<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 14a-11(c) or 14a-12
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
One South Street
Baltimore, Maryland 21202
---------------------------
August 25, 1999
Dear Shareholder:
On June 4, 1999, Bankers Trust merged with Deutsche Bank AG. Bankers Trust
is the parent of Investment Company Capital Corp., the investment advisor to
the Flag Investors Equity Partners Fund, Inc. (the "Fund"). Bankers Trust also
indirectly owns a 1% general partnership interest and a 49% limited partnership
interest in Alex. Brown Investment Management, the Fund's sub-advisor. As a
result of the merger, we are asking shareholders of the Fund to approve new
advisory and sub-advisory agreements. Enclosed is further information relating
to these changes, including a Questions & Answers section, proxy statement and
proxy card(s).
Important information about the changes:
o The merger has no effect on the number of shares you own or the value of
those shares.
o The advisory and sub-advisory fees payable under the new advisory and
sub-advisory agreements have not increased.
o The investment objective of your mutual fund investment has not changed.
In addition to the change in advisory agreements, shareholders are also
being asked to approve other changes outlined in the enclosed Proxy Statement.
The Board of Directors of the Fund believes that the proposals are important
and recommends that you read the enclosed materials carefully and then vote for
all proposals. ---
What you need to do:
o Read all enclosed materials including the Questions & Answers section.
o Choose one of the following options to vote:
1. By Mail: Complete the enclosed proxy card and return it in the
postage-paid envelope provided.
2. By Telephone: Call the Toll-Free # on your proxy card.
3. By Internet: Logon to www.proxyvote.com.
-----------------
4. Attend the Shareholder Meeting (details enclosed).
Sincerely,
/s/ Truman T. Semans
---------------------
Truman T. Semans
Chairman
Flag Investors Equity Partners Fund, Inc.
<PAGE>
August 25, 1999
IMPORTANT NEWS
FOR SHAREHOLDERS OF
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of some matters affecting the Fund which
require a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. What has happened to require a shareholder vote?
A. On June 4, 1999, Bankers Trust became a subsidiary of Deutsche Bank AG.
Bankers Trust is the parent of Investment Company Capital Corp. ("ICC"),
investment advisor to the Flag Investors Equity Partners Fund, Inc. (the
"Fund"). In addition, Bankers Trust also indirectly owns a 1% general
partnership interest and a 49% limited partnership interest in Alex. Brown
Investment Management ("ABIM"), the Fund's sub-advisor. Deutsche Bank, a
banking company organized under the laws of the Federal Republic of Germany,
provides a comprehensive range of global banking and financial services.
Deutsche Bank now ranks as the fourth largest investment manager in the world
with $670 billion in assets in a full range of active and index strategies.
Deutsche Asset Management Americas handles the investment management activities
of Deutsche Bank in the Americas and, as of July 31, 1999, manages $322 billion
in assets.
To ensure that ICC may continue to serve as investment advisor and ABIM as
sub-advisor to the Fund, we are seeking shareholder approval of new advisory
and sub-advisory agreements. In addition, you are being asked to elect a Board
of Directors of the Fund and to modify, eliminate or reclassify as
non-fundamental certain of the Fund's investment policies in response to
changes in the law.
THE BOARD MEMBERS OF YOUR FUND, INCLUDING THOSE WHO ARE NOT AFFILIATED WITH THE
FUND, RECOMMEND THAT YOU VOTE FOR THESE PROPOSALS.
---
Q. Why am I being asked to vote on the new advisory and sub-advisory
agreements?
A. The Investment Company Act of 1940, which regulates investment companies in
the United States such as the Fund, requires a shareholder vote to approve new
investment advisory agreements following certain types of business
combinations. The new advisory and sub-advisory agreements became effective
immediately upon consummation of the merger and will continue in effect only
upon shareholder approval.
Q. How does the merger affect the Fund?
A. The Fund and its investment objective have not changed as a result of the
merger. You still own the same shares in the same Fund as you did prior to the
merger. The new advisory and sub-advisory agreements contain substantially the
same terms and conditions as the investment advisory and sub-advisory agreements
in effect prior to the merger, except for the dates of execution, effectiveness
and initial term. If shareholders do not approve the new advisory and
sub-advisory agreements, these agreements will no longer continue and the Board
of Directors will take such action as it deems to be in the best interests of
the Fund and its shareholders.
<PAGE>
Q. Have the investment advisory and sub-advisory fees remained the same?
A. Yes.
Q. What are the benefits of the merger?
A. There are several potential positive aspects of the merger you may be
interested in. Most notably, the combined institution will be one of the
largest financial institutions in the world, as well as a leader in a number of
important categories, including asset management. The financial strength of the
combined institution coupled with the increased breadth and depth of its
resources and capabilities are advantages the acquisition brings. Further, as a
truly global institution, the combined entity will be in a unique position to
provide coverage, services and products.
Q. How does the Board of Directors of the Fund recommend that I vote?
A. After careful consideration, the Board of Directors of the Fund recommends
that you vote in favor of all the proposals on the enclosed proxy card.
Q. Where can I get more information?
A. If you need more information, please call Shareholder Communications
Corporation, the Fund's information agent, at 1-800-732-6168.
Q. How can I vote my shares?
A. You may choose from one of the following options to vote your shares:
o By mail, with the enclosed proxy card(s) and return envelope.
o By telephone, with a toll-free call to the telephone number that appears on
your proxy card.
o Through the Internet, by using the Internet address located on your proxy
card and following the instructions on the site.
o In person at the shareholder meeting (see details enclosed in proxy
statement).
Q. Will the Fund pay for the proxy solicitation and legal costs associated with
this transaction?
A. No, ICC will bear these costs.
Please vote all issues on each proxy card that you receive. Thank you for
mailing your proxy card promptly.
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
One South Street
Baltimore, Maryland 21202
---------------------------
Notice of Special Meeting of Shareholders
October 7, 1999
TO THE SHAREHOLDERS OF FLAG INVESTORS EQUITY PARTNERS FUND, INC.:
You are cordially invited to a special meeting (the "Special Meeting") of
the shareholders of Flag Investors Equity Partners Fund, Inc. (the "Fund"). The
Special Meeting will be held on Thursday, October 7, 1999, at 1:15 p.m. Eastern
Time at the offices of Investment Company Capital Corp., in the conference room
on the 30th Floor of The Alex. Brown Building, One South Street, Baltimore,
Maryland 21202. The purpose of the Special Meeting is to consider the proposals
set forth below and to transact such other business as may be properly brought
before the Special Meeting:
PROPOSAL 1: To consider and act upon a proposal to elect a Board of
Directors of the Fund.
PROPOSAL 2: To approve a new Investment Advisory Agreement between the
Fund and Investment Company Capital Corp.
PROPOSAL 3: To approve a new Sub-Advisory Agreement among the Fund,
Investment Company Capital Corp. and Alex. Brown Investment
Management.
PROPOSAL 4: To eliminate the Fund's fundamental investment policy
concerning short sales.
PROPOSAL 5: To eliminate the Fund's fundamental investment policy
concerning the purchase of securities on margin.
PROPOSAL 6: To eliminate the Fund's fundamental investment policy
concerning purchases of oil, gas or mineral interests.
PROPOSAL 7: To modify the Fund's fundamental investment policy concerning
the purchase or sale of commodities or commodity contracts.
PROPOSAL 8: To modify the Fund's fundamental investment policy concerning
borrowing.
PROPOSAL 9: To modify the Fund's fundamental investment policy concerning
loans.
PROPOSAL 10: To reclassify the Fund's fundamental investment policy
concerning illiquid securities from fundamental to
non-fundamental.
Only shareholders of the Fund at the close of business on August 6, 1999
are entitled to notice of, and to vote at, this meeting or any adjournment
thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS SOON
AS POSSIBLE. YOU MAY ALSO VOTE EASILY AND QUICKLY BY TELEPHONE OR THROUGH THE
INTERNET. TO DO SO, PLEASE FOLLOW THE INSTRUCTIONS INCLUDED ON YOUR ENCLOSED
PROXY CARD. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO VOTE SO THAT A
QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. THE PROXY
IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
/s/ Amy M. Olmert
----------------------
Amy M. Olmert
Secretary
Dated: August 25, 1999
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
One South Street
Baltimore, Maryland 21202
---------------------------------
PROXY STATEMENT
---------------------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
October 7, 1999
This Proxy Statement is furnished by the Board of Directors of Flag
Investors Equity Partners Fund, Inc. (the "Fund") in connection with the
solicitation of proxies for use at the special meeting of shareholders of the
Fund to be held on Thursday, October 7, 1999, at 1:15 p.m. Eastern Time, or at
any adjournment thereof (the "Special Meeting"), at the offices of Investment
Company Capital Corp., in the conference room on the 30th Floor of The Alex.
Brown Building, One South Street, Baltimore, Maryland 21202. It is expected
that the Notice of Special Meeting, the Proxy Statement and a Proxy Card will
be mailed to shareholders on or about August 25, 1999.
Summary
-------
At the Special Meeting, shareholders will be asked to elect a slate of
Directors, to approve a new Investment Advisory Agreement, to approve a new
Sub-Advisory Agreement and to consider a number of issues relating to the
fundamental investment policies of the Fund.
Proposal 1 asks shareholders of the Fund to elect a Board of Directors.
Proposals 2 and 3 ask shareholders to consider 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"). This action is necessary
because the merger on June 4, 1999 (the "Merger") between Bankers Trust
Corporation ("Bankers Trust"), the indirect parent of ICC, and a U.S.
subsidiary of Deutsche Bank AG ("Deutsche Bank") may have arguably resulted in
an assignment and, therefore, termination of the Fund's prior Investment
Advisory and Sub-Advisory Agreements under the Investment Company Act of 1940,
as amended (the "1940 Act"). The proposed new Investment Advisory and
Sub-Advisory Agreements are identical to the Fund's prior Investment Advisory
and Sub-Advisory Agreements, except for the dates of execution, effectiveness
and initial term.
Proposals 4 through 10 ask shareholders to approve changes in the
fundamental investment policies of the Fund. Shareholders are being asked to
modify, eliminate or
1
<PAGE>
reclassify as non-fundamental certain of the Fund's investment policies
primarily to update these policies to reflect changes in the law. The changes
to the Fund's fundamental policies would become effective upon shareholder
approval or at such later date as the proper officers of the Fund determine.
