FLAG INVESTORS EMERGING GROWTH FUND INC, DEFS14A, 1997-01-07

FLAG INVESTORS EMERGING GROWTH FUND INC
DEFS14A, 1997-01-07

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<PAGE>

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Flag Investors Emerging Growth Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:

..........................................................................
2) Aggregate number of securities to which transaction applies:

..........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):

..........................................................................
4) Proposed maximum aggregate value of transaction:

..........................................................................
5) Total fee paid:

..........................................................................
[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:

..........................................................................
2) Form, Schedule or Registration Statement No.:

..........................................................................
3) Filing Party:

..........................................................................
4) Date Filed:

..........................................................................

<PAGE>

FLAG INVESTORS EMERGING GROWTH FUND, INC.
1 South Street
Baltimore, Maryland 21202

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 11, 1997

TO THE SHAREHOLDERS OF FLAG INVESTORS EMERGING GROWTH FUND, INC.

You are cordially invited to a special meeting (the "Special Meeting")
of the shareholders of Flag Investors Emerging Growth Fund, Inc. (the "Fund") on
Tuesday, February 11, 1997, at 4:00 p.m. Eastern Standard Time at the offices of
Investment Company Capital Corp., in the Second Floor Conference Room of the
Alex. Brown Capital Advisory & Trust Company Building, 19-21 South Street,
Baltimore, Maryland 21202, for the purpose of considering the proposal set forth
below and for the transaction of such other business as may be properly brought
before the Special Meeting:

PROPOSAL: To consider and act upon a proposal to elect a Board of
Directors of the Fund.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS SOON AS
POSSIBLE. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN AND DATE
YOUR PROXY CARD AND RETURN IT SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM
NUMBER OF SHARES MAY BE VOTED. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
USE.

Edward J. Stoken
Secretary

Dated: January 8, 1997

<PAGE>

FLAG INVESTORS EMERGING GROWTH FUND, INC.
1 South Street
Baltimore, Maryland 21202

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

PROXY STATEMENT
------------------------------

SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD

FEBRUARY 11, 1997

This Proxy Statement is furnished by the Board of Directors of Flag
Investors Emerging Growth Fund, Inc. (the "Fund") in connection with their
solicitation of proxies for use at the special meeting of shareholders of the
Fund to be held on Tuesday, February 11, 1997, at 4:00 p.m. Eastern Standard
Time, or at any adjournment thereof (the "Special Meeting"), at the offices of
Investment Company Capital Corp., in the Second Floor Conference Room of the
Alex. Brown Capital Advisory & Trust Company Building, 19-21 South Street,
Baltimore, Maryland 21202. It is expected that the Notice of Special Meeting,
the Proxy Statement and the Proxy Card will be mailed to shareholders on or
about January 8, 1997.

If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please date and sign the enclosed Proxy Card ("Proxy") and
mail it in the enclosed reply envelope, allowing sufficient time for the Proxy
to be received on or before 4:00 p.m. Eastern Standard Time on February 11,
1997. No postage is required if mailed in the United States. If the accompanying
Proxy is executed properly and returned, shares represented by it will be voted
at the Special Meeting in accordance with the instructions on the Proxy.
However, if no instructions are specified, shares will be voted FOR the election
of the proposed slate of Directors of the Fund (the "Proposal"). All
shareholders of the Fund are entitled to vote on the Proposal. Shareholders may
revoke their Proxies at any time prior to the time they are voted by giving
written notice to the Secretary of the Fund, by delivering a subsequently dated
Proxy or by attending and voting at the Special Meeting.

The close of business on December 19, 1996, has been fixed as the
record date (the "Record Date") for the determination of shareholders entitled
to notice of, and to vote at, the Special Meeting and at any adjournment
thereof. On the Record Date, the Fund had 3,714,148.166 shares outstanding,
consisting of 2,405,919.898 Flag Investors Emerging Growth Fund Class A Shares,
57,873.825 Flag Investors Emerging Growth Fund Class B Shares and 1,250,354.443
Flag Investors Emerging Growth Fund Institutional Shares. Each full share will
be entitled to one vote at the Special Meeting and each fraction of a share will
be entitled to the fraction of a vote equal to the proportion of a full share
represented by the fractional share.

