FLAG INVESTORS EQUITY PARTNERS FUND INC, 485BPOS, 2000-09-28

FLAG INVESTORS EQUITY PARTNERS FUND INC
485BPOS, 2000-09-28

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<PAGE>

As Filed With the Securities and Exchange Commission on September 28, 2000

File No. 33-86832
811-8886
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

POST-EFFECTIVE AMENDMENT NO. 8 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 11 [X]

FLAG INVESTORS EQUITY PARTNERS FUND, INC.

(Exact Name of Registrant as Specified in Charter)

One South Street
Baltimore, MD 21202

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (800) 638-2596

Edward J. Veilleux
One South Street
Baltimore, MD 21202

(Name and Address of Agent for Service)

Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103

It is proposed that this filing will become effective (check appropriate box)

immediately upon filing pursuant to paragraph (b)
---

X on October 1, 2000 pursuant to paragraph (b)
---

60 days after filing pursuant to paragraph (a)(1)
---

75 days after filing pursuant to paragraph (a)(2)
---

on _____________ pursuant to paragraph (a) of Rule 485.

<PAGE>

[LOGO]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE-Registered Trademark-

EQUITY PARTNERS FUND, INC.
(CLASS A, CLASS B AND CLASS C SHARES)

PROSPECTUS

OCTOBER 1, 2000

The Securities and Exchange Commission has neither approved nor disapproved
these securities nor has it passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>

THIS MUTUAL FUND (THE "FUND") SEEKS TO ACHIEVE LONG-TERM GROWTH OF CAPITAL AND,
SECONDARILY, CURRENT INCOME BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF
COMMON STOCKS.

The Fund offers shares through securities dealers and through financial
institutions that act as shareholder servicing agents. You may also buy shares
through the Fund's Transfer Agent. This Prospectus describes Flag Investors
Class A Shares ("Class A Shares"), Flag Investors Class B Shares ("Class B
Shares"), and Flag Investors Class C Shares ("Class C Shares") of the Fund.
These separate classes give you a choice of sales charges and fund expenses.
(Refer to the section on "Sales Charges.")

<TABLE>
TABLE OF CONTENTS
-----------------
<S> <C>
INVESTMENT SUMMARY ..................................... 1
FEES AND EXPENSES OF THE FUND .......................... 3
INVESTMENT PROGRAM ..................................... 4
THE FUND'S NET ASSET VALUE ............................. 4
HOW TO BUY SHARES ...................................... 5
HOW TO REDEEM SHARES ................................... 6
TELEPHONE TRANSACTIONS ................................. 6
SALES CHARGES .......................................... 7
HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU .......... 9
DIVIDENDS AND TAXES .................................... 9
INVESTMENT ADVISOR AND SUB-ADVISOR ..................... 10
FINANCIAL HIGHLIGHTS ................................... 11
</TABLE>

FLAG INVESTORS FUNDS
P.O. BOX 515
BALTIMORE, MD 21203

<PAGE>

INVESTMENT SUMMARY
-------------------------------------------------------------------------------

OBJECTIVES AND STRATEGIES

The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.

In selecting investments for the Fund's portfolio, the Fund's investment
advisor and sub-advisor (the "Advisors") use a "flexible value" approach. With
this approach, they try to find securities of companies that are undervalued in
the marketplace based on such characteristics as earnings, dividends, cash flow
or asset values. In evaluating a company's potential, the Advisors also consider
other factors such as earnings growth, industry position and the strength of
management. The Advisors' strategy gives them the flexibility to purchase
traditional value stocks as well as the stocks of high growth rate companies.
While the Fund does not limit its investments to issuers in a particular
capitalization range, the Advisors currently focus on the securities of larger
companies.

RISK PROFILE

The Fund may be suited for you if you are willing to accept the risks and
uncertainties of the stock markets in the hope of achieving above-average
long-term capital appreciation.

GENERAL STOCK RISK. The value of an investment in the Fund will vary from
day to day based on changes in the prices of the securities the Fund holds. The
prices of common stocks purchased by the Fund will fluctuate based upon investor
perceptions of the economy, the markets and the companies represented in the
Fund's portfolio.

STYLE RISK. As with any investment strategy, the "flexible value" strategy
used in managing the Fund's portfolio will, at times, perform better than or
worse than other investment styles and the overall market. If the Advisors
overestimate the value or return potential of one or more common stocks, the
Fund may underperform the general equity market.

If you invest in the Fund, you could lose money. An investment in the Fund
is not a bank deposit and is not insured or guaranteed by the FDIC or any other
government agency.

1
<PAGE>

FUND PERFORMANCE

The following bar chart and table show the performance of the Class A
Shares both year-by-year and as an average over different periods of time. The
variability of performance over time provides an indication of the risks of
investing in the Fund. This is an historical record and does not necessarily
indicate how the Fund will perform in the future.

[CHART]

CLASS A SHARES* FOR YEARS ENDED DECEMBER 31,

* The bar chart does not reflect sales charges that you may pay upon purchase
or redemption of Fund shares. If it did, returns would be less than those
shown. For the period from December 31, 1999 through June 30, 2000, the
total return for Class A Shares was (9.35)%.

During the 4-year period shown in the bar chart, the highest return for a
quarter was 29.97% (quarter ended 12/31/98) and the lowest return for a quarter
was (16.63)% (quarter ended 9/30/98).

AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIODS ENDED DECEMBER 31, 1999)

<TABLE>
<CAPTION>
CLASS A SHARES(1) CLASS B SHARES(1) S&P 500(2) CLASS C SHARES S&P 500(2)
<S> <C> <C> <C> <C> <C>
Past One Year .................... 1.40% 1.18% 21.04% 5.44% 21.04%
Since Inception .................. 20.23% (2/13/95) 20.51% (2/13/95) 28.42%(3) 23.27% (10/28/98) 29.96%(4)
</TABLE>

--------------

(1) These figures assume the reinvestment of dividends and capital gains
distributions and include the impact of the current maximum sales charges
which increased on January 18, 2000.

(2) The Standard & Poor's 500 Index (the "S&P 500 Index") is an unmanaged index
that is a widely recognized benchmark of general market performance. The
S&P 500 Index does not factor in the costs of buying, selling and holding
securities -- costs which are reflected in the Fund's results.

(3) For the period from 1/31/95 through 12/31/99.

(4) For the period from 10/31/98 through 12/31/99.

2
<PAGE>

FEES AND EXPENSES OF THE FUND
-------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
INITIAL SALES DEFERRED SALES DEFERRED SALES
SHAREHOLDER FEES: CHARGE CHARGE CHARGE
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) ALTERNATIVE ALTERNATIVE ALTERNATIVE
------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage
of offering price) ............................................................ 5.50%* None None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, whichever is lower) .................... 1.00%* 5.00%** 1.00%***
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ...................... None None None
Redemption Fee ................................................................... None None None
Exchange Fee ..................................................................... None None None

ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees .................................................................. 0.77% 0.77% 0.77%
Distribution and/or Service (12b-1) Fees ......................................... 0.25% 0.75% 0.75%
Other Expenses (including a 0.25% shareholder servicing fee for
Class B and Class C Shares) ................................................... 0.16% 0.41% 0.41%
----- ----- -----
Total Annual Fund Operating Expenses ............................................. 1.18% 1.93% 1.93%
===== ===== =====
</TABLE>

--------------

* You will pay no sales charge on purchases of $1 million or more of Class A
Shares, but you may pay a deferred sales charge if you redeem your shares
within two years after your purchase unless you are otherwise eligible for
a sales charge waiver or reduction. (See "Sales Charges -- Redemption
Price")

** You will pay a deferred sales charge if you redeem your shares within six
years after your purchase. The amount of the charge declines over time and
eventually reaches zero. Seven years after your purchase, your Class B
Shares will automatically convert to Class A Shares. (See "Sales Charges --
Redemption Price."

*** You will pay a deferred sales charge if you redeem your shares within one
year after your purchase. (See "Sales Charges -- Redemption
Price.")

EXAMPLE:

This Example is intended to help you compare the cost of investing in each
class of the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares ......... $664 $904 $1,163 $1,903
Class B Shares ......... $696 $906 $1,242 $1,968
Class C Shares ......... $296 $606 $1,042 $2,254
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<S> <C> <C> <C> <C>
Class A Shares ......... $664 $904 $1,163 $1,903
Class B Shares ......... $196 $606 $1,042 $1,968
Class C Shares ......... $196 $606 $1,042 $2,254
</TABLE>

Federal regulations require that the table above reflect the maximum sales
charge. However, you may qualify for reduced sales charges or no sales charge at
all. (Refer to the section entitled "Sales Charges".) If you hold your shares
for a long time, the combination of the initial sales charge you paid and the
recurring 12b-1 fees may exceed the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.

3
<PAGE>

INVESTMENT PROGRAM
-------------------------------------------------------------------------------

INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.

The Advisors are responsible for managing the Fund's investments. (Refer to
the section entitled "Investment Advisor and Sub-Advisor".) In selecting equity
investments for the Fund, the Advisors use a "flexible value" approach. With
this approach, they try to find common stocks of companies that are undervalued
in the marketplace based on such characteristics as earnings, cash flow, or
asset values. In evaluating a company's potential, the Advisors also consider
other factors such as earnings growth, industry position and the strength of
management. The Advisors' strategy gives them the flexibility to purchase
traditional value stocks as well as the stocks of high growth rate companies.
While the Fund does not limit its investments to issuers in a particular
capitalization range, the Advisors currently focus on the securities of larger
companies.

An investment in the Fund involves risk. Over time, common stocks have
shown greater potential for growth than other types of securities, but in the
short run stocks can be more volatile than other types of securities. Stock
prices are sensitive to developments affecting particular companies and to
general economic conditions that affect particular industry sectors or the
securities markets as a whole. No one can predict how the markets will behave in
the future. As with any investment approach, the Advisors' "flexible value"
strategy will, at times, perform better than or worse than other investment
styles and the overall market. If the Advisors overestimate the value or return
potential of one or more common stocks, the Fund may underperform the general
equity market. There can be no guarantee that the Fund will achieve its goals.

To reduce the Fund's risk under adverse market conditions, the Advisors may
make temporary defensive investments in high quality, short-term money market
instruments and U.S. Government obligations. While engaged in a temporary
defensive strategy, the Fund may not achieve its investment objectives. The
Advisors would follow such a strategy only if they believed the risk of loss in
pursuing the Fund's primary investment strategies outweighed the opportunity for
gain.

THE FUND'S NET ASSET VALUE
-------------------------------------------------------------------------------

The price you pay when you buy shares or receive when you redeem shares is
based on the Fund's net asset value per share. When you buy Class A Shares, the
price you pay may be increased by a sales charge. When you redeem any class of
shares, the amount you receive may be reduced by a sales charge. Read the
section entitled "Sales Charges" for details on how and when these charges may
or may not be imposed.

The net asset value per share of the Fund is determined at the close of
regular trading on the New York Stock Exchange on each day the Exchange is open
for business. While regular trading ordinarily closes at 4:00 p.m. (Eastern
Time), it could be earlier, particularly on the day before a holiday. Contact
the Transfer Agent for information about whether the Fund will close early
before a particular holiday. The net asset value per share is calculated by
subtracting the liabilities attributable to a class from its proportionate share
of the Fund's assets and dividing the result by the number of outstanding shares
of the class. Because the different classes have different distribution or
service fees, their net asset values may differ.

In valuing its assets, the Fund's investments are priced at their market
value. When price quotes for a particular security are either not readily
available or unreliable, the security is priced at its "fair value" using
procedures approved by the Fund's Board of Directors.

You may buy or redeem shares on any day the New York Stock Exchange is open
for business (a "Business Day"). If your order is entered before the net asset
value per share is determined for that day, the price you pay or receive will be
based on that day's net asset value per share. If your order is entered after
the net asset value per share is determined for that day, the price you pay or
receive will be based on the next Business Day's net asset value per share.

The following sections describe how to buy and redeem shares.

4
<PAGE>

HOW TO BUY SHARES
-------------------------------------------------------------------------------

You may buy any class of the Fund's shares through your securities dealer
or through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy shares by sending your check (along with a completed
Application Form) directly to the Fund.

You may invest in Class A Shares unless you are a defined contribution plan
with assets of $75 million or more.

Your purchase order may not be accepted if the sale of Fund shares has been
suspended or if it is determined that your purchase would be detrimental to the
interests of the Fund's shareholders.

INVESTMENT MINIMUMS

Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:

- If you are investing in an IRA account, your initial investment may be
as low as $1,000.

- If you are a shareholder of any other Flag Investors fund, your
initial investment may be as low as $500.

- If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be as low as $250. If you participate in the
monthly plan, your subsequent investments may be as low as $100. If
you participate in the quarterly plan, your subsequent investments may
be as low as $250. Refer to the section on the Fund's Automatic
Investing Plan for details.

- There is no minimum investment requirement for qualified retirement
plans such as 401(k), pension, or profit sharing plans.

INVESTING REGULARLY

You may make regular investments in the Fund through any of the following
methods. If you wish to enroll in any of these programs or if you need any
additional information, complete the appropriate section of the Application Form
or contact your securities dealer, your servicing agent, or the Transfer Agent.

AUTOMATIC INVESTING PLAN. You may elect to make a regular monthly or
quarterly investment in any class of shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
money is received by the Transfer Agent, it will be invested in the class of
shares selected at that day's offering price. Either you or the Fund may
discontinue your participation upon 30 days' notice.

DIVIDEND REINVESTMENT PLAN. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares at net
asset value. You may elect to receive your distributions in cash or to have your
distributions invested in shares of other Flag Investors funds. To make either
of these elections or to terminate automatic reinvestment, complete the
appropriate section of the Application Form or notify the Transfer Agent, your
securities dealer, or your servicing agent at least five days before the date on
which the next dividend or distribution will be paid.

SYSTEMATIC PURCHASE PLAN. You may also purchase any class of shares through
a Systematic Purchase Plan. Contact your securities dealer or servicing agent
for details.

5
<PAGE>

HOW TO REDEEM SHARES
-------------------------------------------------------------------------------

You may redeem any class of the Fund's shares through your securities
dealer or servicing agent. Contact them for details on how to enter your order
and for information as to how you will be paid. If you have an account with the
Fund that is in your name, you may also redeem shares by contacting the Transfer
Agent by mail or (if you are redeeming less than or equal to $50,000) by
telephone. The Transfer Agent will mail your redemption check within seven days
after it receives your order in proper form. Refer to the section entitled
"Telephone Transactions" for more information on this method of redemption.

Your securities dealer, your servicing agent or the Transfer Agent may
require the following documents before they redeem your shares:

1) A letter of instructions specifying your account number and the number
of shares or dollar amount you wish to redeem. The letter must be
signed by all owners of the shares exactly as their names appear on
the account.

2) If you are redeeming more than $50,000, a guarantee of your signature.
You can obtain one from most banks or securities dealers.

3) Any stock certificates representing the shares you are redeeming. The
certificates must be either properly endorsed or accompanied by a duly
executed stock power.

4) Any additional documents that may be required if your account is in
the name of a corporation, partnership, trust, or fiduciary.

OTHER REDEMPTION INFORMATION

Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time, the
dividend will be paid to you in cash whether or not that is the payment option
you have selected.

If you redeem sufficient shares to reduce your investment to $500 or less,
the Fund has the power to redeem the remaining shares after giving you 60 days'
notice. The Fund reserves the right to redeem shares in kind under certain
circumstances.

If you own Fund shares having a value of at least $10,000, you may arrange
to have some of your shares redeemed monthly or quarterly under the Fund's
Systematic Withdrawal Plan. Each redemption under this plan involves all the tax
and sales charge implications normally associated with Fund redemptions. Contact
your securities dealer, your servicing agent or the Transfer Agent for
information on this plan.

TELEPHONE TRANSACTIONS
-------------------------------------------------------------------------------

If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You are automatically entitled
to telephone transaction privileges, but you may specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.

The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that either reasonably believes to be genuine.
Your telephone transaction request will be recorded.

During periods of economic or market volatility, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail. If you hold your shares in certificate form,
you may not exchange or redeem them by telephone.

6
<PAGE>

SALES CHARGES
-------------------------------------------------------------------------------
PURCHASE PRICE

The price you pay to buy shares will be the Fund's offering price; this is
calculated by adding any applicable sales charges to the net asset value per
share of the class you are buying. The amount of any sales charge included in
your purchase price will be according to the following schedule:

CLASS A SALES
CHARGE AS A % OF
--------------------
OFFERING NET AMOUNT CLASS B CLASS C
AMOUNT OF PURCHASE PRICE INVESTED SALES CHARGE SALES CHARGE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 ..... 5.50% 5.82% None None
$50,000 - $99,999 ..... 4.50% 4.71% None None
$100,000 - $249,999 ... 3.50% 3.63% None None
$250,000 - $499,999 ... 2.50% 2.56% None None
$500,000 - $999,999 ... 2.00% 2.04% None None
$1,000,000 and over ... None None None None
-------------------------------------------------------------------------------
</TABLE>

Although you do not pay an initial sales charge when you invest $1,000,000
or more in Class A Shares or when you buy any amount of Class B or Class C
Shares, you may pay a sales charge when you redeem your shares. Refer to the
section entitled "Redemption Price" for details. Your securities dealer may be
paid a commission at the time of your purchase.