If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please vote your proxy (the "Proxy") by mail, telephone or
Internet, allowing sufficient time for the Proxy to be received on or before
1:15 p.m. Eastern Time on Thursday, October 7, 1999. If your Proxy is properly
returned, shares represented by it will be voted at the Special Meeting in
accordance with your instructions. However, if no instructions are specified on
the Proxy with respect to a specific Proposal, the Proxy will be voted FOR the
approval of such Proposal and in accordance with the judgment of the persons
appointed as proxies upon any other matter that may properly come before the
Special Meeting. Shareholders may revoke their Proxies at any time prior to the
time they are voted by giving written notice to the Secretary of the Fund, by
delivering a subsequently dated Proxy or by attending and voting at the Special
Meeting.
The close of business on August 6, 1999, has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to notice
of, and to vote at, the Special Meeting and at any adjournment thereof. On that
date, the Fund had 19,012,999.183 shares outstanding. Each full share will be
entitled to one vote at the Special Meeting and each fraction of a share will
be entitled to the fraction of a vote equal to the proportion of a full share
represented by the fractional share.
The expenses of the Special Meeting will be borne by ICC and will include
reimbursement to brokerage firms and others for expenses in forwarding Proxy
solicitation materials to beneficial owners. The solicitation of Proxies will
be largely by mail, but may include telephonic, telegraphic, Internet or oral
communication by employees and officers of ICC and ABIM (collectively, the
"Advisors"). Additional solicitation may be made by Shareholder Communications
Corporation ("Shareholder Communications"), a solicitation firm located in New
York, New York, that has been engaged by the Fund to assist in proxy
solicitation.
Upon request, the Fund will furnish to shareholders, without charge, a
copy of the Annual Report for its fiscal year ended May 31, 1999. The Annual
Report of the Fund may be obtained by written request to the Fund, One South
Street, Baltimore, Maryland 21202, or by calling (800) 553-8080.
The Fund is registered as an open-end, diversified management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended. The Fund offers four classes of shares: Class A, Class
B, Class C and Institutional.
2
<PAGE>
PROPOSAL 1: To consider and act upon a proposal to elect a Board of Directors
of the Fund.
At the Special Meeting, it is proposed that eight Directors be elected to
hold office until their successors are duly elected and qualified. The persons
named in the accompanying Proxy intend, in the absence of contrary
instructions, to vote all Proxies on behalf of the shareholders for the
election of Richard R. Burt, Richard T. Hale, Joseph R. Hardiman, Louis E.
Levy, Eugene J. McDonald, Rebecca W. Rimel, Truman T. Semans, and Robert H.
Wadsworth (each a "Nominee" and collectively the "Nominees"). All of the
Nominees are currently members of the Board of Directors except Messrs. Burt
and Wadsworth. Ms. Rimel and Messrs. Hale, Levy, McDonald and Semans were last
elected by a vote of shareholders on August 14, 1997. Mr. Hardiman was
appointed by the Board of Directors to fill a vacancy on the Board and has not
previously been elected by the shareholders. Messrs. James J. Cunnane and Carl
W. Vogt, who are currently members of the Board, are not seeking reelection and
will resign from the Board effective upon the election of their successors. It
is the intention of the Board that at least 75% of its members will be
disinterested persons within the contemplation of Section 15(f) of the 1940 Act
and will remain disinterested persons for at least three years after the
Merger.
At a meeting held on July 28, 1999, the nominating committees (with each
committee comprised of four independent directors) of the Boards of Directors
of the Deutsche Funds, Inc. ("Deutsche Funds") and the Deutsche Portfolios
recommended to the full Boards the nomination of Ms. Rimel and Messrs. Hale,
Hardiman, Levy, McDonald and Semans to each Board. If approved by the full
Boards of the Deutsche Funds and the Deutsche Portfolios, and if subsequently
approved by shareholders, they will serve as directors of the Deutsche Funds
and the Deutsche Portfolios. The Deutsche Funds and the Deutsche Portfolios are
advised by a subsidiary of Deutsche Bank.
The proposal to elect the Board of Directors is being presented for
shareholder approval pursuant to requirements under the 1940 Act. Under the
1940 Act, Directors may not fill vacancies unless at least two-thirds of the
Directors holding office after such vacancies are filled have been elected by
the shareholders. The Special Meeting will provide the Board with operating
flexibility by making it possible for the Board of Directors to fill vacancies
that may occur in the future.
Each of the Nominees has consented to being named in this Proxy Statement
and to serving as a Director if elected. The Fund knows of no reason why any
Nominee would be unable or unwilling to serve if elected. Because the Fund does
not hold regular annual shareholder meetings, each Nominee, if elected, will
hold office until his or her successor is elected and qualified.
3
<PAGE>
Information Regarding Nominees
The following information is provided for each Nominee. As of May 31,
1999, the Directors and officers of the Fund as a group and the Nominees as a
group beneficially owned an aggregate of less than 1% of the Fund.
<TABLE>
<CAPTION>
Shares
Beneficially
Name and Position Business Experience During the Past Owned as of
with the Fund Age Five Years (including all directorships) May 31, 1999** Percentage
- ------------------------- ----- ------------------------------------------- ---------------- -----------
<S> <C> <C> <C> <C>
Truman T. Semans* 72 Vice Chairman, Brown Investment None ***
Director and Chairman Advisory & Trust Company (formerly,
since 1994 Alex. Brown Capital Advisory & Trust
Company); Director, Investment Company
Capital Corp. (registered investment
advisor); and Director and Chairman, the
Executive Committee of 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). Director of
10 funds in the Fund Complex.****
Richard R. Burt 52 Chairman, IEP Advisors, Inc.; Chairman of None ***
Nominee the Board, Weirton Steel Corporation;
Member of the Board, Archer Daniels
Midland Company (agribusiness
operations), Hollinger International Inc.,
(publishing), Homestake Mining Company
(mining and exploration), HCL
Technologies (information technology) and
Anchor Technologies (gaming software and
equipment); Director, Mitchell Hutchins
family of funds and Deutsche Funds, Inc.;
Trustee, Deutsche Portfolios (registered
investment companies); and Member,
Textron Corporation International Advisory
Council. Formerly, Partner, McKinsey &
Company (consulting), 1991-1994; and
U.S. Chief Negotiator in Strategic Arms
Reduction Talks (START) with former
Soviet Union and U.S. Ambassador to the
Federal Republic of Germany, 1985-1991.
Nominee for Director of 8 funds in the
Fund Complex.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Name and Position Business Experience During the Past Owned as of
with the Fund Age Five Years (including all directorships) May 31, 1999** Percentage
- ----------------------- ----- -------------------------------------------- ---------------- -----------
<S> <C> <C> <C> <C>
Richard T. Hale* 54 Managing Director, Deutsche Asset 22,475.00 ***
Director since 1994 Management Americas; Managing Director,
BT Alex. Brown Incorporated; Director and
President, Investment Company Capital
Corp. (registered investment advisor); and
Chartered Financial Analyst. Director of 10
funds in the Fund Complex.
Joseph R. Hardiman 62 Private Equity Investor and Capital None ***
Director since 1998 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 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. Director of each fund in the Fund
Complex.
Louis E. Levy 66 Director, Kimberly-Clark Corporation 2,104.00+ ***
Director since 1994 (personal consumer products) and
Household International (finance and
banking). 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. Director of each fund in the Fund
Complex.
Eugene J. McDonald 67 President, Duke Management Company None ***
Director since 1994 (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). Director of
each fund in the Fund Complex.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Name and Position Business Experience During the Past Owned as of
with the Fund Age Five Years (including all directorships) May 31, 1999** Percentage
- ----------------------- ----- ---------------------------------------------- ---------------- -----------
<S> <C> <C> <C> <C>
Rebecca W. Rimel 48 President and Chief Executive Officer, The None ***
Director since 1995 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. Director of 11 funds in the Fund
Complex.
Robert H. Wadsworth 59 President, The Wadsworth Group None ***
Nominee (registered investment advisor), First Fund
Distributors, Inc. (registered broker dealer)
and Guinness Flight Investment Funds,
Inc.; Director, The Germany Fund, Inc.,
The New Germany Fund, Inc., The Central
European Equity Fund, Inc., DB New
World Portfolio, Ltd., and Deutsche Funds,
Inc.; Trustee, Deutsche Portfolios; and Vice
President, Professionally Managed
Portfolios and Advisors Series Trust
(registered investment companies).
Nominee for Director of 8 funds in the
Fund Complex.
</TABLE>
- ----------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** This information has been provided by each Nominee for Director of the
Fund.
*** As of May 31, 1999, the Nominees of the Fund as a group beneficially owned
an aggregate of less than 1% of the Fund.
**** The "Fund Complex" consists of 12 registered investment companies which
hold themselves out to investors as related companies for purposes of
investment and investor services for which ICC provides investment
advisory or administrative services.
+ Mr. Levy disclaims beneficial ownership of these shares as they are held by
his wife in trust for his children.
Compensation of Directors
Each Director who is not an "interested person" within the meaning of the
1940 Act, as well as 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 the
Fund and all of the funds in the Fund Complex for which he or she serves.
Payment of such fees and expenses is allocated among all such funds described
above in 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
6
<PAGE>
$14,458. Officers of the Fund, except the Fund's President, receive no direct
remuneration from the Fund. Officers of the Fund who are employees of Deutsche
Asset Management Americas or its affiliates may be considered to have received
remuneration indirectly.
Any Director who receives fees from the Fund is permitted to defer between
50% and 100% of his or her annual compensation pursuant to a Deferred
Compensation Plan. Ms. Rimel and Messrs. Cunnane, Levy, McDonald and Vogt have
each executed a Deferred Compensation Agreement and may defer a portion of
their compensation from the Fund and the Fund Complex. Currently, the deferring
Directors may select from among various funds in the Fund Complex 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 quarterly installments over a period of ten
years.
The aggregate compensation payable by the Fund to each of the Fund's
Directors serving during the fiscal year ended May 31, 1999 is set forth in the
compensation table below. The aggregate compensation payable to such Directors
during the fiscal year ended May 31, 1999 by the Fund Complex is also set forth
in the compensation table below.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Total Compensation Number of Funds
Compensation Benefits Accrued as from the Fund in Fund Complex
Payable Part of Fund and Fund Complex for which Director
Name and Position from the Fund Expenses Payable to Directors Serves
- ------------------------------------- --------------- ----------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Truman T. Semans, Chairman(1) ....... $ 0 $0 $ 0 10
Richard T. Hale, Director(1) ........ $ 0 $0 $ 0 10
James J. Cunnane, Director .......... $1,589(2) (3) $39,000 13(4)
Joseph R. Hardiman, Director(5) ..... $1,239 (3) $29,250 11(6)
John F. Kroeger, Director(7) ........ $1,492 (3) $36,750 13(4)
Louis E. Levy, Director ............. $1,892 (3) $46,500 13(4)
Eugene J. McDonald, Director ........ $1,790(2) (3) $44,000 13(4)
Rebecca W. Rimel, Director .......... $1,614(2) (3) $39,000 12(4,6)
Carl W. Vogt, Esq., Director ........ $1,624(2) (3) $39,000 13(4,6)
</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.