The expenses of the Special Meeting will be borne by the Fund and will
include reimbursement to brokerage firms and others for expenses in forwarding
Proxy solicitation

<PAGE>

materials to beneficial owners. The solicitation of Proxies will be largely by
mail, but may include telephonic, telegraphic or oral communication by employees
and officers of Investment Company Capital Corp. ("ICC"), which serves as the
Fund's investment advisor.

THE FUND WILL FURNISH TO SHAREHOLDERS, UPON REQUEST AND WITHOUT CHARGE,
A COPY OF THE ANNUAL REPORT FOR ITS FISCAL YEAR ENDED OCTOBER 31, 1996. THE
ANNUAL REPORT OF THE FUND MAY BE OBTAINED BY WRITTEN REQUEST TO THE FUND, 1
SOUTH STREET, BALTIMORE, MARYLAND 21202 OR BY CALLING (800) 767-FLAG.

The Fund is registered as an open-end diversified management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended.

PROPOSAL: To consider and act upon a proposal to elect a Board of Directors of
the Fund.

At the Special Meeting, it is proposed that nine Directors be elected
to hold office until their successors are duly elected and qualified. The
persons named in the accompanying Proxy intend, in the absence of contrary
instructions, to vote all Proxies on behalf of the shareholders for the election
of Truman T. Semans, Charles W. Cole, Jr., James J. Cunnane, Richard T. Hale,
John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel and Carl W.
Vogt (each a "Nominee" and collectively, the "Nominees"). Messrs. Semans,
Cunnane, Hale, Kroeger, Levy and McDonald are currently members of the Board of
Directors. Messrs. Semans, Hale and Kroeger were last elected by the
shareholders of the Fund on June 20, 1989. Messrs. Cunnane, Levy and McDonald
were appointed by the Board of Directors to fill vacancies on the Board as they
arose and have not previously been elected by the shareholders. Messrs. Cole and
Vogt and Ms. Rimel have not previously served on the Board of Directors and have
not previously been elected by the shareholders. Messrs. W. James Price and
Harry Woolf retired from the Board effective December 31, 1996.

The proposal to elect the Board of Directors is being presented for
shareholder approval pursuant to requirements under the 1940 Act. Under the 1940
Act, if at any time less than a majority of the Directors have been elected by
shareholders, the Directors then holding office are required to hold a meeting
of shareholders within 60 days for the purpose of electing Directors to fill any
existing vacancies on the Board of Directors. As a result of the retirements of
Messrs. Price and Woolf, less than a majority of the Directors have been elected
by shareholders of the Fund and, accordingly, the Directors are required to hold
a meeting of shareholders for the purpose of electing Directors.

The Fund is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act,
such as the Fund, is not required to hold an annual meeting in any year in which
the election of Directors is not required to be acted upon under the 1940 Act.
The Fund has availed itself of this provision and achieves cost

<PAGE>

savings by eliminating printing costs, mailing charges and other expenses
involved in routine annual meetings. Because the Fund does not hold regular
annual shareholder meetings, each Nominee, if elected, will hold office until
his or her successor is elected and qualified.

Even with the elimination of routine annual meetings, the Board of
Directors may call special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act, or as required or permitted by the
Articles of Incorporation and By-Laws of the Fund. As described above,
shareholder meetings will be held, in compliance with the 1940 Act, to elect
Directors under certain circumstances. Shareholder meetings may also be held by
the Fund for other purposes, including to approve investment policy changes, a
new investment advisory agreement or other matters requiring shareholder action
under the 1940 Act. In addition, Maryland General Corporation Law provides for
the calling of a special meeting by the written request of shareholders holding
at least 25% of the shares entitled to vote at the meeting.

Each of the Nominees has consented to being named in this Proxy
Statement and to serving as a Director if elected. The Fund knows of no reason
why any Nominee would be unable or unwilling to serve if elected.

