<PAGE>
As Filed With the Securities and Exchange Commission on January 18, 2000
Registration Nos. 33-21119/811-5320
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 17 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 21 [X]
FLAG INVESTORS EMERGING GROWTH 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: (410) 727-1700
Daniel O. Hirsch, Esq. Copy to: Richard W. Grant, Esq.
One South Street Morgan, Lewis & Bockius LLP
Baltimore, MD 21202 1701 Market Street
(Name and address of agent for service) Philadelphia, PA 19103
It is proposed that this filing will become effective (check appropriate box)
_X_ immediately upon filing pursuant to paragraph (b)
___ on (date), pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ 75 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
[FLAG INVESTORS LOGO]
EMERGING GROWTH FUND, INC.
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(Class A and Class B Shares )
Prospectus & Application - January 18, 2000
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This mutual fund (the "Fund") seeks to achieve long-term capital appreciation
primarily through investment in a diversified portfolio of common stocks of
small and mid-sized emerging growth companies.
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 Class A Shares
(the "Class A Shares") and Flag Investors Class B Shares (the "Class B Shares")
of the Fund. These separate classes give you a choice of sales charge and fund
expenses. (Refer to the section on sales charges and the attached Application.)
TABLE OF CONTENTS
Investment Summary........................................1
Fees and Expenses of the Fund.............................2
Investment Program........................................3
The Fund's Net Asset Value................................4
How to Buy Shares.........................................4
How to Redeem Shares......................................5
Telephone Transactions....................................6
Sales Charges.............................................6
How to Choose the Class
That Is Right for You....................................8
Dividends and Taxes.......................................8
Investment Advisor and Sub-Advisor........................9
Financial Highlights.....................................10
Application.............................................A-1
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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.
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INVESTMENT SUMMARY
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Objectives and Strategies
The Fund seeks to achieve long-term capital appreciation primarily
through investment in a diversified portfolio of common stocks of small and
mid-sized emerging growth companies. These companies have relatively small
market capitalizations. The Fund's investment advisor and sub-advisor
(collectively, the "Advisors") will attempt to identify emerging growth
companies, that is, companies that they believe have the ability or potential
to sustain a high level of growth in their revenue, earnings, assets and cash
flow. The Advisors will focus on a number of key selection criteria including a
company's industry position, management quality and experience, accounting and
financial policies, marketing and service capabilities, and product development
efforts.
Risk Profile
The Fund may be suited for you if you are willing to accept the risks and
uncertainties of investing in emerging growth companies 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 securities the Fund holds. Those
prices, in turn, reflect investor perceptions of the economy, the markets and
the companies represented in the Fund's portfolio.
Emerging Growth and Small Cap Stock Risks. The stocks of small and
mid-sized companies may experience greater price volatility than those of
larger companies. The market for such stocks may be more limited and the
companies themselves may be more vulnerable to economic or company-specific
problems. In particular, these small companies may have limited product lines,
markets and financial resources, and may depend on a relatively small
management group.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the Fund both
year by year and as an average over different periods of time. The variability
of performance over time provides an indication of the risks of investing in
the Fund. This is an historical record and does not necessarily indicate how
the Fund will perform in the future.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -21.07% 49.62% -9.18% -0.77% 5.03% 37.34% 18.20% 20.74% 6.61% 49.26%
</TABLE>
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* The bar chart does not reflect sales charges. If it did, returns would be
less than those shown.
During the 10-year period shown in the bar chart, the highest return for a
quarter was 52.16% (quarter ended 12/31/99) and the lowest return for a quarter
was (29.50)% (quarter ended 9/30/90).
1
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Average Annual Total Return (for periods ended December 31, 1999)
<TABLE>
<CAPTION>
Class A Shares(1) S&P 500(2) Russell 2000(3)
----------------- -------- ---------------
<S> <C> <C> <C>
Past One Year ............ 42.54% 21.04% 21.26%
Past Five Years .......... 24.39% 28.56% 16.69%
Past Ten Years ........... 12.78% 18.21% 13.40%
Class B Shares(1) S&P 500(2) Russell 2000(3)
----------------- -------- -------------
Past One Year ............ 48.09% 21.04% 21.26%
Since Inception .......... 13.89% (6/20/96) 27.15%(4) 12.84%(4)
</TABLE>
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(1) These figures assume the reinvestment of dividends and capital gains
distributions and include the impact of the maximum sales charges, which
increased on January 18, 2000.
(2) The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. The index is a
passive measure of equity market returns. It does not factor in the costs of
buying, selling and holding securities -- costs that are reflected in the
Fund's results.
(3) The Russell 2000 Index is an unmanaged index that is a widely recognized
benchmark of small company stock performance. The Russell 2000's performance
may be a better comparison for the Fund than the S&P 500, which tracks
larger, more developed stocks.
(4) For the period from 6/30/96 through 12/31/99.
FEES AND EXPENSES OF THE FUND
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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
Shares Shares
Initial Sales Deferred
Charge Sales Charge
Alternative Alternative
--------------- -------------
<S> <C> <C>
Shareholder Transaction Expenses:
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) ..................................... 5.50%* None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ....................... 1.00%* 5.00%**
Maximum Sales Charge (Load) Imposed on Reinvested Dividends .............. None None
Redemption Fee ........................................................... None None
Exchange Fee ............................................................. None None
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees .......................................................... 0.85% 0.85%
Distribution and/or Service (12b-1) Fees ................................. 0.25% 0.75%
Other Expenses (including a 0.25% shareholder
servicing fee for Class B Shares) ....................................... 0.30% 0.55%
---------- ---------
Total Annual Fund Operating Expenses ..................................... 1.40% 2.15%
========== =========
</TABLE>
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* You will pay no sales charge on purchases of $1 million or more of Class A
Shares, but unless you are otherwise eligible for a sales charge waiver or
reduction, you may pay a contingent deferred sales charge when you redeem
your shares. (See "Sales Charges -- Redemption Price.")
** Contingent deferred sales charges decline over time and reach zero after six
years. After seven years, Class B Shares convert automatically to Class A
Shares. (See "Sales Charges" and "How to Choose the Class That Is Right
for You.")
2
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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 Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Class A Shares .......... $685 $969 $1,274 $2,137
Class B Shares .......... $718 $973 $1,354 $2,208
You would pay the following expenses if you did not redeem your shares:
Class A Shares ......... $685 $969 $1,274 $2,137
Class B Shares ......... $218 $673 $1,154 $2,208
Federal regulations require that the table above reflect the maximum sales
charge. However, you may qualify for reduced sales charges or no sales charge
at all. (Refer to the section on sales charges.) If you hold your shares for a
long time, the combination of the initial sales charge you paid and the
recurring 12b-1 fees may exceed the maximum sales charges permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
INVESTMENT PROGRAM
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Investment Objective, Policies and
Risk Considerations
The Fund seeks to achieve long-term capital appreciation primarily
through investment in a diversified portfolio of small and mid-sized emerging
growth companies.
The Advisors are responsible for managing the Fund's investments. (Refer
to the section on the Investment Advisor and Sub-Advisor.) The Advisors will
seek to identify companies that, in their opinion, are well managed and have
experienced or have the potential to experience rapid growth in their revenue,
earnings, assets and cash flow. The selection criteria will include a company's
industry position, management qualifications and experience, accounting and
financial policies, marketing and service capabilities and product development
efforts. The Advisors will invest in a broad cross-section of industries in an
effort to limit the Fund's volatility. The Fund will invest primarily, but not
exclusively, in the businesses of technology, health care, business services,
energy, transportation, financial services, consumer products and services and
capital goods.
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. In
general, 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.
In addition to the general risks of the stock markets, investing in small
to mid-sized companies entails special risks. The stock prices of emerging
growth companies tend to be more volatile than investments in larger, more
established companies, making such investments more speculative. In particular,
the Fund's investments may have limited product lines, markets, and financial
resources, and may depend on a relatively small management group. There can be
no guarantee that the Fund will achieve its goals.
To protect the Fund under adverse market conditions, the Advisors may
make temporary defensive investments of up to 100% of the Fund's assets in
money market instruments that ordinarily would not be consistent with the
Fund's objectives. While engaged in a temporary defensive strategy, the Fund
may not achieve its investment objective. The Advisors would follow such a
strategy only if they believed the risk of loss outweighed the opportunity for
gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
3
<PAGE>
computer systems used by its service providers do not properly process dates
after January 1, 2000 and distinguish between the year 2000 and the year 1900.
The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its
shareholders may experience losses if these assurances prove to be incorrect or
if issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others, with which the Fund does business experience
difficulties as a result of year 2000 issues.
THE FUND'S NET ASSET VALUE
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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 either
class of shares, the amount you receive may be reduced by a sales charge. Read
the section on sales charges for details on how and when these charges may or
may not be imposed.
The net asset value per share of the Fund is determined at the close of
regular trading on the New York Stock Exchange (ordinarily 4:00 p.m. Eastern
Time) on each day the Exchange is open for business. On the day before certain
holidays are observed, the primary trading markets for the Fund may close
early, and the Fund also may close early. You may call the Transfer Agent at
1-800-553-8080 for additional information about whether the Fund will close
early before a particular holiday. The net asset value is calculated by
subtracting the liabilities attributable to a class from its proportionate
share of the Fund's assets and dividing the result by the outstanding shares of
the class. Because the different classes have different distribution or service
fees, their net asset values may differ.
In valuing the Fund's assets, its investments are priced at their market
value. When price quotes for a particular security are not readily available,
investments are priced at their "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem 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 or after the
Fund has closed early before a holiday, the price you pay or receive will be
based on the next Business Day's net asset value per share.
The following sections describe how to buy and redeem shares.
HOW TO BUY SHARES
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You may buy either class of the Fund's shares through your securities
dealer or through any financial institution that is authorized to act as a
shareholder servicing agent. Contact them for details on how to enter and pay
for your order. You may also buy shares by sending your check (along with a
completed Application Form) directly to the Fund. The Application Form, which
includes instructions, is attached to this Prospectus.
You may invest in Class A Shares unless you are a defined contribution
plan with assets of $75 million or more.
Your purchase order may not be accepted if the sale of Fund Shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $2,000. Subsequent investments
must be at least $100. The following are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment may be
as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your initial
investment in this Fund may be as low as $500.
o If you are a participant in the Fund's Automatic Investing Plan, your
initial investment may be as low as $250. Your subsequent investments
may be as low as $100 if you participate in the monthly program or
$250 if you participate in the quarterly program. Refer to the
section on the Fund's Automatic Investing Plan for details.
4
<PAGE>
o 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 attached
Application Form or contact your securities dealer, your servicing agent or the
Transfer Agent.
Automatic Investing Plan. You may elect to make a regular monthly or
quarterly investment in any class of shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
Transfer Agent receives the money, it will be invested in the class of shares
selected at that day's offering price. Either you or the Fund may discontinue
your participation upon 30 days' notice.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund Shares at net
asset value. You may elect to receive your distributions in cash or to have
your distributions invested in shares of other Flag Investors funds. To make
either of these elections or to terminate automatic reinvestment, complete the
appropriate section of the attached Application Form or notify the Transfer
Agent, your securities dealer or your servicing agent at least five days before
the date on which the next dividend or distribution will be paid.
Systematic Purchase Plan. You may also purchase either class of shares
through a Systematic Purchase Plan. Contact your securities dealer or servicing
agent for details.
HOW TO REDEEM SHARES
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You may redeem either class of the Fund's shares through your securities
dealer or servicing agent. Contact them for details on how to enter your order
and for information as to how you will be paid. If you have an account with the
Fund that is in your name, you may also redeem shares by contacting the
Transfer Agent by mail or (if you are redeeming less than $50,000) by
telephone. The Transfer Agent will mail your redemption check within seven days
after it receives your order in proper form. Refer to the section on telephone
transactions for more information on this method of redemption.
Your securities dealer, your servicing agent or the Transfer Agent may
require the following documents before they redeem your shares:
1) A letter of instructions specifying your account number and the number of
shares or dollar amount you wish to redeem. All owners of the shares must
sign the letter exactly as their names appear on the account.
2) A guarantee of your signature if you are redeeming more than $50,000. You
can obtain a signature guarantee 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 by check 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.
5
<PAGE>
TELEPHONE TRANSACTIONS
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If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are automatically entitled
to telephone transaction privileges but you may specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that it reasonably believes to be genuine.
Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail.
If you hold shares in certificate form, you may not exchange or redeem
them by telephone.
SALES CHARGES
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Purchase Price
The price you pay to buy shares is the Fund's offering price, which is
calculated by adding any applicable sales charges to the net asset value per
share of the class you are buying. The amount of any sales charge included in
your purchase price will be according to the following schedule:
Class A
Sales Charge
as % of
------------------------
Offering Net Amount Class B
Amount of Purchase Price Invested Sales Charge
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Less than $ 50,000 ........ 5.50% 5.82% None
$ 50,000 - $ 99,999 ........ 4.50% 4.71% None
$ 100,000 - $249,999 ........ 3.50% 3.63% None
$ 250,000 - $499,999 ........ 2.50% 2.56% None
$ 500,000 - $999,999 ........ 2.00% 2.04% None
$1,000,000 and over .......... None None None
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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
Shares, you may pay a sales charge when you redeem your shares. Refer to the
section on 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 following circumstances.
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 a reduced sales charge. (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 the shares you own will be redeemed
to pay this difference.
6
<PAGE>
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 last 90 days.
2) If you are exchanging an investment in another Flag Investors fund for an
investment in this Fund (see "Purchases by Exchange" for a description of
the conditions).
3) If you are a current or retired Fund Director, a director, an employee or a
member of the immediate family of an employee of any of the following (or
their respective affiliates): the Fund's distributor, the Advisor 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. Your securities dealer or servicing agent may charge
you an additional fee if you buy shares in this manner.
Purchases by Exchange
You may exchange Class A or B shares of any other Flag Investors fund for
an equal dollar amount of Class A or B Shares, respectively, without payment of
the sales charges described above or any other charge. You may not exchange
Class A shares of a Flag Investors Money Market Fund unless you acquired those
shares through a prior exchange. You may enter both your redemption and
purchase orders on the same Business Day or, if you have already redeemed the
shares of the other fund, you may enter your purchase order within 90 days of
the redemption. The Fund may modify or terminate these offers of exchange upon
60 days' notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
Redemption Price
The amount of any sales charge deducted from your redemption price will
be determined according to the following schedule.
Sales Charge as a Percentage
of the Dollar Amount
Subject to Charge
---------------------------------------------
Class A Sales Charge Class B Sales Charge
(as % of (as % of
Years Since Purchase Cost or Value) Cost or Value)
- ------------------------------------------------------------------------------
First ......................... 1.00%* 5.00%
Second ........................ 0.50%* 4.00%
Third ......................... None 3.00%
Fourth ........................ None 3.00%
Fifth ......................... None 2.00%
Sixth ......................... None 1.00%
Seventh and Thereafter ........ None None
* You will pay a sales charge when you redeem Class A Shares only if your
shares were purchased at net asset value because they were part of an
investment of $1 million or more. If the purchase was made before May 1,
1999, you will pay a sales charge of 0.50% if you redeem them within the
first year of purchase instead of the 1.00% reflected in the above table.
<PAGE>
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.
7
<PAGE>
3) If your redemption represents a distribution from a Systematic Withdrawal
Plan. This waiver applies only if the annual withdrawals under your Plan are
12% or less of your share balance.
4) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under the
following conditions:
(i) The account is registered in your name either individually, as a joint
tenant with rights of survivorship, as a participant in community
property or as a minor child under the Uniform Gifts or Uniform
Transfers to Minors Acts.
(ii) Either you or your representative notifies your securities dealer,
servicing agent or the Transfer Agent that such circumstances exist.
5) If you are redeeming Class A Shares, your original investment was at least
$3,000,000 and your securities dealer has agreed to return to the Fund's
distributor any payments received when you bought your shares.
Automatic Conversion of Class B Shares. Your Class B Shares, along with
any reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares seven years after your purchase. If
you purchased your shares prior to January 18, 2000, your 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.
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.
In general, if you intend to invest more than $50,000 your combined sales
charges and expenses are lower with Class A Shares.
Your securities dealer is paid a fee when you buy shares. In addition,
your securities dealer is paid a fee as long as you hold your shares. For Class
A and B Shares, this fee begins when you purchase your shares. Your securities
dealer or servicing agent may receive different levels of compensation
depending upon which class of shares you buy.
Distribution Plans
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 and for shareholder service. Class A Shares pay an
annual distribution fee equal to 0.25% of average daily net assets. Class B
Shares pay an annual distribution fee equal to 0.75% of average daily net
assets and an annual shareholder servicing fee equal to 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 taxable net investment income in the form of annual dividends and to
distribute taxable net capital gains on an annual basis.
Taxes
The following summary is based on current tax laws, which may change.
8
<PAGE>
The Fund will distribute substantially all of its income and capital
gains. The dividends and distributions you receive are subject to federal,
state and local taxation, depending on your tax situation. The tax treatment of
dividends and distributions is the same whether or not you reinvest them. Each
sale or exchange of the Fund's shares is a taxable event.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state and local income taxes.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Brown Investment Advisory & Trust Company (formerly,
Alex. Brown Capital Advisory & Trust Company) ("Brown Trust" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $12.4 billion of net assets as of December 31, 1999. Brown Trust
is a Maryland trust company with approximately $4.8 billion under management as
of December 31, 1999.
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of Brown Trust. Brown Trust is
responsible for decisions to buy and sell securities for the Fund, for
broker-dealer selection and for negotiation of commission rates.
As compensation for its advisory services for the fiscal year ended
October 31, 1999, ICC received from the Fund a fee equal to 0.85% of the Fund's
average daily net assets. ICC compensates Brown Trust out of its advisory fee.
The Advisor 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.
The Advisor was formerly an indirect subsidiary of Bankers Trust
Corporation. It became an indirect subsidiary of Deutsche Bank as a result of
Bankers Trust Corporation's merger with Deutsche Bank on June 4, 1999. Because
this merger resulted in a change of control of the Advisor, the shareholders
were asked to approve a new investment advisory agreement between the Fund and
ICC and a new sub-advisory agreement among the Fund, ICC and Brown Trust. Under
these agreements, the services provided to the Fund by the Advisors are the
same as the services provided under the agreements in effect when the Advisor
was a subsidiary of Bankers Trust. The agreements were approved at a Special
Meeting of shareholders held on October 7, 1999.
On March 11, 1999, Bankers Trust announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. Bankers Trust plead guilty to misstating entries in the bank's
books and records and agreed to pay a $63.5 million fine to state and federal
authorities. On July 26, 1999, the federal criminal proceedings were concluded
with Bankers Trust's formal sentencing. The events leading up to the guilty
pleas did not arise out of the investment advisory or mutual fund management
activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC and Brown
Trust would not be able to continue to provide investment advisory services to
the Fund. The SEC has granted a temporary order to permit Bankers Trust and its
affiliates to continue to provide investment advisory services to registered
investment companies. There is no assurance that the SEC will grant a permanent
order.
Portfolio Manager
Frederick L. Meserve, Jr. has been responsible for managing the Fund's
assets since November 1993. Mr. Meserve is a Managing Director at Brown Trust
where he has served as the Fund's portfolio manager since July 1998. Prior to
joining Brown Trust, he served as the Fund's portfolio manager while employed
at BT Alex. Brown Incorporated. In addition, Mr. Meserve has published a number
of investment strategy reports on growth stocks. Mr. Meserve received a B.S.&E.
from Princeton University in 1960 and an M.B.A. from the Columbia School of
Business in 1962.