7
<PAGE>
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
investment 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 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 thirteen and fourteen years, respectively, as Directors in the Fund
Complex and each of whom will be paid a quarterly fee of $4,875 by the Fund
Complex for the rest of his life. Such fees are allocated to each fund in the
Fund Complex based upon the relative net assets of such fund to the Fund
Complex.
Set forth in the table below are the estimated annual benefits payable to
a Participant upon retirement assuming various years of service and payment of
a percentage of the fee earned by such Participant in his or her last year of
service, as described below. The approximate credited years of service, shown
in parentheses, for each Participant at December 31, 1998, are as follows: Ms.
Rimel (3), and Messrs. Cunnane (4), Hardiman (0), Levy (4), McDonald (6) and
Vogt (3).
Estimated Annual Benefits Payable By Fund Complex Upon Retirement
Chairmen of Audit
Years of Service and Executive Committees Other Participants
- ------------------ -------------------------- -------------------
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
Meetings and Committees of the Board of Directors
There were four regular meetings of the Board of Directors held during the
fiscal year ended May 31, 1999. All incumbent Directors attended all of the
meetings held during their respective terms.
The Board of Directors has an Audit and Compliance Committee. The Audit
and Compliance Committee makes recommendations to the full Board of Directors
with respect to the engagement of independent accountants. The Committee
reviews, with the independent accountants, the results of the audit engagement
and matters having a material effect on the Fund's financial operations. The
members of the Audit and Compliance Committee during the fiscal year ended May
31, 1999, were Ms. Rimel
8
<PAGE>
and Messrs. Levy (Chairman), Cunnane, Hardiman, McDonald and Vogt, each of whom
is not an "interested person" within the meaning of the 1940 Act. Mr. Kroeger
was Chairman of the Audit and Compliance Committee until his retirement. If
elected, Messrs. Burt and Wadsworth will become members of the Audit and
Compliance Committee. The Audit and Compliance Committee met four times during
the fiscal year ended May 31, 1999. All incumbent members attended at least 75%
of the meetings held during their respective terms. The Chairman receives an
aggregate annual fee of $10,000 from the Fund Complex. Payment of the fee is
allocated among all funds in the Fund Complex in proportion to their relative
net assets.
The Board of Directors has a Nominating Committee. The Nominating
Committee makes recommendations to the full Board of Directors with respect to
candidates for the Board of Directors. The members of the Nominating Committee
during the fiscal year ended May 31, 1999, were Ms. Rimel and Messrs. McDonald
(Chairman), Cunnane, Hardiman, Levy, and Vogt, each of whom is not an
"interested person" within the meaning of the 1940 Act. If elected, Messrs.
Burt and Wadsworth will become members of the Nominating Committee. The
Nominating Committee met once during the fiscal year ended May 31, 1999. All
incumbent members, except Mr. Vogt, attended the meeting.
The Board of Directors has a Compensation Committee. The Compensation
Committee makes recommendations to the full Board of Directors with respect to
the compensation of Directors. The members of the Compensation Committee during
the fiscal year ended May 31, 1999, were Ms. Rimel and Messrs. Cunnane
(Chairman), Hardiman, Levy, McDonald and Vogt, each of whom is not an
"interested person" within the meaning of the 1940 Act. If elected, Messrs.
Burt and Wadsworth will become members of the Compensation Committee. The
Compensation Committee did not meet during the fiscal year ended May 31, 1999.
The Board of Directors has an Executive Committee. The Executive Committee
makes recommendations to the full Board of Directors with respect to the
renewal of the Fund's agreements with its service providers. The members of the
Executive Committee during the fiscal year ended May 31, 1999 were, Ms. Rimel
and Messrs. McDonald (Chairman), Cunnane, Levy, Hardiman and Vogt, each of whom
is not an "interested person" within the meaning of the 1940 Act. If elected,
Messrs. Burt and Wadsworth will become members of the Executive Committee. The
Executive Committee was formed on September 28, 1998, and met twice during the
fiscal year ended May 31, 1999. All incumbent members attended the meetings
held during their respective terms. The Chairman receives an aggregate annual
fee of $10,000 from the Fund Complex. Payment of the fee is allocated among all
funds in the Fund Complex in proportion to their relative net assets.
9
<PAGE>
Board Approval of the Election of Directors
At meetings of the Board of Directors held on March 30, 1999 and July 28,
1999, the Board of Directors recommended that shareholders vote FOR each of the
Nominees for Director named herein. In recommending that shareholders elect the
Nominees as Directors of the Fund, the Board considered the Nominees'
experience and qualifications.
Shareholder Approval of the Election of Directors
The Election of the Directors requires the affirmative vote of a plurality
of all votes cast at the Special Meeting, provided that a majority of the
shares entitled to vote are present in person or by Proxy at the Special
Meeting. If you give no voting instructions, your shares will be voted FOR all
Nominees named herein. If the Directors are not approved by shareholders of the
Fund, the Board of Directors will consider alternative nominations.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND
VOTE FOR THE ELECTION OF THE DIRECTORS.
---
PROPOSAL 2: To approve a new Investment Advisory Agreement between
the Fund and Investment Company Capital Corp.
General Information
ICC is the Fund's investment advisor and ABIM is the Fund's sub-advisor.
ICC is an indirect wholly owned subsidiary of Bankers Trust. BT Alex. Brown
Incorporated ("BT Alex. Brown") owns a 1% general partnership interest in ABIM
and BT Alex. Brown Holdings, Inc. owns a 49% limited partnership interest in
ABIM.
On November 30, 1998, Bankers Trust, Deutsche Bank and Circle Acquisition
Corporation entered into an Agreement and Plan of Merger (the "Merger
Agreement"). Pursuant to the terms of the Merger Agreement, Circle Acquisition
Corporation, a wholly owned, New York subsidiary of Deutsche Bank, merged with
and into Bankers Trust on June 4, 1999, with Bankers Trust continuing as the
surviving entity. Under the terms of the Merger, each outstanding share of
Bankers Trust common stock was converted into the right to receive $93 in cash,
without interest.
As a result of the Merger, Bankers Trust became a wholly owned subsidiary
of Deutsche Bank. Deutsche Bank is a banking company with limited liability
organized under the laws of the Federal Republic of Germany. Deutsche Bank is
the parent company of a group consisting of banks, capital markets companies,
mutual fund management companies, mortgage banks, a property finance company,
installment financing and leasing companies, insurance companies, research and
consultancy companies and other domestic and foreign companies (the "Deutsche
Group"). At March 31, 1999, the Deutsche Group had total assets of U.S. $727
billion. The Deutsche Group's capital and reserves at March 31, 1999 were U.S.
$19.6 billion. Since the Merger, Bankers Trust, ICC and ABIM, along with their
affiliates, have continued to offer the same range of financial products and
services, including investment advisory services, that they offered prior to the
Merger.
10
<PAGE>
The Merger on June 4, 1999 may have resulted in an assignment and,
therefore a termination, of the Fund's prior Investment Advisory Agreement
under the 1940 Act. In anticipation of the Merger, the Directors of the Fund,
including the Directors who are not (i) parties to the new Investment Advisory
Agreement between the Fund and ICC (the "New Advisory Agreement") or (ii)
interested persons of any such party (the "Independent Directors"), unanimously
approved the New Advisory Agreement (attached as Exhibit A) on March 30, 1999.
The New Advisory Agreement is identical to the Fund's prior Investment Advisory
Agreement, except for the dates of execution, effectiveness and initial term.
On May 25, 1999, ICC was granted an exemptive order (the "Exemptive
Order") by the Securities and Exchange Commission ("SEC") permitting
implementation, without obtaining prior shareholder approval, of the New
Advisory Agreement during an interim period commencing on the date of the
closing of the Merger and continuing, for a period of up to 150 days, through
the date on which the New Advisory Agreement is approved by the shareholders of
the Fund (the "Interim Period"). Under the terms of the Exemptive Order, ICC is
allowed to receive advisory fees during the Interim Period pursuant to the New
Advisory Agreement. In accordance with the Exemptive Order, the advisory fees
charged to the Fund and paid to ICC under the New Advisory Agreement have been
held in an interest-bearing escrow account and the Fund expects to continue to
deposit these fees in such account until approval of the New Advisory Agreement
by shareholders of the Fund has been obtained. If the New Advisory Agreement is
not approved by the shareholders of the Fund by the expiration of the Interim
Period, the fees held in escrow will be remitted to the Fund. As of July 31,
1999, the amount escrowed totaled $623,017.55.
ICC does not anticipate that the Merger will result in any reduction in
the quality of services now provided to the Fund. Nor does ICC anticipate that
the Merger will have any adverse effect on its ability to fulfill its
obligations under the New Advisory Agreement or to operate its business in a
manner consistent with past business practice.
The Prior Advisory Agreement
Prior to June 4, 1999, ICC served as investment advisor to the Fund
pursuant to an Investment Advisory Agreement between ICC and the Fund, dated as
of September 1, 1997 (the "Prior Advisory Agreement"). The Prior Advisory
Agreement was initially approved by the shareholders of the Fund on August 14,
1997. The Prior Advisory Agreement was last approved by the Fund's Board of
Directors, including a majority of the Independent Directors, on September 29,
1998.
11
<PAGE>
The New Advisory Agreement
Other than the dates of execution, effectiveness and initial term, the New
Advisory Agreement is identical to the Prior Advisory Agreement. The terms of
the New Advisory Agreement are summarized below and are qualified by reference
to Exhibit A.
Advisory Fees. The investment advisory fee as a percentage of net assets
payable by the Fund will be the same under the New Advisory Agreement as under
the Prior Advisory Agreement. If the investment advisory fee under the New
Advisory Agreement had been in effect for the Fund's most recently completed
fiscal year, ICC would have received the same compensation as it received under
the Prior Advisory Agreement.
The New Advisory Agreement. The New Advisory Agreement provides that the
Advisor, in return for its fee, will (a) supervise and manage all aspects of
the Fund's operations, except for distribution services; (b) formulate and
implement continuing programs for the 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 materials, tax returns, reports to
the Fund's shareholders and reports to and filings with the SEC and state Blue
Sky authorities which may be required of the Fund. Subject to the approval of
the Board and the Fund's shareholders, the Advisor may delegate certain of its
duties enumerated above to a sub-advisor.