The sales charge you pay on your current purchase of Class A Shares may be
reduced under the circumstances listed below.

RIGHTS OF ACCUMULATION. If you are purchasing additional Class A Shares of
this Fund or Class A shares of any other Flag Investors fund or if you already
have investments in Class A shares, you may combine the value of your purchases
with the value of your existing investments to determine whether you qualify for
reduced sales charges. (For this purpose your existing investments will be
valued at the higher of cost or current value.) You may also combine your
purchases and investments with those of your spouse and your children under the
age of 21 for this purpose. You must be able to provide sufficient information
to verify that you qualify for this right of accumulation.

LETTER OF INTENT. If you anticipate making additional purchases of Class A
Shares over the next 13 months, you may combine the value of your current
purchase with the value of your anticipated purchases to determine whether you
qualify for a reduced sales charge. You will be required to sign a letter of
intent specifying the total value of your anticipated purchases and to initially
purchase at least 5% of the total. When you make each purchase during the
period, you will pay the sales charge applicable to their combined value. If, at
the end of the 13-month period, the total value of your purchases is less than
the amount you indicated, you will be required to pay the difference between the
sales charges you paid and the sales charges applicable to the amount you
actually did purchase. Some of your Class A Shares will be redeemed to pay this
difference.

PURCHASES AT NET ASSET VALUE. You may buy Class A Shares without paying a
sales charge under the following circumstances:

1) If you are reinvesting some or all of the proceeds of a redemption of
Class A Shares made within the prior 90 days.

2) If you are exchanging an investment in another Flag Investors fund for
an investment in this Fund (see "Purchases by Exchange" for a
description of the conditions).

3) If you are a current or retired Director of this or any affiliated Fund,
a director, an employee or a member of the immediate family of an
employee of any of the following (or their respective affiliates): the
Fund's distributor, the Advisors, or a broker-dealer authorized to sell
shares of the Fund.

4) If you are buying shares in any of the following types of accounts:

(i) A qualified retirement plan;

(ii) A Flag Investors fund payroll savings plan program;

(iii) A fiduciary or advisory account with a bank, bank trust
department, registered investment advisory company, financial
planner or securities dealer purchasing shares on your behalf. To
qualify for this provision you must be paying an account
management fee for the fiduciary or advisory services. You may be
charged an additional fee by your securities dealer or servicing
agent if you buy shares in this manner.

PURCHASES BY EXCHANGE

You may exchange Class A, B, or C shares of any other Flag Investors fund
for an equal dollar amount of Class A, B or C Shares, respectively, without
payment of the sales charges described above or any other charge up to four
times a year. You may not exchange shares of Flag Investors Cash Reserve Prime
Shares for shares of the Fund unless you acquired those shares through a prior
exchange from shares of another Flag Investors fund. You may enter both your
redemption and purchase orders on the same Business Day or, if you have already
redeemed the shares of the other fund, you may enter your purchase order within
90 days of the redemption. The Fund may modify or terminate these offers of
exchange upon 60 days' notice.

7
<PAGE>

You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.

REDEMPTION PRICE

The amount of any sales charge deducted from your redemption price will be
determined according to the following schedule.

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE
OF THE DOLLAR AMOUNT SUBJECT TO CHARGE
(AS A % OF COST OR VALUE)
--------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
YEAR SINCE PURCHASE SALES CHARGE SALES CHARGE SALES CHARGE
-------------------------------------------------------------------------------
<S> <C> <C> <C>
First .................... 1.00%* 5.00% 1.00%
Second ................... 0.50%* 4.00% None
Third .................... None 3.00% None
Fourth ................... None 3.00% None
Fifth .................... None 2.00% None
Sixth .................... None 1.00% None
Thereafter None None None
-------------------------------------------------------------------------------
</TABLE>

* You will pay a sales charge when you redeem Class A Shares within two years
of purchase only if your shares were purchased at net asset value because
they were part of an investment of $1,000,000 or more.

DETERMINATION OF SALES CHARGE. The sales charge applicable to your
redemption is calculated in a manner that results in the lowest possible rate:

1) No sales charge will be applied to shares you own as a result of
reinvesting dividends or distributions.

2) If you have purchased shares at various times, the sales charge will be
applied first to shares you have owned for the longest period of time.

3) If you acquired your shares through an exchange of shares of another
Flag Investors fund, the period of time you held the original shares
will be combined with the period of time you held the shares being
redeemed to determine the years since purchase. If you bought your
shares prior to January 18, 2000, you will pay the sales charge that was
in effect at the time of your original purchase.

4) The sales charge is applied to the lesser of the cost of the shares or
their value at the time of your redemption.

WAIVER OF SALES CHARGE. You may redeem shares without paying a sales charge
under any of the following circumstances:

1) If you are exchanging your shares for shares of another Flag Investors
fund of the same class.

2) If your redemption represents the minimum required distribution from an
individual retirement account or other retirement plan.

3) If your redemption represents a distribution from a Systematic
Withdrawal Plan. This waiver applies only if the annual withdrawals
under your Plan are 12% or less of your share balance.

4) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under the
following conditions:

(i) The account is registered in your name either individually, as a
joint tenant with rights of survivorship, as a participant in
community property, or as a minor child under the Uniform Gifts
or Uniform Transfers to Minors Acts.

(ii) Either you or your representative notifies your securities
dealer, servicing agent, or the Transfer Agent that such
circumstances exist.

5) If you are redeeming Class A Shares, your original investment was at
least $3,000,000, and your securities dealer has agreed to return to the
Fund's distributor any payments the dealer received when you bought your
shares.

AUTOMATIC CONVERSION OF CLASS B SHARES. Your Class B Shares, along with any
reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares seven years after your purchase. If
you purchased your shares prior to January 18, 2000, your Class B Shares will be
converted to Class A Shares six years after your purchase. This conversion will
be made on the basis of the relative net asset values of the classes and will
not be a taxable event to you.

8
<PAGE>

HOW TO CHOOSE THE CLASS THAT IS RIGHT FOR YOU
-------------------------------------------------------------------------------

Your decision as to which class of the Fund's shares is best for you should
be based upon a number of factors including the amount of money you intend to
invest and the length of time you intend to hold your shares.

If you choose Class A Shares, you will pay a sales charge when you buy your
shares, but the amount of the charge declines as the amount of your investment
increases. You will pay lower expenses while you hold the shares and, except in
the case of investments of $1,000,000 or more, no sales charge if you redeem
them.

If you choose Class B Shares, you will pay no sales charge when you buy
your shares, but your annual expenses will be higher than Class A Shares. You
will pay a sales charge if you redeem your shares within six years of purchase,
but the amount of the charge declines the longer you hold your shares and, at
the end of seven years, your shares convert to Class A Shares, thus eliminating
the higher expenses.

If you choose Class C Shares, you will pay no sales charge when you buy
your shares or if you redeem them after holding them for at least a year. On the
other hand, expenses on Class C Shares are the same as those on Class B Shares
and, since there is no conversion to Class A Shares at the end of seven years,
the higher expenses continue for as long as you own your shares.

Your securities dealer is paid a fee when you buy your shares and an annual
fee for as long as you hold your shares. For Class A and Class B Shares, the
annual fee begins when you purchase your shares. For Class C Shares, it begins
one year after you purchase your shares. In addition to these payments, the
Fund's investment advisor may provide significant compensation to securities
dealers and servicing agents for distribution, administrative and promotional
services.

Your securities dealer or servicing agent may receive different levels of
compensation depending upon which class of shares you buy.

DISTRIBUTION PLANS AND SHAREHOLDER SERVICING

The Fund has adopted plans under Rule 12b-1 that allow it to pay your
securities dealer or shareholder servicing agent distribution and other fees for
the sale of its shares. In addition, the Fund may pay shareholder servicing fees
on Class B and Class C Shares. Class A Shares pay an annual distribution fee
equal to 0.25% of average daily net assets. Class B and Class C Shares pay an
annual distribution fee of 0.75% of average daily net assets and an annual
shareholder servicing fee of 0.25% of average daily net assets. Because these
fees are paid out of net assets on an on-going basis, they will, over time,
increase the cost of your investment and may cost you more than paying other
types of sales charges.

DIVIDENDS AND TAXES
-------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Fund's policy is to distribute to shareholders substantially all of its
net investment income in the form of semi-annual dividends and to distribute net
capital gains at least annually.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary is based on current tax laws, which may change.

The Fund will distribute substantially all of its net investment income and
net realized capital gains at least annually. The dividends and distributions
you receive may be subject to federal, state, local and foreign taxation,
depending upon your tax situation. If so, they are taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains regardless of how long you have owned your shares.
Each sale or exchange of the Fund's shares is generally a taxable event. For tax
purposes, an exchange of your Fund shares for shares of a different Flag
Investors fund is the same as a sale. The individual tax rate on any gain from
the sale or exchange of your shares depends upon your marginal tax rate and how
long you have held your shares.

If you are a non-U.S. investor in the Fund may you be subject to U.S.
withholding and estate tax and are encouraged to consult your tax advisor prior
to investing in the Fund.

More information about taxes is in the Statement of Additional Information.
Please contact your tax advisor if you have specific questions about federal,
state, local or foreign income taxes.

9
<PAGE>

INVESTMENT ADVISOR AND SUB-ADVISOR
-------------------------------------------------------------------------------

Investment Company Capital Corp. ("ICCC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the "Sub-
Advisor") is the Fund's sub-advisor. ICCC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and Deutsche Banc Alex.
Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $12.8 billion of net assets as of August 31, 2000.

ICCC is an indirect, wholly owned subsidiary of Deutsche Bank, AG. Deutsche
Bank is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual funds, retail and
commercial banking, investment banking and insurance.

ABIM is a registered investment advisor with approximately $10.8 billion
under management as of August 31, 2000. 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. DB Alex. Brown LLC owns the remaining 50%
general partnership interest in ABIM.

ICCC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of ABIM. ABIM is responsible
for decisions to buy and sell securities for the Fund, for broker-dealer
selection, and for negotiation of commission rates.

PORTFOLIO MANAGER

Lee S. Owen has been responsible for managing the Fund's assets since its
inception. Mr. Owen, who has 28 years of investment experience, joined ABIM as a
Vice President in 1983. From 1972 to 1983, Mr. Owen was a Vice President and
Portfolio Manager for T. Rowe Price Associates. Mr. Owen is a 1970 graduate of
Williams College and received his M.B.A. from the University of Virginia in
1972. He is a member of the Baltimore Security Analysts Society and the
Financial Analysts Federation.

10
<PAGE>

FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------

The financial highlights tables are intended to help you understand the
Fund's financial performance for the past five fiscal years for Class A and
Class B Shares and since commencement of operations for Class C Shares. Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements is included in the
Fund's Annual Report, which is available upon request.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A SHARES
FOR THE YEARS ENDED MAY 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period .................... $25.68 $21.29 $16.93 $13.09 $10.77
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(expenses in excess of income) ......................... 0.10 (0.01) 0.05 0.08 0.17
Net realized and unrealized gain/(loss)
on investments ......................................... (3.54) 4.70 4.60 3.96 2.29
------ ------ ------ ------ ------
Total from Investment Operations .......................... (3.44) 4.69 4.65 4.04 2.46
LESS DISTRIBUTIONS FROM:
Net investment income and net realized
short-term gains ....................................... (0.03) (0.03) (0.10) (0.13) (0.14)
Net realized long-term gains .............................. (0.99) (0.27) (0.19) (0.07) --
------ ------ ------ ------ ------
Total distributions ....................................... (1.02) (0.30) (0.29) (0.20) (0.14)
------ ------ ------ ------ ------
Net asset value at end of year ............................ $21.22 $25.68 $21.29 $16.93 $13.09
====== ====== ====== ====== ======
TOTAL RETURN(1) .............................................. (13.63)% 22.31% 27.76% 31.17% 23.05%
RATIOS TO AVERAGE DAILY NET ASSETS:
Expenses .................................................. 1.18% 1.20% 1.24% 1.35%(2) 1.35%(2)
Net investment income/
(expenses in excess of income) ......................... 0.38% (0.02)% 0.29% 0.61%(3) 1.52%(3)
SUPPLEMENTAL DATA:
Net assets at end of year (000) ........................... $214,677 $283,950 $198,387 $113,030 $64,230
Portfolio turnover rate ................................... 32.37% 21.21% 7.94% 17.60% 0.73%
</TABLE>

------------------------
(1) Total return excludes the effect of sales charge.

(2) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.48% and 1.77% for the years ended May 31, 1997
and 1996, respectively.

(3) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.48% and 1.10% for the years
ended May 31, 1997 and 1996, respectively.

<PAGE>

FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS B SHARES
FOR THE YEARS ENDED MAY 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period .................... $25.29 $21.10 $16.84 $13.03 $10.75
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(expenses in excess of income) ......................... (0.09) (0.14) (0.06) (0.04) 0.07
Net realized and unrealized gain/(loss)
on investments ......................................... (3.46) 4.60 4.54 3.96 2.31
------ ------ ------ ------ ------
Total from Investment Operations .......................... (3.55) 4.46 4.48 3.92 2.38
LESS DISTRIBUTIONS FROM:
Net investment income and net realized
short-term gains ....................................... (0.03) -- (0.03) (0.04) (0.10)
Net realized long-term gains .............................. (0.99) (0.27) (0.19) (0.07) --
------ ------ ------ ------ ------
Total distributions ....................................... (1.02) (0.27) (0.22) (0.11) (0.10)
------ ------ ------ ------ ------
Net asset value at end of year ............................ $20.72 $25.29 $21.10 $16.84 $13.03
====== ====== ====== ====== ======
TOTAL RETURN(1) .............................................. (14.29)% 21.39% 26.81% 30.28% 22.17%
RATIOS TO AVERAGE DAILY NET ASSETS:
Expenses .................................................. 1.93% 1.95% 1.98% 2.10%(2) 2.10%(2)
Net investment income/
(expenses in excess of income) ......................... (0.37)% (0.77)% (0.47)% (0.16)%(3) 0.71%(3)
SUPPLEMENTAL DATA:
Net assets at end of year (000) ........................... $40,185 $52,603 $37,046 $15,670 $5,302
Portfolio turnover rate ................................... 32.37% 21.21% 7.94% 17.60% 0.73%
</TABLE>

--------------
(1) Total return excludes the effect of sales charge.

(2) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 2.23% and 2.52% for the years ended May 31, 1997
and 1996, respectively.

(3) Without the waiver of advisory fees, the ratio of net investment income/
(expenses in excess of income) to average daily net assets would have been
(0.28)% and 0.29% for the years ended May 31, 1997 and 1996, respectively.

12
<PAGE>

FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS C SHARES
---------------------------------
FOR THE PERIOD
FOR THE YEAR OCT. 28, 1998(1)
ENDED MAY 31, THROUGH MAY 31,
2000 1999
------------- ----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period ........................... $25.27 $19.09
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Expenses in excess of income ..................................... (0.08) (0.03)
Net realized and unrealized gain/(loss)
on investments ................................................ (3.45) 6.48
------ ------
Total from Investment Operations ................................. (3.53) 6.45
LESS DISTRIBUTIONS FROM:
Net investment income and net realized
short-term gains .............................................. (0.03) --
Net realized long-term gains ..................................... (0.99) (0.27)
------ ------
Total distributions .............................................. (1.02) (0.27)
------ ------
Net asset value at end of period ................................. $20.72 $25.27
====== ======
TOTAL RETURN(2) ..................................................... (14.22)% 34.06%
RATIOS TO AVERAGE DAILY NET ASSETS:
Expenses ......................................................... 1.93% 1.85%(3)
Expenses in excess of income ..................................... (0.39)% (0.73)%(3)
SUPPLEMENTAL DATA:
Net assets at end of period (000) ................................ $6,455 $3,441
Portfolio turnover rate .......................................... 32.37% 21.21%
</TABLE>

--------------
(1) Commencement of operations.

(2) Total return excludes the effect of sales charge.

(3) Annualized.

<PAGE>

THIS PAGE LEFT BLANK INTENTIONALLY.
<PAGE>

THIS PAGE LEFT BLANK INTENTIONALLY.

<PAGE>

INVESTMENT ADVISOR
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

INVESTMENT SUB-ADVISOR
ALEX. BROWN INVESTMENT MANAGEMENT
One South Street
Baltimore, Maryland 21202

DISTRIBUTOR
ICC DISTRIBUTORS, INC.