9
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five fiscal years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the Fund's financial statements, are included in
the Fund's annual report, which is available upon request.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------------------------
For the Year Ended October 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year ......... $ 19.08 $ 23.17 $ 19.14 $ 17.09 $ 12.90
------- ------- ------- ------- -------
Income from Investment Operations:
Expenses in excess of investment
income ..................................... (0.28) (0.22)(1) (0.18) (0.15) (0.09)
Net realized and unrealized gain/(loss)
on investments ............................. 5.56 (2.82) 4.95 3.10 4.32
------- ------- ------- ------- -------
Total from Investment Operations ............. 5.28 (3.04) 4.77 2.95 4.23
------- ------- ------- ------- -------
Less Distributions:
Distributions from net realized short-
term gains ................................. -- (0.21) (0.21) (0.30) --
Distributions from net realized long-
term gains ................................. -- (0.84) (0.53) (0.60) (0.04)
------- ------- ------- ------- -------
Total distributions .......................... -- (1.05) (0.74) (0.90) (0.04)
------- ------- ------- ------- -------
Net asset value at end of year ............... $ 24.36 $ 19.08 $ 23.17 $ 19.14 $ 17.09
======= ======= ======= ======= =======
Total Return(2) ............................... 27.67% (13.48)% 25.93% 18.19% 32.92%
Ratios to Average Daily Net Assets:
Expenses ..................................... 1.40% 1.41% 1.44% 1.50% 1.50%
Expenses in excess of investment
income ..................................... (1.19)% (1.03)% (0.97)% (0.83)% (0.64)%
Supplemental Data:
Net assets at end of year (000) .............. $70,236 $65,247 $71,123 $45,325 $38,127
Portfolio turnover rate ...................... 38% 23% 42% 24% 39%
</TABLE>
- -----------
(1) Calculations based on average shares.
(2) Total return excludes the effect of sales charge.
10
<PAGE>
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares
-----------------------------------------------------------------
For the Period
June 20, 1996(1)
Through
For the Year Ended October 31, October 31,
----------------------------------------------- ---------------
1999 1998 1997 1996
------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period . $18.69 $22.88 $19.10 $19.22
------ ------ ------ ------
Income from Investment Operations:
Expenses in excess of investment
income ................................. (0.55) (0.37)(2) (0.18) (0.12)
Net realized and unrealized gain/(loss)
on investments ......................... (5.53) (2.77) 4.70 --
------ ------ ------ ------
Total from Investment Operations ......... (4.98) (3.14) 4.52 (0.12)
------ ------ ------ ------
Less Distributions:
Distributions from net realized short-
term gains ............................. -- (0.21) (0.21) --
Distributions from net realized long-
term gains ............................. -- (0.84) (0.53) --
------ ------ ------ ------
Total distributions ...................... -- (1.05) (0.74) --
------ ------ ------ ------
Net asset value at end of period ......... $23.67 $18.69 $22.88 $19.10
====== ====== ====== ======
Total Return(3)............................ 26.65% (14.11)% 24.69% (0.62)%
Ratios to Average Daily Net Assets:
Expenses ................................. 2.15% 2.16% 2.19% 2.25%(4)
Expenses in excess of investment
income ................................. (1.94)% (1.77)% (1.73)% (1.67)%(4)
Supplemental Data:
Net assets at end of year (000) .......... $3,662 $5,155 $5,719 $ 772
Portfolio turnover rate .................. 38% 23% 42% 24%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Calculations based on average shares.
(3) Total return excludes the effect of sales charge.
(4) Annualized.
11
<PAGE>
[PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "Flag Investors Emerging For assistance in completing
Growth Fund, Inc." and mail with this this Application please call:
Application to: 1-800-553-8080, Monday through
Flag Investors Funds Friday, 8:30 a.m. to 5:30 p.m.
P.O. Box 219663 (Eastern Time).
Kansas City, MO 64121-9663
Attn: Flag Investors Emerging Growth Fund, Inc. To open an IRA account, please
call 1-800-767-3524 for an IRA
information kit.
I wish to purchase the following class of shares of the Fund, in the amount
indicated below. (Please check the applicable box and indicate the amount of
purchase.)
[ ] Class A Shares (5.5% maximum initial sales charge) in the amount of
$_______
[ ] Class B Shares (5.0% maximum contingent deferred sales charge) in the
amount of $__________
Your Account Registration (Please Print)
<TABLE>
<CAPTION>
<S> <C>
Existing Account No., if any: _______________
Individual or Joint Tenant Gifts to Minors
- ------------------------------------------------------- ----------------------------------------------------------------------
First Name Initial Last Name Custodian's Name (only one allowed by law)
- ------------------------------------------------------- ----------------------------------------------------------------------
Social Security Number Minor's Name (only one)
- ------------------------------------------------------- ------------------------------- -----------------------------------
Joint Tenant Initial Last Name Social Security Number of Minor Minor's Date of Birth (Mo./Day/Yr.)
under the _____________________ Uniform Gifts to Minors Act
State of Residence
Corporations, Trusts, Partnerships, etc. Mailing Address
- ------------------------------------------------------- ----------------------------------------------------------------------
Name of Corporation, Trust or Partnership Street
- ---------------------- -------------------------- ----------------------------------------------------------------------
Tax ID Number Date of Trust City State Zip
( )
- ------------------------------------------------------- ----------------------------------------------------------------------
Name of Trustees (if to be included in Daytime Phone
the Registration)
- -------------------------------------------------------
For the Benefit of
</TABLE>
<PAGE>
Letter of Intent (Optional)
[ ] I intend to invest at least the amount indicated below in Class A Shares
of Flag Investors Emerging Growth Fund, Inc. I understand that if I satisfy
the conditions described in the attached prospectus, this Letter of Intent
entitles me to the applicable level of reduced sales charges on my
purchases.
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1 000,000
Right of Accumulation (Optional)
List the Account numbers of other Flag Investors Funds that you or your
immediate family already own that qualify you for reduced sales charges.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution Options
Please check the appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional shares of the same class of the
Fund at no sales charge.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in cash [ ] Paid in cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
A-1
<PAGE>
Automatic Investing Plan (Optional)
[ ] I authorize you as Agent for the Automatic Investing Plan to automatically
invest $_______ in Class A Shares or $_______ in Class B Shares for me, on a
monthly or quarterly basis, on or about the 20th of each month or if quarterly,
the 20th of January, April, July and October, and to draw a bank draft in
payment of the investment against my checking account. (Bank drafts may be
drawn on commercial banks only.)
Minimum Initial Investment: $250 per class
Subsequent Investments (check one): [ ] Monthly ($100 minimum per class)
[ ] Quarterly ($250 minimum per class)
Please attach a voided check.
- ---------------------------------- ------------------------------------------
Bank Name Depositor's Signature Date
- ---------------------------------- ------------------------------------------
Existing Flag Investors Fund Account Depositor's Signature (if Date
No., if any joint acct., both must sign)
Systematic Withdrawal Plan (Optional)
[ ] Beginning the month of ___________ , 19__ please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of (complete as
applicable) $___________ , from Class A Shares and/or $___________ from Class
B Shares that I own, payable to the account registration address as shown
above. (Participation requires minimum account value of $10,000 per class.)
Frequency (check one): [ ] Monthly [ ] Quarterly (January, April,
July, and October)
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect to
other Flag Investors Funds) unless I mark one or both of the boxes below:
No, I/we do not want: [ ] Telephone redemption privileges
[ ] Telephone exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a predesignated bank account, please
provide the following information:
Bank: ____________________________ Bank Account No.: ________________________
Address: ___________________________ Bank Account Name: _______________________
___________________________
<PAGE>
Signature and Taxpayer Certification
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against
your ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above,
I have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish
either number, I may be subject to a penalty and a 31% backup
withholding on distributions and redemption proceeds. (Please provide
either number on IRS Form W-9. You may request such form by calling the
Transfer Agent at 800-553-8080.)
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes: _________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
I acknowledge that I am of legal age in the state of my residence. I have
received a copy of the Fund's prospectus.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- ---------------------------------- -----------------------------------------
Signature Date Signature (if joint acct., both must sign)
Date
- --------------------------------------------------------------------------------
For Dealer Use Only
Dealer's Name: ______________________________ Dealer Code: ____________________
Dealer's Address: ___________________________ Branch Code: ____________________
___________________________
Representative: _____________________________ Rep. No.: _______________________
A-2
<PAGE>
[PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Investment Advisor Distributor
INVESTMENT COMPANY CAPITAL CORP. ICC DISTRIBUTORS, INC.
One South Street Two Portland Square
Baltimore, Maryland 21202 Portland, Maine 04101
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 21201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
[FLAG INVESTORS LOGO]
Flag Investors
P.O. Box 515
Baltimore, Maryland 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:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion
of market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-202-942-8090 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. 811-5320
________________________________________________________________________________
EGPRS (1/00)
<PAGE>
LOGO
FLAG INVESTORS
Investing With A Difference(R)
Emerging Growth Fund, Inc.
(Institutional Shares)
Prospectus & Application
January 18, 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>
LOGO
FLAG INVESTORS
Investing With A Difference(R)
This mutual fund (the "Fund") seeks to achieve long-term capital appreciation
primarily through investment in a diversified portfolio of common stocks of
small and mid-sized emerging growth companies.
The Fund offers shares through securities dealers and financial institutions
that act as shareholder servicing agents. You may also buy shares through the
Fund's Transfer Agent. This Prospectus describes Flag Investors Institutional
Shares (the "Institutional Shares") of the Fund. Institutional Shares may be
purchased only by eligible institutions, certain qualified retirement plans or
by investment advisory affiliates of DB Alex. Brown LLC on behalf of their
clients. (See "How to Buy Institutional Shares.")
TABLE OF CONTENTS
- -----------------
Investment Summary ......................................... 1
Fees and Expenses of the
Institutional Shares .................................... 2
Investment Program ......................................... 2
The Fund's Net Asset Value ................................. 3
How to Buy Institutional Shares ............................ 3
How to Redeem Institutional Shares ......................... 4
Telephone Transactions ..................................... 4
Dividends and Taxes ........................................ 5
Investment Advisor and Sub-Advisor ......................... 5
Financial Highlights ....................................... 6
Application ................................................ A-1
<PAGE>
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Objectives and Strategies
The Fund seeks to achieve long-term capital appreciation primarily
through investment in a diversified portfolio of common stocks of small and
mid-sized emerging growth companies. The Fund's investment advisor and
sub-advisor (collectively, the "Advisors") will attempt to identify emerging
growth companies, that is, companies that they believe have the ability or
potential to sustain a high level of growth in their revenue, earnings, assets
and cash flow. The Advisors will focus on a number of key selection criteria
including a company's industry position, management quality and experience,
accounting and financial policies, marketing and service capabilities, and
product development efforts.
Risk Profile
The Fund may be suited for you if you are willing to accept the risks and
uncertainties of investing in emerging growth companies 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 securities the Fund holds. Those
prices, in turn, reflect investor perceptions of the economy, the markets and
the companies represented in the Fund's portfolio.
Emerging Growth and Small Cap Stock Risks. The stocks of small and
mid-sized companies may experience greater price volatility than those of larger
companies. The market for such stocks may be more limited and the companies
themselves may be more vulnerable to economic or company-specific problems. In
particular, these small companies may have limited product lines, markets and
financial resources, and may depend on a relatively small management group.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the
Institutional 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.
Institutional Shares
For years ended December 31,
1997 1998 1999
21.08% 6.72% 48.65%
- ------------------------
During the three-year period shown in the bar chart, the highest return for a
quarter was 52.27% (quarter ended 12/31/99) and the lowest return for a quarter
was (23.02)% (quarter ended 9/30/98).
Average Annual Total Return (for periods ended December 31, 1999)
Institutional Russell
Shares(1) S&P 500(2) 2000(3)
------------- ---------- -------
Past One Year ........... 49.65% 21.04% 21.26%
Since Inception ......... 22.27%(11/2/95) 27.07%(4) 15.16%(4)
- ------------------------
(1) These figures assume the reinvestment of dividends and capital gains
distributions.
(2) The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. The index is a
passive measure of equity market returns. It does not factor in the costs of
buying, selling and holding securities -- costs that are reflected in the
Fund's results.
(3) The Russell 2000 Index is an unmanaged index that is a widely recognized
benchmark of small company stock performance. The Russell 2000's performance
may be a better comparison for the performance of the Fund than the S&P 500,
which tracks larger, more developed stocks.
(4) For the period from 10/31/95 through 12/31/99.
1
<PAGE>
FEES AND EXPENSES OF THE INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and
hold Institutional Shares.
<TABLE>
<S> <C>
Shareholder Transaction Expenses (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 ............................................................. 0.85%
Distribution and/or Service (12b-1) Fees .................................... None
Other Expenses .............................................................. 0.30%
----
Total Annual Fund Operating Expenses ........................................ 1.15%
====
</TABLE>
Example:
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Institutional Shares
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Institutional Shares .......... $117 $366 $633 $1,398
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies
and Risk Considerations
The Fund seeks to achieve long-term capital appreciation primarily
through investment in a diversified portfolio of small and mid-sized emerging
growth companies.
The Advisors are responsible for managing the Fund's investments. (Refer
to the section on the Investment Advisor and Sub-Advisor.) The Advisors will
seek to identify companies that, in their opinion, are well managed and have
experienced or have the potential to experience rapid growth in their revenue,
earnings, assets and cash flow. The selection criteria will include a company's
industry position, management qualifications and experience, accounting and
financial policies, marketing and service capabilities and product development
efforts. The Advisors will invest in a broad cross-section of industries in an
effort to limit the Fund's volatility. The Fund will invest primarily, but not
exclusively, in the businesses of technology, health care, business services,
energy, transportation, financial services, consumer products and services and
capital goods.
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. In
general, 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.
In addition to the general risks of the stock markets, investing in small
to mid-sized companies entails special risks. The stock prices of emerging
growth companies tend to be more volatile than investments in larger, more
established companies making such investments more speculative. In particular,
the Fund's investments may have limited product lines, markets, and financial
resources, and may depend on a relatively small management group. There can be
no guarantee that the Fund will achieve its goals.
2
<PAGE>
To protect the Fund under adverse market conditions, the Advisors may
make temporary defensive investments of up to 100% of the Fund's assets in
money market instruments that ordinarily would not be consistent with the
Fund's objectives. While engaged in a temporary defensive strategy, the Fund
may not achieve its investment objective. The Advisors would follow such a
strategy only if they believed the risk of loss outweighed the opportunity for
gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates
after January 1, 2000 and distinguish between the year 2000 and the year 1900.
The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its
shareholders may experience losses if these assurances prove to be incorrect or
if issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others, with which the Fund does business experience
difficulties as a result of year 2000 issues.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The price you pay when you buy shares or receive when you redeem shares
is based on the Fund's net asset value per share. The net asset value per share
of the Fund is determined at the close of regular trading on the New York Stock
Exchange (ordinarily 4:00 p.m. Eastern Time) on each day the Exchange is open
for business. On the day before certain holidays are observed, the primary
trading markets for the Fund may close early, and the Fund also may close
early. You may call the Transfer Agent at 1-800-553-8080 for additional
information about whether the Fund will close early before a particular
holiday. The net asset value is calculated by subtracting the liabilities
attributable to the Institutional Shares from their proportionate share of the
Fund's assets and dividing the result by the outstanding Institutional Shares.
In valuing the Fund's assets, its investments are priced at their market
value. When price quotes for a particular security are not readily available,
investments are priced at their "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem 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 or after the
Fund has closed early before a holiday, the price you pay or receive will be
based on the next Business Day's net asset value per share.
The following sections describe how to buy and redeem Institutional
Shares.
HOW TO BUY INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may buy Institutional Shares if you are any of the following:
o An eligible institution (e.g., a financial institution, corporation,
investment counselor, trust, estate or educational, religious or
charitable institution or a qualified retirement plan other than a
defined contribution plan).
o A defined contribution plan with assets of at least $75 million.
o An investment advisory affiliate of DB Alex. Brown purchasing shares
for the accounts of your investment advisory clients.
You may buy Institutional Shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order. You may also buy Institutional Shares by sending your check (along with
a completed Application Form) directly to the Fund. The Application Form, which
includes instructions, is attached to this Prospectus.
Your purchase order may not be accepted if the sale of Fund Shares has
been suspended or if it is determined that your purchase would be detrimental
to the interests of the Fund's shareholders.
3
<PAGE>
Investment Minimums
Your initial investment must be at least $500,000. The following are
exceptions to this minimum:
o There is no minimum initial investment for investment advisory
affiliates of DB Alex. Brown purchasing shares for the accounts of
their investment advisory clients.
o There is no minimum initial investment for defined contribution plans
with assets of at least $75 million.
o The minimum initial investment for all other qualified retirement plans
is $1 million.
There are no minimums for subsequent investments.
Purchases by Exchange
You may exchange Institutional shares of any other Flag Investors fund
for an equal dollar amount of Institutional Shares of the Fund. The Fund may
modify or terminate this offer of exchange upon 60 days' notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or by telephone.
HOW TO REDEEM INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
You may redeem Institutional Shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid. If your shares are in an account with
the Fund, you may also redeem them by contacting the Transfer Agent by mail or
(if you are redeeming less than $500,000) by telephone. You will be paid for
redeemed shares by wire transfer of funds to your securities dealer, servicing
agent or bank upon receipt of a duly authorized redemption request as promptly
as feasible and, under most circumstances, within three Business Days.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be remitted by wire to your securities dealer, servicing
agent or bank.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice. The Fund reserves the right to redeem shares in kind under
certain circumstances.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $500,000 or exchange them for Institutional shares of
another Flag Investors fund by calling the Transfer Agent on any Business Day
between the hours of 8:30 a.m. and 5:30 p.m. (Eastern Time). You are
automatically entitled to telephone transaction privileges but you may
specifically request that no telephone redemptions or exchanges be accepted for
your account. You may make this election when you complete the Application Form
or at any time thereafter by completing and returning documentation supplied by
the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information when you
open your account and before you effect each telephone transaction. You may be
required to provide additional telecopied instructions. If these procedures are
employed, neither the Fund nor the Transfer Agent will bear any liability for
following telephone instructions that it reasonably believes to be genuine.
Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by express mail or facsimile.
4
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of annual dividends and to
distribute taxable net capital gains on an annual basis.
Taxes
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its income and capital
gains. The dividends and distributions you receive are subject to federal,
state and local taxation, depending on your tax situation. The tax treatment of
dividends and distributions is the same whether or not you reinvest them. Each
sale or exchange of the Fund's shares is a taxable event.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state and local income taxes.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Brown Investment Advisory & Trust Company (formerly,
Alex. Brown Capital Advisory & Trust Company) ("Brown Trust" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $12.4 billion of net assets as of December 31, 1999. Brown Trust
is a Maryland trust company with approximately $4.8 billion under management as
of December 31, 1999.
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of Brown Trust. Brown Trust is
responsible for decisions to buy and sell securities for the Fund, for
broker-dealer selection, and for negotiation of commission rates.
As compensation for its services for the fiscal year ended October 31,
1999, ICC received from the Fund a fee equal to 0.85% of the Fund's average
daily net assets. ICC compensates Brown Trust out of its advisory fee.
The Advisor 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.
The Advisor was formerly an indirect subsidiary of Bankers Trust
Corporation. It became an indirect subsidiary of Deutsche Bank as a result of
Bankers Trust Corporation's merger with Deutsche Bank on June 4, 1999. Because
this merger resulted in a change of control of the Advisor, the shareholders
were asked to approve a new investment advisory agreement between the Fund and
ICC and a new sub-advisory agreement among the Fund, ICC and Brown Trust. Under
these agreements, the services provided to the Fund by the Advisors are the
same as the services provided under the agreements in effect when the Advisor
was a subsidiary of Bankers Trust. The agreements were approved at a Special
Meeting of shareholders held on October 7, 1999.
On March 11, 1999, Bankers Trust announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. Bankers Trust plead guilty to misstating entries in the bank's
books and records and agreed to pay a $63.5 million fine to state and federal
authorities. On July 26, 1999, the federal criminal proceedings were concluded
with Bankers Trust's formal sentencing. The events leading up to the guilty
pleas did not arise out of the investment advisory or mutual fund management
activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC and Brown
Trust would not be able to continue to provide investment advisory services to
the Fund. The SEC has granted a temporary order to permit Bankers Trust and its
affiliates to continue to provide investment advisory services to registered
investment companies. There is no assurance that the SEC will grant a permanent
order.