Under the New Advisory Agreement, the Fund pays ICC an annual fee based on
the Fund's average daily net assets. This fee is calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly, at the annual rate
of 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. The Advisor may,
from time to time, voluntarily waive a portion of its advisory fee to preserve
or enhance the performance of the Fund.
12
<PAGE>
The New Advisory Agreement provides that the Advisor will furnish, subject
to compliance with applicable banking regulations, at its expense and without
cost to the Fund, the services of one or more officers of the Fund to the
extent that such officers may be required by the Fund for the proper conduct of
its affairs. The Fund assumes and pays all other expenses of the Fund. These
expenses include, but are not limited to, 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; and
broker's commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party. Additional information
regarding other Fund expenses is included in the New Advisory Agreement
attached as Exhibit A.
The services of the Advisor are not to be deemed exclusive, and the
Advisor is free to render investment advisory and corporate administrative or
other services to others (including other investment companies), and to engage
in other activities, so long as its services under the agreement are not
impaired thereby. The Advisor's officers or directors may serve as officers or
directors of the Fund, and the Fund's officers or directors may serve as
officers or directors of the Advisor, to the extent permitted by law.
Following the expiration of its initial two-year term, the New Advisory
Agreement continues in full force and effect from year to year, provided that
such continuance is approved at least annually by the Fund's Board or by the
vote of a majority of the Fund's outstanding voting securities, and by the
affirmative vote of a majority of the Directors who are not parties to the
agreement or "interested persons" of a party to the agreement (other than as
Directors of the Fund) by votes cast in person at a meeting specifically called
for such purpose.
The New Advisory Agreement may be terminated at any time, on waivable
written notice within 60 days and without any penalty, by vote of the Fund's
Board of Directors, by vote of a majority of the Fund's outstanding voting
securities or by the Advisor. The agreement automatically terminates in the
event of its assignment.
The New Advisory Agreement obligates the Advisor to exercise care and
diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under the
agreement, but the Advisor is not 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.
13
<PAGE>
Board Considerations. The Board held a meeting on March 30, 1999, at which
the Board, including the Independent Directors, unanimously approved the New
Advisory Agreement and recommended the New Advisory Agreement for approval by
the shareholders of the Fund. In evaluating the New Advisory Agreement, the
Board based its determination primarily on its conclusion that there would be a
high degree of continuity of services to the Fund and took into account that
the Prior Advisory Agreement and the New Advisory Agreement, including their
terms relating to the services to be provided thereunder by ICC and the fees
and expenses payable by the Fund, are substantially identical.
The Board was assured on behalf of Bankers Trust and Deutsche Bank that
they intend to comply with the requirements of Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment advisor to
an investment company or any of its affiliated persons to receive any amount or
benefit in connection with a change in control of the investment advisor that
results in an assignment so long as two conditions are met:
1. For a period of three years after the change of control, at least 75%
of the board members of the investment company must not be interested persons
of the acquired advisor or the acquiror (Bankers Trust and Deutsche Bank,
respectively, in this case). The Fund would be in compliance with this
provision of Section 15(f).
2. An "unfair burden" must not be imposed upon the investment company as a
result of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
Merger whereby the investment advisor, or any interested person of any such
advisor, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from
or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). Bankers
Trust and Deutsche Bank are not aware of any express or implied term,
condition, arrangement or understanding that would impose an "unfair burden" on
the Fund as a result of the Merger. Bankers Trust and Deutsche Bank have agreed
that they, and their affiliates, will take no action that would have the effect
of imposing an "unfair burden" on the Fund as a result of the Merger.
The Board also considered the terms of the Merger and the possible effects
of the Merger upon ICC's organization and upon the ability of ICC to provide
advisory services to the Fund. The Board considered the skills and capabilities
of ICC in this regard and the representations of Bankers Trust and Deutsche
Bank that no material change was planned in the current management or
facilities of ICC.
14
<PAGE>
The Board was also informed of the resources of Deutsche Bank that could
be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Deutsche Bank's experience as advisor and service provider to two families of
U.S. mutual funds as well as numerous non-U.S. mutual funds.
The Board also considered other effects on the Fund of ICC becoming an
affiliated person of Deutsche Bank. Following the Merger, the 1940 Act will
prohibit or impose certain conditions on the ability of the Fund to engage in
certain transactions with Deutsche Bank. For example, absent exemptive relief,
the Fund will be prohibited from entering into securities transactions in which
Deutsche Bank acts as a principal. Currently the Fund is prohibited from
entering into only those transactions in which Bankers Trust acts as principal.
The Fund will also have to satisfy certain conditions in order to engage in
securities transactions in which Deutsche Bank is acting as an underwriter. The
Fund is already required to satisfy such conditions when engaging in
transactions in which Bankers Trust is acting as an underwriter. In this
connection, management of the Advisor represented to the Board that it does not
believe these prohibitions or conditions will have a material effect on the
management or performance of the Fund.
The Board also considered that the costs of the Special Meeting, insofar
as they apply to approval of the New Advisory Agreement, would be borne by the
Advisor.
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the
Independent Directors, unanimously approved the New Advisory Agreement and
voted to recommend its approval to the shareholders of the Fund.
Additional Information. On March 11, 1999, Bankers Trust Company, a
separate subsidiary of Bankers Trust, 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 after these events
took place. Pursuant to its agreement with the U.S. Attorney's office, Bankers
Trust Company 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 Company's formal sentencing. The events leading up to the
guilty pleas did not arise out of the investment advisory or management
activities provided by ICC to the Fund.
As a result of the pleas, absent an order from the SEC, ICC would not be
able to continue as Advisor. The SEC granted Bankers Trust Company a temporary
order under Section 9(c) of the 1940 Act to permit Bankers Trust Company and its
affiliates to continue to provide investment advisory services to registered
investment companies, and Bankers Trust Company, pursuant to Section 9(c) of the
1940 Act, has filed an application for a permanent order. On May 7, 1999, the
15
<PAGE>
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. If the SEC refuses to grant a permanent order, shareholders
will receive supplemental proxy materials requesting approval to release any
amounts held in escrow up to the time of the refusal and such other action as
deemed appropriate by the Board.
Investment Company Capital Corp.
ICC is a registered investment advisor that had under management as of
June 30, 1999 approximately $10 billion, including assets of the Fund and the
assets of ICC's other clients. ICC is a wholly owned subsidiary of BT Alex.
Brown and an indirect subsidiary of Bankers Trust. The principal address of ICC
and BT Alex. Brown is One South Street, Baltimore, Maryland, 21202 and the
principal address of Bankers Trust is 130 Liberty Street, New York, New York,
10006. Bankers Trust is a wholly owned subsidiary of Deutsche Bank. The
principal address of Deutsche Bank is Deutsche Bank Aktiengesellschaft,
Taunsalage 12, D-60262 Frankfurt am Main, Federal Republic of Germany.
Deutsche Asset Management Americas is an operating unit of Deutsche Bank
consisting of ICC and other asset management affiliates of Deutsche Bank.
The following information is provided for each Director and the principal
executive officer of ICC.
Directors and Principal Executive Officer of ICC
<TABLE>
<CAPTION>
Name and Position
with the Advisor Address Principal Occupation
- -------------------------- --------------------------- -----------------------------------
<S> <C> <C>
Richard T. Hale One South Street Managing Director,
Director and President Baltimore, Maryland 21202 Deutsche Asset Management Americas
Margaret-Mary V. Preston One South Street Managing Director,
Director Baltimore, Maryland 21202 BT Alex. Brown Incorporated
Mayo A. Shattuck III One South Street President, Chief Operating Officer
Director Baltimore, Maryland 21202 and Director
BT Alex. Brown Incorporated
Truman T. Semans Furness House Vice Chairman.
Director 19 South Street Brown Investment Advisory &
Baltimore, Maryland 21202 Trust Company
</TABLE>
For the fiscal year ended May 31, 1999, the Fund paid ICC an aggregate fee
of $2,864,847 for advisory services. For such fiscal year, the Fund also paid
ICC aggregate fees of $145,421 for transfer agency services provided to the
Fund and $94,427 for accounting services provided to the Fund. For the same
period, the Fund paid $55,913 to Bankers Trust Company for custody services
provided to the Fund.
16
<PAGE>
As of June 4, 1999, to the Fund management's knowledge as provided by the
Directors of the Fund, the following Directors of the Fund beneficially owned
shares of Bankers Trust that were converted into the right to receive $93 per
share in cash, without interest, pursuant to the terms of the Merger. Mr. Hale,
Director of the Fund and President and a Director of ICC, beneficially owned
74,190 shares of Bankers Trust. Mr. Semans, Chairman and a Director of the Fund
and a Director of ICC, beneficially owned 329 shares of Bankers Trust.
Other Funds Advised by ICC with Similar Investment Objectives
A number of funds in the Flag Investors Fund Complex invest primarily in
equity securities and accordingly seek capital appreciation, either in and of
itself, or along with income. However, each of these funds employs widely
differing investment policies and styles in seeking these objectives. The
following table provides comparative information on fees paid to ICC pursuant
to advisory agreement in effect for such funds.
<TABLE>
<CAPTION>
Management Fee
Assets (as a percentage of
Fund (000's) average daily net assets)
- ---- ------- -------------------------
<S> <C> <C>
Flag Investors Emerging Growth Fund, Inc. ................ $ 123,273(1) 0.85%(1)
Flag Investors Communications Fund, Inc. ................. $ 1,445,143(2) 0.68%(2)
Flag Investors International Fund, Inc. .................. $ 12,187(3) 00% (net of fee waivers)(3)
Flag Investors Real Estate Securities Fund, Inc. ......... $ 41,462(4) 0.35% (net of fee waivers)(4)
Flag Investors Value Builder Fund, Inc. .................. $ 922,789(5) 0.75%(5)
</TABLE>
- ----------------
(1) Information given for the fiscal year ended October 31, 1998.
(2) Information given for the fiscal year ended December 31, 1998.
(3) Information given for the fiscal year ended October 31, 1998. Absent fee
waivers, Management Fees would be 0.75% of the fund's average daily net
assets.
(4) Information given for the fiscal year ended December 31, 1998. Absent fee
waivers, Management Fees would be 0.65% of the fund's average daily net
assets.
(5) Information given for the fiscal year ended March 31, 1999.
Shareholder Approval of the New Advisory Agreement
Approval of the New Advisory Agreement requires the affirmative vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act). In the event that shareholders of the Fund do not approve the New
Advisory Agreement, the Board will take such action as it deems in the best
interest of the Fund and its shareholders, which may include proposing that
shareholders approve an agreement in lieu of the New Advisory Agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND
VOTE FOR APPROVAL OF THE NEW ADVISORY AGREEMENT.