Information Regarding Nominees

The following information is provided for each Nominee. It includes his
or her name, position with the Fund, length of directorship (if applicable),
age, principal occupations or employment during the past five years,
directorships with other companies which file reports periodically with the
Securities and Exchange Commission, number of directorships with the 12
registered investment companies which hold themselves out to investors as
related companies for purposes of investment and investor services or to which
ICC or an affiliated person of ICC provides investment advisory services
(collectively, the "Fund Complex"), number of shares of the Fund beneficially
owned and percentage of shares of the Fund beneficially owned. As of November
30, 1996, the Nominees as a group beneficially owned an aggregate of less than
1% of the shares of the Fund.

<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Business Experience Owned as of
Name and Position During the Past Five Years November 30, Percent-
with the Fund Age (including all directorships) 1996** age
- ------------------ --- ----------------------------- ------ -----
<S> <C> <C> <C> <C>
Truman T. Semans* 69 Managing Director, Alex. Brown & 19,860 shares ***
Director and Sons Incorporated; Director,
Chairman Investment Company Capital Corp.
of the Board since (registered investment advisor).
1987 Formerly, Vice Chairman, Alex.
Brown & Sons Incorporated.
Director of eight funds in the Fund
Complex.

Charles W. Cole, 61 Vice Chairman, Alex. Brown 2,382 shares ***
Jr.*+ Capital Advisory & Trust Company
Nominee for (registered investment advisor);
Director Chairman, Investment Company
Capital Corp. (registered investment
advisor); Director, Provident
Bankshares Corporation and
Provident Bank of Maryland.
Formerly, President and Chief
Executive Officer, Chief
Administrative Officer, and
Director, First Maryland Bancorp,
The First National Bank of
Maryland and First Omni Bank;
Director, York Bank and Trust
Company. Director of four funds in
the Fund Complex.

James J. Cunnane 58 Managing Director, CBC Capital None ***
Director since (merchant banking), 1993-Present.
1994 Formerly, Senior Vice President
and Chief Financial Officer, General
Dynamics Corporation (defense),
1989-1993; and Director, The Arch
Fund (registered investment
company). Director of each fund in
the Fund Complex.

</TABLE>
4

<PAGE>

John F. Kroeger 72 Director/Trustee, AIM Funds 1,311 shares ***
Director since (registered investment companies).
1987 Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting
firm) and General Manager, Shell
Oil Company. Director of each fund
in the Fund Complex.

Louis E. Levy 64 Director, Kimberly-Clark 1,311 shares ***
Director since Corporation (personal consumer
1994 products) and Household
International (finance and banking);
Chairman of the Quality Control
Inquiry Committee, American
Institute of Certified Public
Accountants. Formerly, Trustee,
Merrill Lynch Funds for
Institutions, 1991-1993; Adjunct
Professor, Columbia University-
Graduate School of Business, 1991-
1992; Partner, KPMG Peat
Marwick, retired 1990. Director of
each fund in the Fund Complex.

</TABLE>
5

<PAGE>

<TABLE>
<CAPTION>
Shares
Beneficially
Business Experience Owned as of
Name and Position During the Past Five Years November 30, Percent-
with the Fund Age (including all directorships) 1996** age
- ------------------ --- ----------------------------- ------ -----
<S> <C> <C> <C> <C>
Eugene J. 64 President, Duke Management None ***
McDonald Company (investments); Executive (2,462
Director since Vice President, Duke University shares)++
1992 (education, research and
healthcare); Director, Central Carolina
Bank & Trust (banking), Key Funds
(registered investment companies), and
AMBAC Treasurers Trust (registered
investment company). Director of each
fund in the Fund Complex.

Rebecca W. Rimel 45 President and Chief Executive None ***
Nominee for Officer, The Pew Charitable Trusts;
Director Director and Executive Vice
President, The Glenmede Trust
Company. Formerly, Executive
Director, The Pew Charitable
Trusts. Director of six funds in the
Fund Complex.