5
<PAGE>
Portfolio Manager
Frederick L. Meserve, Jr. has been responsible for managing the Fund's
assets since November 1993. Mr. Meserve is a Managing Director at Brown Trust
where he has served as the Fund's portfolio manager since July 1998. Prior to
joining Brown Trust, he served as the Fund's portfolio manager while employed
at BT Alex. Brown Incorporated. In addition, Mr. Meserve has published a number
of investment strategy reports on growth stocks. Mr. Meserve received a B.S.&E.
from Princeton University in 1960 and an M.B.A. from the Columbia School of
Business in 1962.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Institutional Shares' financial performance since the class began operations.
Certain information reflects financial results for a single Institutional Share.
The total returns in the table represent the rate that an investor would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Fund's annual report, which is available upon request.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
November 2,
1995(1) Through
For the Year Ended October 31, October 31,
----------------------------------------- ---------------
1999 1998 1997 1996
----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .......... $ 19.17 $ 23.25 $ 19.15 $ 17.45
------- -------- ------- -------
Income from Investment Operations:
Expenses in excess of investment income ......... ( 0.21) (0.17)(2) (0.26) (0.12)
Net realized and unrealized gain/(loss)
on investments. ............................... 5.58 (2.86) 5.10 2.72
------- ---------- ------- --------
Total from Investment Operations ................ 5.37 (3.03) 4.84 2.60
------- ---------- ------- --------
Less Distributions:
Distributions from net realized short-term
gains ......................................... -- (0.21) (0.21) (0.30)
Distributions from net realized long-term
gains ......................................... -- (0.84) (0.53) (0.60)
------- ---------- ------- --------
Total distributions ............................. -- (1.05) (0.74) (0.90)
------- ---------- ------- --------
Net asset value at end of period ................ $ 24.54 $ 19.17 $ 23.25 $ 19.15
======= ========== ======= ========
Total Return ..................................... 28.01% (13.39)% 26.36% 16.48%
Ratios to Average Daily Net Assets:
Expenses ........................................ 1.15% 1.16% 1.19% 1.25%(3)
Expenses in excess of investment income ......... (0.94)% (0.76)% (0.74)% (0.61)%(3)
Supplemental Data:
Net assets at end of period (000) ............... $ 7,578 $ 6,243 $13,068 $ 19,751
Portfolio turnover rate ......................... 38% 23% 42% 24%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Calculations based on average shares.
(3) Annualized.
6
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
(INSTITUTIONAL SHARES)
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Send completed Application by overnight carrier to: For assistance in
Flag Investors Funds completing this Application
P.O. Box 219663 please call: 1-800-553-8080,
Kansas City, MO 64121-9663 Monday through Friday, 8:30
Attn: Flag Investors Emerging Growth Fund, Inc. a.m. to 5:30 p.m. (Eastern
Time).
If you are paying by check, make check payable to "Flag Investors Emerging
Growth Fund, Inc." and mail with this Application. If you are paying by wire,
see instructions below.
Your Account Registration (Please Print)
<TABLE>
<S> <C>
Name on Account Mailing Address
- ----------------------------------------- --------------------------------------------
Name of Corporation, Trust or Partnership Name of Individual to Receive Correspondence
- ----------------------------------------- --------------------------------------------
Tax ID Number Street
/ / Corporation / / Partnership / / Trust --------------------------------------------
City State Zip
/ / Non-Profit or Charitable Organization / / Other______ ( )
--------------------------------------------
Daytime Phone
</TABLE>
If a Trust, please provide the following:
- --------------------------------------------------------------------------------
Date of Trust For the Benefit of
- --------------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
Initial Investment
Indicate the amount to be invested and the method of payment:
__A. By Mail: Enclosed is a check in the amount of $_______ payable to
Flag Investors Emerging Growth Fund, Inc.
__B. By Wire: A bank wire in the amount of $________ has been sent from
------------ -------------------
Name of Bank Wire Control Number
Wire Instructions
Follow the instructions below to arrange for a wire transfer for initial
investment:
o Send completed Application by overnight carrier to Flag Investors Funds
at the address listed above.
o Call 1-800-553-8080 to obtain new investor's Fund account number.
o Wire payment of the purchase price to Investors Fiduciary
Trust Company ("IFTC"), as follows:
IFTC
a/c Flag Investors Funds
Acct. # 7528183
ABA # 1010-0362-1
Kansas City, Missouri 64105
Please include the following information in the wire:
o Flag Investors Emerging Growth Fund, Inc. -- Institutional Shares
o The amount to be invested
o "For further credit to _______________________________ ."
(Investor's Fund Account Number)
<PAGE>
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Institutional Shares of the
Fund.
Income Dividends Capital Gains
/ / Reinvested in additional shares / / Reinvested in additional
shares
/ / Paid in cash / / Paid in cash
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $500,000) and exchange privileges (with respect to
Institutional Shares of other Flag Investors Funds) unless I mark one or both
of the boxes below:
No, I do not want: / / Telephone redemption / / Telephone
privileges exchange privileges
Redemptions effected by telephone will be wired to the bank account
designated below.
Bank Account Designation (This Section Must Be Completed)
Please attach a blank, voided check to provide account and bank routing
information.
- --------------------------------------------------------------------------------
Name of Bank Branch
- --------------------------------------------------------------------------------
Bank Address City/State/Zip
- --------------------------------------------------------------------------------
Name(s) on Account
- --------------------------------------------------------------------------------
Account Number A.B.A. Number
A-1
<PAGE>
Signature and Taxpayer Certificate
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
/ / U.S. Citizen/Taxpayer:
/ / I certify that (1) the number shown above on this form is the correct
Tax ID Number and (2) I am not subject to any backup withholding either
because (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
/ / If no Tax ID Number has been provided above, I have applied, or intend
to apply, to the IRS for a Tax ID Number, and I understand that if I do
not provide such number to the Transfer Agent within 60 days of the date
of this Application or if I fail to furnish my correct Tax ID Number, I
may be subject to a penalty and a 31% backup withholding on
distributions and redemption proceeds. (Please provide your Tax ID
Number on IRS Form W-9. You may request such form by calling the
Transfer Agent at 800-553-8080.)
/ / Non-U.S. Citizen/Taxpayer: Indicated country of residence for tax
purposes:_________________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
I have received a copy of the Fund's prospectus.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid
backup withholding.
- --------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
- --------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
Person(s) Authorized to Conduct Transactions
The following person(s) ("Authorized Person(s)") are currently officers,
trustees, general partners or other authorized agents of the investor. Any
________* of the Authorized Person(s) is, by lawful and appropriate action of
the investor, a person entitled to give instructions regarding
purchases and redemptions or make inquiries regarding the Account.
- ---------------------------------- ----------------------------------
Name/Title Signature Date
- ---------------------------------- ----------------------------------
Name/Title Signature Date
- ---------------------------------- ----------------------------------
Name/Title Signature Date
- ---------------------------------- ----------------------------------
Name/Title Signature Date
<PAGE>
The signature appearing to the right of each Authorized Person is that person's
signature. Investment Company Capital Corp. ("ICC") may, without inquiry, act
upon the instructions (whether verbal, written, or provided by wire,
telecommunication, or any other process) of any person claiming to be an
Authorized Person. Neither ICC nor any entity on behalf of which ICC is acting
shall be liable for any claims or expenses (including legal fees) or for any
losses resulting from actions taken upon any instructions believed to be
genuine. ICC may continue to rely on the instructions made by any person
claiming to be an Authorized Person until it is informed through an amended
Application that the person is no longer an Authorized Person and it has a
reasonable period (not to exceed one week) to process the amended Application.
Provisions of this Application shall be equally Applicable to any successor of
ICC.
* If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from
any one Authorized Person. Written instructions will require signatures of
the number of Authorized Persons indicated in this space.
- --------------------------------------------------------------------------------
Certificate of Authority
Investors must complete one of the following two Certificates of Authority.
Certificate A: FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS (With a Board
of Directors or Board of Trustees.)
I_______________________, Secretary of the above-named investor, do hereby
certify that at a meeting on_______________, at which a quorum was present
throughout, the Board of Directors (Board of Trustees) of the investor duly
adopted a resolution which is in full force and effect and in accordance with
the investor's charter and by-laws, which resolution did the following: (1)
empowered the officers/trustees executing this Application (or amendment) to do
so on behalf of the investor; (2) empowered the above-named Authorized Person(s)
to effect securities transactions for the investor on the terms described above;
(3) authorized the Secretary to certify, from time to time, the names and titles
of the officers of the investor and to notify ICC when changes in officers
occur; and (4) authorized the Secretary to certify that such a resolution has
been duly adopted and will remain in full force and effect until ICC receives a
duly-executed amendment to the Certification form.
Witness my hand and seal on behalf of the investor.
This ____ day of ___________, 199_ Secretary _____________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the investor.
- -------------------------------------------------------------------------------
Signature and title
Date
Certificate B: FOR PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all general partners/trustees of the
investor and that they have done the following under the authority of the
investor's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application (or amendment) to do so on behalf of
the investor; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the investor on the terms described above; (3)
authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the investor and to notify ICC when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until ICC receives a further duly-executed certification. (If there
are not enough spaces here for all necessary signatures, complete a separate
certificate containing the language of this Certificate B and attach it to the
Application).
- --------------------------------------------------------------------------------
Signature and title Date
- --------------------------------------------------------------------------------
Signature and title Date
A-2
<PAGE>
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor
BROWN INVESTMENT ADVISORY & TRUST COMPANY
Furness House
19 South Street
Baltimore, Maryland 21202
Distributor
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, Maine 04101
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(R)
Flag Investors o P.O. Box 515 o Baltimore, MD 21203 o (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:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
(Call 1-202-942-8090 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. 811-5320 EGIPRS (1/00)
<PAGE>
BROWN INVESTMENT ADVISORY & TRUST
EMERGING GROWTH SHARES
(A Class of Flag Investors Emerging Growth Fund, Inc.)
(formerly, Alex. Brown Capital Advisory & Trust Emerging Growth Shares)
Prospectus -- January 18, 2000
- --------------------------------------------------------------------------------
This mutual fund (the "Fund") seeks to achieve long-term capital appreciation
primarily through investment in a diversified portfolio of common stocks of
small and mid-sized emerging growth companies.
The Fund offers Brown Investment Advisory & Trust Shares (the "Shares") solely
for the discretionary accounts of Brown Investment Advisory & Trust Company and
its affiliates. (See "How to Buy Shares.")
TABLE OF CONTENTS
Investment Summary ......................... 1
Fees and Expenses of the Shares ............ 2
Investment Program ......................... 2
The Fund's Net Asset Value ................. 3
How to Buy Shares .......................... 3
How to Redeem Shares ....................... 3
Dividends and Taxes ........................ 4
Investment Advisor and Sub-Advisor ......... 4
Financial Highlights ....................... 6
- --------------------------------------------------------------------------------
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 PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Objectives and Strategies
The Fund seeks to achieve long-term capital appreciation primarily
through investment in a diversified portfolio of common stocks of small and
mid-sized emerging growth companies. These companies have relatively small
market capitalizations. The Fund's investment advisor and sub-advisor
(collectively, the "Advisors") will attempt to identify emerging growth
companies, that is, companies that they believe have the ability or potential
to sustain a high level of growth in their revenue, earnings, assets and cash
flow. The Advisors will focus on a number of key selection criteria including a
company's industry position, management quality and experience, accounting and
financial policies, marketing and service capabilities, and product development
efforts.
Risk Profile
The Fund may be suited for you if you are willing to accept the risks and
uncertainties of investing in emerging growth companies 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 securities the Fund holds. Those
prices, in turn, reflect investor perceptions of the economy, the markets and
the companies represented in the Fund's portfolio.
Emerging Growth and Small Cap Stock Risks. The stocks of small and
mid-sized companies may experience greater price volatility than those of
larger companies. The market for such stocks may be more limited and the
companies themselves may be more vulnerable to economic or company-specific
problems. In particular, these small companies may have limited product lines,
markets and financial resources, and may depend on a relatively small
management group.
If you invest in the Fund, you could lose money. An investment in the
Fund is not a bank deposit and is not guaranteed by the FDIC or any other
government agency.
Fund Performance
The following bar chart and table show the performance of the Shares for
the calendar year ended December 31, 1998 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.
Brown Investment Advisory
& Trust Shares
For years ended December 31,
Brown Investment Advisory & Trust Shares
For years ended December 31,
1999 1998
49.65% 6.86%
During the two-year period shown in the bar chart, the highest return for
a quarter was 52.27% (quarter ended 12/31/99) and the lowest return for a
quarter was (23.04)% (quarter ended 9/30/98).
<PAGE>
Average Annual Total Return (for periods ended December 31, 1999)
<TABLE>
<CAPTION>
Brown
Investment
Advisory & Trust
Shares(1) S&P 500(2) Russell 2000(3)
-------------------------- ------------ --------------
<S> <C> <C> <C>
Past One Year .......... 49.65% 21.04% 21.26%
Since Inception ........ 28.93%(5/9/97) 27.36%(4) 16.99%(4)
</TABLE>
- ------------------------
(1) These figures assume the reinvestment of dividends and capital gains
distributions.
(2) The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. The index is a
passive measure of equity market returns. It does not factor in the costs of
buying, selling and holding securities -- costs that are reflected in the
Fund's results.
(3) The Russell 2000 Index is an unmanaged index that is a widely recognized
benchmark of small company stock performance. The Russell 2000's performance
may be a better comparison for the performance of the Fund than the S&P 500,
which tracks larger, more developed stocks.
(4) For the period from 4/30/97 through 12/31/99.
1
<PAGE>
FEES AND EXPENSES OF THE SHARES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and
hold Shares.
<TABLE>
<S> <C>
Shareholder Transaction Expenses (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 ............................................................. 0.85%*
Distribution and/or Service (12b-1) Fees .................................... None
Other Expenses .............................................................. 0.30%
------
Total Annual Fund Operating Expenses ........................................ 1.15%
======
</TABLE>
- ------------------------
* Brown Investment Advisory & Trust Company intends to waive its advisory fee
at the account level for client assets invested in Shares.
Example:
This Example is intended to help you compare the cost of investing in the
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Brown Investment
Advisory & Trust Shares ......... $117 $366 $633 $1,398
</TABLE>
<PAGE>
INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
Investment Objective, Policies and Risk Considerations
The Fund seeks to achieve long-term capital appreciation primarily
through investment in a diversified portfolio of small and mid-sized emerging
growth companies.
The Advisors are responsible for managing the Fund's investments. (Refer
to the section on the Investment Advisor and Sub-Advisor.) The Advisors will
seek to identify companies that, in their opinion, are well managed and have
experienced or have the potential to experience rapid growth in their revenue,
earnings, assets and cash flow. The selection criteria will include a company's
industry position, management qualifications and experience, accounting and
financial policies, marketing and service capabilities and product development
efforts. The Advisors will invest in a broad cross-section of industries in an
effort to limit the Fund's volatility. The Fund will invest primarily, but not
exclusively, in the businesses of technology, health care, business services,
energy, transportation, financial services, consumer products and services and
capital goods.
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. In
general, 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.
In addition to the general risks of the stock markets, investing in small
to mid-sized companies entails special risks. The stock prices of emerging
growth companies tend to be more volatile than investments in larger, more
established companies, making such investments more speculative. In particular,
the Fund's investments may have limited product lines, markets, and financial
resources, and may depend on a relatively small management group. There can be
no guarantee that the Fund will achieve its goals.
2
<PAGE>
To protect the Fund under adverse market conditions, the Advisors may
make temporary defensive investments of up to 100% of the Fund's assets in
money market instruments that ordinarily would not be consistent with the
Fund's objectives. While engaged in a temporary defensive strategy, the Fund
may not achieve its investment objective. The Advisors would follow such a
strategy only if they believed the risk of loss outweighed the opportunity for
gain.
Year 2000 Issues
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates
after January 1, 2000 and distinguish between the year 2000 and the year 1900.
The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition and has received
assurances from each that its system is expected to accommodate the year 2000
without material adverse consequences to the Fund. The Fund and its
shareholders may experience losses if these assurances prove to be incorrect or
if issuers of portfolio securities or third parties, such as custodians, banks,
broker-dealers or others, with which the Fund does business experience
difficulties as a result of year 2000 issues.
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The price you pay when you buy Shares or receive when you redeem Shares
is based on the Fund's net asset value per share. The net asset value per share
of the Fund is determined at the close of regular trading on the New York Stock
Exchange (ordinarily 4:00 p.m. Eastern Time) on each day the Exchange is open
for business. On the day before certain holidays are observed, the primary
trading markets for the Fund may close early, and the Fund also may close
early. You may call the Transfer Agent at 1-800-553-8080 for additional
information about whether the Fund will close early before a particular
holiday. The net asset value is calculated by subtracting the liabilities
attributable to a class from its proportionate share of the Fund's assets and
dividing the result by the outstanding shares of the class.
In valuing the Fund's assets, its investments are priced at their market
value. When price quotes for a particular security are not readily available,
investments are priced at their "fair value" using procedures approved by the
Fund's Board of Directors.
You may buy or redeem 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 or after the
Fund has closed early before a holiday, the price you pay or receive will be
based on the next Business Day's net asset value per share.
The following sections describe how to buy and redeem Shares.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
Only Brown Investment Advisory & Trust Company and its affiliates may
acquire Shares on behalf of their discretionary accounts by placing orders with
the Fund's distributor. There is no minimum for initial or subsequent
investments in Shares.
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.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares may be redeemed by, or at the direction of, Brown Investment
Advisory & Trust Company, or an affiliate, by transmitting an order through the
Fund's distributor or the Transfer Agent. Contact them for details. Payment for
redeemed shares will be made by, or at the direction of, Brown Investment
Advisory & Trust Company, or an affiliate. Payment will be made as promptly as
feasible and, under most circumstances, within three Business Days. Any
dividends payable on Shares you redeem will be paid on the next dividend
payable date.
3
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of annual dividends and to
distribute taxable net capital gains on an annual basis.
Taxes
The following summary is based on current tax laws, which may change.
The Fund will distribute substantially all of its income and capital
gains. The dividends and distributions you receive are subject to federal,
state and local taxation, depending on your tax situation. The tax treatment of
dividends and distributions is the same whether or not you reinvest them. Each
sale or exchange of the Fund's shares is a taxable event.
More information about taxes is in the Statement of Additional
Information. Please contact your tax advisor if you have specific questions
about federal, state and local income taxes.
INVESTMENT ADVISOR AND SUB-ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor") is the Fund's
investment advisor and Brown Investment Advisory & Trust Company (formerly,
Alex. Brown Capital Advisory & Trust Company) ("Brown Trust" or the
"Sub-Advisor") is the Fund's sub-advisor. ICC is also the investment advisor to
other mutual funds in the Flag Investors family of funds and Deutsche Banc
Alex. Brown Cash Reserve Fund, Inc. These funds, together with the Fund, had
approximately $12.4 billion of net assets as of December 31, 1999. Brown Trust
is a Maryland trust company with approximately $4.8 billion under management as
of December 31, 1999.
ICC is responsible for supervising and managing all of the Fund's
operations, including overseeing the performance of Brown Trust. Brown Trust is
responsible for decisions to buy and sell securities for the Fund, for
broker-dealer selection and for negotiation of commission rates.
As compensation for its services for the fiscal year ended October 31,
1999, ICC received from the Fund a fee equal to 0.85% of the Fund's average
daily net assets. ICC compensates Brown Trust out of its advisory fee.
The Advisor 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.