TRANSFER AGENT
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080

INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201

CUSTODIAN
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006

FUND COUNSEL
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
<PAGE>

[LOGO]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE-Registered Trademark-

Flag Investors - P.O. Box 515 - Baltimore, MD 21203 - (800) 767-FLAG
www.flaginvestors.com
-------------------------------------------------------------------------------

You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling
(800) 767-FLAG:

- A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.

- The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion
of market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.

In addition, you may review information about the Fund (including the SAI) at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. (Call 202-942-8090 to find out about the operation of the Public Reference
Room.) The EDGAR Database on the Commission's Internet site at
http://www.sec.gov has reports and other information about the Fund. Copies of
this information may be obtained, upon payment of a duplicating fee, by
electronic request at the following email address: [email protected] or by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-0102.

For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.

Investment Company Act File No. 811-8886 EPPRS (10/00)

<PAGE>

[LOGO]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE-Registered Trademark-

EQUITY PARTNERS FUND, INC.
(INSTITUTIONAL SHARES)

PROSPECTUS

OCTOBER 1, 2000

The Securities and Exchange Commission has neither approved nor disapproved
these securities nor has it passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

<PAGE>

THIS MUTUAL FUND (THE "FUND") SEEKS TO ACHIEVE LONG-TERM GROWTH OF CAPITAL AND,
SECONDARILY, CURRENT INCOME BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF
COMMON STOCKS.

The Fund offers shares through securities dealers and financial institutions
that act as shareholder servicing agents. You may also buy shares through the
Fund's Transfer Agent. This Prospectus describes Flag Investors Institutional
Shares (the "Institutional Shares") of the Fund. Institutional Shares may be
purchased only by eligible institutions, by certain qualified retirement plans
or by investment advisory affiliates of DB Alex. Brown LLC or the Flag Investors
family of funds on behalf of their clients.

TABLE OF CONTENTS
-----------------

INVESTMENT SUMMARY ....................................... 1
FEES AND EXPENSES OF INSTITUTIONAL SHARES ................ 3
INVESTMENT PROGRAM ....................................... 3
THE FUND'S NET ASSET VALUE ............................... 4
HOW TO BUY INSTITUTIONAL SHARES .......................... 4
HOW TO REDEEM INSTITUTIONAL SHARES ....................... 5
TELEPHONE TRANSACTIONS ................................... 5
DIVIDENDS AND TAXES ...................................... 5
INVESTMENT ADVISOR AND SUB-ADVISOR ....................... 6
FINANCIAL HIGHLIGHTS ..................................... 7

FLAG INVESTORS FUNDS

P.O. BOX 515
BALTIMORE, MD 21203
<PAGE>

INVESTMENT SUMMARY
-------------------------------------------------------------------------------

OBJECTIVES AND STRATEGIES

The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.

RISK PROFILE

The Fund may be suited for you if you are willing to accept the risks and
uncertainties of the stock markets in the hope of achieving above-average
long-term capital appreciation.

If you invest in the Fund, you could lose money. An investment in the Fund
is not a bank deposit and is not insured or guaranteed by the FDIC or any other
government agency.

1
<PAGE>

FUND PERFORMANCE

The following bar chart and table show the performance of the Fund both
year-by-year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of
investing in the Fund. This is an historical record and does not necessarily
indicate how the Fund will perform in the future.

INSTITUTIONAL SHARES* FOR YEARS ENDED DECEMBER 31,
<TABLE>
<S> <C>
1997 24.76%
1998 25.63%
1999 7.54%
</TABLE>

* For the period from December 31, 1999 through June 30, 2000, the total return
for the Institutional Shares was (9.23)%.

During the 3-year period shown in the bar chart, the highest return for a
quarter was 30.03% (quarter ended 12/31/98) and the lowest return for a quarter
was (16.57)% (quarter ended 9/30/98).

<TABLE>

AVERAGE ANNUAL TOTAL RETURN (FOR PERIODS ENDED DECEMBER 31, 1999)

INSTITUTIONAL SHARES(1) S&P 500(2)
<S> <C> <C>
Past One Year ..................... 7.54% 21.04%
Since Inception ................... 20.27% (2/14/96) 25.93%(3)
</TABLE>

--------------
(1) These figures assume the reinvestment of dividends and capital gains
distributions.

(3) For the period from 1/31/96 through 12/31/99.

2
<PAGE>

FEES AND EXPENSES OF INSTITUTIONAL SHARES
-------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the Fund.

<TABLE>
<S> <C>
SHAREHOLDER FEES:
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases .................... None
Maximum Deferred Sales Charge (Load) ................................ None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ......... None
Redemption Fee ...................................................... None
Exchange Fee ........................................................ None

ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees ..................................................... 0.77%
Distribution and/or Service (12b-1) Fees ............................ None
Other Expenses ...................................................... 0.16%
-----
Total Annual Fund Operating Expenses ................................ 0.93%
=====
</TABLE>

EXAMPLE:

This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Institutional Shares for
the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Shares ......... $95 $296 $515 $1,143
</TABLE>

INVESTMENT PROGRAM
-------------------------------------------------------------------------------

INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks.

3
<PAGE>

THE FUND'S NET ASSET VALUE
-------------------------------------------------------------------------------

The price you pay when you buy shares or receive when you redeem shares is
based on the Fund's net asset value per share. The net asset value per share of
the Fund is determined at the close of regular trading on the New York Stock
Exchange on each day the Exchange is open for business. While regular trading
ordinarily closes at 4:00 p.m. (Eastern Time), it could be earlier, particularly
on a day before a holiday. Contact the Transfer Agent for information about
whether the Fund will close early before a particular holiday. The net asset
value per share is calculated by subtracting the liabilities attributable to the
Institutional Shares from its proportionate share of the Fund's assets and
dividing the result by the number of outstanding Institutional Shares.

In valuing its assets, the Fund's investments are priced at their market
value. When price quotes for a particular security are either not readily
available, or unreliable, the security is priced at its "fair value" using
procedures approved by the Fund's Board of Directors.

You may buy or redeem Institutional Shares on any day the New York Stock
Exchange is open for business (a "Business Day"). If your order is entered
before the net asset value per share is determined for that day, the price you
pay or receive will be based on that day's net asset value per share. If your
order is entered after the net asset value per share is determined for that day,
the price you pay or receive will be based on the next Business Day's net asset
value per share.

The following sections describe how to buy and redeem Institutional
Shares.

HOW TO BUY INSTITUTIONAL SHARES
-------------------------------------------------------------------------------

You may buy Institutional Shares if you are any of the following:

- An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or
charitable institution or a qualified retirement plan other than a
defined contribution plan).

- A defined contribution plan with assets of at least $75 million.

- An investment advisory affiliate of DB Alex. Brown LLC or the Flag
Investors family of funds purchasing shares for the accounts of your
investment advisory clients.

You may buy Institutional Shares through your securities dealer or through
any financial institution that is authorized to act as a shareholder servicing
agent. Contact them for details on how to enter and pay for your order. You may
also buy Institutional Shares by sending your check (along with a completed
Application Form) directly to the Fund.

Your purchase order may not be accepted if the sale of Fund shares has been
suspended or if it is determined that your purchase would be detrimental to the
interests of the Fund's shareholders.

INVESTMENT MINIMUMS

Your initial investment must be at least $500,000.

The following are exceptions to this minimum:

- There is no minimum initial investment for investment advisory
affiliates of DB Alex. Brown LLC or the Flag Investors family of funds
purchasing shares for the accounts of their investment advisory clients.

- There is no minimum initial investment for defined contribution plans
with assets of at least $75 million.

- The minimum initial investment for all other qualified retirement plans
is $1 million.

- There are no minimums for subsequent investments.

PURCHASES BY EXCHANGE

You may exchange Institutional shares of any other Flag Investors fund for
an equal dollar amount of Institutional Shares of the Fund up to four times a
year. The Fund may modify or terminate this offer of exchange upon 60 days'
notice.

4
<PAGE>

HOW TO REDEEM INSTITUTIONAL SHARES
-------------------------------------------------------------------------------

You may redeem Institutional Shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid. If your shares are in an account with
the Fund, you may also redeem them by contacting the Transfer Agent by mail or
(if you are redeeming less than $500,000) by telephone. You will be paid for
redeemed shares by wire transfer of funds to your securities dealer, servicing
agent or bank upon receipt of a duly authorized redemption request as promptly
as feasible and, under most circumstances, within three Business Days.

TELEPHONE TRANSACTIONS
-------------------------------------------------------------------------------

If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $500,000 or exchange them for Institutional shares of
another Flag Investors fund by calling the Transfer Agent on any Business Day
between the hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges but you may
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.

During periods of economic or market volatility, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail.

DIVIDENDS AND TAXES
-------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS

The Fund's policy is to distribute to shareholders substantially all of its
net investment income in the form of semi-annual dividends and to distribute net
capital gains at least annually.

DIVIDEND REINVESTMENT

Unless you elect otherwise, all income and capital gains distributions will
be reinvested in additional Institutional Shares at net asset value. You may
elect to receive your distributions in cash or to have your distributions
invested in shares of other Flag Investors funds. To make either of these
elections or to terminate automatic reinvestment, complete the appropriate
section of the Application Form or notify the Transfer Agent, your securities
dealer, or servicing agent at least five days before the date on which the next
dividend or distribution will be paid.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary is based on current tax laws, which may change.

The Fund will distribute substantially all of its net investment income and
net realized capital gains at least annually. The dividends and distributions
you receive may be subject to federal, state, local and foreign taxation,
depending upon your tax situation. If so, they are taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains regardless of how long you have owned your shares.
Each sale or exchange of the Fund is generally a taxable event. For tax
purposes, an exchange of your Fund shares for shares of a different Flag
Investors fund is the same as a sale. The individual tax rate on any gain from
the sale or exchange of your shares depends upon your marginal tax rate and how
long you have held your shares.

5
<PAGE>

If you have a tax-advantaged or other retirement account you generally
will not be subject to federal taxation on income and capital gains
distributions until you begin receiving distributions from your retirement
account. You should consult your tax advisor regarding the rules governing your
own retirement plan.

If you are a non-U.S. investor in the Fund you may be subject to U.S.
withholding and estate tax and are encouraged to consult your tax advisor prior
to investing in the Fund.

More information about taxes is in the Statement of Additional Information.
Please contact your tax advisor if you have specific questions about federal,
state, local or foreign income taxes.

INVESTMENT ADVISOR AND SUB-ADVISOR
-------------------------------------------------------------------------------

Investment Company Capital Corp. ("ICCC" or the "Advisor") is the Fund's
investment advisor and Alex. Brown Investment Management ("ABIM" or the
"Sub-Advisor") is the Fund's sub-advisor. ICCC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and Deutsche Banc Alex.
Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $12.8 billion of net assets as of August 31, 2000.

ICCC is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche
Bank is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual funds, retail and
commercial banking, investment banking and insurance.

As compensation for its services for the fiscal year ended May 31, 2000,
ICCC received from the Fund a fee equal to 0.77% of the Fund's average daily net
assets. ICCC compensates ABIM out of its advisory fee. ICCC also may provide
significant compensation to securities dealers and servicing agents for
distribution, administrative and promotional services.

PORTFOLIO MANAGER

6
<PAGE>

FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------

The financial highlights table is intended to help you understand the
Institutional Shares' financial performance since commencement of operations.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
on an investment in Institutional Shares (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the Fund's financial statements is included in the
Fund's Annual Report, which is available upon request.

INSTITUTIONAL SHARES (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
-------------------------------------------------------------------------------

FOR THE YEARS ENDED MAY 31, FEB. 14, 1996(1)
------------------------------------------ THROUGH
2000 1999 1998 1997 MAY 31, 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period ..................... $25.75 $21.32 $16.94 $13.10 $12.72
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................................... 0.15 0.04 0.10 0.14 0.04
Net realized and unrealized gain/(loss)
on investments .......................................... (3.53) 4.70 4.61 3.95 0.34
------ ------ ------ ------ ------
Total from Investment Operations ........................... (3.38) 4.74 4.71 4.09 0.38
LESS DISTRIBUTION FROM:
Net investment income and net realized
short-term gains ........................................ (0.03) (0.04) (0.14) (0.18) --
Net realized long-term gains ............................... (0.99) (0.27) (0.19) (0.07) --
------ ------ ------ ------ ------
Total distributions ........................................ (1.02) (0.31) (0.33) (0.25) --
------ ------ ------ ------ ------
Net asset value at end of period ........................... $21.35 $25.75 $21.32 $16.94 $13.10
====== ====== ====== ====== ======
TOTAL RETURN ............................................... (13.39)% 22.53% 28.14% 31.58% 3.23%
RATIOS TO AVERAGE DAILY NET ASSETS:
Expenses ................................................... 0.93% 0.95% 0.98% 1.10%(2) 1.10%(2,4)
Net investment income ...................................... 0.65% 0.23% 0.54% 0.81%(3) 1.20%(3,4)
SUPPLEMENTAL DATA:
Net assets at end of period (000) .......................... $105,505 $125,388 $94,354 $42,115 $4,235
Portfolio turnover rate .................................... 32.37% 21.21% 7.94% 17.60% 0.73%
</TABLE>

--------------
(1) Commencement of operations.

(2) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.23% and 1.55% (annualized) for the year ended
May 31, 1997, and the period ended May 31, 1996, respectively.

(3) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.70% and 0.75% (annualized) for
the year ended May 31, 1997 and the period ended May 31, 1996,
respectively.

(4) Annualized.

7
<PAGE>

THIS PAGE LEFT BLANK INTENTIONALLY.

<PAGE>

INVESTMENT ADVISOR
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

INVESTMENT SUB-ADVISOR
ALEX. BROWN INVESTMENT MANAGEMENT
One South Street
Baltimore, Maryland 21202

DISTRIBUTOR
ICC DISTRIBUTORS, INC.

TRANSFER AGENT
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080

INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201

CUSTODIAN
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006

FUND COUNSEL
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, Pennsylvania 19103

<PAGE>
[LOGO]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE-Registered Trademark-

Flag Investors - P.O. Box 515 - Baltimore, MD 21203 - (800) 767-FLAG
www.flaginvestors.com
-------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling
(800)767-FLAG:

- A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.

For other shareholder inquiries, contact the Transfer Agent at (800) 553-8080.
For Fund information, call (800) 767-FLAG or your securities dealer or servicing
agent.

Investment Company Act File No. 811-8886 EPIRS (10/00)

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FLAG INVESTORS EQUITY PARTNERS FUND, INC.

One South Street
Baltimore, Maryland 21202

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH A PROSPECTUS. THE AUDITED FINANCIAL STATEMENTS OF THE FUND
ARE INCLUDED IN THE FUND'S ANNUAL REPORT, WHICH HAS BEEN FILED ELECTRONICALLY
WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS INCORPORATED BY REFERENCE IN
THIS STATEMENT OF ADDITIONAL INFORMATION. A COPY OF EACH PROSPECTUS AND ANNUAL
REPORT MAY BE OBTAINED WITHOUT CHARGE FROM YOUR SECURITIES DEALER OR SHAREHOLDER
SERVICING AGENT OR BY WRITING OR CALLING THE FUND, ONE SOUTH STREET, BALTIMORE,
MARYLAND 21202, (800) 767-FLAG.

Statement of Additional Information Dated October 1, 2000
relating to Prospectuses Dated October 1, 2000 for:
Flag Investors Equity Partners Class A Shares, Flag Investors
Equity Partners Class B Shares, Flag Investors Equity
Partners Class C Shares and Flag Investors Equity Partners
Institutional Shares

Page 1
<PAGE>

<TABLE>
TABLE OF CONTENTS
<S> <C>
GENERAL INFORMATION AND HISTORY ........................................... 3
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS ................... 4
VALUATION OF SHARES AND REDEMPTION ........................................ 10
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS ...................... 11
MANAGEMENT OF THE FUND .................................................... 15
INVESTMENT ADVISORY AND OTHER SERVICES .................................... 22
DISTRIBUTION OF FUND SHARES ............................................... 23
BROKERAGE ................................................................. 28
CAPITAL STOCK ............................................................. 31
SEMI-ANNUAL REPORTS AND ANNUAL REPORTS .................................... 32
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES ......................... 32
INDEPENDENT ACCOUNTANTS ................................................... 33
LEGAL MATTERS ............................................................. 33
PERFORMANCE INFORMATION ................................................... 33
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ....................... 35

FINANCIAL STATEMENTS ...................................................... 36

APPENDIX A ................................................................ A-1
</TABLE>

Page 2
<PAGE>

GENERAL INFORMATION AND HISTORY

Flag Investors Equity Partners Fund, Inc. (the "Fund") is an open-end
diversified management investment company. Under the rules and regulations of
the Securities and Exchange Commission (the "SEC"), all mutual funds are
required to furnish prospective investors with certain information concerning
the activities of the company being considered for investment. The Fund
currently offers four classes of shares: Flag Investors Equity Partners Fund
Class A Shares (the "Class A Shares"), Flag Investors Equity Partners Fund Class
B Shares (the "Class B Shares"), Flag Investors Equity Partners Fund Class C
Shares ("Class C Shares") and Flag Investors Equity Partners Fund Institutional
Shares (the "Institutional Shares") (collectively, the "Shares"). As used
herein, the "Fund" refers to Flag Investors Equity Partners Fund, Inc. and
specific references to any class of the Fund's Shares will be made using the
name of such class.

