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Supplement dated April 6, 2000
to the Statement of Additional Information dated October 1, 1999,
as supplemented through November 19, 1999
of Flag Investors Equity Partners Fund, Inc.
The following disclosure is added following the discussion of "Repurchase
Agreements" on page 3 of the Statement of Additional Information.
Lending of Portfolio Securities
The Fund may lend its investment securities to approved institutional
borrowers who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Fund attempts to increase its net investment income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would belong to
the Fund. The Fund may lend its investment securities so long as the terms,
structure and the aggregate amount of such loans are not inconsistent with the
Investment Company Act of 1940, as amended (the "1940 Act") or the Rules and
Regulations or interpretations of the SEC thereunder, which currently require
that (a) the borrower pledge and maintain with the Fund collateral consisting of
liquid, unencumbered assets having a value at all times not less than 100% of
the value of the securities loaned, (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the borrower "marks to
the market" on a daily basis), (c) the loan be made subject to termination by
the Fund at any time, and (d) the Fund receive reasonable interest on the loan
(which may include the Fund investing any cash collateral in interest bearing
short-term investments), and distributions on the loaned securities and any
increase in their market value. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the Advisors to be of good standing and when, in the judgment of the
Advisors, the consideration that can be earned from such securities loans
justifies the attendant risk. All relevant facts and circumstances, including
the creditworthiness of the borrower, will be considered in making decisions
with respect to the lending of securities, subject to review by the Board of
Directors of the Fund.
At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.
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