The Advisor was formerly an indirect subsidiary of Bankers Trust
Corporation. It became an indirect subsidiary of Deutsche Bank as a result of
Bankers Trust Corporation's merger with Deutsche Bank on June 4, 1999. Because
this merger resulted in a change of control of the Advisor, the shareholders
were asked to approve a new investment advisory agreement between the Fund and
ICC and a new sub-advisory agreement among the Fund, ICC and Brown Trust. Under
these agreements, the services provided to the Fund by the Advisors are the
same as the services provided under the agreements in effect when the Advisor
was a subsidiary of Bankers Trust. The agreements were approved at a Special
Meeting of shareholders held on October 7, 1999.
On March 11, 1999, Bankers Trust announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. Bankers Trust plead guilty to misstating entries in the bank's
books and records and agreed to pay a $63.5 million fine to state and federal
authorities. On July 26, 1999, the federal criminal proceedings were concluded
with Bankers Trust's formal sentencing. The events leading up to the guilty
pleas did not arise out of the investment advisory or mutual fund management
activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, ICC and Brown
Trust would not be able to continue to provide investment advisory services to
the Fund. The SEC has granted a temporary order to permit Bankers Trust and its
affiliates to continue to provide investment advisory services to registered
investment companies. There is no assurance that the SEC will grant a permanent
order.
4
<PAGE>
Portfolio Manager
Frederick L. Meserve, Jr. has been responsible for managing the Fund's
assets since November 1993. Mr. Meserve is a Managing Director at Brown Trust
where he has served as the Fund's portfolio manager since July 1998. Prior to
joining Brown Trust, he served as the Fund's portfolio manager while employed
at BT Alex. Brown Incorporated. In addition, Mr. Meserve has published a number
of investment strategy reports on growth stocks. Mr. Meserve received a B.S.&E.
from Princeton University in 1960 and an M.B.A. from the Columbia School of
Business in 1962.
5
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Brown Investment Advisory & Trust Shares' financial performance since the class
began operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's financial
statements, are included in the Fund's annual report, which is available upon
request.
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
May 9, 1997(1)
Through
For the Year Ended October 31, October 31,
-------------------------------- ----------------
1999 1998 1997
------------ ----------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......................... $ 19.19 $ 23.24 $ 18.64
------- -------- --------
Income from Investment Operations:
Expenses in excess of investment income ........................ (0.21) (0.17)(2) (0.06)
Net realized and unrealized gain/(loss) on investments ......... 5.58 (2.83) 4.66
------- -------- -------
Total from Investment Operations ............................... 5.37 (3.00) 4.60
------- -------- -------
Less Distributions:
Distributions from net realized short-term gains ............... -- (0.21) --
Distributions from net realized long-term gains ................ -- (0.84) --
------- -------- -------
Total distributions ............................................ -- (1.05) --
------- -------- -------
Net asset value at end of period ............................... $ 24.56 $ 19.19 $ 23.24
======= ======== =======
Total Return 27.98% (13.26)% 24.68%
Ratios to Average Daily Net Assets:
Expenses ....................................................... 1.15% 1.16% 1.19%(3)
Expenses in excess of investment income ........................ (0.94)% (0.80)% (0.69)%(3)
Supplemental Data:
Net assets at end of period (000) .............................. $65,021 $46,628 $35,653
Portfolio turnover rate ........................................ 38% 23% 42%
</TABLE>
- -----------
(1) Commencement of operations.
(2) Calculations based on average shares.
(3) Annualized.
6
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
(Brown Investment Advisory & Trust Shares)
Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
Sub-Advisor Distributor
BROWN INVESTMENT ADVISORY ICC DISTRIBUTORS, INC.
& TRUST COMPANY Two Portland Square
Furness House Portland, Maine 04101
19 South Street
Baltimore, Maryland 21202
Transfer Agent Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. PRICEWATERHOUSECOOPERS LLP
One South Street 250 West Pratt Street
Baltimore, Maryland 21202 Baltimore, Maryland 21201
1-800-553-8080
Custodian Fund Counsel
BANKERS TRUST COMPANY MORGAN, LEWIS & BOCKIUS LLP
130 Liberty Street 1701 Market Street
New York, New York 10006 Philadelphia, Pennsylvania 19103
<PAGE>
- --------------------------------------------------------------------------------
You may obtain the following additional information about the Fund, free of
charge, from your securities dealer or servicing agent or by calling
(800) 767-3524:
o A statement of additional information (SAI) about the Fund that is
incorporated by reference into the prospectus.
o The Fund's most recent annual and semi-annual reports containing detailed
financial information and, in the case of the annual report, a discussion of
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
In addition you may review information about the Fund (including the SAI) at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. (Call 1-202-942-8090 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) 767-3524 or your securities dealer or
servicing agent.
Investment Company Act File No. 811-5320
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------
FLAG INVESTORS EMERGING GROWTH FUND, INC.
One South Street
Baltimore, Maryland 21202
-----------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS. IT SHOULD BE READ IN
CONJUNCTION WITH A PROSPECTUS WHICH MAY BE
OBTAINED FROM YOUR SECURITIES DEALER OR
SHAREHOLDER SERVICING AGENT OR BY WRITING OR
CALLING THE FUND, ONE SOUTH STREET,
BALTIMORE, MARYLAND 21202, (800) 767-FLAG.
Statement of Additional Information Dated: January 18, 2000,
Relating to Prospectuses dated January 18, 2000, for:
Flag Investors Class A Shares, Flag Investors Class B Shares
Flag Investors Institutional Shares
and
Brown Investment Advisory & Trust Emerging Growth Shares
<PAGE>
TABLE OF CONTENTS
Page
----
1. GENERAL INFORMATION AND HISTORY........................................2
2. INVESTMENT OBJECTIVES AND POLICIES.....................................2
3. VALUATION OF SHARES AND REDEMPTION.....................................6
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS...................6
5. MANAGEMENT OF THE FUND.................................................9
6. INVESTMENT ADVISORY AND OTHER SERVICES................................14
7. DISTRIBUTION OF FUND SHARES...........................................15
8. BROKERAGE.............................................................18
9. CAPITAL STOCK.........................................................19
10. FINANCIAL STATEMENTS .................................................20
11. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES.....................20
12. LEGAL MATTERS.........................................................21
13. INDEPENDENT ACCOUNTANTS...............................................21
14. PERFORMANCE INFORMATION...............................................21
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...................23
<PAGE>
1. GENERAL INFORMATION AND HISTORY
Flag Investors Emerging Growth Fund, Inc. (the "Fund") is an open-end
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 Emerging Growth Fund Class A Shares (the "Class A
Shares"), Flag Investors Emerging Growth Fund Class B Shares (the "Class B
Shares"), Flag Investors Emerging Growth Fund Institutional Shares (the
"Institutional Shares") and Brown Investment Advisory & Trust Emerging Growth
Shares (formerly "Alex. Brown Capital Advisory & Trust Emerging Growth Shares")
(the "BIAT Shares") (collectively, the "Shares").
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, with respect to each class except the BIAT Shares class,
from Participating Dealers that offer such Shares to prospective investors. Some
of the information required to be in this Statement of Additional Information is
also included in the Fund's current Prospectuses. To avoid unnecessary
repetition, references are made to related sections of the Prospectuses. In
addition, the Prospectuses and this Statement of Additional Information omit
certain information about the Fund and its business that is contained in the
registration statement respecting the Fund and its Shares filed with the SEC.
Copies of the registration statement as filed, including such omitted items, may
be obtained from the SEC by paying the charges prescribed under its rules and
regulations.
The Fund was incorporated under the laws of the State of Maryland on
July 2, 1987. The Fund filed a registration statement with the SEC registering
itself as an open-end diversified management investment company under the 1940
Act, as amended (the "1940 Act") and its Shares under the 1933 Act, as amended
(the "1933 Act"). The Fund's registration statement was declared effective by
the SEC on June 15, 1988 and the Fund began operations as an open-end
diversified management investment company. The Fund has offered the Class A
Shares since its inception on December 30, 1987, the Institutional Shares since
November 2, 1995, the Class B Shares since June 20, 1996 and the BIAT Shares
since May 9, 1997.
Under a license agreement dated December 29, 1987 between the Fund and
Alex. Brown & Sons Incorporated (predecessor to DB Alex. Brown LLC (formerly BT
Alex. Brown Incorporated)), Alex. Brown & Sons Incorporated licenses to the Fund
the "Flag Investors" name and logo but retains the rights to the name and logo,
including the right to permit other investment companies to use them.
Size of the Fund
The allocation of the Fund's assets in emerging growth companies
requires substantial research and analysis in respect of such companies and the
Fund's management believes that the size of the Fund should be limited so that
the investment advisor can perform the appropriate research and analysis of
investment opportunities. Accordingly, at such time as the assets of the Fund
are in excess of $400 million, the Fund will accept Share purchases only from
existing shareholders (including reinvestment of dividends and capital gains
distributions). Further, at such time as the assets of the Fund are in excess of
$500 million, the Fund will discontinue sales of Shares with the exception of
purchases made by pre-existing IRA accounts.
2. INVESTMENT OBJECTIVES AND POLICIES
Investment Objective and Policies of the Fund
The Fund has the investment objective of long-term capital
appreciation. Realization of income is not a significant investment
consideration and any income realized on the Fund's investments will be
incidental to the Fund's objective. There can be no assurance that the Fund's
investment objective will be achieved.
-2-
<PAGE>
The Fund seeks to achieve its objective through investments in common
stocks of small and mid-sized emerging growth companies. In general, an emerging
growth company with $250 million or less in annual sales would be considered to
be a small company, while an emerging growth company with approximately $250
million to $1 billion in annual sales would be considered to be a mid-sized
company. While the Fund intends to invest in emerging growth companies that are
small to mid-sized at the time of investment, it may retain the securities of
these companies even after they reach a larger size if the Fund's investment
advisor (the "Advisor") believes they continue to have growth potential.
Investments in such emerging growth companies involve certain risks. (See
"Special Risk Considerations.")
Under normal circumstances Fund assets will be invested as fully as
possible in the common stocks and securities convertible into common stocks of
small and mid-sized emerging growth companies (and at least 65% of the Fund's
assets will be so invested). However, up to 25% of the Fund's assets may from
time to time be invested in "other investments" which do not otherwise meet the
criteria set forth above, but which the Advisor believes offer improved
opportunities for growth not yet fully appreciated by investors. Such
investments may arise, for example, because of a new product developed by a
mature company or a new opportunity in an established business line of a mature
company that shows growth potential similar to that of emerging growth
companies.
In addition, the Fund may invest up to 20% of its net assets in
securities convertible into the common stock of high-quality growth companies.
Convertible securities are fixed-income securities that may be converted at a
stated price, within a specified period of time, into a specified number of
shares of common stock of the same or a different issuer. While providing a
fixed income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. In general, the market value of a
convertible security is at least the higher of its "investment value" (i.e., its
value as a fixed-income security) or its "conversion value" (i.e., the value of
the underlying shares of common stock if the security is converted). As a
fixed-income security, a convertible security tends to increase in market value
when interest rates decline and tends to decrease in value when interest rates
rise. However, the price of a convertible security also is influenced by the
market value of the security's underlying common stock. Thus, the price of a
convertible security tends to increase as the market value of the underlying
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 investments in the common stock of the same issuer.
In addition, up to 35% of the Fund's assets may be invested in U.S.
Government securities, corporate bonds and debentures rated in one of the three
highest rating categories of Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's") (or, if unrated, determined by the Advisor
to be of equivalent quality), preferred stocks or money market instruments when
the Advisor believes doing so is appropriate in light of the Fund's investment
objective and market conditions.
Additional information about certain of the Fund's investment policies
and practices are described below.
Restricted Securities
The Fund may also invest in securities eligible for resale pursuant to
Rule 144A under the 1933 Act, as amended ("Rule 144A Securities") that have been
determined to be liquid by the Advisor under standards approved by the Fund's
Board of Directors, and may invest up to 10% of its net assets in Rule 144A
Securities that are illiquid. (See "Investment Restrictions" below.) Rule 144A
Securities may become illiquid if qualified institutional buyers are not
interested in acquiring the securities.
-3-
<PAGE>
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 collateral for these
repurchase agreements will be held by the Fund's custodian or by a duly
appointed sub-custodian. 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.
Loans 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 be for the
account of 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 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 only
be made 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 currently
from such securities loans justifies the attendant risk. All relevant facts and
circumstances, including the creditworthiness of the borrower, will be
considered in making decisions with respect to the lending of securities,
subject to review by the Board of Directors of the Fund. The Fund's custodian or
another affiliate may act as securities lending agent.
At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.
Special Risk Considerations
Although the Advisor will seek to invest in quality emerging growth
companies, there are risks to investors inherent in the characteristics of
emerging growth companies. Many of the Fund's investments are small
capitalization or "small cap" companies. Securities of small companies often
have only a small proportion of their outstanding securities held by the general
public. Securities held by the Fund may have limited trading markets that may be
subject to wide price fluctuations. In view of such factors, the net asset value
of a share may vary significantly. Accordingly, you should not consider
investing in this Fund if you are unable or unwilling to assume the risk of loss
inherent in such a program, nor should you consider an investment in the Fund to
be a balanced or complete investment program.
-4-
<PAGE>
The Fund's investments may have relatively small revenues and lack
depth of management. Investments in such companies tend to be volatile and are
therefore speculative. They may have a small share of the market for their
products or services and they may provide goods or services to a regional or
limited market. Small companies may be unable to internally generate funds
necessary for growth or potential development or to generate such funds through
external financing on favorable terms. In addition, they may be developing or
marketing new products or services for which markets are not yet established and
may never become established. Such companies may have or may develop only a
regional market for products or services and thus be affected by local or
regional market conditions. Moreover, small companies may have insignificant
market share in their industries and may have difficulty maintaining or
increasing their market share in competition with larger companies. Due to these
and other factors, small companies may suffer significant losses.
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 Fund's outstanding Shares. 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 its total
assets in the securities of any single issuer (for these purposes the
U.S. Government and its agencies and instrumentalities are not considered
an issuer);
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 the securities of any single issuer if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of such
issuer;
5) Invest in real estate or mortgages on real estate except that the Fund
may invest in the securities of companies that invest in real estate or
mortgages;
6) Purchase or sell commodities or commodities contracts provided that the
Fund may invest in financial futures and options on such futures;
7) 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;
8) Issue senior securities; or
9) Make loans, except that the Fund may purchase or hold debt instruments
and enter into repurchase agreements in accordance with its investment
objective and policies and may lend portfolio securities and enter into
repurchase agreements as described in the Registration Statement.
The following are investment restrictions that may be changed by a vote
of the majority of the Board of Directors. The percentage limitations contained
in these restrictions apply at the time of purchase of securities. The Fund will
not:
1) Invest more than 10% of the Fund's net assets in illiquid securities,
including time deposits and repurchase agreements with maturities of
greater than seven days.
-5-
<PAGE>
3. VALUATION OF SHARES AND REDEMPTION
Valuation of Shares
The net asset value per Share is determined daily as of the close of
the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time) each
day on which the New York Stock Exchange is open for business (a "Business
Day"). The New York Stock Exchange is open for business on all weekdays except
for the following holidays (or the days on which they are observed): New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund may enter into agreements that allow a third party, as agent
for the Fund, to accept orders from its customers up until the Fund's close of
business which is ordinarily 4:00 p.m. (Eastern Time). So long as a third party
receives an order prior to the Fund's close of business, the order is deemed to
have been received by the Fund and, accordingly, may receive the net asset value
computed at the close of business that day. These "late day" agreements are
intended to permit shareholders placing orders with third parties to place
orders up to the same time as other shareholders.
Redemption
The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC so that valuation of the net assets of the Fund is not
reasonably practicable.
Under normal circumstances, the Fund will redeem Shares by check, or by
wire transfer of funds. 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 of securities from
the portfolio of the Fund in lieu of cash, in conformity with applicable rules
of the SEC. 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.
4. 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.
-6-
<PAGE>
Qualification as a Regulated Investment Company
The Fund intends to qualify and elect to be treated for each taxable
year as a regulated investment company ("RIC") under Subchapter M of the Code.
Accordingly, the Fund 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 and 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 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 above, in order to qualify as
a RIC, the Fund must distribute at least 90% of its net investment income (that
generally includes dividends, taxable interest, and the excess of net short-term
capital gains over net short-term capital losses less operating expenses) and at
least 90% of its net tax-exempt interest income, for each tax year, if any, to
its shareholders. If the Fund meets all of the RIC requirements, it will not be
subject to federal income tax on any of its net investment income or capital
gains that it distributes to 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.
If the Fund fails to qualify for any taxable year as a regulated
investment company, 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, such distributions generally will be
eligible for the dividends-received deduction for corporate 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. 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 that are individuals at a maximum rate of 20%,
regardless of the length of time the shareholder has held 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 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
shareholder and will be able to claim their share of the tax paid by the Fund as
a refundable credit.
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. Accordingly, such distributions will generally qualify for the
corporate dividends-received deduction.
-7-
<PAGE>
Ordinarily, investors should include all dividends as income in the
year of payment. However, dividends declared payable to shareholders of record
in December of one year, but paid in January of the following year, will be
deemed for tax purposes to have been received by the shareholder and paid by the
Fund in the year in which the dividends were declared.
The sale or exchange of a share 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 and otherwise will be short-term. 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.
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 taxable on the
entire amount of the dividend or distribution received, even though the net
asset value per share on the date of such purchase may have reflected the amount
of such distribution.
The Fund will provide a statement annually to shareholders as to the
federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year, including the amount of dividends eligible for the corporate
dividends-received deduction.
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 tax identification number, (2) is subject to
backup withholding by the Internal Revenue Service for failure to properly
report receipt of interest or dividends, or (3) has failed to certify to the
Fund that such shareholder is not subject to backup withholding.
Federal Excise Tax; Miscellaneous Considerations; Effect of Future Legislation
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 on October 31 of that year (and any retained
amount from the prior calendar year), the Fund will be subject to a
nondeductible 4% Federal excise tax on the undistributed amounts. The Fund
intends to make sufficient distributions to avoid imposition of this tax, or to
retain, at most, its net capital gains and pay tax thereon.
State and Local Tax Considerations
Rules of state and local taxation of dividend and capital gains
distributions from regulated investment companies often differ from the 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.
-8-
<PAGE>
5. MANAGEMENT OF THE FUND
Directors and Officers
The Fund's Board of Directors manages its overall business and affairs.
The Board approves all significant agreements between the Fund and persons or
companies furnishing services to the Fund, including the Fund's agreements with
its investment advisor, sub-advisor, distributor, custodian and transfer agent.
The Directors and executive officers of the Fund, their respective
dates of birth and their principal occupations during the last five years are
set forth below. Unless otherwise indicated, the address of each Director and
executive officer is One South Street, Baltimore, Maryland 21202.
*TRUMAN T. SEMANS, Chairman (10/27/26)
Brown Investment Advisory & Trust Company, 19 South Street, Baltimore,
Maryland 21202. Vice Chairman, Brown Investment Advisory & Trust
Company (formerly, Alex. Brown Capital Advisory & Trust Company);
Director, Investment Company Capital Corp. (registered investment
advisor) and Virginia Hot Springs Inc. (property management). Formerly,
Managing Director and Vice Chairman, Alex. Brown Incorporated (now DB
Alex. Brown LLC) 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 Mining (mining and exploration), HCL
Technologies (information technology) and Anchor Technologies (gaming
software and equipment); Director, Mitchell Hutchins family of funds
and Flag Investors Funds, Inc. (formerly Deutsche Funds, Inc.),
Trustee, Flag Investors Portfolios Trust (formerly Deutsche Portfolios)
(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, 1985-1991.
*RICHARD T. HALE, Director (7/17/45)
Managing Director, Deutsche Asset Management Americas; Director and
President, Investment Company Capital Corp. (registered investment
advisor); and 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 and ISI Family of Funds (registered
investment companies). Formerly, Director, Circon Corp. (medical
instruments), 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; 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,
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.