Important information concerning the Fund is included in the Fund's
Prospectuses, which may be obtained without charge from the Fund's distributor
(the "Distributor") or from Participating Dealers that offer Shares to
prospective investors. Prospectuses may also be obtained from Shareholder
Servicing Agents. Some of the information required to be in this Statement of
Additional Information is also included in the Fund's current Prospectuses. To
avoid unnecessary repetition, references are made to related sections of the
Prospectuses. In addition, the Prospectuses and this Statement of Additional
Information omit certain information about the Fund and its business that is
contained in the Registration Statement for the Fund and its Shares filed with
the Securities and Exchange Commission ("SEC"). Copies of the Registration
Statement as filed, including such omitted items, may be obtained from the SEC
by paying the charges prescribed under its rules and regulations.

The Fund was incorporated under the laws of the State of Maryland on
November 29, 1994. The Fund filed a registration statement with the SEC
registering itself as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") and its Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and began operations on February 13, 1995. The Fund has
offered the Institutional Shares since February 14, 1996 and the Class C Shares
since October 28, 1998.

Under a license agreement dated January 31, 1995 between the Fund and Alex.
Brown & Sons Incorporated (predecessor to DB Alex. Brown LLC), Alex. Brown &
Sons Incorporated licenses to the Fund the "Flag Investors" name and logo but
retains the rights to the name and logo, including the right to permit other
investment companies to use them.

Page 3
<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The Fund seeks to achieve long-term growth of capital and, secondarily,
current income by investing primarily in a diversified portfolio of common
stocks. The Fund may make other equity investments (including preferred stocks,
convertible securities, warrants and other securities convertible into or
exchangeable for common stocks). Under normal market conditions, the Fund will
invest as fully as feasible in equity securities and at least 65% of the Fund's
total assets will be so invested. There can be no assurance that the Fund's
investment objectives will be achieved.

The Fund is named for the three-way partnership among company
management, the Fund's management and the shareholder. Companies owned by the
Fund have management who are committed to the interests of their shareholders
and may have a significant ownership position in their companies' stock.
Similarly, the Fund's portfolio manager has a significant personal investment
in the Fund's shares. Their vested interests are aligned with yours, so that
achieving shareholder value is more than a stated objective. Company
management, Fund management and you are linked like equity partners.

The Fund's emphasis, as always, has been on continuous improvement in
the portfolio holdings. This process involves eliminating names in which the
manager's confidence has waned and adding investments in which his conviction
is high. The manager tries to avoid selling his favorite long-term holdings
simply because they have gone up significantly and buying weaker companies
simply because their stocks have lagged. The manager's experience over the
years has been that, despite various market levels, there are always good
values to take advantage of by using extensive research and independent
thinking.

In addition, the Fund may invest up to 10% of its total assets in
non-convertible debt securities. Up to all of any such investments may be in
securities that are rated below investment grade by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P") or are unrated and
of similar quality. A description of the rating categories of S&P and Moody's is
set forth in Appendix A to this Statement of Additional Information. Any
remaining assets of the Fund not invested as described above may be invested in
high quality money market instruments. For temporary defensive purposes the Fund
may invest up to 100% of its assets in high quality short-term money market
instruments, including repurchase agreements, and in bills, notes or bonds
issued by the U.S. Treasury Department or by other agencies of the U.S.
Government.

Additional information about certain of the Fund's investment policies and
practices are described below.

EQUITY SECURITIES

Equity securities include common stocks, preferred stocks, warrants, and
other securities that may be converted into or exchanged for common stocks.
Common stocks are equity securities that represent an ownership interest in a
corporation, entitling the shareholder to voting rights and receipt of dividends
based on proportionate ownership. Preferred stock is a class of capital stock
that pays dividends at a specified rate and that has preference over common
stock in the payment of dividends and the liquidation of assets. Warrants are
instruments giving holders the right, but not the obligation, to buy shares of a
company at a given price during a specified period. Convertible securities are
securities that may be converted either at a stated price or rate within a
specified period of time into a specified number of shares of common stock.

In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., the value of the underlying shares of common stock
if the security is converted). As a fixed-income security, a convertible
security tends to increase in market value when interest rates decline and tends
to decrease in value when interest rates rise. However,

Page 4
<PAGE>

the price of a convertible security also is influenced by the market value of
the security's underlying common stock. Thus, the price of a convertible
security tends to increase as the market value of the underlying common stock
increases, whereas it tends to decrease as the market value of the underlying
stock declines. Investments in convertible securities generally entail less risk
than investment in common stock of the same issuer.

BELOW INVESTMENT GRADE SECURITIES

The Fund may invest up to 10% of its total assets (measured at the time
of investment) in debt obligations that carry ratings lower than those
assigned to investment grade bonds by Moody's or S&P, or that are unrated if
such bonds, in the Advisor's judgement meet the quality criteria established
by the Board of Directors. These bonds are generally known as "junk bonds."
These securities may trade at substantial discounts from their face values.
Accordingly, if the Fund is successful in meeting its objectives, investors
may receive a total return consisting not only of income dividends but, to a
lesser extent, capital gain distributions. Appendix A to this Statement of
Additional Information sets forth a description of the S&P and Moody's rating
categories, which indicate the rating agency's opinion as to the probability
of timely payment of interest and principal. These ratings range in
descending order of quality from AAA to D (though the Fund will not purchase
securities rated, at the time of purchase, below C), in the case of S&P, and
from Aaa to C, in the case of Moody's.

Ratings of S&P and Moody's represent their opinions of the quality of bonds
and other debt securities they undertake to rate at the time of issuance.
However, these ratings are not absolute standards of quality and may not reflect
changes in an issuer's creditworthiness. Accordingly, the Fund's investment
advisor (the "Advisor") and the Fund's sub-advisor (the "Sub-Advisor")
(collectively, the "Advisors") do not rely exclusively on ratings issued by S&P
or Moody's in selecting portfolio securities, but supplement such ratings with
independent and ongoing review of credit quality. In addition, the total return
the Fund may earn from investments in high-yield securities will be
significantly affected not only by credit quality but by fluctuations in the
markets in which such securities are traded. Accordingly, selection and
supervision by the Advisors of investments in lower rated securities involves
continuous analysis of individual issuers, general business conditions,
activities in the high-yield bond market and other factors. The analysis of
issuers may include, among other things, historic and current financial
conditions, strength of management, responsiveness to business conditions,
credit standing and current and anticipated results of operations. Analysis of
general business conditions and other factors may include anticipated changes in
economic activity in interest rates, the availability of new investment
opportunities and the economic outlook for specific industries.

Investing in higher yield, lower rated bonds entails substantially greater
risk than investing in investment grade bonds, including not only credit risk,
but potentially greater

Page 5
<PAGE>

market volatility and lower liquidity. Yields and market values of high-yield
bonds will fluctuate over time, reflecting not only changing interest rates but
also the bond market's perception of credit quality and the outlook for economic
growth. When economic conditions appear to be deteriorating, lower rated bonds
may decline in value due to heightened concern over credit quality, regardless
of prevailing interest rates. In adverse economic conditions, the liquidity of
the secondary market for junk bonds may be significantly reduced. In addition,
adverse economic developments could disrupt the high-yield market, affecting
both price and liquidity, and could also affect the ability of issuers to repay
principal and interest, thereby leading to a default rate higher than has been
the case historically. Even under normal conditions, the market for high-yield
bonds may be less liquid than the market for investment grade corporate bonds.
There are fewer securities dealers in the high-yield market and purchasers of
high-yield bonds are concentrated among a smaller group of securities dealers
and institutional investors. In periods of reduced market liquidity, the market
for high-yield bonds may become more volatile and there may be significant
disparities in the prices quoted for high-yield securities by various dealers.
Under conditions of increased volatility and reduced liquidity, it would become
more difficult for the Fund to value its portfolio securities accurately because
there might be less reliable, objective data available. Finally, prices for
high-yield bonds may be affected by legislative and regulatory developments. For
example, from time to time, Congress has considered legislation to restrict or
eliminate the corporate tax deduction for interest payments or to regulate
corporate restructurings such as takeovers, mergers or leveraged buyouts. Such
legislation may significantly depress the prices of outstanding high-yield
bonds.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with domestic banks or
broker-dealers deemed to be creditworthy by the Advisors. A repurchase agreement
is a short-term investment in which the Fund acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the Fund's holding period. The value of underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. The Fund makes payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of a custodian or bank acting as agent. The underlying
securities, which in the case of the Fund are securities of the U.S. Government
only, may have maturity dates exceeding one year. The Fund does not bear the
risk of a decline in value of the underlying securities unless the seller
defaults under its repurchase obligation. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and loss including (a) possible
decline in the value of the underlying security while the Fund seeks to enforce
its rights thereto, (b) possible subnormal levels of income and lack of access
to income during this period and (c) expenses of enforcing its rights.

Page 6
<PAGE>

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.

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 occurs affecting an
investment on loan, the loan must be called and the securities voted. Cash
collateral may be invested in a money market fund managed by Bankers Trust
Company (or its affiliates) and Bankers Trust may serve as the Portfolio's
lending agent and may share in revenue received from securities lending
transactions as compensation for this service.

FOREIGN INVESTMENT RISK CONSIDERATIONS

From time to time, the Advisors may invest the Fund's assets in American
Depositary Receipts and other securities, which are traded in the United States
and

Page 7
<PAGE>

represent interests in foreign issuers. The Advisors may also invest up to 10%
of the Fund's assets in securities of foreign companies, and in debt and equity
securities issued by foreign corporate and government issuers and which are not
traded in the United States when the Advisors believe that such investments
provide good opportunities for achieving income and capital gains without undue
risk. Foreign investments involve substantial and different risks which should
be carefully considered by any potential investor. Such investments are usually
not denominated in dollars so changes in the relative values of the dollar and
other currencies will affect the value of foreign investments. In general, less
information is publicly available about foreign companies than is available
about companies in the United States. Most foreign companies are not subject to
uniform audit and financial reporting standards, practices and requirements
comparable to those in the United States. In most foreign markets volume and
liquidity are less than in the United States and, at times, volatility can be
greater than in the United States. Fixed commissions on foreign stock exchanges
are generally higher than the negotiated commissions on United States exchanges.
There is generally less government supervision and regulation of foreign stock
exchanges, brokers, and companies than in the United States. The settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. Portfolio securities held by
the Fund which are listed on foreign exchanges may be traded on days that the
Fund does not value its securities, such as Saturdays and the customary United
States business holidays on which the New York Stock Exchange is closed. As a
result, the net asset value of Shares may be significantly affected on days when
shareholders do not have access to the Fund.

Although the Fund intends to invest in securities of companies and
governments of developed, stable nations, there is also the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets,
political or social instability, or diplomatic developments that could adversely
affect investments, assets or securities transactions of the Fund in some
foreign countries. The dividends and interest payable on certain of the Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount available for distribution to the Fund's shareholders.

TEMPORARY INVESTMENTS

For temporary defensive purposes the Fund may invest up to 100% of its
assets in high quality short-term money market instruments, including repurchase
agreements, and in bills, notes or bonds issued by the U.S. Treasury Department
or by agencies of the U.S. Government.

RULE 144A SECURITIES

Page 8
<PAGE>

The Fund may purchase Rule 144A Securities. Rule 144A Securities are
restricted securities in that they have not been registered under the Securities
Act, but they may be traded between certain qualified institutional investors,
including investment companies. The presence or absence of a secondary market
may affect the value of the Rule 144A Securities. The Fund's Board of Directors
has established guidelines and procedures to be utilized to determine the
liquidity of such securities.

INVESTMENT RESTRICTIONS

The Fund's investment program is subject to a number of investment restrictions
that reflect self-imposed standards as well as federal and state regulatory
limitations. The investment restrictions recited below are matters of
fundamental policy and may not be changed without the affirmative vote of a
majority of the outstanding Shares. The vote of a majority of the outstanding
Shares of the Fund means the lesser of: (i) 67% or more of the Shares present at
a shareholder meeting at which the holders of more than 50% of the Shares are
present or represented or (ii) more than 50% of the outstanding Shares of the
Fund. The Fund will not:

1. Concentrate 25% or more of its total assets in securities of issuers
in any one industry (for these purposes the U.S. Government and its
agencies and instrumentalities are not considered an industry);

2. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any single issuer or
purchase more than 10% of the outstanding voting securities of any one
issuer, except the U.S. Government, its agencies and
instrumentalities;

3. Borrow money except as a temporary measure for extraordinary or
emergency purposes in an amount not exceeding 10% of the value of the
total assets of the Fund at the time of such borrowing;

4. Invest in real estate or mortgages on real estate;

5. Purchase or sell commodities or commodities contracts provided that
the Fund may invest in financial futures and options on such futures;

6. Act as an underwriter of securities within the meaning of the U.S.
federal securities laws except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired
within the limitation on purchases of restricted securities;

7. Issue senior securities; or

Page 9
<PAGE>

8. Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objectives and policies, and may
loan portfolio securities and enter into repurchase agreements as
described in the Registration Statement.

The following investment restriction may be changed by a vote of the
majority of the Board of Directors. The Fund will not:

1. Invest more than 10% of the value of its net assets in illiquid
securities (as defined under federal or state securities laws).

VALUATION OF SHARES AND REDEMPTION

VALUATION OF SHARES

The net asset value per Share is determined daily as of the close of the
New York Stock Exchange, each day on which the New York Stock Exchange is open
for business (a "Business Day"). The New York Stock Exchange is open for
business on all weekdays except for the following holidays (or the days on which
they are observed): New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

The Fund may enter into agreements that allow a third party, as agent for
the Fund, to accept orders from its customers up until the Fund's close of
business. So long as a third party receives an order prior to the Fund's close
of business, the order is deemed to have been received by the Fund and,
accordingly, may receive the net asset value computed at the close of business
that day. These "late day" agreements are intended to permit shareholders
placing orders with third parties to place orders up to the same time as other
shareholders.

REDEMPTION

The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC so that valuation of the net assets of the Fund is not
reasonably practicable.

Under normal circumstances, the Fund will redeem shares in cash. However,
if the Board of Directors determines that it would be in the best interests of
the remaining shareholders to make payment of the redemption price in whole or
in part by a distribution in kind of readily marketable securities from the
portfolio of the Fund in lieu

Page 10
<PAGE>

of cash, in conformity with applicable rules of the SEC, the Fund will make such
distributions in kind. If Shares are redeemed in kind, the redeeming shareholder
will incur brokerage costs in later converting the assets into cash. The method
of valuing portfolio securities is described under "Valuation of Shares" and
such valuation will be made as of the same time the redemption price is
determined. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act pursuant to which the Fund is obligated to redeem Shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund during any 90-day period for any one shareholder.

FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS

The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectuses is not intended as a substitute
for careful tax planning. For example, under certain specified circumstances,
state income tax laws may exempt from taxation distributions of a regulated
investment company to the extent that such distributions are derived from
interest on federal obligations. Investors are urged to consult with their tax
advisor regarding whether such exemption is available.

The following general discussion of certain federal income tax consequences
is based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY

The Fund intends to qualify and elect to be treated as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code.
Accordingly, the Fund generally must, among other things, (a) derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currencies, and certain other related income,
including, generally, certain gains from options, futures and forward contracts;
and (b) diversify its holdings so that, at the end of each fiscal quarter of the
Fund's taxable year, (i) at least 50% of the market value of the Fund's total
assets is represented by cash or cash items, United States Government
securities, securities of other RICs, and other securities, with such other
securities limited, in respect to any one issuer, to an amount not greater than
5% of the value of the Fund's total assets or 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities (other than United States Government
securities or securities of other RICs) of any one issuer or two or more

Page 11
<PAGE>

issuers that the Fund controls and which are engaged in the same, similar, or
related trades or business. For purposes of the 90% gross income requirement
described above, foreign currency gains that are not directly related to the
Fund's principal business of investing in stock or securities (or options or
futures with respect to stock or securities) may be excluded from income that
qualifies under the 90% requirement.

In addition to the requirements described previously, in order to qualify
as a RIC, the Fund must distribute at least 90% of its investment company
taxable income (that generally includes dividends, taxable interest, and the
excess of net short-term capital gains over net long-term capital losses less
operating expenses, but determined without regard to the deduction for dividends
paid) and at least 90% of its net tax-exempt interest income, for each tax year,
if any, to its shareholders. If the Fund meets all of the RIC requirements, it
will not be subject to federal income tax on any if its net investment income or
capital gains it distributes to its shareholders. .