Carl W. Vogt 60 Senior Partner, Fulbright & None ***
Nominee for Jaworski L.L.P. (law); Director, Yellow (368 shares)++
Director Corporation (trucking). Formerly,
Chairman and Member, National
Transportation Safety Board; Director,
National Railroad Passenger Corporation
(Amtrak); and Member, Aviation System
Capacity Advisory Committee (Federal
Aviation Administration). Director of
five funds in the Fund Complex.
----------------------------
</TABLE>
6

<PAGE>

<TABLE>
<CAPTION>
Shares
Beneficially
Business Experience Owned as of
Name and Position During the Past Five Years November 30, Percent-
with the Fund Age (including all directorships) 1996** age
- ------------------ --- ----------------------------- ------ -----
<S> <C> <C>
* Denotes an individual who is an "interested person" as defined in the 1940 Act.
** This information has been provided by each Nominee for Director of the Fund.
*** As of November 30, 1996, the Nominees of the Fund as a group beneficially owned an
aggregate of less than 1% of the shares of the Fund.
+ Mr. Cole is the father-in-law of Scott J. Liotta, a Vice President of the Fund.
++ Represents shares not beneficially owned, but held by funds in the Fund Complex as
designated by the Nominee pursuant to the Fund Complex's Deferred Compensation
Plan.
</TABLE>

Compensation of Directors

Each Director who is not an "interested person" receives an aggregate
annual fee (plus reimbursement for reasonable out-of-pocket expenses incurred in
connection with his or her attendance at Board and committee meetings) from the
Fund and all of the funds in the Fund Complex for which he or she serves. If
elected, Mr. Vogt and Ms. Rimel will receive compensation from the Fund for
their services. Payment of such fees and expenses is allocated among all such
funds described above in proportion to their relative net assets. For the fiscal
year ended October 31, 1996, Non-Interested Directors' fees attributable to the
assets of the Fund totaled $2,270. Officers of the Fund receive no direct
remuneration in such capacity from the Fund. Officers of the Fund who are
employees of Alex. Brown & Sons Incorporated ("Alex. Brown") may be considered
to have received remuneration indirectly.

Any Director who receives fees from the Fund is permitted to defer a
minimum of 50%, and up to 100%, of his or her annual compensation pursuant to a
Deferred Compensation Plan. Messrs. Cunnane, Kroeger, Levy, McDonald, and Woolf
have each executed a Deferred Compensation Agreement and may defer a portion of
their compensation from the Fund and the Fund Complex. Currently, the deferring
Directors may select various Flag Investors and Alex. Brown Cash Reserve Funds
in which all or part of their deferral account shall be invested. Distributions
from the deferring Directors' deferral accounts will be paid in cash, in
quarterly installments over a period of ten years.

The aggregate compensation payable by the Fund to each of the Fund's
Directors serving during the fiscal year ended October 31, 1996, is set forth in
the compensation table below. The aggregate compensation payable to such
Directors during the fiscal year ended October 31, 1996, by the Fund Complex is
also set forth in the compensation table below.

<PAGE>

COMPENSATION TABLE
<TABLE>
<CAPTION>

Total
Pension or Compensation Number of
Retirement From the Funds in
Benefits Fund and Fund
Aggregate Accrued as Fund Complex for
Compensation Part of Complex Which
from the Fund Payable Director
Name and Position Fund Expenses to Directors Serves
- ----------------- ---- ---------- ------------- -------
<S> <C> <C> <C> <C>
Truman T. Semans, Director* $0 $0 $0 8
Richard T. Hale, Director* $0 $0 $0 12
W. James Price, Director*/*** $0 $0 $0 7
James J. Cunnane, Director $355(1) + $39,000 12
N. Bruce Hannay, Director** $106(1) + $13,071 12
John F. Kroeger, Director $446(1) + $49,000 12
Louis E. Levy, Director $355(1) + $39,000 12
Eugene J. McDonald, Director $355(1) + $39,000 12
Harry Woolf, Director*** $355(1) + $39,000 12
</TABLE>
- --------------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** Retired, effective January 31, 1996, and is now deceased.
*** Retired, effective December 31, 1996.
(1) Of the amounts payable to Messrs. Cunnane, Hannay, Kroeger, Levy, McDonald
and Woolf, $197, $0, $0, $0, $197 and $197, respectively, was
deferred pursuant to the Deferred Compensation Plan.
+ The Fund Complex has adopted a retirement plan for eligible Directors, as
described below. The actuarially computed expense for the Fund for the
fiscal year ended October 31, 1996, was $1,837.