-9-
<PAGE>
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705. President, Duke Management
Company (investments); Executive Vice President, Duke University
(education, research and health care); Executive Vice Chairman and
Director, Central Carolina Bank & Trust (banking) and Director, Victory
Funds (registered investment companies). Formerly, Director AMBAC
Treasurers Trust (registered investment company), 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; Director and Executive
Vice President, The Glenmede Trust Company. Formerly, Executive
Director, The Pew Charitable Trusts and 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, The Wadsworth Group (registered investment advisor), First
Fund Distributors, Inc. (registered broker-dealer) and Guinness Flight
Investments Funds, Inc.; Director, The Germany Fund, Inc., The New
Germany Fund, Inc., The Central European Equity Fund, Inc., Flag
Investors Funds, Inc. (formerly Deutsche Funds, Inc.), Trustee, Flag
Investors Portfolios Trust (formerly Deutsche Portfolios), and Vice
President, Professionally Managed Portfolios and Advisors Series Trust
(registered investment companies).
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);
Interim President, Williams College; Director, Yellow Corporation
(trucking) and American Science & Engineering (x-ray detection
equipment); Formerly, Chairman and Member, National Transportation
Safety Board; Director, National Railroad Passenger Corporation
(Amtrak); and Member, Aviation System Capacity Advisory Committee
(Federal Aviation Administration). Formerly, Director of Flag
Investor/ISI Fund Complexes (registered investment companies).
CHARLES A. RIZZO, Treasurer (8/5/57)
Vice President and Department Head, Deutsche Asset Management Americas,
since 1999; and Vice President and Department Head, BT Alex. Brown
Incorporated (now DB Alex. Brown LLC), 1998-1999. Formerly, Senior
Manager, PricewaterhouseCoopers LLP, 1993-1998.
AMY M. OLMERT, Secretary (5/14/63)
Vice President, Deutsche Asset Management Americas, since 1999; and
Vice President, BT Alex. Brown Incorporated (now DB Alex. Brown LLC),
1997-1999. Formerly, Senior Manager, PricewaterhouseCoopers LLP,
1988-1997.
DANIEL O. HIRSCH, Assistant Secretary (3/27/54)
Director, Deutsche Asset Management Americas, since 1999. Principal, BT
Alex. Brown Incorporated (now DB Alex. Brown LLC), 1998-1999. Formerly,
Assistant General Counsel, United States Securities and Exchange
Commission, 1993-1998.
- ---------
* Messrs. Semans and Hale are directors who are "interested persons," as defined
in the 1940 Act.
-10-
<PAGE>
Directors and officers of the Fund are also directors and officers of
some or all of the other investment companies managed, administered or advised
by Deutsche Asset Management or its affiliates. There are currently eight funds
in the Flag Investors Funds and Deutsche Banc Alex. Brown Cash Reserve Fund,
Inc. fund complex (the "Fund Complex"). Mr. Semans serves as Chairman of five
funds and as a Director of three other funds in the Fund Complex. Mr. Hale
serves as Chairman of three funds and as a Director of four funds in the Fund
Complex. Messrs. Burt, Hardiman, Levy, McDonald and Wadsworth serve as Directors
of each of the funds in the Fund Complex. Ms. Rimel serves as a Director of
seven funds in the Fund Complex. Mr. Vogt serves as President of seven of the
funds in the Fund Complex. Mr. Rizzo serves as Treasurer, Ms. Olmert serves as
Secretary, and Mr. Hirsch serves as Assistant Secretary, for each of the funds
in the Fund Complex. Prior to September 28, 1999, the Fund Complex included four
funds in the ISI Family of Funds.
Some of the Directors of the Fund are customers of, and have had normal
brokerage transactions with, DB Alex. Brown in the ordinary course of business.
All such transactions were made on substantially the same terms as those
prevailing at the time for comparable transactions with unrelated persons.
Additional transactions may be expected to take place in the future.
With the exception of the Fund's President, officers of the Fund
receive no direct remuneration in such capacity from the Fund. Officers and
Directors of the Fund who are officers or directors of Deutsche Asset Management
or the Advisor may be considered to have received remuneration indirectly. As
compensation for his or her services, each Director who is not an "interested
person" of the Fund (as defined in the 1940 Act) (an "Independent Director") and
Mr. Vogt, the Fund's President effective October 7, 1999, 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 are allocated among
all such funds described above in direct proportion to their relative net
assets. For the fiscal year ended October 31, 1999, Independent Directors' fees
attributable to the assets of the Fund totaled $5,847. 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 year ended October 31, 1999.
-11-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Compensation Pension or Retirement Total Compensation From the Fund
From the Fund for the Benefits Accrued and Fund Complex payable to
Fiscal Year Ended October as Part of Fund Directors for the Fiscal Year Ended
31, 1999 Expenses(1) October 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truman T. Semans (2) $0 $0 $0
Chairman
Richard R. Burt (3) $0 $0 $0
Director
Richard T. Hale (2) $0 N/A N/A
Director
James J. Cunanne (4) $555(5) $39,000 for service on 12 Boards in
Director the Fund Complex
Joseph R. Hardiman $253(6) $39,000 for service on 12 Boards in
Director the Fund Complex
Louis E. Levy $697(6) $49,000 for service on 12 Boards in
Director the Fund Complex
Eugene J. McDonald $697(5) $49,000 for service on 12 Boards in
Director the Fund Complex
Carl W. Vogt, Esq.(7) $561(5) $39,000 for service on 12 Boards in
Director the Fund Complex
Rebecca W. Rimel(8) $559(5) $39,000 for service on 12 Boards in
Director the Fund Complex
Robert H. Wadsworth (3) $0 N/A $0
Director
</TABLE>
The Fund Complex has adopted a Retirement Plan for Directors who are
not employees of the Fund, the Fund's Advisor or its respective affiliates and a
Retirement Plan for a former Director serving as the Fund's President (the
"Retirement Plans"). After completion of six years of service, each participant
in the Retirement Plan 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 Plan is
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, who have qualified for the
Retirement Plan by serving 13 years and 14 years, respectively, as Directors in
the Fund Complex and each of whom will be paid a quarterly fee of $4,875 by the
Fund Complex for the rest of his life. Such fees are allocated to each fund in
the Fund Complex based upon the relative net assets of such fund to the Fund
Complex. Mr. McDonald has qualified for, but has not received, benefits.
- -----------------
(1) The Fund Complex has adopted a Retirement Plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund for
the year ended October 31, 1999 was approximately $1,739.
(2) A Director who is an "interested person" as defined in the 1940 Act.
(3) Elected to the Fund's Board effective October 7, 1999.
(4) Retired effective October 7, 1999.
(5) Of the amounts payable to Messrs. Cunnane, McDonald, Vogt and Ms. Rimel,
$555, $697, $561 and $559, respectively, was deferred pursuant to a deferred
compensation plan.
(6) Of the amounts payable to Messrs. Hardiman and Levy, nothing was deferred
pursuant to the Fund's deferred compensation plan in the year ended October
31, 1999.
(7) Retired as a Director on October 7, 1999. Currently serves as the Fund's
President.
(8) Ms. Rimel received proportionately higher compensation from each fund for
which she served.
-12-
<PAGE>
Set forth in the table below are the estimated annual benefits payable
to a Participant upon retirement assuming various years of service and payment
of a percentage of the fee earned by such Participant in his or her last year of
service, as described above. The approximate credited years of service for each
Participant at December 31, 1999, are as follows: for Mr. Levy, 5 years; for Mr.
McDonald, 7 years; for Ms. Rimel, 4 years; for Mr. Vogt, 4 years; for Mr.
Hardiman, 1 year; and for Mr. Burt and Mr. Wadsworth, 0 years.
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement
- ---------------- -----------------------------------------------------------------
Chairmen of Audit and Executive Committees 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>
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, Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc. and BT International Equity Fund in which all or part of
their deferral account shall be deemed to be invested. Distributions from the
deferring Directors' deferral accounts will be paid in cash, in generally equal
quarterly installments over a period of ten years.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Code of Ethics applies to the
personal investing activities of all of the directors and officers of the Fund,
as well as to designated officers, directors and employees of the Advisors and
the Distributor. As described below, the Code of Ethics imposes additional
restrictions on the Advisors' investment personnel, including the portfolio
managers and employees who execute or help execute a portfolio manager's
decisions or who obtain contemporaneous information regarding the purchase or
sale of a security by the Fund.
The Code of Ethics requires that any officer, director, or employee of
the Fund or the Advisors preclear any personal securities investments (with
certain exceptions, such as non-volitional purchases or purchases that are part
of an automatic dividend reinvestment plan). The foregoing would apply to any
officer, director or employee of the Distributor that is an access person. The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and special preclearance of the
acquisition of securities in private placements. Furthermore, the Code of Ethics
provides for trading "blackout periods" that prohibit trading by investment
personnel and certain other employees within periods of trading by the Fund in
the same security. Trading by investment personnel and certain other employees
of the Advisor or Sub-Advisor, as appropriate, would be exempt from this
"blackout period" provided that (1) the market capitalization of a particular
security exceeds $2 billion; and (2) orders of such entity do not exceed ten
percent of the daily average trading volume of the security for the prior 15
days. Officers, directors and employees of the Advisors and the Distributor may
comply with codes instituted by those entities so long as they contain similar
requirements and restrictions.
-13-
<PAGE>
6. INVESTMENT ADVISORY AND OTHER SERVICES
On March 30, 1999, the Board of Directors of the Fund, including a
majority of the Independent Directors, approved an Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. ("ICC" or the "Advisor").
On October 7, 1999, the Investment Advisory Agreement and a Sub-Advisory
Agreement among the Fund, ICC and Brown Investment Advisory & Trust Company
(formerly, Alex. Brown Capital Advisory & Trust Company) ("Brown Trust") were
approved by a vote of shareholders of the Fund. ICC, the investment advisor, is
an indirect subsidiary Deutsche Bank, AG. Brown Trust is a trust company
chartered under the laws of the State of Maryland. Brown Trust is a wholly-owned
subsidiary of Brown Capital Holdings Incorporated ("Brown Capital Holdings"), a
Maryland corporation whose principal executive officer is Michael D. Hankin.
Brown Capital Holdings is owned by management and employees of Brown Trust and
outside investors. ICC also serves as investment advisor and Brown Trust serves
as sub-advisor to other funds in the Flag Investors family of funds.
Under the Investment Advisory Agreement, ICC obtains and evaluates
economic, statistical and financial information to formulate and implement
investment policies for the Fund. ICC has delegated this responsibility to Brown
Trust provided that ICC continues to supervise the performance of Brown Trust
and report thereon to the Fund's Board of Directors. Any investment program
undertaken by ICC or Brown Trust will at all times be subject to policies and
control of the Fund's Board of Directors. ICC will provide the Fund with office
space for managing its affairs, with the services of required executive
personnel and with certain clerical and bookkeeping services and facilities.
These services are provided by ICC without reimbursement by the Fund for any
costs. Neither ICC nor Brown Trust shall be liable to the Fund or its
shareholders for any act or omission by ICC or Brown Trust or any losses
sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duty. The
services of ICC and Brown Trust to the Fund are not exclusive and ICC and Brown
Trust are free to render similar services to others.
As compensation for its services, ICC receives an annual fee, payable
monthly, representing 0.85% of the Fund's average daily net assets. As
compensation for providing sub-advisory services, Brown Trust is entitled to
receive a fee from ICC, calculated daily and payable monthly, at the annual rate
of 0.55% of the Fund's average daily net assets.
Each of the Investment Advisory Agreement and the Sub-Advisory
Agreement has an initial term of two years and will continue in effect from year
to year thereafter if such continuance is specifically approved at least
annually by the Fund's Board of Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
agreements, by votes cast in person at a meeting called for such purpose, and by
a vote of a majority of the outstanding Shares (as defined under "Capital
Stock"). The Fund or ICC may terminate the Investment Advisory Agreement on
sixty days' written notice without penalty. The Investment Advisory Agreement
will terminate automatically in the event of assignment (as defined in the
1940 Act). The Sub-Advisory Agreement has similar termination provisions.
Advisory fees paid by the Fund to ICC for the last three fiscal years
were as follows:
Fiscal Year Ended October 31,
-----------------------------
1999 1998 1997
---- ---- ----
$ 1,169,346 $ 1,103,023 $ 782,095
For the period from November 1, 1998 through October 31, 1999, Brown
Trust received $756,636 as compensation for sub-advisory services.
-14-
<PAGE>
ICC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Fund. An affiliate of ICC serves as the
Fund's custodian. See "Custodian, Transfer Agent and Accounting Services."
7. DISTRIBUTION OF FUND SHARES
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves
as the exclusive distributor of each class of the Fund's Shares pursuant to a
Distribution Agreement (the "Distribution Agreement") effective August 31, 1997.
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 ICC Distributors' duties
or obligations under the Distribution Agreement or by reason of ICC
Distributors' 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 outstanding
Shares of the Fund (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 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, so long as the Fund's Plan of Distribution is approved at least
annually by the Independent Directors in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement, including the
form of Sub-Distribution Agreement, was initially approved by the Board of
Directors, including a majority of the Independent Directors, on August 4, 1997
and most recently September 27, 1999.
With respect to the Class A, Class B and Institutional Shares, ICC
Distributors and certain broker-dealers ("Participating Dealers") have entered
into Sub-Distribution Agreements under which such broker 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. It is not currently anticipated that ICC Distributors will enter into
Sub-Distribution Agreements for the BIAT Shares. Any Sub-Distribution Agreement
may be terminated in the same manner as the Distribution Agreement at any time
and shall automatically terminate in the event of an assignment.
-15-
<PAGE>
In addition, with respect to the Class A and Class B Shares, the Fund
may enter into Shareholder Servicing Agreements with certain financial
institutions, including DB Alex. Brown and certain banks, to act as Shareholder
Servicing Agents, pursuant to which ICC Distributors will allocate a portion of
its distribution fee as compensation for such financial institutions' ongoing
shareholder services. The Fund may also enter into Shareholder Servicing
Agreements pursuant to which the Advisor, the Distributor, or their respective
affiliates will provide compensation out of their own resources. Although
banking laws and regulations prohibit banks from distributing shares of open-end
investment companies such as the Fund, according to interpretations by various
bank regulatory authorities, financial institutions are not prohibited from
acting in other capacities for investment companies, such as the shareholder
servicing capacities described above. Should future legislative, judicial or
administrative action prohibit or restrict the activities of the Shareholder
Servicing Agents in connection with the Shareholder Servicing Agreements, the
Fund may be required to alter materially or discontinue its arrangements with
the Shareholder Servicing Agents. Such financial institutions may impose
separate fees in connection with these services and investors should review the
Prospectus and this Statement of Additional Information in conjunction with any
such institution's fee schedule. In addition, state securities laws on this
issue may differ from the interpretations of federal law expressed herein, and
banks and financial institutions may be required to register as dealers pursuant
to state law.
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. As
compensation for providing distribution services as described above, for the
Class B Shares, ICC Distributors receives an annual fee, paid monthly, equal to
0.75% of the average daily net assets of the Class B Shares. With respect to the
Class A Shares, ICC Distributors expects to allocate up to all of its fee to
Participating Dealers. With respect to the Class B Shares, ICC Distributors
expects to retain the entire distribution fee as reimbursement for front-end
payments to Participating Dealers. In addition, with respect to the Class B
Shares, the Fund pays ICC Distributors a shareholder servicing fee at an annual
rate equal to 0.25% of the Class B Shares' average daily net assets. ICC
Distributors expects to allocate most of its shareholder servicing fee to
Participating Dealers and Shareholder Servicing Agents. ICC Distributors
receives no compensation for distributing the Institutional Shares or the BIAT
Shares.
As compensation for providing distribution and shareholder services to
the Fund for the last three fiscal years, the Fund's distributor received
aggregate fees in the following amounts:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
-----------------------------
Fee 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
12b-1 Fees $202,972(1) $223,094(1) $161,564(2)
Class B Shareholder Servicing Fee $ 11,026(1) $ 14,536(1) $ 6,398(3)
</TABLE>
- --------
(1) Received by ICC Distributors, the Fund's distributor.
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $124,346 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $37,218.
(3) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $4,330 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $2,068.
Pursuant to Rule 12b-1 under the 1940 Act, which provides that
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 two separate Plans of
Distribution, one for the Class A Shares (the "Class A Plan") and one for the
Class B Shares (the "Class B Plan") (collectively, the "Plans"). Under the
Plans, the Fund pays fees as described above to ICC Distributors for
distribution and other shareholder servicing assistance as set forth in the
Distribution Agreement, and ICC Distributors is authorized to make payments out
of its fee to Participating Dealers and Shareholder Servicing Agents. The Plans
will remain in effect from year to year thereafter as specifically approved (a)
at least annually by the Fund's Board of Directors and (b) by the affirmative
vote of a majority of the Independent Directors by votes cast in person at a
meeting called for such purpose. The Plans were most recently approved by the
Fund's Board of Directors, including a majority of the Independent Directors, on
September 27, 1999.
-16-
<PAGE>
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 outstanding Shares of
the related class (as defined under "Capital Stock").
During the continuance of the Plans, the Fund's Board of Directors will
be provided for their review, at least quarterly, a written report concerning
the payments made under the Plans to ICC Distributors pursuant to the
Distribution Agreement, to broker-dealers pursuant to any Sub-Distribution
Agreements and to Shareholder Servicing Agents pursuant to Shareholder Servicing
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 such Plans. Payments under the Plans are made as described above
regardless of ICC Distributors' actual cost of providing distribution services
and may be used to pay ICC Distributors' overhead expenses. If the cost of
providing distribution services to the Class A Shares is less than 0.25% of the
average daily net assets invested in that Class or Class B Shares is less than
0.75% of the average daily net assets invested in that Class 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
such Plan.
The Fund's distributor received commissions on the sale of the Class A
Shares and contingent deferred sales charges on the Class B Shares and retained
such commissions or sales charges in the following amounts:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
-----------------------------
Class 1999 1998 1997
----- ---- ---- ----
Received Retained Received Retained Received Retained
-------- -------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A Commissions $260,441(1) $0 $278,417(1) $0 $293,651(2) $213,280(4)
Class B Contingent $ 21,293(1) $0 $ 35,662(1) $0 $180,270(3) $ 78,625(5)
Deferred Sales Charge
</TABLE>
- --------
(1) Received by ICC Distributors, the Fund's distributor.
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $227,165 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $66,486.
(3) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $89,798 and ICC Distributors, the Fund's distributor
effective August 31, 1997 received $90,472.
(4) Of commissions received, Alex. Brown retained $213,280 and ICC Distributors
retained $0, respectively.
(5) Of sales charges received, Alex. Brown retained $78,625 and ICC Distributors
retained $0, respectively.
-17-
<PAGE>
The Fund will pay all costs associated with its organization and
registration under the 1933 Act and the 1940 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 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 accountants,
in connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) of the Fund that
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 or ICC Distributors.
The address of ICC Distributors is Two Portland Square, Portland, Maine
04101.
8. BROKERAGE
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 ICC and the broker-dealers. ICC
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 the
Advisor or its affiliates in any transaction in which the Advisor or its
affiliates acts as a principal.
If the Advisor or its affiliates are participating in an underwriting
or selling group, the Fund may not buy portfolio securities from the group
except in accordance with rules of the SEC. The Fund believes that the
limitation will not affect its ability to carry out its present investment
objective.
-18-
<PAGE>
ICC's primary consideration in effecting securities transactions is to
obtain the best price and execution of orders on an overall basis. As described
below, however, ICC may, in its discretion, effect agency transactions with
broker-dealers that furnish statistical, research or other information or
services that are deemed by ICC to be beneficial to the Fund's investment
program. ICC is also authorized to pay higher commissions on brokerage
transactions for the Fund to non-affiliated brokers in order to secure research
and investment services described below, subject to periodic review by the
Fund's Board of Directors. Research services may include the following:
statistical and background information on the U.S. economy, industry groups and
individual small and mid-sized companies; forecasts and interpretations with
respect to specific industry groups and individual small and mid-sized
companies; information on federal, state, local and foreign political
developments; portfolio management strategies; performance information on
securities, indices and investment accounts; information concerning prices of
securities; provision of equipment used to communicate research information;
arrangement of meetings with management of companies; and provision of access to
consultants who supply research information. Certain research services furnished
by broker-dealers may be useful to ICC with clients other than the Fund.