Although the Fund intends to distribute substantially all of its net
investment income and may distribute its capital gains for any taxable year, the
Fund will be subject to federal income taxation to the extent any such income or
gains are not distributed. In addition, as discussed below, a federal excise tax
may be imposed in the event the Fund fails to meet certain additional
distribution thresholds.

If the Fund fails to qualify for any taxable year as a RIC, all of its
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
the Fund's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders. The Board reserves the right not to maintain
qualification of the Fund as a RIC if it determines such course of action to be
beneficial to shareholders.

FUND DISTRIBUTIONS

Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all of its investment company taxable income for each taxable year.

The Fund may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders who are individuals at a maximum rate of 20%, regardless
of the length of time the shareholder has held the Shares. If any such gains are
retained, the Fund will pay federal income tax thereon, and if the Fund makes an
election the shareholders will include such

Page 12
<PAGE>

undistributed gains in their income, will increase their basis in Fund shares by
the difference between the amount of such includable gains and the tax deemed
paid by such shareholders and will be able to claim their share of the tax paid
by the Fund as a refundable credit

If the Fund's distributions exceed its taxable income and capital gains
realized during a taxable year, all or a portion of all distributions made in
the same taxable year may be recharacterized as a return of capital to
shareholders. A return of capital distribution will generally not be taxable,
but will reduce each shareholder's cost basis in the Fund and result in a higher
reported capital gain or lower reported capital loss when those shares on which
the distribution was received are sold.

In the case of corporate shareholders, Fund distributions (other than
capital gains distributions) generally qualify for the dividends-received
deduction to the extent of the gross amount of qualifying dividends received by
the Fund for the year. Generally, and subject to certain limitations, a dividend
will be treated as a qualifying dividend if it has been received from a domestic
corporation (including certain holding period limitations). All dividends
(including the deducted portion) must be included in your alternative minimum
taxable income calculation.

Ordinarily, investors should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
October, November, or December of one year, but paid in January of the following
year, will be deemed for tax purposes to have been received by the shareholder
and paid by the Fund in the year in which the dividends were declared.

Investors should be careful to consider the tax implications of purchasing
Shares just prior to the ex-dividend date of any ordinary income dividend or
capital gains distribution. Those investors will be taxed on the entire amount
of the dividend or distribution received, even though some or all of the amount
distributed may have been realized by the Fund prior to the investor's purchase.

The Fund will provide an annual statement to shareholders as to the federal
tax status of distributions paid (or deemed to be paid) by the Fund during the
year, including the amount of dividends eligible for the corporate
dividends-received deduction.

The Fund may invest in complex securities. These investments may be subject
to numerous special and complex tax rules. These rules could affect whether the
gains or losses recognized by the Fund are treated as ordinary income or capital
gain, accelerate the recognition of income to the Fund and / or defer the Fund's
ability to recognize losses. In turn, those rules may affect the amount, timing
or character of the income distributed to you by the Fund. The Fund may be
subject to foreign withholding taxes on income it may earn from investing in
foreign securities, which may reduce the return on such investments. It is not
expected that the Fund will be able to pass-through to shareholders their
pro-rata share of any foreign taxes paid by the Fund.

Page 13
<PAGE>

SALE OR EXCHANGE OF FUND SHARES

The sale or exchange of Shares is a taxable event for the shareholder.
Generally, gain or loss on the sale or exchange of a Share will be capital gain
or loss that will be long-term if the Share has been held for more than twelve
months; otherwise the gain or loss will be short-term. For individuals, net
long-term capital gains are currently taxed at a maximum rate of 20% and net
short-term capital gains are currently taxed at ordinary income tax rates.
However, if a shareholder realizes a loss on the sale, exchange or redemption of
a Share held for six months or less and has previously received a capital gains
distribution with respect to the Share (or any undistributed net capital gains
of the Fund with respect to such Share are included in determining the
shareholder's long-term capital gains), the shareholder must treat the loss as a
long-term capital loss to the extent of the amount of the prior capital gains
distribution (or any undistributed net capital gains of the Fund that have been
included in determining such shareholder's long-term capital gains). In
addition, any loss realized on a sale or other disposition of Shares will be
disallowed to the extent an investor repurchases (or enters into a contract or
option to repurchase) Shares within a period of 61 days (beginning 30 days
before and ending 30 days after the disposition of the Shares). This loss
disallowance rule will apply to Shares received through the reinvestment of
dividends during the 61-day period.

In certain cases, the Fund will be required to withhold, and remit to the
United States Treasury, 31% of distributions payable to any shareholder who (1)
has failed to provide a correct taxpayer identification number, (2) is subject
to backup withholding by the Internal Revenue Service, or (3) has failed to
certify to the Fund that such shareholder is not subject to backup withholding.

FEDERAL EXCISE TAX; MISCELLANEOUS CONSIDERATIONS

If the Fund fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the
excess of short and long term capital gains over short and long term capital
losses) for the one-year period ending October 31 of that year (and any
retained amount from the prior calendar year), the Fund will be subject to a
nondeductible 4% Federal excise tax on the undistributed amounts. The Fund
intends to make sufficient distributions to avoid imposition of this tax, or
to retain, at most, its net capital gains and pay tax thereon. However, the
Fund can give no assurances that its distributions will be sufficient to
eliminate all excise taxes.

If you are a non-U.S. Investor in the Fund you may be subject to U.S.
witholding and estate tax and are encouraged to consult with your tax advisor
prior to investing in the Fund.

STATE AND LOCAL TAXES

Page 14
<PAGE>

Rules of state and local taxation of dividend and capital gains
distributions from regulated investment companies often differ from rules for
federal income taxation described above. Shareholders are urged to consult their
tax advisors as to the consequences of these and other state and local tax rules
affecting an investment in the Fund.

Many states grant tax-free status to dividends paid to you from interest
earned on direct obligations of the U.S. government, subject in some states to
minimum investment requirements that must be met by a fund. Investment in
Government National Mortgage Association or Fannie Mae securities, banker's
acceptances, commercial paper and repurchase agreements collateralized by U.S.
government securities do not generally qualify for such tax-free treatment. The
rules on exclusion of this income are different for corporate shareholders.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

The overall business and affairs of the Fund are managed by its Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, sub-advisor, distributor, custodian and
transfer agent.

The Directors and executive officers of the Fund, their respective dates of
birth and their principal occupations during the last five years are set forth
below. Unless otherwise indicated, the address of each Director and executive
officer is One South Street, Baltimore, Maryland 21202.

*TRUMAN T. SEMANS, CHAIRMAN AND DIRECTOR (10/27/26)

Brown Investment Advisory & Trust Company, 19 South Street, Baltimore, MD
21202. Vice Chairman, Brown Investment Advisory & Trust Company (formerly,
Alex.Brown Capital Advisory & Trust Company) and Director and President,
Virginia Hot Springs, Inc. (property management). Formerly, Managing
Director and Vice Chairman, Alex. Brown & Sons Incorporated (now DB
Alex.Brown LLC); Director, Investment Company Capital Corp. (registered
investment advisor) and Director, ISI Family of Funds (registered
investment companies).

RICHARD R. BURT, DIRECTOR (2/3/47)

IEP Advisors, LLP, 1275 Pennsylvania Avenue, NW, 10th Floor, Washington, DC
20004. Chairman, IEP Advisors, Inc.; Chairman of the Board, Weirton Steel
Corporation; Member of the Board, Archer Daniels Midland Company
(agribusiness operations), Hollinger International, Inc. (publishing),
Homestake

Page 15
<PAGE>

Mining (mining and exploration), HCL Technologies (information technology)
and Anchor Technologies (gaming software and equipment); Director, Mitchell
Hutchins family of funds (registered investment companies); and Member,
Textron Corporation International Advisory Council. Formerly, Partner,
McKinsey & Company (consulting), 1991-1994; U.S. Chief Negotiator in
Strategic Arms Reduction Talks (START) with former Soviet Union and U.S.
Ambassador to the Federal Republic of Germany, 1985-1989.

*RICHARD T. HALE, DIRECTOR (7/17/45)

Managing Director, DB Alex. Brown LLC (formerly BT Alex. Brown
Incorporated); Deutsche Asset Management Americas; Director and President,
Investment Company Capital Corp. (registered investment advisor). Director
and President, Deutsche Asset Management Mutual Funds (registered
investment companies). Chartered Financial Analyst. Formerly, Director, ISI
Family of Funds (registered investment companies).

JOSEPH R. HARDIMAN, DIRECTOR (5/27/37)

8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor and
Capital Markets Consultant; Director, Wit Capital Group (registered broker
dealer), The Nevis Fund (registered investment company), and ISI Family of
Funds (registered investment companies). Formerly, Director, Circon Corp.
(medical instruments), November 1998-January 1999; President and Chief
Executive Officer, The National Association of Securities Dealers, Inc. and
The NASDAQ Stock Market, Inc., 1987-1997; Chief Operating Officer of Alex.
Brown & Sons Incorporated, (now DB Alex.Brown LLC), 1985-1987; and General
Partner, Alex. Brown & Sons Incorporated (now - DB Alex. Brown LLC),
1976-1985.

LOUIS E. LEVY, DIRECTOR (11/16/32)

26 Farmstead Road, Short Hills, New Jersey 07078. Director, Kimberly-Clark
Corporation (personal consumer products) Household International (banking
and finance) and ISI Family of Funds (registered investment companies).
Formerly, Chairman of the Quality Control Inquiry Committee, American
Institute of Certified Public Accountants, 1992-1998; Trustee, Merrill
Lynch Funds for Institutions, 1991-1993; Adjunct Professor, Columbia
University-Graduate School of Business, 1991-1992; and Partner, KPMG Peat
Marwick, retired 1990.

EUGENE J. MCDONALD, DIRECTOR (7/14/32)

Page 16
<PAGE>

Duke Management Company, Erwin Square, Suite 1000, 2200 West Main Street,
Durham, North Carolina 27705. President, Duke Management Company
(investments); Executive Vice President, Duke University (education,
research and health care); Executive Vice Chairman and Director, Central
Carolina Bank & Trust (banking); and Director, Victory Funds (registered
investment companies). Formerly, Director, AMBAC Treasurers Trust
(registered investment company), DP Mann Holdings (insurance) and ISI
Family of Funds (registered investment companies).

REBECCA W. RIMEL, DIRECTOR (4/10/51)

The Pew Charitable Trusts, One Commerce Square, 2005 Market Street, Suite
1700, Philadelphia, Pennsylvania 19103-7017. President and Chief Executive
Officer, The Pew Charitable Trusts (charitable foundation); and Director
and Executive Vice President, The Glenmede Trust Company (investment trust
and wealth management). Formerly, Executive Director, The Pew Charitable
Trusts and Director, ISI Family of Funds (registered investment companies).

ROBERT H. WADSWORTH, DIRECTOR (1/29/40)

4455 E. Camelback Road, Suite 261 E., Phoenix, Arizona 85018. President,
Investment Company Administration LLC, President, Trustee, Trust for
Investment Managers (registered investment company) and President,
Director, First Fund Distributors, Inc. (registered broker-dealer);
Director, The Germany Fund, Inc., The New Germany Fund, Inc., The Central
European Equity Fund, Inc., and Vice President, Professionally Managed
Portfolios and Advisors Series Trust (registered investment companies).
Formerly, President, Guinness Flight Investment Funds, Inc. (registered
investment companies); and President, The Wadsworth Group (registered
investment advisor).

CARL W. VOGT, ESQ., PRESIDENT (4/20/36)

Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington,
D.C. 20004-2604. Senior Partner, Fulbright & Jaworski L.L.P. (law);
Director, Yellow Corporation (trucking), American Science & Engineering
(x-ray detection equipment) and ISI Family of Funds (registered investment
companies). Formerly, Chairman and Member, National Transportation Safety
Board; Director, National Railroad Passenger Corporation (Amtrak); Member,
Aviation System Capacity Advisory Committee (Federal Aviation
Administration); Interim President of Williams College and Director, Flag
Investors Family of Funds (registered investment companies).

CHARLES A. RIZZO, TREASURER (8/5/57)

Page 17
<PAGE>

Director, Deutsche Asset Management; Formerly, Vice President and
Department Head, BT Alex. Brown Incorporated (now DB Alex. Brown LLC),
1998-1999; Senior Manager, Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP), 1993-1997.

AMY M. OLMERT, SECRETARY (5/14/63)

Director, Deutsche Asset Management; Formerly, Vice President, BT Alex.
Brown Incorporated, (now DB Alex. Brown LLC), 1997-1999; Senior Manager,
Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP), 1988-1997.

DANIEL O. HIRSCH, ASSISTANT SECRETARY (3/27/54)

Director, Deutsche Asset Management.Formerly, Principal, BT Alex. Brown
Incorporated, (now DB Alex. Brown), 1998-1999; Assistant General Counsel,
United States Securities and Exchange Commission, 1993-1998.

--------------------
* Messrs. Semans and Hale are directors who are "interested persons" as defined
in the Investment Company Act.

Directors and officers of the Fund are also directors and officers of some
or all of the other investment companies managed, advised, or administered by
Investment Company Capital Corporation ("ICCC") or its affiliates. There are
currently 23 funds in the Flag Investors Funds and Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as
Chairman of five funds and as a Director of 18 other funds in the Fund Complex.
Mr. Hale serves as Chairman of three funds and as Director of 20 other funds in
the Fund Complex. Ms. Rimel and Messrs. Burt, Hardiman, Levy, McDonald and
Wadsworth serve as Directors of each fund in the Fund Complex. Mr. Vogt serves
as President of 22 funds in the Fund Complex. Mr. Rizzo serves as Treasurer, Ms.
Olmert serves as Secretary and Mr. Hirsch serves as Assistant Secretary, of each
of the funds in the Fund Complex.

Some of the Directors of the Fund are customers of, and have had normal
brokerage transactions with, DB Alex. Brown LLC in the ordinary course of
business. All such transactions were made on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated persons.
Additional transactions may be expected to take place in the future.

With the exception of the Fund's President, officers of the Fund receive no
direct remuneration in such capacity from the Fund. Officers and Directors of
the Fund who are officers or directors of ICCC or its affiliates may be
considered to have received

Page 18
<PAGE>

remuneration indirectly. As compensation for his or her services, each Director
who is not an "interested person" of the Fund (as defined in the Investment
Company Act) (an "Independent Director") and Mr. Vogt, the Fund's President,
receives an aggregate annual fee (plus reimbursement for reasonable
out-of-pocket expenses incurred in connection with his or her attendance at
board and committee meetings) from each fund in the Fund Complex for which he or
she serves. In addition, the Chairmen of the Fund Complex's Audit Committee and
Executive Committee receive an annual fee from the Fund Complex. Payment of such
fees and expenses is allocated among all such funds described above in direct
proportion to their relative net assets. For the fiscal year ended May 31, 2000,
Independent Directors' fees (including fees paid to the Fund's President)
attributable to the assets of the Fund totaled approximately $11,479.

The following table shows aggregate compensation payable to each of the
Fund's Directors by the Fund and the Fund Complex, respectively, and pension or
retirement benefits accrued as part of Fund expenses in the fiscal year ended
May 31, 2000.

COMPENSATION TABLE

<TABLE>
<CAPTION>
Name of Person, Position Aggregate
Compensation
From the Fund and Pension or
Fund Complex Retirement Total Compensation From
Payable to Directors Benefits the Fund and Fund Complex
for the Fiscal Accrued as Payable to Directors for the
Year Ended May 31, 2000 Part of Fund Fiscal Year Ended May 31,
2000 Expenses 2000
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truman T. Semans, Chairman and Director(1) $0 $0 $0

Richard T. Hale, Director(1) $0 $0 $0

Robert H. Wadsworth, Director(7) $743(2) $0(3) $19,500 for service on 12
Boards in the Fund Complex
Joseph R. Hardiman, Director $1,616 $0(3) $39,000 for service on 12
Boards in the Fund Complex
Louis E. Levy, Director $2,031 $0(3) $49,000 for service on 12
Boards in the Fund Complex
Eugene J. McDonald, Director $2,031(2) $0(3) $49,000 for service on 12
Boards in the Fund Complex
Rebecca W. Rimel, Director $1,618(2) $0(3) $39,000 for service on 12(4)
Boards in the Fund Complex
Carl W. Vogt, Esq., Director(6) $1,616(2) $0(3) $39,000 for service on 12
Boards in the Fund Complex

Page 19
<PAGE>

Richard R. Burt, Director(7) $743(2) $0 $19,500 for service on 12
Boards in the Fund Complex
James Cunnane(5) $873(2) $0 $19,500 for service on 12
Boards in the Fund Complex
</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. Burt, Cunnane,
McDonald, Vogt and Wadsworth 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, 2000 was $18,141.