The Fund Complex has adopted a retirement plan (the "Retirement Plan")
for Directors who are not employees of the Fund, the Fund's investment advisor
or their respective affiliates (the "Participants"). After completion of six
years of service, each Participant will be entitled to receive an annual
retirement benefit equal to a percentage of the fees earned by such 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 Plan is unfunded and unvested. Mr. Kroeger has qualified but has not
received benefits. The Fund has two Participants, a Director who retired
effective December 31, 1994, and

<PAGE>

a Director who retired effective December 31, 1996, who have qualified for the
Retirement Plan by serving thirteen years and fourteen years, respectively, as
Directors in the Fund Complex and each of whom will be paid a quarterly fee of
$4,875 by the Fund Complex for the rest of his life. Another Participant who
retired on January 31, 1996, and died on June 2, 1996, was paid fees of $8,090
by the Fund Complex under the Retirement Plan in the fiscal year ended October
31, 1996. Such fees are allocated to each fund in the Fund Complex based upon
the relative net assets of such fund to the Fund Complex.

Set forth in the table below are the estimated annual benefits payable
to a Participant upon retirement assuming various years of service and payment
of a percentage of the fee earned by such Participant in his or her last year of
service, as described above. The approximate credited years of service, shown in
parentheses, for each Participant at December 31, 1996, are as follows:
Messrs. Cunnane (2), Kroeger (14), Levy (2) and McDonald (4).

Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- -----------------------------------------------------------------

Chairman of Audit Committee Other Participants
--------------------------- ----------------------
<S> <C> <C>

6 years $ 4,900 $ 3,900
7 years $ 9,800 $ 7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>

Meetings and Committees of the Board of Directors

There were four meetings of the Board of Directors held during the
fiscal year ended October 31, 1996. In such fiscal year, all Directors attended
at least 75% of the meetings of the Board of Directors held during their
respective terms.

The Board of Directors has an Audit and Compliance Committee. The Audit
and Compliance Committee makes recommendations to the full Board of Directors
with respect to the engagement of independent accountants and reviews, with the
independent accountants, the results of the audit engagement and matters having
a material effect on the Fund's financial operations. The members of the Audit
and Compliance Committee during the fiscal year ended October 31, 1996, were
Messrs. Kroeger (Chairman), Cunnane, Hannay, Levy, McDonald and Woolf, each of
whom is not an "interested person" within the meaning of the 1940 Act. Mr.
Hannay was a member of the Audit and Compliance Committee until his retirement
on January 31, 1996. It is expected that Ms. Rimel and Mr. Vogt will serve as
members of the Audit and Compliance Committee if elected by shareholders. The
Audit and Compliance Committee met

<PAGE>

four times during the fiscal year ended October 31, 1996. In such fiscal year,
all members attended at least 75% of the meetings of the Audit and Compliance
Committee held during their respective terms. The Chairman of the Audit and
Compliance Committee receives an aggregate annual fee of $10,000 from the Fund
Complex. Payment of such fee is allocated among all funds in the Fund Complex in
proportion to their relative net assets.

The Board of Directors has a Nominating Committee. The Nominating
Committee makes recommendations to the full Board of Directors with respect to
candidates for the Board of Directors. The members of the Nominating Committee
during the fiscal year ended October 31, 1996, were Messrs. McDonald (Chairman),
Cunnane, Hannay, Kroeger, Levy and Woolf, each of whom is not an "interested
person" within the meaning of the 1940 Act. Mr. Hannay was a member of the
Nominating Committee until his retirement on January 31, 1996. It is expected
that Ms. Rimel and Mr. Vogt will serve as members of the Nominating Committee if
elected by shareholders. The Nominating Committee met once during the fiscal
year ended October 31, 1996 and all members, except Mr. Cunnane, attended such
meeting.