Similarly, any research services received by ICC through placement of portfolio
transactions of other clients may be of value to ICC in fulfilling its
obligations to the Fund. No specific value can be determined for research and
statistical services furnished without cost to ICC by a broker-dealer. ICC 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 ICC's research and analysis. Therefore, it may tend to benefit the
Fund by improving ICC's investment advice. In over-the-counter transactions, ICC
will not pay any commission or other remuneration for research services. ICC'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
ICC'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, ICC is also authorized to pay broker-dealers other than affiliates of
the Advisor higher commissions than another broker may 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. In
addition, consistent with NASD Rules, and subject to seeking the most favorable
price and execution available and such other policies as the Board may
determine.
Subject to the above considerations, the Board of Directors has
authorized the Fund to effect portfolio transactions through affiliates of the
Advisor. 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 Advisor
must be "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities during a comparable period
of time." Rule 17e-1 also contains requirements for the review of such
transactions by the Board of Directors and requires ICC to furnish reports and
to maintain records in connection with such reviews. In the fiscal year ended
October 31, 1999, the Fund paid no brokerage commissions to affiliates of the
Advisor.
ICC 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 ICC. ICC 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 that it seeks to purchase or sell.
ICC directed transactions to broker-dealers and paid related
commissions because of research services in the following amounts:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Transactions Directed $8,783,000 $4,112,107 $98,445,406
Commissions Paid $ 18,318 $ 13,081 $ 13,853
</TABLE>
- --------
The increasing amounts of commissions reflect the growth of the Fund.
-19-
<PAGE>
The Fund is required to identify any securities of its "regular brokers
or dealers" (as such term is defined in the 1940 Act) that the Fund has acquired
during its most recent fiscal year. As of October 31, 1999, the Fund held a
5.10% repurchase agreement issued by Goldman Sachs & Co. valued at $1,342,000.
Goldman Sachs & Co. is a "regular broker or dealer" of the Fund.
9. CAPITAL STOCK
The Fund is authorized to issue 35 million Shares of capital stock, par
value of $.001 per Share, all of which Shares are designated common stock. The
Board of Directors may increase or decrease the number of authorized Shares
without shareholder approval.
sThe 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 five classes of shares: Flag Investors Emerging Growth Fund Class
A Shares, Flag Investors Emerging Growth Fund Class B Shares, Flag Investors
Emerging Growth Fund Class C Shares, Flag Investors Emerging Growth Fund
Institutional Shares and Brown Investment Advisory & Trust Emerging Growth
Shares (formerly known as Alex. Brown Capital Advisory & Trust Shares). The Flag
Investors Institutional Shares are offered only to certain eligible institutions
and to clients of investment advisory affiliates of DB Alex. Brown. The Brown
Investment Advisory & Trust Emerging Growth Shares are offered only to clients
of Brown Investment Advisory & Trust Company and its affiliates. The Flag
Investors Emerging Growth Fund Class C Shares have not been offered In the event
separate series 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. In general,
each 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 would be identical to every other class in a particular series and
expenses of the Fund (other than 12b-1 and any applicable service fees) would be
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. In the event of liquidation or dissolution of the Fund, each
Share is entitled to its pro rata 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.
10. FINANCIAL STATEMENTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of investments
held in the Fund's portfolio and financial statements.
The financial statements for the Fund for the period ended October 31,
1999, are incorporated herein by reference to the Fund's Annual Report dated
October 31, 1999. A copy of the Annual Report may be obtained without charge by
contacting the Fund. The annual financial statements are audited by the Fund's
independent accountants.
-20-
<PAGE>
11. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Bankers Trust Company ("Bankers Trust") 130 Liberty Street, New York,
New York 10006, has been retained to act 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 October 31, 1999, Bankers Trust was paid $47,252.
Investment Company Capital Corp., One South Street, Baltimore, Maryland 21202,
has been retained to act as transfer and dividend disbursing agent. As
compensation for providing these services, the Fund pays ICC up to $15.67 per
account per year, plus reimbursement for out-of-pocket expenses. For the fiscal
year ended October 31, 1999, ICC received transfer agency fees of $81,307.
ICC also provides certain accounting services to the Fund. As
compensation for these services, ICC receives an annual fee, calculated daily
and paid monthly as shown below.
Average Net Assets Incremental Annual Accounting Fee
------------------ ---------------------------------
$ 0 - $ 10,000,000 $13,000 (fixed fee)
$ 10,000,000 - $ 20,000,000 0.100%
$ 20,000,000 - $ 30,000,000 0.080%
$ 30,000,000 - $ 40,000,000 0.060%
$ 40,000,000 - $ 50,000,000 0.050%
$ 50,000,000 - $ 60,000,000 0.040%
$ 60,000,000 - $ 70,000,000 0.030%
$ 70,000,000 - $ 100,000,000 0.020%
$100,000,000 - $ 500,000,000 0.015%
$500,000,000 - $1,000,000,000 0.005%
Over $1,000,000,000 0.001%
For the fiscal years ended October 31, 1999, 1998 and 1997 ICC received
accounting fees of $60,637, $59,460 and $53,054, respectively.
In addition, the Fund will reimburse ICC for the following
out-of-pocket expenses incurred in connection with ICC's provision of accounting
services under the Master Services Agreement: express delivery service,
independent pricing and storage.
12. LEGAL MATTERS
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
13. INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland
21201, are independent accountants to the Fund.
14. PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the Fund to
that of other open-end diversified management investment companies and to stock
or other relevant indices in advertisements or in certain reports to
shareholders, performance will be stated in terms of total return, rather than
in terms of yield. The total return quotations, under the rules of the SEC, must
be calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1-, 5-, or
10-year periods (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of the
1, 5 or 10 year periods.
-21-
<PAGE>
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 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 a
class or series) began operations (or the later commencement of operations of
the series or class).
Calculated according to SEC rules, the ending redeemable value and
average annual total return of a hypothetical $1,000 investment for the periods
ended October 31, 1999 were as follows:
<TABLE>
<CAPTION>
One-Year Period Ended Five-Year Period Ended Ten-Year Period Ended
October 31, 1999 October 31, 1999 October 31, 1999
--------------------------------------------------------------------------------------
Average Average
Ending Ending Annual Ending Annual
Redeemable Total Redeemable Total Redeemable Total
Class Value Return Value Return Value Return
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A , 12/30/87* $1,219 21.93% $2,087 21.74% $2,430 14.80%
</TABLE>
<TABLE>
<CAPTION>
One-Year Period Ended Since Inception
October 31, 1999
--------------------------------------------------------------------------
Ending Ending Average
Redeemable Total Redeemable Annual
Class Value Return Value Total Return
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B, 6/20/96* $1,226 22.64% $1,317 31.71%
Institutional, 11/295* $1,497 49.65% $1,223 22.27%
BIAT Shares, 5/9/97* $1,497 49.65% $1,289 28.93%
</TABLE>
- -----------
* Inception Date
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., 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 (as distinguished from the computation required by the SEC where
the $1,000 payment is reduced by sales charges before being invested in Shares).
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.
-22-
<PAGE>
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. For the fiscal years
ended October 31, 1999 and October 31, 1998, the Fund's portfolio turnover rate
was 38% and 23%, respectively.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, the Directors and Officers of the Fund
as a group (12 persons) beneficially owned less than 1% of the Fund's total
outstanding shares, as of January 10, 2000. To Fund management's knowledge, no
person owned, beneficially or of record 25% or more of the Fund's outstanding
shares as of January 10, 2000. To Fund management's knowledge, the following
persons owned of record or beneficially 5% or more of the outstanding Shares of
a class of the Fund, as of January 10, 2000.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Owned of Beneficially
Name and Address Record Owned Percentage Owned
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bankers Trust Corp & Affil 401K Savings Plan, The
Partnershare Plan of Bankers Trust NY Corp & Affil, 100
Plaza One, Jersey City, NJ 07311 X 20.32% (A Shares)
- --------------------------------------------------------------------------------------------------------------------
DB Alex Brown LLC, FBO 255-17950-12, POB 1346, X 7.77% (B Shares)
Baltimore, MD 21203
- --------------------------------------------------------------------------------------------------------------------
DB Alex Brown LLC, FBO 601-20603-12, POB 1346, X 38.09% (Instl Shares)
Baltimore, MD 21203
- --------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Securities Corp Inc., POB X 13.80% (Instl Shares)
2052, Jersey City, NJ 07303
- --------------------------------------------------------------------------------------------------------------------
Mercantile Safe Deposit & Tr Co Cus U/A 4/28/93, X 9.64% (Instl Shares)
Physicians Mem Hospital Pens Plan, 2 Hopkins Plaza,
Baltimore, MD 21201
- --------------------------------------------------------------------------------------------------------------------
Frank Nominees Ltd, POB 919, 10 Fenchurch St, London X 8.88% (Instl Shares)
EC3M 3LB UK
- --------------------------------------------------------------------------------------------------------------------
Allfirst Trust Co NA FBO Maryland Hospital Assoc Master X 8.23% (Instl Shares)
Inv SEC Proc 109-911, POB 1596, Baltimore, MD 21203
- --------------------------------------------------------------------------------------------------------------------
Light & Co, c/o Allfirst Trust Co NA, Attn: Trust X 5.18% (Instl Shares)
Operations #101-610, POB 1596, Baltimore, MD 21203
- --------------------------------------------------------------------------------------------------------------------
DB Alex Brown LLC, FBO FBO 01-01-170-7140019, POB 1346, X 5.46% (BIAT Shares)
Baltimore, MD 21203
- --------------------------------------------------------------------------------------------------------------------
DB Alex Brown LLC, FBO 01-01-170-7200019, POB 1346,
Baltimore, MD 21203 X 7.39% (BIAT Shares)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
o As of such date, to Fund management's knowledge, DB Alex. Brown LLC
(formerly, BT Alex. Brown Incorporated) owned beneficially less than 1% of
such shares.
-23-
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) (1) Articles of Incorporation incorporated by reference to Exhibit 1(a) to
Post-Effective No. 10 to Registrant's Registration Statement on Form N-1A (File
No. 33-21119), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-95-000392) on August 18, 1995.
(2) Articles of Amendment incorporated by reference to Exhibit 1(b) to
Post-Effective No. 10 to Registrant's Registration Statement on Form N-1A (File
No. 33-21119), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-95-000392) on August 18, 1995.
(3) Articles Supplementary incorporated by reference to Exhibit 1(c) to
Post-Effective No. 10 to Registrant's Registration Statement on Form N-1A (File
No. 33-21119), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-95-000392) on August 18, 1995.
(4) Articles Supplementary incorporated by reference to Exhibit 1(d) to
Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-06-000107) on February 28, 1996.
(5) Articles Supplementary with respect to the creation of the ABCAT Shares
Class incorporated by reference to Exhibit 1(e) to Post-Effective Amendment No.
14 to Registrant's Registration Statement on Form N-1A (File No. 33-21119),
filed with the Securities and Exchange Commission via EDGAR (Accession No.
950116-97-000363) on February 26, 1997.
(6) Articles Supplementary dated October 23, 1998, incorporated by reference to
Post-Effective Amendment No. 16 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR on December 30, 1998.
(7) Articles of Amendment dated February 16, 1999, filed herewith.
(b) By-Laws as amended through December 18, 1996, incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 14 to Registrant's Registration
Statement on Form N-1A (File No. 33-21119), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-97-000363) on February 26,
1997.
(1) By-laws as amended through July 28, 1999, filed herewith.
(c) Instruments Defining Rights of Securities Holders incorporated by reference
to Exhibit 1(Articles of Incorporation) of Post-Effective Amendments Nos. 10, 11
and 14 to Registrant's Registration Statement on Form N-1A (File No. 33-21119),
filed with the Securities and Exchange Commission via EDGAR on August 18, 1995,
February 28, 1996 and February 26, 1997, respectively, and Exhibit 2 (By-Laws)
of Post-Effective Amendment No. 14 to such Registration Statement filed with the
Securities and Exchange Commission via EDGAR on February 26, 1997.
<PAGE>
(d) (1) Investment Advisory Agreement dated June 4, 1999, between Registrant and
Investment Company Capital Corp., filed herewith.
(2) Investment Sub-Advisory Agreement dated June 4, 1999, between Registrant,
Investment Company Capital Corp. and Alex. Brown Capital Advisory & Trust
Company, filed herewith.
(e) (1) Distribution Agreement dated as of August 31, 1997 between Registrant
and ICC Distributors, Inc. incorporated by reference to Exhibit (6)(a) to
Post-Effective Amendment No. 15 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000482) on February 26, 1998.
(2) Form of Sub-Distribution Agreement between ICC Distributors, Inc. and
Participating Dealers incorporated by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 15 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000482) on February 26, 1998.
(3) Shareholder Servicing Agreement between Registrant and Shareholder Servicing
Agents incorporated by reference to Exhibit (6)(c) to Post-Effective Amendment
No. 15 to Registrant's Registration Statement on Form N-1A (File No. 33-21119),
filed with the Securities and Exchange Commission via EDGAR (Accession No.
950116- 98-000482) on February 26, 1998.
(f) None.
(g) Custodian Agreement dated June 5, 1998, between Registrant and Bankers Trust
Company, incorporated by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A (File No. 33-21119), filed with
the Securities and Exchange Commission via EDGAR on December 30, 1998.
(h) Master Services Agreement between Registrant and Investment Company Capital
Corp. with Appendices for the provision of Transfer Agency and Accounting
Services incorporated by reference to Exhibit 9(a) to Post-Effective No. 10 to
Registrant's Registration Statement on Form N-1A (File No. 33-21119), filed with
the Securities and Exchange Commission via EDGAR (Accession No.
950116-95-000392) on August 18, 1995.
(i) Opinion of Counsel, filed herewith.
(j) Consent of PricewaterhouseCoopers LLP, filed herewith.
(k) None.
(l) Subscription Agreements between Registrant and Investors incorporated by
reference to Exhibit 13 to Post-Effective No. 10 to Registrant's Registration
Statement on Form N-1A (File No. 33-21119), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-95-000392) on August 18,
1995.
<PAGE>
(m) (1) Distribution Plan with respect to Flag Investors Emerging Growth Fund
Class A Shares incorporated by reference to Exhibit (15)(a) to Post-Effective
No. 10 to Registrant's Registration Statement on Form N-1A (File No. 33-21119),
filed with the Securities and Exchange Commission via EDGAR (Accession No.
950116-95-000392) on August 18, 1995.
(2) Distribution Plan with respect to Flag Investors Emerging Growth Fund Class
B Shares incorporated by reference to Exhibit (15)(b) to Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A (File No.
33-21119), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000161) on March 25, 1996.
(3) Amended Distribution Plan with respect to Flag Investors Emerging Growth
Fund Class A Shares incorporated by reference to Exhibit (15)(c) to
Post-Effective Amendment No. 15 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000482) on February 26, 1998.
(4) Amended Distribution Plan with respect to Flag Investors Emerging Growth
Fund Class B Shares incorporated by reference to Exhibit (15)(d) to
Post-Effective Amendment No. 15 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-98-000482) on February 26, 1998.
(n) Financial Date Schedule, not applicable.
(o) (1) Rule 18f-3 Plan incorporated by reference to Exhibit (18)(a) to
Post-Effective Amendment No. 13 to Registrant's Registration Statement on Form
N-1A (File No. 33-21119), filed with the Securities and Exchange Commission via
EDGAR (Accession No. 950116-96-001119) on October 18, 1996.
(2) Rule 18f-3 Plan, as amended through March 26, 1997, incorporated by
reference to Exhibit (18)(b) to Post-Effective Amendment No. 14 to Registrant's
Registration Statement on Form N-1A (File No. 33-21119), filed with the
Securities and Exchange Commission via EDGAR (Accession No. 950116-97-000363) on
February 26, 1997.
(3) Amended Rule 18f-3 Plan, incorporated by reference to Post-Effective
Amendment No. 16 to Registrant's Registration Statement on Form N-1A (File No.
33-21119), filed with the Securities and Exchange Commission via EDGAR on
December 30, 1998.
(p) Code of Ethics, not applicable.
(q) Powers of Attorney, filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
<PAGE>
Item 25. Indemnification.
Section 17(h) of the Investment Company Act of 1940, as amended (the "1940
Act"), MD Corps. & Ass'ns Code Ann. Section 2-418 (1985 repl. vol.) and Article
VIII of Registrant's Articles of Incorporation, provide that in certain
situations the Registrant may indemnify any person who was or is a director,
officer or employee of the Registrant against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees reasonably incurred by
any such indemnified person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body except with respect to any matter as to which
such person shall have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the reasonable belief
that such person's action was in the best interests of the Registrant or (b) to
be liable to the Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office. Expenses, including counsel
fees so incurred by any such person, shall be paid from time to time by the
Registrant in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay amounts so paid to the Registrant if it is ultimately determined that
indemnification of such expenses is not authorized under the Articles of
Incorporation, provided, however, that either (a) such person shall have
provided appropriate security for such undertaking, (b) the Registrant shall be
insured against losses arising from any such advance payments or (c) either a
majority of the Directors who are not "interested persons" of the Registrant as
defined in Section 2(a)(19) of the 1940 Act acting on the matter (provided that
a majority of the Directors who are not "interested persons" then in office act
on the matter), or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts that there is reason
to believe that such person will be found entitled to indemnification under the
Articles of Incorporation.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1940 Act and
is, therefore, unenforceable. In the event of a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person in connection with
the securities being registered) the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1940 Act and will be governed by
the final adjudication of such issue. In the absence of a determination by a
court of competent jurisdiction, the determinations that indemnification against
such liabilities is proper, and advances can be made, are made by a majority of
a quorum of the disinterested, non-party directors of the Fund, or an
independent legal counsel in a written opinion, based on review of readily
available facts.
Item 26. Business and Other Connections of Investment Advisor.
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.
<PAGE>
Item 27. Principal Underwriters
(a) ICC Distributors, Inc., the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies: BT Advisor Funds, BT Institutional 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 Index Portfolio, Capital Appreciation Portfolio, Asset
Management Portfolio, BT Investment Portfolios, Deutsche Banc Alex. Brown
Cash Reserve Fund, Inc., Flag Investors Communications Fund, Inc., Flag
Investors Emerging Growth Fund, Inc., the Flag Investors Total Return U.S.
Treasury Fund Shares of Total Return U.S. Treasury Fund, Inc., the Flag
Investors Managed Municipal Fund Shares of Managed Municipal Fund, Inc.,
Flag Investors Short-Intermediate Income Fund, Inc., Flag Investors Value
Builder Fund, Inc., Flag Investors Real Estate Securities Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Flag Investors International Fund,
Inc., Flag Investors Funds, Inc. (formerly known as Deutsche Funds, Inc.),
Flag Investors Portfolios Trust (formerly known as Deutsche Portfolios),
Morgan Grenfell Funds, Glenmede Fund, Inc. and Glenmede Portfolios.
(b) Names and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
John Y. Keffer President None
Ronald H. Hirsch Treasurer None
Nanette K. Chern Chief Compliance Officer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Frederick Skillin Assistant Treasurer None
Marc D. Keffer Assistant Secretary None
- -----
* Two Portland Square
Portland, ME 04101
(c) Not Applicable.
Item 28. Location of Accounts and Records.