---
17
<PAGE>
PROPOSAL 3: To approve a new Sub-Advisory Agreement among the Fund, Investment
Company Capital Corp. and Alex. Brown Investment Management.
General Information
ABIM is the Fund's sub-advisor. Shareholders are being asked to approve a
new Sub-Advisory Agreement among ICC, ABIM and the Fund which has been in
effect since the closing of the Merger on June 4, 1999. For a description of
the Merger, together with the factors considered by the Board in its review and
analysis of such Merger, please see Proposal 2 beginning on page 10.
The Merger may have resulted in an assignment and, therefore a
termination, of the Fund's prior Sub-Advisory Agreement under the 1940 Act. In
anticipation of the Merger, the Directors of the Fund, including the Directors
who are not (i) parties to the new Sub-Advisory Agreement among the Fund, ICC
and ABIM (the "New Sub-Advisory Agreement") or (ii) interested persons of any
such party (the "Independent Directors"), unanimously approved the New
Sub-Advisory Agreement (attached as Exhibit B) on March 30, 1999. The New
Sub-Advisory Agreement is identical to the Fund's prior Sub-Advisory Agreement,
except for the dates of execution, effectiveness and initial term.
On May 25, 1999, ICC was granted an Exemptive Order by the SEC permitting
implementation, without obtaining prior shareholder approval, of the New Sub-
Advisory Agreement during an interim period commencing on the date of the
closing of the Merger and continuing, for a period of up to 150 days, through
the date on which the New Sub-Advisory Agreement is approved by the
shareholders of the Fund (the "Interim Period"). Under the terms of the
Exemptive Order, ABIM is allowed to receive advisory fees during the Interim
Period pursuant to the New Sub-Advisory Agreement. In accordance with the
Exemptive Order, the sub-advisory fees paid to ABIM by ICC under the New
Sub-Advisory Agreement have been held and will continue to be held in an
interest-bearing escrow account until approval of the New Sub-Advisory
Agreement by shareholders of the Fund has been obtained. If the New Sub-Advisory
Agreement is not approved by the shareholders of the Fund by the expiration of
the Interim Period, ABIM will not be entitled to accrued fees and interest paid
to ICC.
ABIM does not anticipate that the Merger will result in any reduction in
the quality of services now provided to the Fund. Nor does ABIM anticipate that
the Merger will have any adverse effect on its ability to fulfill its
obligations under the New Sub-Advisory Agreement or to operate its business in
a manner consistent with past business practice.
The Prior Sub-Advisory Agreement
Prior to June 4, 1999, ABIM served as sub-advisor to the Fund pursuant to
a Sub-Advisory Agreement among the Fund, ICC and ABIM, dated as of September 1,
18
<PAGE>
1997 (the "Prior Sub-Advisory Agreement"). The Prior Sub-Advisory Agreement was
initially approved by the shareholders of the Fund on August 14, 1997. The
Prior Sub-Advisory Agreement was last approved by the Fund's Board of
Directors, including a majority of the Independent Directors, on September 29,
1998.
The New Sub-Advisory Agreement
Other than the dates of execution, effectiveness and initial term, the New
Sub-Advisory Agreement which has been in effect since June 4, 1999 is identical
to the Prior Sub-Advisory Agreement. The terms of the New Sub-Advisory
Agreement are summarized below and are qualified by reference to Exhibit B.
Sub-Advisory Fees. The sub-advisory fee as a percentage of net assets
payable to the sub-advisor will be the same under the New Sub-Advisory
Agreement as under the Prior Sub-Advisory Agreement. If the sub-advisory fee
under the New Sub-Advisory Agreement had been in effect for the Fund's most
recently completed fiscal year, ABIM would have received the same compensation
as it received under the Prior Sub-Advisory Agreement.
The New Sub-Advisory Agreement. The New Sub-Advisory Agreement provides
that ABIM, in return for its fee, will (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 and otherwise, whether affecting the
economy generally or the Fund, and whether concerning the individual issuers
whose securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which ICC considers desirable
for inclusion in the Fund's portfolio.
Under the New Sub-Advisory Agreement ICC pays ABIM an annual fee based on
the Fund's average daily net assets. This fee is calculated daily and paid
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 Fund's average daily net assets in excess of
$200 million.
The New Sub-Advisory Agreement provides that ABIM will furnish, subject to
compliance with applicable banking regulations, 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. ABIM will maintain at its expense and without cost to the Fund, a
trading function in order to place
19
<PAGE>
orders for the purchase and sale of portfolio securities of the Fund. The Fund
assumes and pays all other expenses of the Fund. These expenses include, but
are not limited to, payments to ICC under the New Advisory Agreement, 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;
and broker's commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party. Additional information
regarding other Fund expenses is included in the New Sub- Advisory Agreement
attached as Exhibit B.
The services of ABIM are not to be deemed exclusive, and ABIM is 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 the agreement are not impaired thereby. Partners of ABIM may
serve as officers or Directors of the Fund, the Fund's officers or Directors
may serve as officers or partners of ABIM, to the extent permitted by law, and
partners of ABIM are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers, trustees or directors of any other firm, trust or
corporation, including other investment companies.
Following the expiration of its initial two-year term, the New
Sub-Advisory Agreement continues in full force and effect from year to year,
provided that such continuance is approved at least annually by the Fund's
Board or by the vote of a majority of the Fund's outstanding voting securities,
and by the affirmative vote of a majority of the Directors who are not parties
to the agreement or "interested parties" of a party to the agreement (other
than as Directors of the Fund) by votes cast in person at a meeting
specifically called for such purpose.
The New Sub-Advisory Agreement may be terminated, without the payment of
any penalty, by the Fund upon a vote of the Fund's Board of Directors, by a vote
of a majority of the Fund's outstanding voting securities or by ABIM, upon 60
days' waivable written notice to the other parties. The agreement automatically
terminates in the event of its assignment.
The New Sub-Advisory Agreement obligates ABIM to exercise care and
diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under the
agreement, but ABIM is not liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
ABIM or its officers, directors or employees or reckless disregard by ABIM of
its duties under the agreement.
Board Considerations. The Board held a meeting on March 30, 1999, at which
the Board, including the Independent Directors, approved the New Sub-Advisory
Agreement and recommended the New Sub-Advisory Agreement for approval by the
20
<PAGE>
shareholders of the Fund. In evaluating the New Sub-Advisory Agreement, the
Board considered substantially the same factors that led it to approve the New
Advisory Agreement, particularly the continuity of services. In this regard,
the Board took into account that the Fund's Prior Sub-Advisory Agreement and
the New Sub-Advisory Agreement, including their terms relating to the services
to be provided thereunder by ABIM and the fees and expenses, are substantially
identical.
Alex. Brown Investment Management
ABIM is a registered investment advisor that had under management as of
June 30, 1999, approximately $11.7 billion, including assets of the Fund and
the assets of ABIM's other clients. ABIM is a limited partnership affiliated
with the Advisor. Buppert, Behrens & Owen, Inc., a company organized and owned
by three employees of ABIM, owns a 49% limited partnership interest and a 1%
general partnership interest in ABIM. BT Alex. Brown owns a 1% general
partnership interest in ABIM and BT Alex. Brown Holdings, Inc. owns the
remaining 49% limited partnership interest. The address of each of the
foregoing entities is One South Street, Baltimore, Maryland 21202.
The following information is provided for each general partner and the
principal executive officer of ABIM.
<TABLE>
<CAPTION>
Name and Position with ABIM Address Principal Occupation
- ------------------------------- --------------------- ----------------------------
<S> <C> <C>
Buppert, Behrens & Owen, Inc. One South Street N/A
General Partner Baltimore, MD 21202
BT Alex. Brown Incorporated One South Street N/A
General Partner Baltimore, MD 21202
J. Dorsey Brown, III One South Street Chief Executive Officer,
Chief Executive Officer Baltimore, MD 21202 Alex. Brown Investment Management
</TABLE>
For the fiscal year ended May 31, 1999, ICC paid ABIM an aggregate fee of
$1,535,410 for sub-advisory services. For such fiscal year, the Fund paid ICC
aggregate fees of $2,864,847 for advisory services, $145,421 for transfer
agency services and $94,427 for accounting services provided to the Fund.
Other Funds with Similar Investment Objectives Sub-Advised by ABIM
ABIM acts as sub-advisor to two other funds which invest primarily in
equity securities and accordingly seek capital appreciation, either in and of
itself, or along with income. However, each of these funds employs widely
differing investment policies and styles in seeking these objectives. The
following table provides comparative information on fees paid by ICC to ABIM
pursuant to sub-advisory agreements in effect for such funds.
21
<PAGE>
<TABLE>
<CAPTION>
Sub-Advisory Fee
Size of Fund (as a percentage of average
Fund (000s) daily net assets)
- ---- ------ -----------------
<S> <C> <C>
Flag Investors Communications Fund, Inc.......... $ 1,445,143(1) 0.48%(1)
Flag Investors Value Builder Fund, Inc. ......... $ 922,789(2) 0.53%(2)
</TABLE>
- ----------------
(1) Information given for the fiscal year ended December 31, 1998.
(2) Information given for the fiscal year ended March 31, 1999.
Shareholder Approval of the New Sub-Advisory Agreement
Approval of the New Sub-Advisory Agreement requires the affirmative vote
of a majority of the outstanding voting securities of the Fund (as defined in
the 1940 Act). In the event that shareholders of the Fund do not approve the
New Sub-Advisory Agreement, the Board will take such action as it deems in the
best interest of the Fund and its shareholders, which may include proposing
that shareholders approve an agreement in lieu of the New Sub-Advisory
Agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND
VOTE FOR APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
---
PROPOSAL 4: To eliminate the Fund's fundamental investment policy
concerning short sales.
At the Special Meeting, the shareholders of the Fund will vote regarding
the elimination of the Fund's fundamental investment policy with respect to
short sales. Currently, the Fund has a fundamental investment policy stating
that:
The Fund will not effect short sales of securities.
If shareholders approve, this policy will be eliminated.
The primary purpose of this Proposal is to eliminate the Fund's
fundamental investment policy on short sales. This policy was initially adopted
primarily to comply with state regulatory requirements, which have been
eliminated as a result of federal legislation. If the proposal is approved, the
Fund, subject to the approval of the Board of Directors and upon proper
disclosure in the Fund's registration statement, would be able to make short
sales in conformity with Section 18 of the 1940 Act. In a short sale, an
investor sells a borrowed security and has a corresponding obligation to the
lender to return the identical security. Approval of the Proposal is not
expected to significantly affect the way the Fund is managed because the Fund
has no present
22
<PAGE>
intention to engage in short sales. However, the Directors are requesting
approval of the Proposal in order to eliminate an unnecessary policy and are
doing so at this time in order to take advantage of the fact that the Fund is
holding a shareholder meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR
THE ELIMINATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY CONCERNING SHORT SALES.