The Board of Directors has a Compensation Committee. The Compensation
Committee makes recommendations to the full Board of Directors with respect to
the compensation of Directors. The members of the Compensation Committee during
the fiscal year ended October 31, 1996, were Messrs. Woolf (Chairman), Cunnane,
Hannay, Kroeger, Levy and McDonald, each of whom is not an "interested person"
within the meaning of the 1940 Act. Mr. Hannay was a member of the Compensation
Committee until his retirement on January 31, 1996. It is expected that Ms.
Rimel and Mr. Vogt will serve as members of the Compensation Committee if
elected by shareholders. The Compensation Committee did not meet during the
fiscal year ended October 31, 1996.

Board Approval of the Election of Directors

At a meeting of the Board of Directors held December 18, 1996, the
Board of Directors recommended that shareholders vote FOR each of the Nominees
for Director named herein. In recommending that shareholders elect the Nominees
as Directors of the Fund, the Board considered the Nominees' experience and
qualifications.

Shareholder Approval of the Election of Directors

The election of the Directors requires the favorable vote of a
plurality of all votes cast at the Special Meeting, provided that one-third of
the shares entitled to vote are present in person or by Proxy at the Special
Meeting. If you give no voting instructions, your shares will be voted FOR all
Nominees named herein. If the Directors are not approved by shareholders of the
Fund, the Board of Directors will consider alternative nominations.

<PAGE>

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT
SHAREHOLDERS OF THE FUND VOTE FOR THE ELECTION OF THE DIRECTORS.
---

ADDITIONAL INFORMATION

Directors and Executive Officers

Information about the Fund's current Directors and principal executive
officers, including their names, positions with the Fund, length of service in
such positions, ages, principal occupations or employment during the past five
years and amount of shares of the Fund beneficially owned as of November 30,
1996, is set forth below. Each officer of the Fund will hold such office until a
successor has been elected by the Board of Directors. Directors and officers of
the Fund are also directors and officers of some or all of the other investment
companies managed, administered, advised or distributed by Alex. Brown or its
affiliates. As of November 30, 1996, the Directors and officers of the Fund as a
group (15 persons), beneficially owned 66,794 shares of the Fund, representing
1.8% of the Fund's total outstanding shares.

Shares
Business Experience Beneficially
During the Past Five Owned as of
Position Years, November
Name With the Fund Age including all Directorships 30, 1996
---- ------------- --- --------------------------- ------------
<S> <C> <C> <C> <C>
Truman T. Semans* Director and 69 See "Information Regarding **
Chairman of the Nominees."
Board since
1987

James J. Cunnane Director since 58 See "Information Regarding **
1994 Nominees."

Richard T. Hale* Director since 51 See "Information Regarding **
1989 Nominees."

John F. Kroeger Director since 72 See "Information Regarding **
1987 Nominees."

Louis E. Levy Director since 64 See "Information Regarding **
1994 Nominees."

Eugene J. Director since 64 See "Information Regarding **
McDonald 1992 Nominees."

</TABLE>
11

<PAGE>

Edward J. Veilleux Vice President 53 Principal, Alex. Brown & **
since 1987 Sons Incorporated; Vice
President, Armata Financial
Corp. (registered broker-
dealer); Executive Vice
President, Investment
Company Capital Corp.
(registered investment
advisor).

Gary V. Fearnow Vice President 52 Managing Director, Alex. **
since 1987 Brown & Sons Incorporated
and Manager, Special
Products Department, Alex.
Brown & Sons
Incorporated.

Charles A. Reid Vice President 53 Principal, Alex. Brown & **
since 1987 Sons Incorporated, 1980-
Present;
Principal,
Alex.Brown
Capital Advisory
& Trust Company;
General Partner,
Baltimore Street
Capital III
(growth companies
investor).