<PAGE>
Investment Company Capital Corp. ("ICC") (Registrant's investment advisor,
transfer agent, dividend disbursing agent and accounting services provider), One
South Street, Baltimore, Maryland 21202, maintains physical possession of each
such account, book or other document of the Registrant, except for those
maintained by the Registrant's distributor, ICC Distributors, Inc., Two Portland
Square, Portland, Maine 04101, or by the Registrant's custodian, Bankers Trust
Company, 130 Liberty Street, New York, New York, 10006.
In particular, with respect to the records required by Rule 31a-1(b)(1), ICC
maintains physical possession of all journals containing itemized daily records
of all purchases and sales of securities, including sales and redemptions of
Fund securities, and Bankers Trust Company maintains physical possession of all
receipts and deliveries of securities (including certificate numbers if such
detail is not recorded by the custodian or transfer agent), all receipts and
disbursements of cash, and all other debts and credits.
Item 29. Management Services.
Not Applicable.
Item 30. Undertakings.
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. 17 to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933, as amended, and has duly caused this 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 18th day of January, 2000.
FLAG INVESTORS EMERGING GROWTH FUND, INC.
By: /s/ Carl Vogt
--------------------
Carl Vogt
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 on the date(s) indicated:
* Chairman and Director
Truman T. Semans
* Director
Richard R. Burt
* Director
Richard T. Hale
* Director
Joseph R. Hardiman
* Director
Louis E. Levy
* Director
Eugene J. McDonald
* Director
Rebecca W. Rimel
* Director
Robert H. Wadsworth
* President
Carl Vogt, Esq.
* Chief Financial and Accounting Officer
Charles A. Rizzo
*By: /s/Daniel O. Hirsch
--------------------
Daniel O. Hirsch, Attorney-In-Fact January 18, 2000
* By 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 Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
North American Government Bond Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Flag Investors Equity Partners Fund, Inc. and ISI Strategy Fund,
Inc. 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 Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors Emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag Investors
Short-Intermediate Income Fund, Inc., Flag Investors Value Builder Fund, Inc.,
North American Government Bond Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Flag Investors Equity Partners Fund, Inc. and ISI Strategy Fund,
Inc. on behalf of each Fund's Chief Financial Officer pursuant to a properly
executed power of attorney.
<PAGE>
EX-99.6AA
FLAG INVESTORS EMERGING GROWTH FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 4th day
of June, 1999 by and between FLAG INVESTORS EMERGING GROWTH FUND, INC., a
Maryland corporation (the "Fund"), and INVESTMENT COMPANY CAPITAL CORP., a
Maryland corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended; and
WHEREAS, the Advisor is a registered investment advisor and
engages in the business of acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter into an
agreement to provide investment advisory and administrative services for the
Fund on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints
the Advisor to manage and supervise all aspects of the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
assets, subject at all times to the policies and control of the Fund's Board of
Directors. The Advisor hereby accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished or will
furnish the Advisor with copies properly certified or authenticated of each of
the following:
(a) The Fund's Articles of Incorporation, filed with
the State of Maryland on July 3, 1987 and all amendments thereto (such Articles
of Incorporation, as presently in effect and as from time to time amended, are
herein called the "Articles");
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as from time to time amended, are
herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Advisor and approving this
Agreement;
<PAGE>
(d) The Fund's Notification of Registration Filed
Pursuant to Section 8(a) of the Investment Company Act of 1940, as amended (the
"1940 Act") on Form N-8A under the 1940 Act as filed with the Securities and
Exchange Commission (the "SEC") on September 8, 1987;
(e) The Fund's Registration Statement on Form N-1A
under the 1940 Act and under the Securities Act of 1933, as amended (the "1933
Act") as filed with the SEC relating to the shares of the Fund, and all
amendments thereto; and
(f) The Fund's most recent prospectus (such
prospectus, as presently in effect, and all amendments and supplements thereto
are herein called "Prospectus").
The Fund will furnish the Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties of Investment Advisor. The Advisor shall give the
Fund the benefit of its best judgment, efforts and facilities in rendering its
services as Advisor. In carrying out its obligations under paragraph 1 hereof,
the Advisor shall:
(a) formulate and implement continuing programs for
the purchases and sales of securities and regularly report thereon to the Fund's
Board of Directors; and
(b) in accordance with the Fund's investment
objectives, policies and investment restrictions reflected in the Prospectus
determine what issuers and securities shall be represented in the Fund's
portfolio and in what proportion and regularly report them to the Fund's Board
of Directors; and
(c) provide the Board of Directors of the Fund on a
regular basis with financial reports with respect to the Fund's Portfolio
investments and analyses of the Fund's operations and the operations of
comparable investment companies; and
(d) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the portfolio
of the Fund, and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion in the
Fund's portfolio; and
(e) take, on behalf of the Fund, all actions which
appear to the Fund necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of orders
for the purchase and sale of portfolio securities; and
(f) supervise and manage all aspects of the Fund's
operations; and
(g) provide the Fund with such executive,
administrative and clerical services as are deemed advisable by the Fund's Board
of Directors; and
<PAGE>
(h) arrange, but not pay for, the periodic updating
of prospectuses and supplements thereto, proxy materials, tax returns, reports
to the Fund's shareholders and reports to and filings with the SEC and state
Blue Sky authorities; and
(i) provide the Fund with, or obtain, adequate office
space and all necessary equipment and services, including telephone service,
heat, utilities, stationery, supplies and similar items for any offices as are
deemed advisable by the Fund's Board of Directors; and
(j) be responsible for the maintenance of such
accounts books and records as may be required by law or may, in the judgment of
the Board of Directors, be appropriate for the orderly transaction of the Fund's
business, provided that, if the Fund enters into a contract with any third party
for the maintenance of any such accounts, books and records, the Advisor shall
be responsible for supervision of and coordination with such third party on
behalf of the Fund but shall not be responsible for the costs related to such
contract or for the performance of such contract by such third party; and
(k) supervise, on behalf of the Fund, the operations
of the Fund's transfer and dividend disbursing agent.
4. Broker-Dealer Relationships. The Advisor is responsible for
decisions to buy and sell securities for the Fund, broker-dealer selection, and
negotiation of its brokerage commission rates. In performing this function the
Advisor shall comply with applicable policies established by the Board of
Directors and shall provide the Board of Directors with such reports as the
Board of Directors may require in order to monitor the Fund's portfolio
transaction activities.
The Advisor's primary consideration in effecting securities
transactions will be to obtain best price and execution of orders on an overall
basis. Accordingly, the Advisor will take into consideration in executing
individual transactions the net price available. However, the Advisor may also
take into consideration other factors as discussed below.
The Advisor will take into consideration the ability of the
broker-dealer to meet the Fund's portfolio transaction execution needs on a
continuing basis. Accordingly, the Advisor will consider the reliability,
integrity and financial condition of the broker-dealer, the size of and
difficulty in executing the particular order and the general ability of the
broker-dealer to execute the Fund's transactions reliably and promptly. To the
extent that the executions and prices offered by more than one broker-dealer are
comparable, the Advisor may, in its discretion, effect transactions with
broker-dealers that furnish statistical, research or other information or
services which are deemed by the Advisor to be beneficial to the Fund's
investment program. Accordingly, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Advisor's overall responsibilities
with respect to the Fund.
Consistent with the Conduct Rules of the National Association
of Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Advisor may consider services in connection with the sale of shares of the Fund
as a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund.
<PAGE>
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Advisor is considered at or about the same time, transactions in
such securities will be allocated among the accounts in a manner deemed
equitable by the Advisor. BT Alex. Brown may combine such transactions, in
accordance with applicable laws and regulations, in order to obtain the best net
price and most favorable execution.
The Fund will not deal with the Advisor or BT Alex. Brown in
any transaction in which the Advisor or BT Alex. Brown acts as a principal with
respect to any part of the Fund's order. If BT Alex. Brown is participating in
an underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with rules of the SEC.
5. Control by Board of Directors. Any management or
supervisory activities undertaken by the Advisor pursuant to this Agreement, as
well as any other activities undertaken by the Advisor on behalf of the Fund
pursuant thereto, shall at all times be subject to any directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended; and
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any rules and regulations
adopted thereunder as amended; and
(c) the provisions of the Fund's Articles of
Incorporation; and
(d) the provisions of the By-laws of the Fund, as
amended; and
(e) any other applicable provisions of state and
federal law and applicable rules of any registered national securities
organization.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall, subject to compliance with
applicable banking regulations, furnish, at its expense and without cost to the
Fund (except as provided in paragraph 8 hereof), the services of such officers
and employees as may be required by the Fund for the proper conduct of its
affairs; travel expenses of employees and officers of the Advisor; office space,
equipment, research services and supplies; expenses of maintaining accounts,
books, and records, except to the extent such services are provided by a third
party pursuant to a contract with the Fund.
<PAGE>
(b) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Advisor, any sub-advisor and BT Alex. Brown; the charges and expenses of any
registrar, any custodian appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund and any accounting services
provider 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 corporate fees
payable by the Fund to Federal, State or other governmental agencies; the cost
and expense of engraving or printing of stock certificates representing shares
of the Fund; all costs and expenses in connection with maintenance of
registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); except as provided in subparagraph (a) above, the expenses of
printing, including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
members of any advisory board or committee other than such Directors or members
who are "interested persons" within the meaning of Section 2(a)(19) of the 1940
Act; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's shares; charges and expenses
of legal counsel, including counsel to the Directors of the Fund who are not
interested persons (as defined in the 1940 Act) of the Fund, and of independent
accountants, in connection with any matter relating to the Fund; membership dues
of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. The Advisor may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Advisor's charge
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Fund nor obligate the Advisor to pay or assume any similar Fund expense on
any subsequent occasions. The Advisor may, with the approval of the majority of
the Fund's Directors who are not "interested persons" of the Fund, appoint a
Sub-Advisor for the Fund. Such Sub-Advisor shall be paid by the Advisor.
9. Compensation. For the services to be rendered and the
expenses assumed by the Advisor, the Fund shall pay to the Advisor compensation
at an annual rate of 0.85% of the Fund's average daily net assets; provided
that, if necessary, the Advisor's annual compensation will be reduced so that
the Fund's total expenses for that year do not exceed 1.50% of the Fund's
average daily net assets. Except as hereinafter set forth, compensation under
this Agreement shall be calculated and accrued daily and the amounts of the
daily accruals shall be paid monthly. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Advisor's compensation for the preceding month shall
be made as promptly as possible.
10. Non-Exclusivity. The services of the Advisor to the Fund
are not to be deemed to be exclusive, and the Advisor shall be free to render
investment advisory and other services to others (including other investment
companies) and to engage in other activities, so long as its services under this
Agreement are not impaired thereby. It is understood and agreed that officers or
directors of the Advisor may serve as officers or Directors of the Fund, and
that officers or Directors of the Fund may serve as officers or directors of the
Advisor to the extent permitted by law; and that the officers and directors of
the Advisor are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers or directors of any other firm or corporation, including other
investment companies.
<PAGE>
11. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall continue in force and
effect for an initial term of two years and from year to year thereafter,
provided that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of the holders of a majority of the outstanding voting securities (as
defined in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the
Directors who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of a party to this Agreement (other than as Fund
Directors), by votes cast in person at a meeting specifically called for such
purpose.
12. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party, without the payment of
any penalty, by vote of the Fund's Board of Directors or by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Advisor. The notice provided for herein may
be waived by either party. This Agreement shall automatically terminate in the
event of its assignment, the term "assignment" having the meaning defined in
Section 2(a)(4) of the 1940 Act.
13. Liability.
(a) In the performance of its duties hereunder, the
Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but the Advisor shall not be liable
for any act or omission which does not constitute willful misfeasance, bad faith
or gross negligence on the part of the Advisor or its officers, directors or
employees, or reckless disregard by the Advisor of its duties under this
Agreement.
(b) The Advisor agrees that any claims by it against
the Fund may be satisfied only from the assets of the Fund, and no shareholders,
Directors or officers of the Fund may be held personally liable or responsible
for any obligations arising out of this Agreement.
14. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
15. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act, shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] FLAG INVESTORS EMERGING GROWTH FUND, INC.
Attest: /s/Kathy Churko By: /s/Harry Woolf
---------------------- --------------
Name: Harry Woolf
Title: President
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/Kathy Churko By: /s/Edward J. Veilleux
--------------- ---------------------
Name: Edward J. Veilleux
Title: Executive Vice President
<PAGE>
EXHIBIT 99.1
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
FLAG INVESTORS EMERGING GROWTH FUND, INC.
FLAG INVESTORS EMERGING GROWTH FUND, INC. (the "Corporation"), a
corporation organized under the laws of the State of Maryland, having its
principal place of business at One South Street, Baltimore, Maryland 21202, does
hereby certify to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to the authority contained in Section 2-605(a)(4) of
the Maryland General Corporation Law and under authority contained in Article
XI, Section 1 of the Articles of Incorporation of the Corporation, the full
Board of Directors, by Unanimous Written Consent of Directors dated February 12,
1999, have changed the name of the Corporation's "Alex. Brown Capital Advisory &
Trust Emerging Growth Shares" class to the "Brown Investment Advisory & Trust
Emerging Growth Shares" class.
THIRD: Pursuant to the requirements of Section 2-607 of the Maryland
General Corporation Law, the Board of Directors has determined to file of record
these Articles of Amendment, which Amendment is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law to me made
without action by the stockholders and which Amendment is solely for the purpose
of changing the name of one class of the Corporation's shares.
FOURTH: These Articles of Amendment shall be effective as of the later
of the time the State Department of Assessments and Taxation of Maryland accepts
these Articles of Amendment of record, or March 1, 1999.
<PAGE>
IN WITNESS WHEREOF, Flag Investors Emerging Growth Fund, Inc.
has caused these Articles of Amendment to be signed in its corporate name and on
its behalf by its President and its corporate seal to be hereunto affixed and
attested by its Secretary as of the 16th day of February, 1999.
FLAG INVESTORS EMERGING GROWTH FUND, INC.
By: /s/ Harry Woolf
-------------------------------------
Harry Woolf
President
[SEAL]
Attest:
/s/ Amy M. Olmert
- -------------------------
Amy M. Olmert
Secretary
THE UNDERSIGNED, President of Flag Investors Emerging Growth
Fund, Inc., who executed on behalf of said corporation the foregoing Articles of
Amendment of which this certificate is made a part, hereby acknowledges, in the
name and on behalf of said corporation, the foregoing Articles of Amendment to
be the corporate act of said corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth herein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ Harry Woolf
---------------------------
Harry Woolf
President
<PAGE>
EXHIBIT 99.2
As Amended Through
July 28, 1999
BY-LAWS
OF
FLAG INVESTORS EMERGING GROWTH FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be in the City of Baltimore, State of Maryland.
Section 3. Other Offices. The Corporation may have such other offices
in such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Stockholder Meetings. The Corporation may, but shall not be
required to, hold a regular meeting of stockholders in any year in which the
Corporation is not required, under the Investment Company Act of 1940, as
amended, (the "1940 Act") to submit for stockholder approval (i) the election of
director(s), (ii) any contract with an investment adviser or principal
underwriter (as such terms are defined in the 1940 Act) that the Corporation
enters into or any renewal or amendment thereof, or (iii) the selection of the
Corporation's independent public accountants. If stockholder approval is
required for any of the purposes in (i) through (iii) above, the regular meeting
shall be held, at which stockholders shall vote on the proposal necessitating
such meeting and shall transact any other business as may properly be brought
before the meeting. Regular meetings of stockholders, if any, shall be held on
such day during the month of June and at such time as shall be designated by the
Board of Directors and stated in the notice of the meeting.
<PAGE>
Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Charter may be called for any purpose
or purposes by a majority of the Board of Directors or the President, and shall
be called by the President or Secretary on the written request of the
stockholders as provided by the Maryland General Corporation Law. Such request
shall state the purpose or purposes of the proposed meeting and the matters
proposed to be acted on at it; provided, however, that unless requested by
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting, a special meeting need not be called to consider any matter which
is substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve (12) months.
Section 3. Place of Meetings. The regular meeting, if any, and any
special meeting of the stockholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice; Shareholder List. (a)
Notice of the place, date and time of the holding of each regular and special
meeting of the stockholders and the purpose or purposes of the meeting shall be
given personally or by mail, not less than ten nor more than ninety days before
the date of such meeting, to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. The notice of every meeting of
stockholders may be accompanied by a form of proxy approved by the Board of
Directors in favor of such actions or persons as the Board of Directors may
select.
(b) Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. A meeting of stockholders convened on the
date for which it was called may be adjourned from time to time without further
notice to a date not more than 120 days after the original record date.
(c) At least five (5) days prior to each meeting of stockholders, the
officer or agent having charge of the share transfer books of the Corporation
shall make a complete list of stockholders entitled to vote at such meeting, in
alphabetical order with the address of and the number of shares held by each
stockholder.
<PAGE>
Section 5. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the stockholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
Section 6. Voting. (a) Except as otherwise provided by statute or the
Charter, each holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the stockholders to one vote
for every share of such stock standing in his name on the record of stockholders
of the Corporation as of the record date determined pursuant to Section 8 of
Article VII hereof or if such record date shall not have been so fixed, then at
the later of (i) the close of business on the day on which notice of the meeting
is mailed or (ii) the thirtieth (30) day before the meeting. In all elections
for directors, each share of stock may be voted for as many individuals as there
are directors to be elected and for whose election the share is entitled to be
voted.
(b) Each shareholder entitled to vote at any meeting of shareholders
may authorize another person or persons to act as proxy for the shareholder by
(1) a written authorization signed by such shareholder or the shareholder's
authorized agent; or (2) by telephone, a telegram, cablegram, datagram or other
means of electronic transmission to the person authorized to act as proxy or to
a proxy solicitation firm, proxy support service organization, or other person
authorized by the person who will act as proxy to receive the transmission. No
proxy shall be valid after the expiration of eleven months from the date
thereof, unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except in those cases where
such proxy states that it is irrevocable and where an irrevocable proxy is
permitted by law. Except as otherwise provided by statute, the Charter of the
Corporation or these By-Laws, any corporate action to be taken by vote of the
shareholders shall be authorized by a majority of the total votes cast at a
meeting of shareholders at which a quorum is present by the holders of shares
present in person or represented by proxy and entitled to vote on such action,
except that a plurality of all the votes cast at a meeting at which a quorum is
present is sufficient to elect a director.
(c) If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
<PAGE>
Section 7. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders.
Section 8. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute any action required to be taken at any regular or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if the following are filed with the records of
stockholders' meetings: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Charter,
the business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. All powers of the Corporation may be exercised by or
under authority of the Board of Directors except as conferred on or reserved to
the stockholders by law or by the Charter or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (except for any period during which shares
of the corporation are held by fewer than three shareholders) nor more than
fifteen. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be stockholders.
<PAGE>
Section 3. Election and Term of Directors. Directors shall be elected
by plurality vote of a quorum cast by written ballot at the regular meeting of
stockholders, if any, or at a special meeting held for that purpose. The term of
office of each director shall be from the time of his election and qualification
and until his successor shall have been elected and shall have qualified, or
until his death, or until he shall have resigned, or have been removed as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Charter.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. The stockholders may elect a successor to fill a
vacancy on the Board of Directors which results from the removal of a director.
A majority of the remaining directors, whether or not sufficient to constitute a
quorum, may fill a vacancy on the Board of Directors which results from any
cause except an increase in the number of directors, and a majority of the
entire Board of Directors may fill a vacancy which results from an increase in
the number of directors; provided however, that no vacancies shall be filled by
action of the remaining directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the directors then holding office shall have
been elected by the stockholders of the Corporation. In the event that at any
time there is a vacancy in any office of a director which vacancy may not be
filled by the remaining directors, a special meeting of the stockholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A director elected by the Board of
Directors to fill a vacancy serves until the next annual meeting of stockholders
and until his successor is elected and qualifies. A director elected by the
stockholders to fill a vacancy which results from the removal of a director
serves for the balance of the term of the removed director.
Section 7. Regular Meetings. Regular meetings of the Board may be held
with notice at such times and places as may be determined by the Board of
Directors.