PROPOSAL 5: To eliminate the Fund's fundamental investment policy
concerning the purchase of securities on margin.
At the Special Meeting, the shareholders of the Fund will vote regarding
the elimination of the Fund's fundamental investment policy with respect to
purchasing securities on margin. Currently, the Fund has a fundamental policy
stating that:
The Fund will not purchase securities on margin (but the Fund may obtain
such short-term credits as may be necessary for the clearance of
transactions).
If shareholders approve, this policy will be eliminated.
The primary purpose of this Proposal is to eliminate the Fund's
fundamental investment policy on purchasing securities on margin. This policy
was initially adopted primarily to comply with state regulatory requirements,
which have been eliminated as a result of federal legislation. If the proposal
is approved, the Fund would be able to purchase securities on margin. Margin
purchases involve the purchase of securities with money borrowed from a broker.
"Margin" is the cash or eligible securities that the borrower places with a
broker as collateral against the loan. Approval of the Proposal is not expected
to significantly affect the way the Fund is managed because the Fund has no
present intention to purchase securities on margin. However, the Directors are
requesting approval of the Proposal in order to eliminate an unnecessary policy
and are doing so at this time to take advantage of the fact that the Fund is
holding a shareholder meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR
THE ELIMINATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY CONCERNING THE PURCHASE
OF SECURITIES ON MARGIN.
PROPOSAL 6: To eliminate the Fund's fundamental investment policy
concerning purchases of oil, gas, or mineral interests.
At the Special Meeting, the shareholders of the Fund will vote regarding
the elimination of the Fund's fundamental investment policy with respect to
purchasing oil, gas or mineral interests. Currently, the Fund has a fundamental
investment policy stating that:
The Fund will not purchase participations or other direct interests in
oil, gas or other mineral exploration or development programs.
23
<PAGE>
If shareholders approve, this policy will be eliminated.
The primary purpose of this Proposal is to remove the Fund's fundamental
investment policy regarding purchases of oil, gas or mineral interests. This
policy was initially adopted to comply with state regulatory requirements,
which have been eliminated as a result of federal legislation. If the Proposal
is approved, the Fund would be permitted to invest directly in oil, gas or
mineral interests. These investments are subject to certain risks including
substantial price fluctuations, unpredictable economic and political
circumstances, the existence of cartels in certain industries, and the
development of new technologies for finding and producing such materials.
Approval of the Proposal is not expected to significantly affect the way the
Fund is managed because the Fund has no present intention to invest directly in
oil, gas or mineral interests. However, the Directors are requesting approval
of the Proposal in order to eliminate an unnecessary policy and are doing so at
this time to take advantage of the fact that the Fund is holding a shareholder
meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR THE ELIMINATION
OF THE FUND'S FUNDAMENTAL INVESTMENT POLICY
CONCERNING PURCHASES OF OIL, GAS, OR MINERAL INTERESTS.
PROPOSAL 7: To modify the Fund's fundamental investment policy
concerning the purchase or sale of commodities or
commodity contracts.
At the Special Meeting, the shareholders of the Fund will vote regarding
the modification of the Fund's fundamental investment policy concerning the
purchase or sale of commodities or commodity contracts. Currently, the Fund has
a fundamental investment policy stating that:
The Fund will not purchase or sell commodities or commodities contracts,
including financial futures contracts.
If shareholders approve, the Fund's fundamental investment policy would
state that:
The Fund will not purchase or sell commodities or commodity contracts
provided that the Fund may invest in financial futures and options on such
futures.
The primary purpose of this Proposal is to modify the Fund's policy on
commodities to permit the Fund to invest in financial futures and to clarify
that the Fund may invest in options on financial futures. Revising the policy
will provide the Fund with increased flexibility in making investment decisions
and allow the Fund to respond to rapidly changing market conditions. Further,
revision of this fundamental investment policy may provide increased investment
opportunities which may enable the Fund to enhance its performance.
24
<PAGE>
Financial futures contracts provide for a future sale by one party and
purchase by another party of a specified amount of a specified security at a
specified price. An option on a futures contract gives the purchaser the right,
in exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. If the Proposal is
approved, to the extent approved by the Board of Directors and subject to
proper disclosure in the Fund's registration statement, the Fund will be able
to use futures and options for bona fide hedging purposes, to offset changes in
the value of securities held or expected to be acquired or to be disposed of,
to minimize fluctuations in foreign currencies, or to gain exposure to a
particular market or instrument. Similarly, the Fund will be able to buy and
sell futures contracts and options to manage its exposure to changing interest
rates and securities prices.
Approval of the Proposal is not expected to significantly affect the way
the Fund is managed because the Fund has no present intention to invest in
financial futures or options. However, the Directors are requesting approval of
the Proposal in order to provide the Fund with increased investment flexibility
and are doing so at this time to take advantage of the fact that the Fund is
holding a shareholder meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR
THE MODIFICATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY CONCERNING THE PURCHASE OR SALE OF
COMMODITIES OR COMMODITY CONTRACTS.
PROPOSAL 8. To modify the Fund's fundamental investment policy
concerning borrowing.
At the Special Meeting, the shareholders of the Fund will vote regarding
the modification of the Fund's fundamental investment policy on borrowing.
Currently, the Fund has a fundamental investment policy stating that:
The Fund will not borrow money, except as a temporary measure and for
extraordinary or emergency purposes and then only from banks in an amount
not exceeding 10% of the total assets of the Fund at the time of such
borrowing, provided that, while borrowings by the Fund equal to 5% or more
of the Fund's total assets are outstanding, the Fund will not purchase
securities.
If shareholders approve, the Fund's fundamental investment policy would
state that:
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes in an amount not exceeding 10% of the
value of the total assets of the Fund at the time of such borrowing.
The primary purpose of this proposal is to modify the Fund's fundamental
investment policy on borrowing to provide the Fund with increased investment
flexibility. The 1940 Act requires all funds to adopt a fundamental policy
regarding borrowing.
25
<PAGE>
The Proposal will permit the Fund to meet its regulatory requirements under the
1940 Act, while allowing the Fund increased flexibility in making investment
decisions. Under its current policy, the Fund may borrow only from banks. If
the Proposal is approved, the Fund could borrow from institutions other than
banks, to the extent permitted by law. Approval of the Proposal is not expected
to significantly affect the way the Fund is managed because the Fund has no
present intention to borrow from institutions other than banks. However, the
Directors are requesting approval of this policy to provide the Fund with
increased investment flexibility and they are doing so at this time to take
advantage of the fact that the Fund is holding a shareholder meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR THE
MODIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICY CONCERNING BORROWING.
PROPOSAL 9. To modify the Fund's fundamental investment policy
concerning loans.
At the Special Meeting, the shareholders of the Fund will vote regarding
the modification of the Fund's fundamental investment policy on loans.
Currently, the Fund has a fundamental investment policy stating that:
The Fund will not make loans, except that the Fund may purchase or hold
debt instruments and enter into repurchase agreements in accordance with
its investment objectives and policies.
If the Proposal is approved, the Fund's fundamental investment policy
would state that:
The Fund will not make loans, except that the Fund may purchase or hold
debt instruments in accordance with its investment objectives and
policies, and may loan portfolio securities and enter into repurchase
agreements.
The primary purpose of this Proposal is to modify the Fund's fundamental
investment policy concerning loans to permit the Fund to engage in securities
lending. The 1940 Act requires all funds to adopt a fundamental investment
policy regarding loans. The Proposal will permit the Fund to meet its
regulatory requirements under the 1940 Act, while permitting the Fund increased
investment flexibility to loan its portfolio securities to others. If the
proposal is approved, the Fund would be able to lend its securities to brokers,
dealers, domestic and foreign banks or other financial institutions for the
purposes of increasing its investment income. Any such loan would be secured by
cash or equivalent collateral, or by a letter of credit at least equal to the
market value of the securities loaned plus accrued interest or income.
Securities lending may subject the Fund to the risk of delay in recovering the
loaned securities or a loss of rights in the collateral should the borrower
fail financially.
26
<PAGE>
Approval of the Proposal is not expected to significantly affect the way
the Fund is managed because the Fund has no present intention to engage in
securities lending. However, the Directors are requesting approval of this
policy to provide the Fund with increased investment flexibility and they are
doing so at this time to take advantage of the fact that the Fund is holding a
shareholder meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR THE
MODIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICY CONCERNING LOANS.
PROPOSAL 10. To reclassify the Fund's fundamental investment policy
concerning illiquid securities from fundamental to
non-fundamental.
At the Special Meeting, the shareholders of the Fund will vote to approve
reclassifying the Fund's fundamental investment policy on illiquid securities
as non-fundamental. Currently, the Fund has a fundamental investment policy
stating that:
The Fund will not invest more than 10% of its net assets in illiquid
securities (defined as securities that cannot be sold in the ordinary
course of business within seven days at approximately the value at which
the Fund is carrying the securities), including securities that the Fund
is restricted from selling to the public without registration under the
Securities Act (excluding restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A Securities")
that have been determined to be liquid by the Fund's Board of Directors
based upon the trading markets for such securities).
If shareholders approve, the Fund's fundamental investment policy would be
changed to a non-fundamental policy and would state that:
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities (as defined under federal or state securities laws).
The primary purpose of this proposal is to reclassify the Fund's
fundamental investment policy on illiquid securities as non-fundamental.
Reclassifying the Fund's policy on illiquid securities as non-fundamental would
provide the Board with the flexibility to change the policy in the future as it
deems appropriate in the interest of investors in the Fund. If the Proposal is
approved, the Board would have the flexibility to increase the Fund's limit on
the purchase of illiquid securities to the extent permitted by federal law and
regulations and interpretations thereof. Investing a larger percentage of the
Fund's assets in illiquid securities may, of course, increase the Fund's
exposure to risks associated with such securities, including, the risk that the
Fund will be unable to sell a security at an opportune time and thus cause the
security to be viewed as speculative. Approval of the Proposal is not expected
to significantly affect the way the Fund is managed because the Fund has no
present intention
27
<PAGE>
to request that the Board increase the Fund's limitation on investment in
illiquid securities. However, the Directors are requesting approval of this
policy to provide the Board with increased flexibility and are doing so at this
time to take advantage of the fact that the Fund is holding a shareholder
meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE FOR THE
RECLASSIFICATION OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICY CONCERNING ILLIQUID SECURITIES FROM
FUNDAMENTAL TO NON-FUNDAMENTAL.