Sandra J. Doeller Vice President 35 Vice President Alex. Brown **
since 1991 & Sons Incorporated, 1994-
Present; Equity Trader,
Asset Management
Department, Alex. Brown &
Sons Incorporated, 1983-
Present.

</TABLE>
12

<PAGE>

<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
During the Past Five Owned as of
Position Years, November
Name With the Fund Age including all Directorships 30, 1996
---- --------------- --- --------------------------- ------------
<S> <C> <C> <C> <C>
Scott J. Liotta Vice President 31 Manager, Fund **
since 1996 Administration, Alex.
Brown & Sons
Incorporated, July 1996-
Present. Formerly,
Manager and Foreign
Markets Specialist, Putnam
Investments Inc. (registered
investment companies),
April 1994 - July 1996;
Supervisor, Brown Brothers
Harriman & Co. (domestic
and global custody), August
1991 - April 1994.

Joseph A. Finelli Treasurer since 39 Vice President, Alex. **
1995 Brown & Sons Incorporated
and Vice President,
Investment Company
Capital Corp. (registered
investment advisor),
September 1995-Present.
Formerly, Vice President
and Treasurer, The
Delaware Group of Funds
(registered investment
companies) and Vice
President, Delaware
Management Company Inc.
(investments), 1980-August
1995.

Edward J. Stoken Secretary since 49 Compliance Officer, Alex. **
1996 Brown & Sons
Incorporated, April 1995-
Present. Formerly, Legal
Advisor, Federated
Investors (registered
investment advisor), 1991-
1995.

</TABLE>
13

<PAGE>

<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
During the Past Five Owned as of
Position Years, November
Name With the Fund Age including all Directorships 30, 1996
---- ------------- --- --------------------------- ---------
<S> <C> <C> <C> <C>
Laurie D. Collidge Assistant 31 Asset Management **
Secretary since Department, Alex. Brown &
1992 Sons Incorporated, 1991-
Present.
</TABLE>
- ---------------------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** As of November 30, 1996, the Directors and officers of the Fund as a group
(15 persons), beneficially owned 66,794 shares of the Fund, representing
1.8% of the Fund's total outstanding shares.

Investment Advisor

ICC, an indirect subsidiary of Alex. Brown Incorporated, is located at
1 South Street, Baltimore, Maryland 21202 and acts as the Fund's investment
advisor.

Principal Underwriter

Alex. Brown, located at 1 South Street, Baltimore, Maryland 21202, acts
as the Fund's principal underwriter.

Independent Accountants

A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected Coopers & Lybrand L.L.P. as the independent
accountants of the Fund for the fiscal year ending October 31, 1997. A
representative of Coopers & Lybrand L.L.P. will be available by telephone during
the Special Meeting, if needed, to make a statement if desired and to respond to
appropriate questions from shareholders.

Beneficial Owners

To the knowledge of Fund Management, as of the Record Date, the
following were beneficial owners of 5% or more of the outstanding shares of the
Fund.

<PAGE>

Amount of Beneficial Percent of Total Shares
Name and Address Ownership Outstanding
---------------- --------- -----------
T. Rowe Price Trustee 437,208 shares 11.8%
Alex. Brown & Sons
Incorporated Plan #100460
Attn: Asset Recon.
P.O. Box 17215
Baltimore, MD 21297-0354

Lauer & Co. Custodian 565,417 shares 15.2%
BAT Customers
c/o Glenmede Income
Collection Department
1600 Market Street
Suite 1200
Philadelphia, PA 19103-7301

Submission of Shareholder Proposals

As a Maryland corporation, the Fund is not required to hold annual
shareholder meetings, except in certain limited circumstances. Shareholders who
wish to present a proposal for action at the next meeting or suggestions as to
nominees for the Board of Directors should submit the proposal or suggestions to
be considered to the Fund sixty days in advance of any such meeting for
inclusion in the Fund's proxy statement and form of proxy for such meeting as is
held. The Nominating Committee of the Board of Directors will give consideration
to shareholder suggestions as to nominees for the Board of Directors.
Shareholders retain the right, under limited circumstances, to request that a
meeting of the shareholders be held for the purpose of considering the removal
of a Director from office and, if such a request is made, the Fund will assist
with shareholder communications in connection with the meeting.