(4) Ms. Rimel received (prior to her appointment or election as Director to all
of the funds in the Fund Complex) proportionately higher compensation from
each fund for which she served as a Director.

(5) Retired, effective October 7, 1999.

(6) Retired as Fund Director, effective October 7, 1999. Currently, President
of the Fund.

(7) Elected to the Fund's board, effective October 7, 1999.

The Fund Complex has adopted a retirement plan (the "Retirement Plan") for
Directors who are not employees of the Fund, the Fund's Administrator or its
respective affiliates (the "Directors' Retirement Plan") and a retirement plan
for a former Director serving as the Fund's President (collectively, the
"Retirement Plans"). After completion of six years of service, each participant
in the Retirement Plans will be entitled to receive an annual retirement benefit
equal to a percentage of the fee earned by the participant in his or her last
year of service. Upon retirement, each participant will receive annually 10% of
such fee for each year that he or she served after completion of the first five
years, up to a maximum annual benefit of 50% of the fee earned by the
participant in his or her last year of service. The fee will be paid quarterly,
for life, by each fund for which he or she serves. The Retirement Plans are
unfunded and unvested. The Fund currently has two participants in the Directors'
Retirement Plan, a Director who retired effective December 31, 1994 and another
Director who retired effective December 31, 1996, each of whom qualified for the
Retirement Plan by serving thirteen and fourteen years, respectively, as
Directors in the Fund Complex and will be paid a quarterly fee of $4,875 by the
Fund Complex for the rest of his life. Such fees are allocated to each fund in
the Fund Complex based upon the relative net assets of such fund to the Fund
Complex. Mr. McDonald has qualified for, but has not received, benefits.

Set forth in the 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

Page 20
<PAGE>

described above. The approximate credited years of service at December 31, 1999
are as follows: for Ms. Rimel, 4 years; for Mr. Levy, 5 years; for Mr. McDonald,
7 years; for Mr. Vogt, 4 years; for Mr. Hardiman, 1 year; and for Messrs. Burt
and Wadsworth, 0 years.

Estimated Annual Benefits Payable By Fund Complex Upon Retirement

<TABLE>
<CAPTION>
Years of Service Chairmen of Audit and Other Participants
Executive Committees
<S> <C> <C>
6 years $ 4,900 $ 3,900
7 years $ 9,800 $ 7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>

Any Director who receives fees from the Fund is permitted to defer 50% to
100% of his or her annual compensation pursuant to a Deferred Compensation Plan.
Messrs. Burt, Levy, McDonald, Vogt, and Wadsworth and Ms. Rimel have each
executed a Deferred Compensation Agreement. Currently, the deferring Directors
may select from among various Flag Investors funds and Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. in which all or part of their deferral account shall be
deemed to be invested. Distributions from the deferring Directors' deferral
accounts will be paid in cash, in generally equal quarterly installments over a
period of 10 years.

CODE OF ETHICS

The Board of Directors of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the Investment Company Act. The Fund's Code permits access
persons to engage in personal trading provided that the access persons comply
with the provisions of the advisor's or sub-advisor's Code of Ethics, as
applicable, and requires that each of these Codes be approved by the Board of
Directors. In addition, the Fund's Code contains reporting requirements
applicable to disinterested Directors of the Fund. The Fund's advisor,
Investment Company Capital Corporation ("ICCC" or the "Advisor"), and
sub-advisor, Alex. Brown Investment Management ("ABIM" or the "Sub-Advisor) have
adopted Codes of Ethics pursuant to Rule 17j-1 under the Investment Company Act.
The Codes of Ethics permit access persons to invest in securities that may be
purchased or held by the Fund for their own accounts, but require compliance
with the Codes' preclearance requirements. In addition, the Codes provide for
trading "blackout periods" that prohibit trading by access persons within
periods of trading by the Fund in the same security, subject to certain
exceptions. The Codes also prohibit short term trading profits and personal
investment in initial public offerings. The Codes require prior approval with
respect to purchases of securities in private placements.

Page 21
<PAGE>

The Fund's principal underwriter, ICC Distributors, Inc., is not required
to adopt a Code of Ethics as it meets the exception provided by Rule 17j-1(c)(3)
under the 1940 Act.

The codes are on public file with, and are available from, the SEC.

INVESTMENT ADVISORY AND OTHER SERVICES

ICCC, the investment advisor, is an indirect subsidiary of Deutsche Bank
AG. ABIM is a limited partnership affiliated with the Advisor. Buppert, Behrens
& Owen, Inc. ("BB&O") a company organized and owned by three employees of ABIM,
owns a 49% limited partnership interest and a 1% general partnership interest in
ABIM. DB Alex. Brown LLC owns the remaining 50% general partnership interest in
ABIM. ICCC also serves as investment advisor and ABIM serves as sub-advisor to
other funds in the Flag Investors family of funds. On May 17, 2000, ABIM and
BB&O entered into an Agreement and Sale of Partnership Interests ("Sale
Agreement") with DB Alex. Brown that will result in BB&O holding all partnership
interests in ABIM, effective as of a March 2001 closing date.

The March 2001 closing date for the Sale Agreement is contingent upon,
among other events, the approval of new sub-advisory agreements reflecting
the sale by the shareholders of the Fund and Flag Investors Value Builder,
Inc., another mutual fund to which ABIM provides sub-advisory services.

Under the Investment Advisory Agreement, ICCC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. ICCC has delegated this responsibility to
ABIM, provided that ICCC continues to supervise the performance of ABIM and
report thereon to the Fund's Board of Directors. Any investment program
undertaken by ICCC or ABIM will at all times be subject to policies and control
of the Fund's Board of Directors. ICCC will provide the Fund with office space
for managing its affairs, with the services of required executive personnel and
with certain clerical and bookkeeping services and facilities. These services
are provided by ICCC without reimbursement by the Fund for any costs. Neither
ICCC nor ABIM shall be liable to the Fund or its shareholders for any act or
omission by ICCC or ABIM or any losses sustained by the Fund or its shareholders
except in the case of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duty. The services of ICCC and ABIM to the Fund are not
exclusive and ICCC and ABIM are free to render similar services to others.

As compensation for its services, the Fund pays ICCC an annual fee based on
the Fund's average daily net assets. This fee is calculated daily and paid
monthly, at the

Page 22
<PAGE>

following annual rates: 1.00% of the first $50 million, 0.85% of the next $50
million, 0.80% of the next $100 million and 0.70% of the amount in excess of
$200 million. As compensation for its services, ABIM is entitled to receive a
fee from ICCC, payable from its advisory fee, based on the Fund's average daily
net assets. This fee is calculated daily and payable monthly, at the annual rate
of 0.65% of the first $50 million, 0.50% of the next $150 million and 0.40% of
the amount in excess of $200 million. Prior to September 1, 2000, the annual
rates were 0.75% of the first $50 million, 0.60% of the next $150 million and
0.50% of the amount in excess of $200 million.

The Investment Advisory Agreement and the Sub-Advisory Agreement will
continue for an initial term of two years, and thereafter, from year to year if
such continuance is specifically approved at least annually by the Fund's Board
of Directors, including a majority of the Independent Directors who have no
direct or indirect financial interest in such agreements, with such Independent
Directors casting votes in person at a meeting called for such purpose, or by a
vote of a majority of the outstanding Shares (as defined under "Capital Stock").
The Fund or ICCC may terminate the Investment Advisory Agreement on 60 days'
written notice without penalty. The Investment Advisory Agreement will terminate
automatically in the event of assignment (as defined in the Investment Company
Act). The Sub-Advisory Agreement has similar termination provisions.

Advisory fees paid by the Fund to ICCC and sub-advisory fees paid by ICCC
to ABIM for the last three fiscal years were as follows:

<TABLE>
<CAPTION>
YEAR ENDED

Fees Paid To: May 31, 2000 May 31, 1999 May 31,1998
------------- ------------ ------------ -----------
<S> <C> <C> <C>
ICCC $3,363,312 $2,864,847 $2,090,159
ABIM $2,450,836 $2,089,053 $1,535,410
</TABLE>

ICCC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Fund. An affiliate of ICCC serves as the
Fund's custodian. (See "Custodian, Transfer Agent and Accounting Services.")

DISTRIBUTION OF FUND SHARES

ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves as
the exclusive distributor of the Fund's Shares pursuant to a Distribution
Agreement which provides for distribution of each class of shares.

Page 23
<PAGE>

The Distribution Agreement provides that ICC Distributors shall; (i) use
reasonable efforts to sell Shares upon the terms and conditions contained in the
Distribution Agreement and the Fund's then current Prospectus; (ii) use its best
efforts to conform with the requirements of all federal and state laws relating
to the sale of the Shares; (iii) adopt and follow procedures as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. and any other applicable self-regulatory organization; (iv)
perform its duties under the supervision of and in accordance with the
directives of the Fund's Board of Directors and the Fund's Articles of
Incorporation and By-Laws; and (v) provide the Fund's Board of Directors with a
written report of the amounts expended in connection with the Distribution
Agreement. ICC Distributors shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of ICC Distributors are not exclusive and ICC Distributors
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment, or for any action
or inaction of ICC Distributors in the absence of bad faith, willful
misfeasance, or gross negligence in the performance of its duties or obligations
under the Distribution Agreement or by reason of the reckless disregard of its
duties and obligations under the Distribution Agreement. The Distribution
Agreement further provides that the Fund and ICC Distributors will mutually
indemnify each other for losses relating to disclosures in the Fund's
registration statement.

The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock") or
upon 60 days' written notice by the Distributor and shall automatically
terminate in the event of an assignment. The Distribution Agreement has an
initial term of one year from the date of effectiveness. It shall continue in
effect thereafter with respect to each class of the Fund provided that it is
approved at least annually by (i) a vote of a majority of the outstanding voting
securities of the related class of the Fund or (ii) a vote of a majority of the
Fund's Board of Directors including a majority of the Independent Directors and,
with respect to each class of the Fund for which there is a plan of
distribution, so long as such plan of distribution is approved at least annually
by the Independent Directors in person at a meeting called for the purpose of
voting on such approval.

ICC Distributors and certain broker-dealers ("Participating Dealers") have
entered into Sub-Distribution Agreements under which such Participating Dealers
have agreed to process investor purchase and redemption orders and respond to
inquiries from shareholders concerning the status of their accounts and the
operations of the Fund. Any Sub-Distribution Agreement may be terminated in the
same manner as the Distribution Agreement and shall automatically terminate in
the event of an assignment.

In addition, with respect to the Class A, Class B and Class C Shares, the
Fund may enter into Shareholder Servicing Agreements with certain financial
institutions to

Page 24
<PAGE>

act as Shareholder Servicing Agents, pursuant to which ICC Distributors will
allocate a portion of its distribution fee as compensation for such financial
institutions' ongoing shareholder services. The Fund may also enter into
Shareholder Servicing Agreements pursuant to which the Advisor or its affiliates
will provide compensation out of its own resources for ongoing shareholder
services. Currently, banking laws and regulations do not prohibit a financial
holding company affiliate from acting as distributor or Shareholder Servicing
Agent or in other capacities for investment companies. Should future
legislative, judicial or administrative action prohibit or restrict the
activities of the Shareholder Servicing Agents in connection with the
Shareholder Servicing Agreements, the Fund may be required to alter materially
or discontinue its arrangements with the Shareholder Servicing Agents. Such
financial institutions may impose separate fees in connection with these
services and investors should review the Prospectuses and this Statement of
Additional Information in conjunction with any such institution's fee schedule.

As compensation for providing distribution services as described above for
the Class A Shares, ICC Distributors receives an annual fee, paid monthly, equal
to 0.25% of the average daily net assets of the Class A Shares. With respect to
the Class A Shares, ICC Distributors expects to allocate up to all of its fee to
Participating Dealers and Shareholder Servicing Agents. As compensation for
providing distribution services as described above for the Class B and Class C
Shares, ICC Distributors receives an annual fee, paid monthly, equal to 0.75% of
their respective average daily net. In addition, with respect to the Class B and
Class C Shares, ICC Distributors receives a shareholder servicing fee at an
annual rate of 0.25% of their respective average daily net assets. (See the
Prospectus.) ICC Distributors receives no compensation for distributing the
Institutional Shares.

As compensation for providing distribution and shareholder services to Fund
for the last three fiscal years, the Fund's distributor received aggregate fees
in the following amounts:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,

Fee 2000 1999 1998
--- ---- ---- ----
<S> <C> <C> <C>
12b-1 Fee $1,067,512 $871,064 $447,239(1)

Shareholder Servicing Fee $122,000 $101,631 $51,052(2)
(Class B Shares)

Shareholder Servicing Fee $17,060 $1,324 N/A
(Class C Shares)
</TABLE>

Page 25
<PAGE>

(1) Of this amount, Alex. Brown & Sons Incorporated, the Fund's distributor
prior to August 31, 1997, received $110,677 and ICC Distributors, the
Fund's distributor effective August 31, 1997, received $336,562.

(2) Of this amount, Alex. Brown & Sons Incorporated, the Fund's distributor
prior to August 31, 1997, received $11,761 and ICC Distributors, the Fund's
distributor effective August 31, 1997, received $39,291.

Pursuant to Rule 12b-1 under the Investment Company Act, investment
companies may pay distribution expenses, directly or indirectly, only pursuant
to a plan adopted by the investment company's board of directors and approved by
its shareholders. The Fund has adopted plans of distribution for each of its
classes of Shares (except the Institutional Shares) (the "Plans"). Under each
plan, the Fund pays a fee to ICC Distributors for distribution and other
shareholder servicing assistance as set forth in the Distribution Agreement, and
ICC Distributors is authorized to make payments out of its fee to Participating
Dealers and Shareholder Servicing Agents. The Plans will remain in effect from
year to year as specifically approved (a) at least annually by the Fund's Board
of Directors and (b) by the affirmative vote of a majority of the Independent
Directors, by votes cast in person at a meeting called for such purpose.

In approving the Plans, the Directors concluded, in the exercise of
reasonable business judgment, that there was a reasonable likelihood that the
Plans would benefit the Fund and its shareholders. The Plans will be renewed
only if the Directors make a similar determination in each subsequent year. The
Plans may not be amended to increase materially the fee to be paid pursuant to
the Distribution Agreement without the approval of the shareholders of the Fund.
The Plans may be terminated at any time by the vote of a majority of the Fund's
Independent Directors or by a vote of a majority of the Fund's outstanding
Shares (as defined under "Capital Stock").

During the continuance of the Plans, the Fund's Board of Directors will be
provided for their review, at least quarterly, a written report concerning the
payments made under the Plans to ICC Distributors pursuant to the Distribution
Agreement and to Participating Dealers pursuant to any Sub-Distribution
Agreements. Such reports shall be made by the persons authorized to make such
payments. In addition, during the continuance of the Plans, the selection and
nomination of the Fund's Independent Directors shall be committed to the
discretion of the Independent Directors then in office.

Under the Plans, amounts allocated to Participating Dealers and Shareholder
Servicing Agents may not exceed amounts payable to ICC Distributors under the
Plans. Payments under the Plans are made as described above regardless of ICC
Distributors' actual cost of providing distribution services and may be used to
pay ICC Distributors'

Page 26
<PAGE>

overhead expenses. If the cost of providing distribution services to the Class A
Shares is less than 0.25% of the Class A Shares' average daily net assets for
any period or if the cost of providing distribution services to the Class B
Shares and the Class C Shares is less than 0.75% of the classes' respective
average daily net assets for any period, the unexpended portion of the
distribution fees may be retained by ICC Distributors. The Plans do not provide
for any charges to the Fund for excess amounts expended by ICC Distributors and,
if any of the Plans is terminated in accordance with its terms, the obligation
of the Fund to make payments to ICC Distributors pursuant to such Plan will
cease and the Fund will not be required to make any payments past the date the
Distribution Agreement terminates with respect to that class. In return for
payments received pursuant to the Plans, ICC Distributors pays the
distribution-related expenses of the Fund including one or more of the
following: advertising expenses; printing and mailing of prospectuses to other
than current shareholders; compensation to dealers and sales personnel; and
interest, carrying or other financing charges.

GENERAL INFORMATION

The Fund's distributor received commissions on the sale of Flag Investors
Class A Shares and contingent deferred sales charges on Flag Investors Class B
and Class C Shares and retained from such commissions and sales charges the
following amounts.

<TABLE>
<CAPTION>
Fiscal Year Ended May 31,
-----------------------------------------------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
Class Received Retained Received Retained Received Retained
----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Class A Commissions $399,923 $0 $431,662 $ 0 $571,016(1) $536,314(3)

Class B Contingent $236,320 $0 $420,883 $ 0 $648,704(2) $632,276(4)
Deferred Sales Charge

Class C Contingent
Deferred Sales Charge $12,134 $0 $ 29,085 $ 0 N/A N/A
</TABLE>

(1) Of this amount, Alex. Brown & Sons Incorporated, the Fund's distributor
prior to August 31, 1997, received $111,345 and ICC Distributors, the
Fund's distributor effective August 31, 1997 received $459,671.