ADDITIONAL INFORMATION
Directors and Executive Officers
Information about the Fund's current Directors and principal executive
officers is set forth below. Each officer of the Fund will hold such office
until a successor has been elected by the Board of Directors. Directors and
officers of the Fund are also directors and officers of some or all of the
other investment companies managed, administered or advised by BT Alex. Brown
or its affiliates.
<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
Name and Position During the Past Five Years, Owned as of
With the Fund Age including all Directorships May 31, 1999 Percentage
- ------------------------ ----- ------------------------------------------------ -------------- -----------
<S> <C> <C> <C> <C>
Truman T. Semans* 72 See "Information Regarding Nominees." None **
Chairman and Director
since 1994
James J. Cunnane 61 Managing Director, CBC Capital (merchant None **
Director since 1994 banking); and Director, Net.World (telecommu-
nications). Director of each fund in the Fund
Complex.
Richard T. Hale* 54 See "Information Regarding Nominees." 22,475.00 **
Director since 1994
Joseph R. Hardiman 62 See "Information Regarding Nominees." None **
Director since 1998
Louis E. Levy 66 See "Information Regarding Nominees." 2,104.00+ **
Director since 1994
Eugene J. McDonald 67 See "Information Regarding Nominees." None **
Director since 1994
Rebecca W. Rimel 48 See "Information Regarding Nominees." None **
Director since 1995
Carl W. Vogt, Esq. 63 Senior Partner, Fulbright & Jaworski L.L.P. None **
Director since 1996 (law); and Director, Yellow Corporation (truck-
ing) and American Science & Engineering
(x-ray detection equipment). Formerly, Chair-
man and Member, National Transportation
Safety Board; Director, National Railroad Pas-
senger Corporation (Amtrak); and Member,
Aviation System Capacity Advisory Committee
(Federal Aviation Administration). Director of
each fund in the Fund Complex.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
Name and Position During the Past Five Years, Owned as of
With the Fund Age including all Directorships May 31, 1999 Percentage
- ------------------------ ----- -------------------------------------------------- -------------- -----------
<S> <C> <C> <C> <C>
Harry Woolf 76 Professor-at-Large Emeritus, Institute for None **
President since 1997 Advanced Study; and Director, Family Health
International (non-profit research and education)
and Research America (non-profit medical
research). Formerly, Director, ATL and
Spacelab's Medical Corp. (medical equipment);
Trustee, Reed College (education) and Rock-
efeller Foundation; and Director, Merrill Lynch
Cluster C Funds and Flag Investors/ISI and
Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc. Fund Complex (registered invest-
ment companies).
Amy M. Olmert 36 Vice President, Deutsche Asset Management 1,754.13 **
Secretary since 1997 Americas since 1999; and Vice President, BT
Alex. Brown Incorporated, 1997-1999. For-
merly, Senior Manager, Coopers & Lybrand
L.L.P. (now PricewaterhouseCoopers LLP),
1988-1997.
Charles A. Rizzo 42 Vice President and Department Head, Deutsche None **
Treasurer since 1999 Asset Management Americas since 1999; and
Vice President and Department Head, BT Alex.
Brown Incorporated, 1998-1999. Formerly,
Senior Manager, PricewaterhouseCoopers LLP,
1993-1998.
Tracie E. Richter 31 Vice President, Deutsche Asset Management None **
Assistant Secretary Americas since 1999; Treasurer and Chief
since 1999 Financial Officer, Morgan Grenfell Investment
Trust, 1998-Present; and Vice President, Mor-
gan Grenfell Inc., 1998-1999. Formerly, Vice
President, Bankers Trust Company, 1996-1998;
and Tax Associate, Goldman Sachs Asset Man-
agement, 1993-1996.
Daniel O. Hirsch 45 Director, Deutsche Asset Management Americas 2,439.00 **
Assistant Secretary since 1999; and Principal, BT Alex. Brown
since 1999 Incorporated, 1998-1999. Formerly, Assistant
General Counsel, United States Securities and
Exchange Commission, 1993-1998.
</TABLE>
- ----------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** As of May 31, 1999 the Directors and officers of the Fund as a group (13
persons) beneficially owned an aggregate of less than 1% the Fund.
+ Mr. Levy disclaims beneficial ownership of these shares as they are held in
trust by his wife for his children.
Investment Advisor and Sub-Advisor
See "Investment Company Capital Corp." on page 16 and "Alex. Brown
Investment Management" on page 21 for additional information concerning the
Advisor and the Sub-Advisor.
29
<PAGE>
Principal Underwriter
ICC Distributors, Inc., located at Two Portland Square, Portland, Maine,
04104, acts as the Fund's principal underwriter.
Portfolio Transactions
In the fiscal year ended May 31, 1999, the Fund paid no brokerage
commissions to BT Alex. Brown or its affiliates.
Independent Accountants
A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected PricewaterhouseCoopers LLP as the
independent accountants of the Fund for the fiscal year ending May 31, 2000. A
representative of PricewaterhouseCoopers LLP will be available by telephone
during the Special Meeting, if needed, to make a statement if desired and to
respond to appropriate questions from shareholders.
Beneficial Owners
To the knowledge of Fund management, as of the Record Date, the following
was a beneficial owner of 5% or more of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
Amount of Beneficial Percent of Total Shares
Name and Address Ownership Outstanding
- ---------------- -------------------- -----------------------
<S> <C> <C>
Bankers Trust Corp & Affil 401k Savings Plan 1,441,410.471 7.58%
The Partnershare Plan of Bankers Trust NY Corp. & Affil. shares
100 Plaza One
Jersey City, NJ 07311-3999
</TABLE>
Submission of Shareholder Proposals
The Fund is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act,
such as the Fund, is not required to hold an annual meeting in any year in
which the election of Directors is not required to be acted upon under the 1940
Act. The Fund has availed itself of this provision and achieves cost savings by
eliminating printing costs, mailing charges and other expenses involved in
routine annual meetings.
Even with the elimination of routine annual meetings, the Board of
Directors may call special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act, or as required or permitted by the
Articles of Incorporation and By-Laws of the Fund. As described above,
shareholder meetings will be held, in compliance with the 1940 Act, to elect
Directors under certain circumstances. Shareholder meetings may also be held by
the Fund for other purposes, including to approve investment policy changes, a
new Investment Advisory Agreement, a new Sub-Advisory Agreement or other
matters requiring shareholder action under the 1940 Act.
30
<PAGE>
A meeting may also be called by shareholders holding at least 10% of the
shares entitled to vote at the meeting for the purpose of voting upon the
removal of Directors. Upon written request by ten or more shareholders, who
have been such for at least six months and who hold shares constituting 1% of
the outstanding shares, stating that such shareholders wish to communicate with
the other shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a Director, the Fund has undertaken to
provide a list of shareholders or to disseminate appropriate materials. In
addition, Maryland General Corporation Law provides for the calling of a
special meeting by the written request of shareholders holding at least 25% of
the shares entitled to vote at the meeting.
Shareholders who wish to present a proposal for action at the next meeting
or suggestions as to nominees for the Board of Directors should submit the
proposal or suggestions to be considered to the Fund 60 days in advance of any
such meeting for inclusion in the Fund's proxy statement and form of proxy for
such meeting as is held. The Nominating Committee of the Board of Directors
will give consideration to shareholder suggestions as to nominees for the Board
of Directors. Shareholders retain the right, under limited circumstances, to
request that a meeting of the shareholders be held for the purpose of
considering the removal of a Director from office and, if such a request is
made, the Fund will assist with shareholder communications in connection with
the meeting.
Required Vote
Approval of Proposal 1 requires the affirmative vote of a plurality of all
votes cast at the Special Meeting, provided that a majority of the shares
entitled to vote are present in person or by Proxy at the Special Meeting.
Approval of Proposals 2 through 10 requires the affirmative vote of a majority
of the outstanding voting securities of the Fund. As defined in the 1940 Act,
the vote of a "majority of the outstanding voting securities" of the Fund means
the vote of (i) 67% or more of the Fund's outstanding shares present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding shares, whichever is less.
Abstentions and "broker non-votes" will not be counted for or against the
Proposals but will be counted for purposes of determining whether a quorum is
present. Abstentions will be counted as votes present for purposes of
determining a "majority of the outstanding voting securities" present at the
Special Meeting and will therefore have the effect of counting against
Proposals 2 through 10. The Fund believes that brokers who hold shares as
record owners for beneficial owners have the authority under the rules of the
various stock exchanges to vote those shares with respect to Proposals 1
through 3 when they have not received instructions from beneficial owners.
31
<PAGE>
Other Matters
No business other than the matters described above is expected to come
before the Special Meeting, but should any matter incident to the conduct of
the Special Meeting or any question as to an adjournment of the Special Meeting
arise, the persons named in the enclosed Proxy will vote thereon according to
their best judgment in the interest of the Fund.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO VOTE BY MAIL, TELEPHONE OR
INTERNET AS EXPLAINED IN THE INSTRUCTIONS INCLUDED ON YOUR PROXY CARD.
By Order of the Directors,
/s/ Amy M. Olmert
---------------------
Amy M. Olmert
Secretary
Dated: August 25, 1999
32
<PAGE>
EXHIBIT A
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;
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(d) The Fund's Notification of Registration filed pursuant to Section
8(a) of the Investment Company Act of 1940 on Form N-8A under the 1940 Act
as filed with the Securities and Exchange Commission (the "SEC") on
November 30, 1994;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-86832)
and under the 1940 Act as filed with the SEC on November 30, 1994 relating
to the shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as presently
in effect, and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. In carrying out its obligations under
Section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Fund's operations, except
for distribution services;
(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies
of the Fund;
(c) provide the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Fund with, or obtain for it, adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery, supplies and similar items for the Fund's principal
office;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund,
and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which they engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Fund's portfolio;
(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;
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(h) supervise the operations of the Fund's transfer and dividend
disbursing agent;
(i) provide the Fund with such administrative and clerical services
for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and
(j) arrange, but not pay for, the periodic updating of prospectuses
and supplements thereto, proxy material, tax returns, reports to the
Fund's shareholders and reports to and filings with the SEC and state Blue
Sky authorities.
4. Broker-Dealer Relationships. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting securities transactions will be to
obtain the best price and execution on an overall basis. In performing this
function the Advisor shall comply with applicable policies established by the
Board of Directors and shall provide the Board of Directors with such reports
as the Board of Directors may require in order to monitor the Fund's portfolio
transaction activities. In certain instances the Advisor may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution
of the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Fund. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Fund to
such broker-dealers 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
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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;
(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:
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(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.