Required Vote

Approval of the Proposal requires the affirmative vote of a plurality
of all votes cast at the Special Meeting, provided that one-third of all shares
entitled to vote are present in person or by Proxy at the Special Meeting.

Votes may be cast in favor of Nominees or withheld. Votes that are
withheld and "broker non-votes" will be excluded entirely from the vote and will
have no effect, other than being present for purposes of determining the
presence of a quorum. The Fund believes that brokers who hold shares as record
owners for beneficial owners have the authority under the rules of the various
stock exchanges to vote those shares with respect to the election of Directors
when they have not received instructions from beneficial owners.

<PAGE>

Other Matters

No business other than the matter described above is expected to come
before the Special Meeting, but should any matter incident to the conduct of the
Special Meeting or any question as to an adjournment of the Special Meeting
arise, the persons named in the enclosed Proxy will vote thereon according to
their best judgment in the interest of the Fund.

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO FILL IN, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.

By Order of the Directors,

Edward J. Stoken
Secretary

Dated: January 8, 1997

<PAGE>

FLAG INVESTORS EMERGING GROWTH FUND, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS

February 11, 1997

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FLAG INVESTORS
EMERGING GROWTH FUND, INC.

This Proxy is for your use in voting on various matters relating to Flag
Investors Emerging Growth Fund, Inc. (the "Fund"). The undersigned
shareholder(s) of the Fund, revoking previous proxies, hereby appoint(s) Edward
J. Veilleux, Edward J. Stoken and Laurie D. Collidge and each of them (with full
power of substitution) the proxy or proxies of the undersigned to attend the
Special Meeting of Shareholders of the Fund to be held on February 11, 1997 (the
"Special Meeting") and any adjournments thereof, to vote all of the shares of
the Fund that the signer would be entitled to vote if personally present at the
Special Meeting and on any matter incident to the conduct of the Special Meeting
or any question of an adjournment of the Special Meeting, all as set forth in
the Notice of Special Meeting of Shareholders and the Proxy Statement of the
Board of Directors.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE
FOR THE ELECTION OF THE DIRECTORS.
- ---
Said proxies are directed to vote or refrain from voting pursuant to the Proxy
Statement as indicated upon the matters set forth below:

Proposal: To consider and act upon a proposal to elect a Board of Directors.

____ FOR all nominees listed below.

____ WITHHOLD AUTHORITY to vote
for all nominees listed below.

____ FOR all nominees listed below except
those whose names have been stricken.

(Instructions: To withhold authority to vote for any or all of the nominees,
strike a line through the name(s) of such nominee(s) below.)

Truman T. Semans Charles W. Cole, Jr.
James J. Cunnane Richard T. Hale
John F. Kroeger Louis E. Levy
Eugene J. McDonald Rebecca W. Rimel
Carl W. Vogt

This Proxy will be voted as indicated above. If no indication is made, this
Proxy will be voted FOR the proposal set forth above.

The undersigned acknowledges receipt with this Proxy of a copy of the Notice of
Special Meeting of Shareholders and the Proxy Statement of the Board of
Directors.

Please Date: - Date: _________________, 1997
-----------
<TABLE>
<CAPTION>
<S> <C> <C>

Please print and sign your
name in the space provided to
authorize the voting of your ______________________________ ___________________________________
shares as indicated and return (Signature of shareholder) (Co-owner signature, if any)
promptly. When signing on
behalf of a corporation,
partnership, estate, trust,
or in any other ______________________________ ___________________________________
representative capacity, (Printed name of shareholder) (Printed name of co-owner, if any)
please sign your name and
title. For joint accounts,
each joint owner must sign.

</TABLE>

PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.