Section 8. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the President, or by a majority of the
directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
<PAGE>
Section 9. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or by
commercial delivery services addressed to him at his residence or usual place of
business, at least three days before the day on which such meeting is to be
held.
Section 10. Waiver of Notice of Special Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of the
meeting or who shall attend such meeting. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice of any meeting need not
state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than three
members, of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Charter, these By-Laws, the 1940 Act or other applicable statute, the act of
a majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board; provided, however, that the approval of any
contract with an investment adviser or principal underwriter, as such terms are
defined in the 1940 Act, which the Corporation enters into or any renewal or
amendment thereof, the approval of the fidelity bond required by the 1940 Act,
and the selection of the Corporation's independent public accountants shall each
require the affirmative vote of a majority of the directors who are not
interested persons, as defined in the 1940 Act, of the Corporation. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn the meeting from time to time, but not for a period
greater than thirty (30) days at any one time, to another time and place until a
quorum shall attend. Notice of the time and place of any adjourned meeting shall
be given to the directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time appoint
one of its members as Chairman of the Board. who shall serve at the pleasure of
the Board and who shall perform and execute such duties and powers as may be
conferred upon or assigned to him by the Board or these By-Laws, but who shall
not by reason of performing and executing these duties and powers be deemed an
officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if one has been selected and is present, shall
preside. In the absence or inability of the Chairman of the Board to preside at
a meeting, the President, or, in his absence or inability to act, another
director chosen by a majority of the directors present, shall act as chairman of
the meeting and preside at it. The Secretary (or, in his absence or inability to
act, any person appointed by the Chairman) shall act as secretary of the meeting
and keep the minutes thereof.
<PAGE>
Section 14. Written Consent of Directors in Lieu of a Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
Section 15. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time.
Section 16. Compensation. Any director, whether or not he is a salaried
officer, employee or agent of the Corporation, may be compensated for his
services as director or as a member of a committee, or as Chairman of the Board
or chairman of a committee, and in addition may be reimbursed for transportation
and other expenses, all in such manner and amounts as the directors may from
time to time determine.
Section 17. Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the stockholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by resolution
adopted by a majority of the entire Board, designate an Executive Committee,
Compensation Committee, Audit Committee and Nomination Committee, each of which
shall consist of two or more of the directors of the Corporation, which
committee shall have and may exercise all the powers and authority of the Board
with respect to all matters other than as set forth in Section 3 of this
Article.
<PAGE>
Section 2. Other Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the Board
of Directors may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No committee of the Board
shall have power or authority to:
(a) recommend to stockholders any action requiring authorization of
stockholders pursuant to statute or the Charter;
(b) approve or terminate any contract with an investment adviser or
principal underwriter, as such terms are defined in the 1940 Act, or take any
other action required to be taken by the Board of Directors by the 1940 Act;
(c) amend or repeal these By-Laws or adopt new By-Laws;
(d) declare dividends or other distributions or issue capital stock of
the Corporation; and
(e) approve any merger or share exchange which does not require
stockholder approval.
Section 4. General. One-third, but not less than two members, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence of disqualification of
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
All committees shall keep written minutes of their proceedings and
shall report such minutes to the Board. All such proceedings shall be subject to
revision or alteration by the Board; provided, however, that third parties shall
not be prejudiced by such revision or alteration.
<PAGE>
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint such other officers, agents and
employees as it may deem necessary or proper. Any two or more offices may be
held by the same person, except the offices of President and Vice President, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board may from time to time elect or appoint, or delegate to the
President the power to appoint, such other officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a director of the Corporation.
<PAGE>
Section 6. Bonds or other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board (or if
there be none), he shall preside at all meetings of the stockholders and of the
Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He may
employ and discharge employees and agents of the Corporation, except such as
shall be appointed by the Board, and he may delegate these powers.
Section 8. The Vice Presidents. In the absence or disability of the
President, or when so directed by the President, any Vice President designated
by the Board of Directors may perform any or all of the duties of the President,
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President; provided, however, that no Vice President
shall act as a member of or as chairman of any committee of which the President
is a member or chairman by designation of ex-officio, except when designated by
the Board. Each Vice President shall perform such other duties as from time to
time may be conferred upon or assigned to him by the Board or the President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation, except those which the Corporation has placed
in the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934)
pursuant to a written agreement designating such bank or trust company or member
of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit
of the Corporation;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment
of its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.
<PAGE>
Section 10. Assistant Treasurers. In the absence or disability of the
Treasurer, or when so directed by the Treasurer, any Assistant Treasurer may
perform any or all of the duties of the Treasurer, and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 12. Assistant Secretaries. In the absence or disability of the
Secretary, or when so directed by the Secretary, any Assistant Secretary may
perform any or all of the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
Each Assistant Secretary shall perform such other duties as from time to time
may be conferred upon or assigned to him by the Board of Directors, the
President or the Secretary.
Section 10. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem sufficient,
the Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
<PAGE>
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by the President, a Vice President,
or the Chairman of the Board, and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date of
issue.
Section 2. Rights of Inspection. There shall be kept at the principal
executive office, which shall be available for inspection during usual business
hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
stockholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been stockholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual business hours the Corporation's
books of account and stock ledger in accordance with the General Laws of the
State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of stockholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
<PAGE>
Section 4. Transfer Agents and Registrars. The Corporation may have one
or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
Section 5. Record Date and Closing of Transfer Books. The Board of
Directors may set a record date for the purpose of making any proper
determination with respect to stockholders, including which stockholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof),
receive a dividend, or be allotted or exercise other rights. The record date may
not be more than ninety (90) days before the date on which the action requiring
the determination will be taken; and, in the case of a meeting of stockholders,
the record date shall be at least ten (10) days before the date of the meeting.
The Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or mutilation
of such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 8. Stock Ledgers. The Corporation shall not be required to keep
original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the respective offices
of the Transfer Agents of the Corporation's capital stock.
<PAGE>
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing the name
of the Corporation, which shall be in the charge of the secretary. The Board of
Directors may authorize one or more duplicate seals and provide for the custody
thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the last day of December in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safekeeping of the
securities and investments of the Corporation shall contain provisions complying
with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
<PAGE>
Section 2. Sale or Transfer of Securities. Money market instruments,
bonds or other securities at any time owned by the Corporation may be held on
behalf of the Corporation or sold, transferred or otherwise disposed of subject
to any limits imposed by these By-Laws, and pursuant to authorization by the
Board and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Directors and
ratified by the Board of Directors or the stockholders in accordance with the
provisions of the 1940 Act.
ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report to
the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIII
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the stockholders or at any special meeting of the stockholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
<PAGE>
EX-99.6SAA
FLAG INVESTORS EMERGING GROWTH FUND, INC.
SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT is made as of the 4th
day of June, 1999 by and among FLAG INVESTORS EMERGING GROWTH FUND, INC., a
Maryland corporation (the "Fund"), INVESTMENT COMPANY CAPITAL CORP., a Maryland
corporation (the "Advisor"), and BROWN INVESTMENT ADVISORY & TRUST COMPANY, a
Maryland trust company (the "Sub-Advisor").
WHEREAS, the Advisor is the investment advisor to the Fund,
which is an open-end, diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Advisor wish to retain the
Sub-Advisor for purposes of rendering advisory services to the Fund and the
Advisor in connection with the Advisor's responsibilities to the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Advisor. The Fund hereby appoints the
Sub-Advisor to act as the Fund's Sub-Advisor under the supervision of the Fund's
Board of Directors and the Advisor, and the Sub-Advisor hereby accepts such
appointment, all subject to the terms and conditions contained herein.
2. Delivery of Documents. The Fund has furnished the
Sub-Advisor with copies properly certified or authenticated of each of the
following:
(a) The Fund's Articles of Incorporation, filed with the
Department of Assessments and Taxation of the State of Maryland on July
2, 1987 and all amendments thereto (such Articles of Incorporation, as
presently in effect and as they shall from time to time be amended, are
herein called the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Sub-Advisor and
approving this Agreement;
<PAGE>
(d) The Fund's Notification of Registration Filed Pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed
with the Securities and Exchange Commission (the "SEC") on September 8,
1987;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-21119)
and under the 1940 Act as filed with the SEC on April 8, 1988 relating
to the shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto are
herein called the "Prospectus").
The Fund will furnish the Sub-Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties of Sub-Advisor. In carrying out its obligations
under Section 1 hereof, the Sub-Advisor shall, subject to overall supervision by
the Advisor:
(a) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of
Directors;
(b) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(c) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Fund's Board of Directors;
(d) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect such purchase and sale programs
as aforesaid, including the placing of orders for the purchase and sale
of securities of the Fund;
(e) provide the Board of Directors of the Fund on a regular
basis with financial reports with respect to the Fund's portfolio
investments and analyses of the Fund's operations and the operations of
comparable investment companies; and
(f) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio.
<PAGE>
4. Broker-Dealer Relationships. In circumstances when the
Sub-Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of its brokerage commission
rates, the Sub-Advisor's primary consideration in effecting a security
transaction will be execution of orders at the most favorable price on an
overall basis. In performing this function the Sub-Advisor shall comply with
applicable policies established by the Board of Directors and shall provide the
Board of Directors with such reports as the Board of Directors may require in
order to monitor the Fund's portfolio transaction activities. In selecting a
broker-dealer to execute each particular transaction, the Sub-Advisor will take
the following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Sub-Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and research
services to the Sub-Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the
Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Sub-Advisor's overall responsibilities with respect to the
Fund. The Sub-Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such broker-dealers who also provide research or
statistical material or other services to the Fund or the Sub-Advisor. Such
allocation shall be in such amounts and proportions as the Sub-Advisor shall
determine and the Sub-Advisor will report on said allocation regularly to the
Board of Directors of the Fund, indicating the brokers to whom such allocations
have been made and the basis therefor.
Consistent with the Conduct Rules of the National Association
of Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Sub-Advisor may consider services in connection with the sale of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Sub-Advisor may direct BT Alex. Brown
Incorporated ("BT Alex. Brown") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to BT Alex. Brown must be, as required
by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time." If the purchase or sale of securities
consistent with the investment policies of the Fund or one or more other
accounts of the Sub-Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Sub-Advisor. BT Alex. Brown and the Sub-Advisor may
combine such transactions, in accordance with applicable laws and regulations,
in order to obtain the best net price and most favorable execution.
The Fund will not deal with the Sub-Advisor or BT Alex. Brown
in any transaction in which the Sub-Advisor or BT Alex. Brown acts as a
principal with respect to any part of the Fund's order. If BT Alex. Brown is
participating in an underwriting or selling group, the Fund may not buy
portfolio securities from the group except in accordance with policies
established by the Board of Directors in compliance with rules of the SEC.
5. Control by Fund's Board of Directors. Any activities
undertaken by the Sub-Advisor on behalf of the Fund pursuant hereto, shall at
all times be subject to any applicable directives of the Board of Directors of
the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Sub-Advisor shall at all times conform
to:
<PAGE>
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder, as amended;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the By-Laws; and
(e) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be
allocable among the Fund, the Sub-Advisor and the Advisor as follows:
(a) The Sub-Advisor shall, subject to compliance with
applicable banking regulations, furnish, at its expense and without
cost to the Fund, the services of one or more officers of the Fund, to
the extent that such officers may be required by the Fund for the
proper conduct of its affairs.
(b) The Sub-Advisor shall maintain, at its expense
and without cost to the Fund, a trading function in order to carry out
its obligations under Section 3 hereof to place orders for the purchase
and sale of portfolio securities for the Fund.
(c) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation:
payments to the Advisor under the Investment Advisory Agreement between
the Fund and the Advisor; the charges and expenses of any registrar,
any custodian or any depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all
taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to federal, state or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection
with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the
costs and expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and
travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not "interested persons" (as
defined in the 1940 Act) of the Fund and of the independent
accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including but not limited to, legal
claims, liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.
<PAGE>
8. Compensation. For the services to be rendered hereunder by
the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly compensation
equal to the sum of 0.55% of the Fund's average daily net assets provided that,
if necessary, the Sub-Advisor's annual compensation will be reduced in an amount
proportional to the Advisor's waiver so that the Fund's total expenses for that
year do not exceed 1.50% of the Flag Investors Class A Shares' average daily net
assets. Except as hereinafter set forth, compensation under this Agreement shall
be calculated and accrued daily and the amounts of the daily accruals shall be
paid monthly. If this Agreement becomes effective subsequent to the first day of
a month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Sub-Advisor's compensation for the preceding month shall be made as promptly as
possible.
9. Additional Responsibilities. The Sub-Advisor may, but shall
not be under any duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Sub-Advisor's
charges in rendering such services will be billed monthly to the Fund, subject
to examination by the Fund's independent certified public accountants. Payment
or assumption by the Sub-Advisor of any Fund expense that the Sub-Advisor is not
required to pay or assume under this Agreement shall not relieve the Sub-Advisor
of any of its obligations to the Fund nor obligate the Sub-Advisor to pay or
assume any similar Fund expenses on any subsequent occasions.
10. Term. This Agreement shall become effective at 12:01 a.m.
on the date hereof and shall remain in force and effect, subject to Section 12
hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial two-year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" of a party to
this Agreement (other than as Directors of the Fund) by votes cast in
person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of Directors or
by vote of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days' written notice
to the Advisor and the Sub-Advisor. This Agreement may be terminated at any
time, without the payment of any penalty, by the Advisor or the Sub-Advisor on
sixty (60) days' written notice to the Fund and the other party. Upon the
termination of the Investment Advisory Agreement, this Agreement shall
automatically terminate on sixty (60) days written notice. The notice provided
for herein may be waived by any person to whom such notice is required. This
Agreement shall automatically terminate in the event of its assignment (as
defined in Section 2(a)(4) of the 1940 Act).
<PAGE>
13. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-Advisor
shall be free to render investment advisory or other services to others
(including other investment companies) and to engage in other activities, so
long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers or Directors of the Sub-Advisor may serve as
officers or Directors of the Fund, and that officers or Directors of the Fund
may serve as officers or Directors of the Sub-Advisor to the extent permitted by
law; and that the officers and Directors of the Sub-Advisor are not prohibited
from engaging in any other business activity or from rendering services to any
other person, or from serving as partners, officers, trustees or directors of
any other firm, trust or corporation, including other investment companies.
14. Liability of Sub-Advisor. In the performance of its duties
hereunder, the Sub-Advisor shall be obligated to exercise care and diligence and
to act in good faith and to use its best efforts within reasonable limits to
ensure the accuracy of all services performed under this Agreement, but the
Sub-Advisor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of the
Sub-Advisor or its officers, directors or employees, or reckless disregard by
the Sub-Advisor of its duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Sub-Advisor for this purpose shall be 19-21 South Street, Baltimore, Maryland
21202, and the address of the Advisor and the Fund shall be One South Street,
Baltimore, Maryland 21202.
16. Questions and Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.
Attest: FLAG INVESTORS EMERGING GROWTH FUND, INC.
/s/ Daniel O. Hirsch By: /s/ Harry Woolf
- ------------------------------- --------------------
Name: Daniel O. Hirsch Name: Harry Woolf
Title: President
Attest: INVESTMENT COMPANY CAPITAL CORP.
/s/ Daniel O. Hirsch By: /s/Edward J. Veilleux
- ------------------------------- --------------------
Name: Daniel O. Hirsch Name: Edward J. Veilleux
Title: Executive Vice President
Attest: BROWN INVESTMENT ADVISORY & TRUST COMPANY
/s/ Daniel O. Hirsch By: /s/Truman T. Semans
- ------------------------------- --------------------
Name: Daniel O. Hirsch Name: Truman T. Semans
Title: Vice Chairman
<PAGE>
EX-99.11
1701 Market Street MORGAN, LEWIS
Philadelphia, PA 19103 & BOCKIUS L L P
(215)963-5000 COUNSELORS AT LAW
Fax: (215)963-5299
January 14, 2000
Flag Investors Emerging Growth Fund, Inc.
One South Street
Baltimore, Maryland 21202
Re: Opinion of Counsel regarding Post-Effective Amendment No. 17 to the
Registration Statement filed on Form N-1A under the Securities Act of
1933 (File No. 33-21119)
---------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Flag Investors Emerging Growth Fund, Inc.
(the "Fund") a Maryland corporation, in connection with the above-referenced
Registration Statement which relates to the Fund's shares of common stock, par
value $.001 per share (the "Shares"). This opinion is being delivered to you in
connection with the Fund's filing of Post-Effective Amendment No. 17 to the
Registration Statement (the "Amendment") to be filed with the Securities and
Exchange Commission pursuant to Rule 485(b) under the Securities Act of 1933.
With your permission, all assumptions and statements of reliance herein have
been made without any independent investigation or verification on our part,
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the State of Maryland to the existence and good
standing of the Fund dated January 13, 2000;
(b) the Articles of Incorporation of the Fund and all amendments and
supplements thereto (the "Articles of Incorporation");
(c) a certificate executed by Daniel O. Hirsch, the Assistant
Secretary of the Fund, certifying as to the Fund's Articles of
Incorporation and By-Laws and certain resolutions adopted by the
Board of Directors of the Fund authorizing the issuance of the
shares; and
(d) a printer's proof of the Amendment.
<PAGE>
In our capacity as counsel to the Fund, we have examined the originals,
or certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of
the opinion that the Shares, when issued and sold in accordance with the
Articles of Incorporation and By-Laws, and for the consideration described in
the Registration Statement, will be legally issued, fully paid and nonassessable
under the laws of the State of Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis and Bockius LLP
FLAG INVESTORS EMERGING GROWTH FUND, INC.
Secretary's Certificate
I, Daniel O. Hirsch, Assistant Secretary of Flag Investors Emerging
Growth Fund, Inc., a Maryland corporation (the "Fund"), hereby certify that each
of (1) the Fund's Articles of Incorporation as amended and supplemented through
February 17, 1999; (2) the Fund's By-Laws, as amended through July 28, 1999; and
(3) the actions of the Board of Directors of the Fund in authorizing the
issuance of shares of the Fund, have not been further amended, modified or
rescinded, and that such Articles of Incorporation, By-Laws, and votes otherwise
continue in full force and effect as of the date hereof.
IN WITNESS WHEREOF, I hereunto sign my name this 12th day of January,
2000.
----------------------------------
Daniel O. Hirsch
<PAGE>
EX-99.12
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 17 to the registration Statement on Form N-1A of our report dated
December 7, 1999, relating to the financial statements and financial highlights
which appear in the October 31, 1999 Annual Report of the Flag Investors
Emerging Growth Fund, Inc., which is also incorporated by reference into the
Registration. We also consent to the reference to us under the headings
"Independent Accountants" and "Financial Highlights" in such Statement of
Additional Information.
/s/ PricewaterhouseCoopers LLP
--------------------------
PricewaterhouseCoopers LLP
Baltimore, Maryland
____________________
<PAGE>
EX-99.16
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard R. Burt, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard R. Burt
-------------------
Richard R. Burt
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chairman and a director of
the Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard T. Hale
-------------------
Richard T. Hale
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph R. Hardiman, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Joseph R. Hardiman
----------------------
Joseph R. Hardiman
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis E. Levy
-----------------
Louis E. Levy
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Eugene J. McDonald
----------------------
Eugene J. McDonald
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Truman T. Semans
--------------------
Truman T. Semans
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux, Amy M.
Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as President of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
----------------
Carl W. Vogt
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, her true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in her
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/ Rebecca W. Rimel
--------------------
Rebecca W. Rimel
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Robert H. Wadsworth, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Robert H. Wadsworth
-----------------------
Robert H. Wadsworth
Date: October 28, 1999
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND, INC.
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that, Charles A. Rizzo, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux,
Amy M. Olmert and Daniel O. Hirsch, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Flag Investors Emerging Growth
Fund, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Treasurer of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Charles A. Rizzo
--------------------
Charles A. Rizzo
Date: October 28, 1999