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(b) The Advisor may, but shall not be under any duty to, perform
services on behalf of the Fund which are not required by this Agreement
upon the request of the Fund's Board of Directors. Such services will be
performed on behalf of the Fund and the Advisor's charge in rendering such
services may be billed monthly to the Fund, subject to examination by the
Fund's independent accountants. Payment or assumption by the Advisor of
any Fund expense that the Advisor is not required to pay or assume under
this Agreement shall not relieve the Advisor of any of its obligations to
the Fund nor obligate the Advisor to pay or assume any similar Fund
expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the expenses assumed
by the Advisor, the Fund shall pay to the Advisor monthly compensation at an
annual rate of 1.00% of the first $50 million of the Fund's average daily net
assets, 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
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(b) by the affirmative vote of a majority of the Directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as Directors of the Fund) by
votes cast in person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated without the payment of
any penalty, by the Fund upon vote of the Fund's Board of Directors or a vote
of a majority of the Fund's outstanding voting securities (as defined in the
1940 Act) or by the Advisor, upon sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
13. Liability of Advisor. In the performance of its duties hereunder, the
Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under the Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund
and of the Advisor for this purpose shall be One South Street, Baltimore,
Maryland 21202.
15. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States courts or in the absence of any controlling decision
of any such court, by rules, regulations or orders of the SEC issued pursuant
to the 1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise the provisions of this Agreement
shall be interpreted in accordance with the laws of Maryland.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective 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>
EXHIBIT B
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;
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(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-86832)
and under the 1940 Act as filed with the SEC on November 30, 1994 relating
to the shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as presently
in effect, and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish the Sub-Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties of Sub-Advisor. In carrying out its obligations under Section 1
hereof, the Sub-Advisor shall:
(a) provide the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors;
(b) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Fund's Board of
Directors;
(c) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to
the Fund's Board of Directors;
(d) take, on behalf of the Fund, all actions which appear to the Fund
necessary to carry into effect such purchase and sale programs as
aforesaid, including the placing of orders for the purchase and sale of
securities of the Fund; and
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund,
and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which they engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Fund's portfolio.
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
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condition of the broker-dealer; the size of and difficulty in executing the
order; and the value of the expected contribution of the broker-dealer to the
investment performance of the Fund on a continuing basis. Accordingly, the
price to the Fund in any transaction may be less favorable than that available
from another broker-dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered. Subject to such policies
as the Board of Directors may determine, the Sub-Advisor shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Fund to pay a broker-dealer
that provides brokerage and research services to the Sub-Advisor an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting
that transaction, if the Sub-Advisor determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either
that particular transaction or the Sub-Advisor's overall responsibilities with
respect to the Fund. The Sub-Advisor is further authorized to allocate the
orders placed by it on behalf of the Fund to such broker-dealers who also
provide research or statistical material or other services to the Fund or the
Sub-Advisor. Such allocation shall be in such amounts and proportions as the
Sub-Advisor shall determine and the Sub-Advisor will report on said allocation
regularly to the Board of Directors of the Fund, indicating the brokers to whom
such allocations have been made and the basis therefor.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Sub-Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct 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
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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.
(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
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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
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<PAGE>
of any Fund expense that the Sub-Advisor is not required to pay or assume under
this Agreement shall not relieve the Sub-Advisor of any of its obligations to
the Fund nor obligate the Sub-Advisor to pay or assume any similar Fund
expenses on any subsequent occasions.
10. Term. This Agreement shall become effective at 12:01 a.m. on the date
hereof and shall remain in force and effect, subject to Section 12 hereof, for
two years from the date hereof.
11. Renewal. Following the expiration of its initial two-year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a)(i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Fund (as defined in
Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Directors who are not
parties to this Agreement or "interested persons" of a party to this
Agreement (other than as Directors of the Fund) by votes cast in person at
a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of
a majority of the outstanding voting securities of the Fund (as defined in
Section 2(a)(42) of the 1940 Act), on sixty (60) days' written notice to the
Advisor and the Sub-Advisor. This Agreement may be terminated at any time,
without the payment of any penalty, by the Sub-Advisor on sixty (60) days'
written notice to the Fund and the Advisor. The notice provided for herein may
be waived by any person to whom such notice is required. This Agreement shall
automatically terminate in the event of its assignment (as defined in Section
2(a)(4) of the 1940 Act).
13. Non-Exclusivity. The services of the Sub-Advisor to the Advisor and
the Fund are not to be deemed to be exclusive, and the Sub-Advisor shall be
free to render investment advisory or other services to others (including other
investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that partners of the Sub-Advisor may serve as officers or Directors of
the Fund, and that officers or Directors of the Fund may serve as officers or
partners of the Sub-Advisor to the extent permitted by law; and that the
partners of the Sub-Advisory are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies.
B-6
<PAGE>
14. Liability of Sub-Advisor. In the performance of its duties hereunder,
the Sub-Advisor shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Sub-Advisor
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Sub-Advisor or its
officers, directors or employees, or reckless disregard by the Sub-Advisor of
its duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the
Sub-Advisor, of the Advisor and of the Fund for this purpose shall be One South
Street, Baltimore, Maryland 21202.
16. Questions and Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States Courts or in the absence of any controlling decision
of any such court, by rules, regulations or orders of the SEC issued pursuant
to said Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise the provisions of this Agreement
shall be interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
[SEAL] FLAG INVESTORS EQUITY
PARTNERS FUND, INC.
Attest: ___________________________ By: ___________________________________
Name:
Title:
[SEAL] INVESTMENT COMPANY CAPITAL
CORP.
Attest: ___________________________ By: ___________________________________
Name:
Title:
[SEAL] ALEX. BROWN INVESTMENT
MANAGEMENT
Attest: ___________________________ By: ___________________________________
Name:
Title:
B-7
<PAGE>
33832P109
33832P208
33832P307
33832P406
<PAGE>
Three Ways To Vote Your Proxy
Proxy Voting Quick & Easy
The enclosed proxy statement provides details on important issues affecting your
Fund(s). The Board of your Fund(s) recommends that you vote FOR all proposals.
We are offering three ways to vote: by automated touch-tone phone, the World
Wide Web or mail. Voting by telephone or Web may be quicker and more cost
effective than the traditional method of mailing back your proxy card; however,
that option is still available to you.
Your proxy vote is important! Please vote today.
How to Vote:
By Automated Touch-Tone Phone*
Using our automated touch-tone phone system, dial the number provided on your
proxy card and follow the directions given.
By the Web*
Visit www.proxyvote.com and enter the 12-digit control number
-----------------
located on your proxy card.
By Mail
Simply return your executed proxy in the enclosed postage-paid envelope.
* Do not mail the Proxy Card if voting by Web or telephone.
<PAGE>
[FLAG INVESTORS]
[PROXY SERVICES]
[P.O. BOX 9148]
[FARMINGDALE, NY 11735]
FORM OF
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
October 7, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
This proxy is for your use in voting on various matters relating to Flag
Investors Equity Partners Fund, Inc. (the "Fund"). The undersigned
shareholder(s) of the Fund, revoking previous proxies, hereby appoint(s) Edward
J. Veilleux, Amy M. Olmert and Kathy L. Churko and each of them (with full power
of substitution) the proxies of the undersigned to attend the Special Meeting of
Shareholders of the Fund to be held on October 7, 1999 (the "Special Meeting")
and any adjournments thereof, to vote all of the shares of the Fund that the
signer would be entitled to vote if personally present at the Special Meeting
and on any matter incident to the conduct of the Special Meeting, all as set
forth in the Notice of Special Meeting of Shareholders and Proxy Statement of
the Board of Directors. Said proxies are directed to vote or refrain from voting
pursuant to the Proxy Statement as indicated upon the matters set forth below.
This proxy will be voted as indicated below. If no indication is made, this
proxy will be voted FOR the proposals set forth below. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.
To Vote by Telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-000-0003
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.
To Vote by Internet:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.
Please print and sign your name in the space provided to authorize the voting of
your shares as indicated and return promptly. When signing on behalf of a
corporation, partnership, estate, trust or in any other representative capacity,
please sign your name and title. For joint accounts, each joint owner must
sign.
UNLESS VOTING BY TELEPHONE OR INTERNET, PLEASE COMPLETE, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
<S> <C>
KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
</TABLE>
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
Vote on Directors
1. To consider and act upon a proposal to elect a Board of Directors.
Truman T. Semans Richard R. Burt
Richard T. Hale Joseph R. Hardiman
Louis E. Levy Eugene J. McDonald
Rebecca W. Rimel Robert H. Wadsworth
[ ] FOR ALL
[ ] WITHHOLD ALL
[ ] FOR ALL EXCEPT:
<PAGE>
To withhold authority to vote mark "FOR ALL EXCEPT" and write the
nominee's name on the line below.
-------------------------------------------
<TABLE>
<CAPTION>
Vote on Proposals
2. To approve a new Investment Advisory Agreement between the Fund and Investment Company Capital
Corp.
<S> <C> <C> <C>
[ ] For [ ] Against [ ] Abstain
3. To approve a new Sub-Advisory Agreement among the Fund, Investment Company Capital Corp. and
Alex. Brown Investment Management.
[ ] For [ ] Against [ ] Abstain
4. To eliminate the Fund's fundamental investment policy concerning short sales.
[ ] For [ ] Against [ ] Abstain
5. To eliminate the Fund's fundamental investment policy concerning the purchase of securities on margin.
[ ] For [ ] Against [ ] Abstain
6. To eliminate the Fund's fundamental investment policy concerning purchases of oil, gas or mineral interests.
[ ] For [ ] Against [ ] Abstain
7. To modify the Fund's fundamental investment policy concerning the purchase or sale of commodities or commodity contracts.
[ ] For [ ] Against [ ] Abstain
8. To modify the Fund's fundamental investment policy concerning borrowing.
[ ] For [ ] Against [ ] Abstain
9. To modify the Fund's fundamental investment policy concerning loans.
[ ] For [ ] Against [ ] Abstain
10. To reclassify the Fund's fundamental investment policy concerning illiquid securities from fundamental to non-fundamental.
[ ] For [ ] Against [ ] Abstain
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Please print and sign your name in the space provided to --------------------------------------- --------------
authorize the voting of your shares as indicated and return Signature [PLEASE SIGN WITHIN BOX] Date
promptly. When signing on behalf of a corporation,
partnership, estate, trustor in any other representative --------------------------------------- --------------
capacity please sign your name and title. For joint accounts, Signature (Joint Owners) Date
each joint owner must sign.
</TABLE>
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
