall comply with applicable policies established by the Board of
Directors and shall provide the Board of Directors with such reports as the
Board of Directors may require in order to monitor the Fund's portfolio
transaction activities. In certain instances the Advisor may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the 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.
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<PAGE>
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Directors may determine, the Advisor shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to pay a
broker-dealer that provides brokerage and research services to the Advisor an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker-dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker-dealer, viewed in terms of either
that particular transaction or the Advisor's overall responsibilities with
respect to the Fund. The Advisor is further authorized to allocate the orders
placed by it on behalf of the Fund to such broker-dealers who also provide
research or statistical material or other services to the Fund or the Advisor.
Such allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the broker-dealers to whom such allocations
have been made and the basis therefor.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Advisor may consider services in connection with the sale of shares of the Fund
as a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund.
Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Advisor is considered at or about the same time, transactions in
such securities will be allocated among the accounts in a manner deemed
equitable by the Advisor. BT Alex. Brown and the Advisor may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution.
The Fund will not deal with the Advisor or BT Alex. Brown in any
transaction in which the Advisor or BT Alex. Brown acts as a principal with
respect to any part of the Fund's order. If BT Alex. Brown is participating in
an underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.
5. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
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<PAGE>
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the By-laws; and
(e) any other applicable provisions of 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 plans 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.
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.
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<PAGE>
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, 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 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.
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.
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<PAGE>
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.
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:
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<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
FORM OF
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 4th day of June, 1999 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;
(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").
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<PAGE>
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.
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.
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<PAGE>
Consistent with the Conduct Rules of the National Association
of Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Sub-Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Sub-Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Sub-Advisor. BT Alex. Brown and the Sub-Advisor may
combine such transactions, in accordance with applicable laws and regulations,
in order to obtain the best net price and most favorable execution.
The Fund will not deal with the Sub-Advisor or BT Alex. Brown
in any transaction in which the Sub-Advisor or BT Alex. Brown acts as a
principal with respect to any part of the Fund's order. If BT Alex. Brown is
participating in an underwriting or selling group, the Fund may not buy
portfolio securities from the group except in accordance with policies
established by the Board of Directors in compliance with rules of the SEC.
5. Control by Fund's Board of Directors. Any 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.
-3-
<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: 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. Except as hereinafter set forth, compensation
under this Agreement shall be calculated and accrued daily and the amounts of
the daily accruals paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculations of the fees as set forth
above. Payment of the Sub-Advisor's compensation for the preceding month shall
be made as promptly as possible.
9. Additional Responsibilities. The Sub-Advisor may, but shall
not be under any duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Sub-Advisor's
charges in rendering such services will be billed monthly to the Fund, subject
to examination by the Fund's independent certified public accountants. Payment
or assumption by the Sub-Advisor of any Fund expense that the Sub-Advisor is not
required to pay or assume under this Agreement shall not relieve the Sub-Advisor
of any of its obligations to the Fund nor obligate the Sub-Advisor to pay or
assume any similar Fund expenses on any subsequent occasions.
10 Term. This Agreement shall become effective at 12:01 a.m.
on the date hereof and shall remain in force and effect, subject to Section 12
hereof, for two years from the date hereof.
-4-
<PAGE>
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.
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.
-5-
<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:______________________________________
Name:
Title:
-6-
<PAGE>
1701 Market Street MORGAN, LEWIS
Philadelphia, PA 19103 & BOCKIUS L L P
(215)963-5000 C O U N S E L O R S A T L A W
Fax: (215)963-5299
September 29, 1999
Flag Investors Equity Partners Fund, Inc.
One South Street
Baltimore, MD 21202
Re: Opinion of Counsel regarding Post-Effective Amendment No. 7 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
(File No. 33-86832)
Ladies and Gentlemen:
We have acted as counsel to Flag Investors Equity Partners Fund, Inc.,
(the "Fund") a Maryland corporation, in connection with the above-referenced
Registration Statement which relates to the Fund's shares of common stock, par
value $.001 per share (the "Shares"). This opinion is being delivered to you in
connection with the Fund's filing of Post-Effective Amendment No. 7 to the
Registration Statement (the "Amendment") to be filed with the Securities and
Exchange Commission pursuant to Rule 485(b) under the Securities Act of 1933.
With your permission, all assumptions and statements of reliance herein have
been made without any independent investigation or verification on our part,
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the State of Maryland to the existence and good
standing of the Fund dated September 13, 1999;
(b) the Articles of Incorporation of the Fund and all amendments
and supplements thereto (the "Articles of Incorporation");
(c) a certificate executed by Amy M. Olmert, the Secretary of
the Fund, certifying as to the Fund's Articles of
Incorporation and By-Laws and certain resolutions adopted by
the Board of Directors of the Fund authorizing the issuance of
the shares; and
(d) a printer's proof of the Amendment.