Page 27
<PAGE>

(2) Of this amount, Alex. Brown & Sons Incorporated, the Fund's distributor
prior to August 31, 1997, received $188,711 and ICC Distributors, the
Fund's distributor effective August 31, 1997 received $459,993.

(3) Of this amount received, Alex. Brown & Sons Incorporated retained $106,124
and ICC Distributors retained $431,090, respectively.

(4) Of this amount, Alex. Brown & Sons Incorporated retained $183,389 and ICC
Distributors retained $448,987, respectively.

The Fund will pay all costs associated with its organization and
registration under the Securities Act and the Investment Company Act. Except as
described elsewhere, the Fund pays or causes to be paid all continuing expenses
of the Fund, including, without limitation: investment advisory and distribution
fees; the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of cash, portfolio securities and
other property, and any transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions chargeable to the Fund in connection
with portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing Shares; all costs and
expenses in connection with the registration and maintenance of registration of
the Fund and its Shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Directors and Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside Service used for pricing of the Shares; fees and
expenses of legal counsel, including counsel to the Independent Directors, and
of independent auditors, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly assumed by ICC Distributors,
ICCC or ABIM.

The address of ICC Distributors is Two Portland Square, Portland, Maine
04101.

BROKERAGE

ABIM is responsible for decisions to buy and sell securities for the Fund,
for broker-dealer selection and for negotiation of commission rates, subject to
the

Page 28
<PAGE>

supervision of ICCC. Purchases and sales of securities on a securities exchange
are effected through broker-dealers who charge a commission for their services.
Brokerage commissions are subject to negotiation between ABIM and the
broker-dealers. ABIM may direct purchase and sale orders to any broker-dealer,
including, to the extent and in the manner permitted by applicable law, its
affiliates, and ICC Distributors.

In over-the-counter transactions, orders are placed directly with a
principal market maker and such purchases normally include a mark up over the
bid to the broker-dealer based on the spread between the bid and asked price for
the security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. The Fund will not deal with
affiliates of the Advisors in any transaction in which they act as a principal.

If affiliates of the Advisors are participating in an underwriting or
selling group, the Fund may not buy portfolio securities from the group except
in accordance with rules of the SEC. The Fund believes that the limitation will
not affect its ability to carry out its present investment objectives.

ABIM's primary consideration in effecting securities transactions is to
obtain best price and execution of orders on an overall basis. As described
below, however, ABIM may, in its discretion, effect transactions with
broker-dealers that furnish statistical, research or other information or
services which are deemed by ABIM to be beneficial to the Fund's investment
program. Certain research services furnished by broker-dealers may be useful to
ABIM with clients other than the Fund. Similarly, any research services received
by ABIM through placement of portfolio transactions of other clients may be of
value to ABIM in fulfilling its obligations to the Fund. No specific value can
be determined for research and statistical services furnished without cost to
ABIM by a broker-dealer. ABIM is of the opinion that because the material must
be analyzed and reviewed by its staff, its receipt does not tend to reduce
expenses, but may be beneficial in supplementing ABIM's research and analysis.
Therefore, it may tend to benefit the Fund by improving ABIM's investment
advice. In over-the-counter transactions, ABIM will not pay any commission or
other remuneration for research services. ABIM's policy is to pay a
broker-dealer higher commissions for particular transactions than might be
charged if a different broker-dealer had been chosen when, in ABIM's opinion,
this policy furthers the overall objective of obtaining best price and
execution. Subject to periodic review by the Fund's Board of Directors, ABIM is
also authorized to pay broker-dealers other than affiliates of the Advisors
higher commissions than another broker might have charged on brokerage
transactions for the Fund for brokerage or research services. The allocation of
orders among broker-dealers and the commission rates paid by the Fund will be
reviewed periodically by the Board. The foregoing policy under which the Fund
may pay higher commissions to certain broker-dealers in the case of agency
transactions, does not apply to transactions effected on a principal basis.

Page 29
<PAGE>

Subject to the above considerations, the Board of Directors has authorized
the Fund to effect portfolio transactions through affiliates of the Advisors. At
the time of such authorization, the Board adopted certain policies and
procedures incorporating the standards of Rule 17e-1 under the Investment
Company Act, which requires that the commissions paid affiliates of the Advisors
must be "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities during a comparable period
of time." Rule 17e-1 also contains requirements for the review of such
transactions by the Board of Directors and requires ICCC and ABIM to furnish
reports and to maintain records in connection with such reviews.

ABIM manages other investment accounts. It is possible that, at times,
identical securities will be acceptable for the Fund and one or more of such
other accounts; however, the position of each account in the securities of the
same issuer may vary and the length of time that each account may choose to hold
its investment in such securities may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of the
Fund or one or more of these accounts is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by ABIM. ABIM may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. Such simultaneous transactions, however, could adversely
affect the ability of the Fund to obtain or dispose of the full amount of a
security which it seeks to purchase or sell.

ABIM directed transactions to broker-dealers and paid related commissions
because of research services in the following amounts:

<TABLE>
<CAPTION>
Fiscal Year Ended May 31,
-------------------------------------------------------------------------------------
2000 1999 1998
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transactions Directed $230,704,456 $156,048,156 $119,136,480
Commissions Paid $488,924 $299,484 $233,761
</TABLE>

The increasing amounts of commissions reflects the growth of the Fund.

The Fund is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the Investment Company Act) which the Fund
has acquired during its most recent fiscal year. As of May 31, 2000, the Fund
held a 6.30%

Page 30
<PAGE>

repurchase agreement issued by Goldman Sachs & Co. valued at $8,874,000. Goldman
Sachs & Co. is a "regular broker or dealer" of the Fund.

CAPITAL STOCK

The Fund is authorized to issue shares of common stock, par value $.001 per
share. The Board of Directors may increase or decrease the number of authorized
Shares without shareholder approval. The Fund's Articles of Incorporation
provide for the establishment of separate series and separate classes of Shares
by the Directors at any time without shareholder approval. The Fund currently
has one Series and the Board has designated four classes of Shares: Flag
Investors Equity Partners Fund Class A Shares, Flag Investors Equity Partners
Fund Class B Shares, Flag Investors Equity Partners Fund Class C Shares and Flag
Investors Equity Partners Fund Institutional Shares. The Flag Investors Equity
Partners Fund Institutional Shares are offered only to certain eligible
institutions and to clients of investment advisory affiliates of DB Alex. Brown
LLC or the Flag Investors family of funds on behalf of their clients. In the
event separate series or classes are established, all Shares of the Fund,
regardless of series or class, would have equal rights with respect to voting,
except that with respect to any matter affecting the rights of the holders of a
particular series or class, the holders of each series or class would vote
separately. Each such series would be managed separately and shareholders of
each series would have an undivided interest in the net assets of that series.
For tax purposes, the series would be treated as separate entities. Generally,
each class of Shares issued by a particular series would be identical to every
other class and expenses of the Fund (other than 12b-1 and any applicable
service fees) are prorated between all classes of a series based upon the
relative net assets of each class. Any matters affecting any class exclusively
will be voted on by the holders of such class.

Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding Shares voting together
for election of Directors may elect all the members of the Board of Directors of
the Fund. In such event, the remaining holders cannot elect any members of the
Board of Directors of the Fund.

There are no preemptive, conversion or exchange rights applicable to any of
the Shares. The issued and outstanding Shares are fully paid and non-assessable.
In the event of liquidation or dissolution of the Fund, each Share is entitled
to its portion of the Fund's assets (or the assets allocated to a separate
series of Shares if there is more than one series) after all debts and expenses
have been paid.

As used in this Statement of Additional Information the term "majority of
the outstanding Shares" means the vote of the lesser of (i) 67% or more of the
Shares present at a meeting, if the holders of more than 50% of the outstanding
Shares are present or represented by proxy, or (ii) more than 50% of the
outstanding Shares.

Page 31
<PAGE>

SEMI-ANNUAL REPORTS AND ANNUAL REPORTS

The Fund furnishes shareholders with semi-annual reports and annual
reports containing information about the Fund and its operations, including a
list of investments held in the Fund's portfolio and financial statements.
The annual financial statements are audited by the Fund's independent
accountants, PricewaterhouseCoopers LLP.

CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES

Bankers Trust Company ("Bankers Trust"), 130 Liberty Street, New York, New
York 10006, serves as custodian of the Fund's investments. Bankers Trust
receives such compensation from the Fund for its services as custodian as may be
agreed to from time to time by Bankers Trust and the Fund. For the fiscal year
ended May 31, 2000, Bankers Trust was paid $57,981 as compensation for providing
custody services to the Fund. Investment Company Capital Corp., One South
Street, Baltimore, Maryland 21202, has been retained to act as transfer and
dividend disbursing agent. As compensation for providing these services, the
Fund pays ICCC up to $16.068 per account per year, plus reimbursement for
out-of-pocket expenses incurred in connection therewith. For the fiscal year
ended May 31, 2000, such fees totaled $173,404.

ICCC also provides certain accounting services to the Fund. As compensation
for these services, ICCC receives an annual fee, calculated daily and paid
monthly as shown below.

<TABLE>
<CAPTION>
Average Daily Net Assets Incremental Fee
------------------------------------------------------------------------
<S> <C>
0 - $10,000,000 $13,000 (fixed fee)
$10,000,000 - $20,000,000 0.100%
$20,000,000 - $30,000,000 0.080%
$30,000,000 - $40,000,000 0.060%
$40,000,000 - $50,000,000 0.050%
$50,000,000 - $60,000,000 0.040%
$60,000,000 - $70,000,000 0.030%
$70,000,000 - $100,000,000 0.020%
$100,000,000 - $500,000,000 0.015%
$500,000,000 - $1,000,000,000 0.005%
over $1,000,000,000 0.001%
</TABLE>

For the fiscal years ended May 31, 2000, 1999, and 1998 ICCC received
accounting fees of $105,155, $94,427, and $77,864, respectively.

Page 32
<PAGE>

In addition, the Fund will reimburse ICCC for the following out-of-pocket
expenses incurred in connection with ICCC's performance of its services under
the Master Services Agreement: express delivery service, independent pricing and
storage.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland
21201, serves as independent accountants to the Fund.

LEGAL MATTERS

Morgan, Lewis & Bockius LLP serves as counsel to the Fund.

PERFORMANCE INFORMATION

For purposes of quoting and comparing the performance of the Fund to that
of other open-end diversified management investment companies and to stock or
other relevant indices in advertisements or in certain reports to shareholders,
performance will be stated in terms of total return rather than in terms of
yield. The total return quotations, under the rules of the SEC, must be
calculated according to the following formula:

P(1 + T)TO THE POWER OF n = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years (1, 5 or 10)

ERV = ending redeemable value at the end of the 1-, 5- or 10-year periods
(or fractional portion thereof) of a hypothetical $1,000 payment made at the
beginning of the 1-, 5- or 10-year periods.

Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to use or submission of the advertising for publication, and will
cover one-, five-, and ten-year periods or a shorter period dating from the
effectiveness of the Fund's registration statement or the date the Fund (or the
later commencement of operations of a series or class) commenced operations.

Calculated according to SEC rules, the ending redeemable value and average
annual total return of a hypothetical $1,000 payment for the periods ended May
31, 2000 were as follows:

Page 33
<PAGE>

<TABLE>
<CAPTION>
ONE YEAR PERIOD FIVE YEAR PERIOD
ENDED MAY 31, 2000 ENDED MAY 31, 2000 SINCE INCEPTION*
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE
Class ENDING ANNUAL ENDING ANNUAL ENDING ANNUAL
REDEEMABLE TOTAL REDEEMABLE TOTAL REDEEMABLE TOTAL
VALUE RETURN VALUE RETURN VALUE RETURN
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A $816.20 (18.38)% $2,058.40 15.53% $2,216.90 16.22%
Class B $814.20 (18.58)% $2,057.90 15.53% $2,234.80 16.40%
Institutional $866.10 (13.39)% N/A N/A $1,847.80 15.37%
Class C $849.20 (15.08)% N/A N/A $1,149.90 9.18%
</TABLE>

*February 13, 1995 for Class A and B Shares; February 14, 1996 for Institutional
Shares; and October 28, 1998 for Class C Shares.

The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth above
to compare more accurately the Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper, Inc., CDA Investment Technologies Inc., Morningstar Inc.,
or SEI Corporation or with the performance of the Consumer Price Index, the
Standard and Poor's 500 Stock Index and other market indices such as NASDAQ and
the Wilshire 5000, the Fund calculates its aggregate and average annual total
return for the specified periods of time by assuming the investment of $10,000
in Shares and assuming the reinvestment of each dividend or other distribution
at net asset value on the reinvestment date. For this alternative computation,
the Fund assumes that the $10,000 invested in Shares is net of all sales
charges. The Fund will, however, disclose the maximum sales charges and will
also disclose that the performance data do not reflect sales charges and that
inclusion of sales charges would reduce the performance quoted. Such alternative
total return information will be given no greater prominence in such advertising
than the information prescribed under SEC rules, and all advertisements
containing performance data will include a legend disclosing that such
performance data represent past performance and that the investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.

The Fund's annual portfolio turnover rate (the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the portfolio during the year, excluding U.S. Government securities and
securities with maturities of one year or less) may vary from year to year, as
well as within a year, depending on market conditions. In the fiscal year ended
May 31, 2000 the Fund's

Page 34
<PAGE>

portfolio turnover rate was 32.37% and in the fiscal year ended May 31, 1999,
the Fund's portfolio turnover rate was 21.21%.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

To the best of Fund management's knowledge and belief, the following
persons held beneficially or of record 5% or more of the outstanding shares
of a class of the Fund, as of September 5, 2000*:

<TABLE>
<CAPTION>
Owned of Beneficially
Name and Address Record Owned Percentage of Ownership
---------------- ------ ----- -----------------------
<S> <C> <C> <C>
Bankers Trust Corp & Affil 401K X 12.87% of Class A Shares
The Partnershare Plan of Bankers Trust
NY Corp & Affil
100 Plaza One
Jersey City, NJ 07311-3999

DB Alex. Brown LLC X 6.83% of Class C Shares
FBO 210-90710-15
PO Box 1346
Baltimore, MD 21203-1346

First Union National Bankers Trust X 5.95% of Institutional Shares
A/C 7028297564 CMG NC 1151
1525 Harris Blvd
Charlotte, NC 28252-8522

DB Alex. Brown LLC X 6.08% of Institutional Shares
FBO 201-00507-10
PO Box 1346
Baltimore, MD 21203-1346

Light & Co X 6.31% of Institutional Shares
c/o Allfirst Trust Co NA
Security Processing 101-610
PO Box 1596
Baltimore, MD 21203-1596

Mercantile Safe Deposit & Trust X 6.55% of Institutional Shares
A/C 126422-7

Page 35
<PAGE>

766 Old Hammonds Ferry Rd
Lithicum, MD 21090

Banc of America Securities LLC X 12.44% of Institutional Shares
116-00036-10
CAS-522-15-13
600 Montgomery Street
San Francisco, CA 94111-2702

DB Alex. Brown LLC X 30.23% of Institutional Shares
FBO 250-10788-16
PO Box 1346
Baltimore, MD 21203-1346
</TABLE>

--------------------

* As of such date, DB Alex. Brown LLC owned less than 5% of the Fund's total
outstanding Shares.

As of September 5, 2000, Directors and officers as a group beneficially
owned an aggregate of less than 1% of the Fund's total outstanding shares.

FINANCIAL STATEMENTS

The financial statements for the Fund for the fiscal year ended May 31,
2000 are incorporated herein by reference to the Fund's Annual Report dated May
31, 2000.

Page 36
<PAGE>

APPENDIX A

BOND AND COMMERCIAL PAPER RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated
A-1+ are those with "extremely strong" safety characteristics. Those rated A-1
reflect a "strong" degree of safety regarding timely payment.

MOODY'S COMMERCIAL PAPER RATINGS

Commercial paper issuers rated Prime-1 by Moody's are judged by Moody's to be of
the highest quality on the basis of relative repayment capacity.

CORPORATE BOND RATINGS

STANDARD & POOR'S BOND RATINGS

AAA - The highest rating assigned by Standard & Poor's. Capacity to pay interest
and repay principal is extremely strong.

AA - Very strong capacity to pay interest and repay principal and, in the
majority of instances, differs from the highest rated issues only in small
degree. Also qualify as high quality debt obligations.

A - Strong capacity to pay interest and repay principal although somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.

BBB - Regarded as having an adequate capacity to pay interest and repay
principal. While normally exhibiting adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

BB, B, CCC, AND CC AND C - Regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.

A-1
<PAGE>

C - May be used to cover a situation where a bankruptcy petition has been filed
or similar action has been taken, but payments on this obligation are being
continued.