<PAGE>
In our capacity as counsel to the Fund, we have examined the originals,
or certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of
the opinion that the Shares, when issued and sold in accordance with the
Articles of Incorporation and By-Laws, and for the consideration described in
the Registration Statement, will be legally issued, fully paid and non
assessable under the laws of the State of Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/Morgan, Lewis & Bockius LLP
- -------------------------------
Morgan, Lewis & Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated July
14, 1999, relating to the financial statements and financial highlights of the
Flag Investors Equity Partners Fund, Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/PricewaterhouseCoopers LLP
- ---------------------------------
PricewaterhouseCoopers LLP
Baltimore, Maryland
September 27, 1999
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
FLAG INVESTORS CLASS C 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 C 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 0.75% 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 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
<PAGE>
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>
Flag Investors Equity Partners Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Flag Investors Class A, Flag Investors Class B,
Flag Investors Class C and Institutional Class Shares
Adopted December 13, 1995
Amended through March 26, 1997
With Exhibits through September 28, 1998
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, Flag Investors Class C and Institutional Class Shares)
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. The Flag
Investors Class C Shares have been offered since October 28, 1998.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors. Before any material amendment of the
Plan, the Fund is required to obtain a finding by a majority of the Board, and
<PAGE>
a 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 By-laws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly attributable to such class ("Class
Expenses")(1); and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
- --------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
<PAGE>
III. Expense Allocations
Expenses of each class created after the date hereof must be allocated
as follows: (i) distribution and shareholder servicing payments associated with
any Rule 12b-1 Plan or servicing agreement, if any, relating to each respective
class of shares (including any costs relating to implementing such plans or any
amendment thereto) will be borne exclusively by that class; (ii) any incremental
transfer agency fees relating to a particular class will be borne exclusively by
that class; and (iii) Class Expenses relating to a particular class will be
borne exclusively by that class.
The methodology and procedures for calculating the net asset value and
dividends and distributions of the various classes of shares of the Fund and the
proper allocation of income and expenses among the various classes of shares of
the Fund are required to comply with the Fund's internal control structure
pursuant to applicable auditing standards, including Statement on Auditing
Standards No. 55, and to be reviewed as part of the independent accountants'
review of such internal control structure. The independent accountants' report
on the Fund's system of internal controls required by Form N-SAR, Item 77B, is
not required to refer expressly to the procedures for calculating the classes'
net asset values.
<PAGE>
Exhibits to Registrant's 18f-3 Plan
1. Articles of Incorporation filed as Exhibit (1)(a) 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, and is incorporated herein by
reference.
2. Articles Supplementary filed as Exhibit (1)(b) 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, and is incorporated herein by reference.
3. Articles Supplementary filed as Exhibit (a)(3) to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via EDGAR on
July 31, 1998, and is incorporated herein by reference.
4. Articles Supplementary filed as Exhibit (a)(4) to this Post-Effective
Amendment No. 7 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), and is incorporated herein by reference.
5. By-Laws, as amended through July 28, 1999 filed as Exhibit (2) to this
Post-Effective Amendment No. 7 to Registrant's Registration Statement on
Form N-1A (Registration No. 33-86832), and is incorporated herein by
reference.
6. Distribution Agreement between Registrant and ICC Distributors, Inc. filed
as Exhibit (e)(1) to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-86832), filed with
the Securities and Exchange Commission via EDGAR on July 31, 1998, and is
incorporated herein by reference.
7. Form of Sub-Distribution Agreement between ICC Distributors, Inc. and
Participating Broker-Dealers filed as Exhibit(e)(2) to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and Exchange
Commission via EDGAR on July 31, 1998, and is incorporated herein by
reference.
8. Registrant's Amended Distribution Plan with respect to Class A Shares filed
as Exhibit(15)(a) to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-86832), filed with
the Securities and Exchange Commission via EDGAR on October 5, 1997, and is
incorporated herein by reference.
9. Registrant's Amended Distribution Plan with respect to Class B Shares filed
as Exhibit (15)(b) to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-86832), filed with
the Securities and Exchange Commission via EDGAR on October 5, 1997, and is
incorporated herein by reference.
<PAGE>
10. Registrant's Amended Distribution Plan with respect to Class C Shares filed
as Exhibit (15)(c) to this Post-Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-86832), and is
incorporated herein by reference.
11. 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.
12. 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>
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,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chairman and a director of
the Fund such Registration Statement and any and all such pre-and post-effective
amendments filed with the Securities and Exchange Commission under the 1933 Act
and the 1940 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorney-in-fact
and agent, or either of them or their substitute or substitutes, shall lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Truman T. Semans
---------------------------
Truman T. Semans
Date: September 29, 1999
------------------------
<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,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Richard T. Hale
---------------------------
Richard T. Hale
Date: September 29, 1999
------------------------
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph R. Hardiman, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Joseph R. Hardiman
---------------------------
Joseph R. Hardiman
Date: September 29, 1999
------------------------
<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,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Eugene J. McDonald
---------------------------
Eugene J. McDonald
Date: September 29, 1999
------------------------
<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,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Louis E. Levy
---------------------------
Louis E. Levy
Date: September 29, 1999
------------------------
<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 Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Equity Partners Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all
pre-and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ James J. Cunnane
---------------------------
James J. Cunnane
Date: September 29, 1999
------------------------
<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,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, her true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in her
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/Rebecca W. Rimel
---------------------------
Rebecca W. Rimel
Date: September 29, 1999
------------------------
<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 Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable Flag Investors Equity Partners Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all
pre-and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
---------------------------
Carl W. Vogt
Date: September 29, 1999
------------------------
<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 Amy M.
Olmert and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Flag Investors Equity Partners Fund, Inc. (the "Fund")
to comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre-and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as President of the Fund such Registration
Statement and any and all such pre-and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Harry Woolf
---------------------------
Harry Woolf
Date: September 29, 1999
------------------------
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Charles A. Rizzo, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Equity Partners
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre-and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Treasurer of the Fund such
Registration Statement and any and all such pre-and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/Charles A. Rizzo
---------------------------
Charles A. Rizzo
Date: September 29, 1999
------------------------