D - In default. Used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. Also used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

A-2
<PAGE>

MOODY'S BOND RATINGS

Aaa - Judged to be of the best quality. Carries the smallest degree of
investment risk and generally referred to as "gilt edged." Interest payments are
protected by a large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.

Aa - Judged to be of high quality by all standards. Together with the Aaa group
comprise what are generally known as "high-grade" bonds. Rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or the fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risk appear
somewhat larger than Aaa securities.

A - Possess many favorable investment attributes and considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.

Baa - Considered as medium-grade obligations (i.e., neither highly protected nor
poorly secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Lack outstanding
investment characteristics and in fact have speculative characteristics as well.

Ba - Judged to have speculative elements; future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterize bonds in this class.

B - Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.

Caa - Of poor standing. May be in default or there may be present elements of
danger with respect to principal or interest.

Ca - Speculative in a high degree. Often in default or have other marked
shortcomings.

C - The lowest rated class of bonds. Issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a rating in the lower end of
that generic rating category.

A-3
<PAGE>

PART C. OTHER INFORMATION

Item 23. Exhibits

(a)(1) Registrant's Articles of Incorporation, incorporated by reference to
Post-Effective Amendment No. 1 to Registrant's Registration Statement
on Form N-1A (Registration No. 33-86832), filed with the Securities
and Exchange Commission via EDGAR on September 22, 1995.

(a)(2) Registrant's Articles Supplementary, incorporated by reference to
Post-Effective Amendment No. 3 to Registrant's Registration Statement
on Form N-1A (Registration No. 33-86832), filed with the Securities
and Exchange Commission via EDGAR on September 26, 1996.

(a)(3) Registrant's Articles Supplementary dated June 17, 1997,
incorporated by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via EDGAR
on July 31, 1998.

(a)(4) Registrant's Articles Supplementary dated September 28, 1998,
incorporated by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement (Registration No. 33-86832), filed
with the Securities and Exchange Commission via EDGAR on September 30,
1999.

(b) By-Laws, as amended through July 28, 1999, incorporated by reference
to Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A (Registration No. 33-86832), filed with the
Securities and Exchange Commission via EDGAR on September 30, 1999.

(c) Instruments Defining Rights of Securities Holders, incorporated by
reference to Post-Effective Amendment Nos. 1 and 5, respectively, to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via on
September 22, 1995 and October 1, 1997.

(d)(1) Investment Advisory Agreement between Registrant and Investment
Company Capital Corp., dated June 4, 1999, filed herewith.

(d)(2) Sub-Advisory Agreement among Registrant, Investment Company Capital
Corp. and Alex. Brown Investment Management dated September 1, 2000,
filed herewith.

(e)(1) Distribution Agreement dated August 31, 1997 between Registrant and
ICC Distributors, Inc., incorporated by Reference to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed

<PAGE>

with the Securities and Exchange Commission via EDGAR on July 31,
1998.

(e)(2) Form of Sub-Distribution Agreement between ICC Distributors, Inc.
and Participating Broker-Dealers, filed herewith.

(e)(3) Form of Shareholder Servicing Agreement between ICC Distributors,
Inc. and Shareholder Servicing Agents, incorporated by reference to
Post-Effective Amendment No. 6 to Registrant's Registration Statement
on Form N-1A (Registration No. 33-86832), filed with the Securities
and Exchange Commission via EDGAR on July 31, 1998.

(f) Not Applicable.

(g) Custodian Agreement between Registrant and Bankers Trust Company,
dated June 5, 1998, incorporated by reference to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and Exchange
Commission via EDGAR on July 31, 1998.

(h) Master Services Agreement between Registrant and Investment Company
Capital Corp., incorporated by reference to Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and Exchange
Commission via EDGAR on September 22, 1995.

(i) Opinion of Counsel, filed herewith.

(j) Consent of PricewaterhouseCoopers LLP, filed herewith.

(k) Not Applicable.

(l) Subscription Agreement, incorporated by reference to Post-Effective
Amendment No. 1 to Registrant's Registration Statement on Form N-1A
(Registration No. 33-86832), filed with the Securities and Exchange
Commission via EDGAR on September 22, 1995.

(m)(1) Distribution Plan with respect to Flag Investors Class A Shares,
incorporated by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via EDGAR
on October 1, 1997.

(m)(2) Distribution Plan with respect to Flag Investors Class B Shares,
incorporated by reference to Post-Effective Amendment No. 5 to
Registrant's

<PAGE>

Registration Statement on Form N-1A (Registration No. 33-86832), filed
with the Securities and Exchange Commission via EDGAR on October 1,
1997.

(m)(3) Distribution Plan with respect to Flag Investors Class C Shares,
incorporated by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A (Registration No.
33-86832), filed with the Securities and Exchange Commission via EDGAR
on September 30, 1999.

(n) Not applicable.

(o) 18f-3 Plan, with exhibits through September 28, 1998, incorporated by
reference to Post- Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A (Registration No. 33-86832), filed
with the Securities and Exchange Commission via EDGAR on September 30,
1999.

(p)(1) Flag Investors Funds Code of Ethics, filed herewith.

(p)(2) Investment Company Capital Corporation Code of Ethics, filed
herewith.

(p)(3) Alex. Brown Investment Management Code of Ethics, filed herewith.

(q) Powers of Attorney, filed herewith.

Item 24. Persons Controlled by or under Common Control with Registrant

Provide a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant. For any person controlled by
another person, disclose the percentage of voting securities owned by the
immediately controlling person or other basis of that person's control. For each
company, also provide the state or other sovereign power under the laws of which
the company is organized.

None.

Item 25. Indemnification

State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection.

<PAGE>

Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, included as Exhibit (a) to this Registration Statement and
incorporated herein by reference, provide as follows:

Section 1. To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation
Law, no director or officer of the Corporation shall have any liability to
the Corporation or its shareholders for damages. This limitation on
liability applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which liability is
asserted.

Section 2. The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses to
its officers to the same extent as to its directors and to such further
extent as is consistent with law. The Board of Directors of the Corporation
may make further provision for indemnification of directors, officers,
employees and agents in the By-Laws of the Corporation or by resolution or
agreement to the fullest extent permitted by the Maryland General
Corporation Law.

Section 3. No provision of this Article VIII shall be effective to protect
or purport to protect any director or officer of the Corporation against
any liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office.

Section 4. References to the Maryland General Corporation Law in this
Article VIII are to such law as from time to time amended. No further
amendment to the Charter of the Corporation shall decrease, but may expand,
any right of any person under this Article VIII based on any event,
omission or proceeding prior to such amendment.

Sections 1, 2, 3, 4 and 5 of Article XIII of Registrant's By-Laws,
included as Exhibit (b) to this Registration Statement and
incorporated herein by reference, provide as follows:

Section 1. Indemnification. The Corporation shall indemnify its
Directors to the fullest extent that indemnification of Directors is
permitted by the Maryland General Corporation Law. The Corporation
shall indemnify its officers to the same extent as its Directors and
to such further extent as is consistent with law. The Corporation
shall indemnify its Directors and officers who while serving as
Directors or officers also serve at the request of the Corporation as
a Director, officer, partner, trustee, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent
with law. This Article XIII shall not protect any such person against
any liability to the Corporation or any shareholder thereof to which
such

<PAGE>

person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

Section 2. Advances. Any current or former Director or officer of the
Corporation claiming indemnification within the scope of this Article
XIII shall be entitled to advances from the Corporation for payment of
the reasonable expenses incurred by him in connection with proceedings
to which he is a party in the manner and to the full extent
permissible under the Maryland General Corporation Law, the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as such statutes are
now or hereafter in force.

Section 3. Procedure. On the request of any current or former Director
or officer requesting indemnification or an advance under this Article
XIII, the Board of Directors shall determine, or cause to be
determined, in a manner consistent with the Maryland General
Corporation Law, the 1933 Act and the 1940 Act, as such statutes are
now or hereafter in force, whether the standards required by this
Article XIII have been met.

Section 4. Other Rights. The indemnification provided by this Article
XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such
indemnification may be entitled under any insurance or other
agreement, vote of shareholders or disinterested Directors or
otherwise, both as to action by a Director or officer of the
Corporation in his official capacity and as to action by such person
in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be a Director or officer and
shall inure to the benefit of the heirs, executors and administrators
of such a person.

Section 5. Maryland Law. References to the Maryland General
Corporation Law in this Article XIII are to such law as from time to
time amended.

Insofar as indemnification for liability arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the 1940 Act and is, therefore, unenforceable. In the
event of a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person in connection with the
securities being registered) the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final
adjudication of such issue. In the absence of a determination by a
court of competent jurisdiction, the determinations that
indemnification against such liabilities is proper, and advances can
be made, are made by a majority of a quorum of the disinterested,
non-party directors of the Fund, or an independent legal counsel in a
written opinion, based on review of readily available facts.

Item 26. Business and Other Connections of the Investment Advisor.

<PAGE>

Describe any other business, profession, vocation or employment of a
substantial nature in which the investment advisor and each director, officer or
partner of the investment advisor, is or has been, engaged within the last two
fiscal years, for his or her own account or in the capacity of director,
officer, employee, partner or trustee. (Disclose the name and principal business
address of any company for which a person listed above serves in the capacity of
director, officer, employee, partner or trustee, and the nature of the
relationship.)

During the last two fiscal years, no director or officer of Investment
Company Capital Corp., the Registrant's investment advisor, has engaged in any
other business, profession, vocation or employment of a substantial nature other
than that of the business of investment management and, through affiliates,
investment banking.

Describe any other business, profession, vocation or employment of a
substantial nature in which the investment sub-advisor, and each director,
officer or partner of the investment sub-advisor, is or has been, engaged within
the last two fiscal years, for his or her own account or in the capacity of
director, officer, employee, partner or trustee. (Disclose the name and
principal business address of any company for which a person listed above serves
in the capacity of director, officer, employee, partner or trustee, and the
nature of the relationship.)

During the last two fiscal years, no director or officer of Alex. Brown
Investment Management, the Registrant's investment sub-advisor, has engaged in
any other business, profession, vocation or employment of a substantial nature
other than that of the business of investment management and, through
affiliates, investment banking.

Item 27. Principal Underwriters

(a) State the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing securities of the
Registrant also acts as a principal underwriter, depositor or investment
advisor.

ICC Distributors, Inc. acts as distributor for Deutsche Banc Alex.
Brown Cash Reserve Fund, Inc.,(formerly, BT Alex. Brown Cash Reserve
Fund, Inc.), Flag Investors Communications Fund, Inc.,(formerly, Flag
Investors Telephone Income Fund, Inc.), Flag Investors Series Fund,
Inc., (formerly, Flag Investors International Fund, Inc.), Flag
Investors Emerging Growth Fund, Inc., Flag Investors Total Return U.S.
Treasury Fund Shares of Total Return U.S. Treasury Fund, Inc., Flag
Investors Managed Municipal Fund Shares of Managed Municipal Fund,
Inc., Flag Investors Short-Intermediate Income Fund, Inc. (formerly,
Flag Investors Intermediate-Term Income Fund, Inc.), Flag Investors
Value Builder Fund, Inc., Flag Investors Real Estate Securities Fund,
Inc., Flag Investors Funds, Inc., (formerly, Deutsche Funds, Inc.),
Flag Investors Portfolios Trust, (formerly, Deutsche Portfolios), The
Glenmede Fund, Inc., The Glenmede Portfolios, BT Advisor Funds, BT
Institutional Funds, BT Investment Funds, BT Pyramid Mutual Funds,
Cash Management Portfolio, Intermediate Tax Free Portfolio, NY Tax
Free Money Portfolio, Treasury Money Portfolio, International Equity
Portfolio, Equity 500

<PAGE>

Index Portfolio, Capital Appreciation Portfolio, Asset Management
Portfolio, BT Investment Portfolios, and Morgan Grenfell Investment
Trust,all registered open-end management investment companies.

(b) Provide the information with respect to each director, officer or
partner of each principal underwriter named in answer to Item 20.

<TABLE>
<CAPTION>
Name and Principal Business Position and Offices with Position and Offices with
Address* Principal Underwriter Registrant
----------------------------------- --------------------------------- --------------------------------

----------------------------------- --------------------------------- --------------------------------
<S> <C> <C>
John Y. Keffer President None
----------------------------------- --------------------------------- --------------------------------
Sara M. Morris Treasurer None
----------------------------------- --------------------------------- --------------------------------
David I. Goldstein Secretary None
----------------------------------- --------------------------------- --------------------------------
Richard C. Butt Vice President None
----------------------------------- --------------------------------- --------------------------------
Benjamin L. Niles Vice President None
----------------------------------- --------------------------------- --------------------------------
Margaret J. Fenderson Assistant Treasurer None
----------------------------------- --------------------------------- --------------------------------
Dana L. Lukens Assistant Secretary None
----------------------------------- --------------------------------- --------------------------------
Nanette K. Chern Chief Compliance None
----------------------------------- --------------------------------- --------------------------------
</TABLE>

------------------------------
* Two Portland Square
Portland, ME 04101

Item 28. Location of Accounts and Records

State the name and address of each person maintaining principal possession
of each account, book or other document required to be maintained by section
31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the rules under that section.

Investment Company Capital Corp. ("ICCC"), Registrant's investment advisor,
transfer agent and dividend disbursing agent, One South Street, Baltimore,
Maryland 21202, maintains physical possession of each such account, book or
other document of the Fund, except for those maintained by ABIM, the
Registrant's sub-advisor, One South Street, Baltimore, Maryland 21202, and by
Bankers Trust Company, the Registrant's custodian, 130 Liberty Street, New York,
New York 10006.

<PAGE>

In particular, with respect to the records required by Rule 31a-1(b)(1),
ICCC and ABIM each maintains physical possession of all journals containing
itemized daily records of all purchases and sales of securities, and, in the
case of ICCC, sales and redemptions of Fund securities, and Bankers Trust
Company maintains physical possession all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash, and all other debts and
credits.

Item 29. Management Services

Provide a summary of the substantive provisions of any management-related
service contract not discussed in Part A or Part B disclosing the parties to the
contract and the total amount paid and by whom, for the Fund's last three fiscal
years.

Not Applicable.

Item 30. Undertakings

(a) Not Applicable.

<PAGE>

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 8 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to the Registration Statement to be signed on
its behalf by the undersigned thereto duly authorized in the City of Baltimore,
in the State of Maryland, on the 27th day of September, 2000.

FLAG INVESTORS EQUITY
PARTNERS FUND, INC.

By: /s/ Carl W. Vogt, Esq.*

--------------
Carl W. Vogt, Esq.
President

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.

<TABLE>
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
* --------------------
--------------------- September 27, 2000
Truman T. Semans Chairman and Director Date
---------------------------------------------------------------------------------------------------------------------------
* -------------------
--------------------- September 27, 2000
Richard T. Hale Director Date
---------------------------------------------------------------------------------------------------------------------------

* ------------------
--------------------- September 27, 2000
Richard R. Burt Director Date
---------------------------------------------------------------------------------------------------------------------------
* ------------------
---------------------- September 27, 2000
Joseph R. Hardiman Director Date
---------------------------------------------------------------------------------------------------------------------------
* -----------------------
------------------------- September 27, 2000
Louis E. Levy Director Date
---------------------------------------------------------------------------------------------------------------------------

* -----------------------
------------------------- September 27, 2000
Eugene J. McDonald Director Date
---------------------------------------------------------------------------------------------------------------------------
* -----------------------
------------------------- September 27, 2000
Rebecca W. Rimel Director Date
---------------------------------------------------------------------------------------------------------------------------

* -----------------------
------------------------- September 27, 2000
Robert H. Wadsworth Director Date
---------------------------------------------------------------------------------------------------------------------------

<PAGE>

---------------------------------------------------------------------------------------------------------------------------
* -----------------------
------------------------- September 27, 2000
Carl W. Vogt, Esq. President Date
---------------------------------------------------------------------------------------------------------------------------
* Chief Financial and -----------------------
----------------------- Accounting Officer September 27, 2000
Charles A. Rizzo Date
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*By: /s/ Daniel O. Hirsch

-------------------------------
Daniel O. Hirsch
Attorney-In-Fact

AUTHORIZATION TO EXECUTE POWERS OF ATTORNEY

PROPOSED RESOLUTIONS:

RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and
any Post-Effective Amendments thereto, of each Fund in the FLAG
FUNDS COMPLEX on behalf of each Fund's President pursuant to a
properly executed power of attorney.

RESOLVED, that Edward J. Veilleux, Amy M. Olmert and Daniel O. Hirsch are
authorized to sign the Registration Statements on Form N-1A, and
any Post-Effective Amendments thereto, of each Fund in the FLAG
FUNDS COMPLEX on behalf of each Fund's Chief Financial Officer
pursuant to a properly executed power of attorney.