[LOGO OMITTED]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE(REGISTRATION MARK)
[GRAPHIC OMITTED]
EMERGING GROWTH
FUND
Annual Report
October 31, 2000
<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Dear Fellow Shareholder:
We are pleased to provide you with the results of the Flag Investors
Emerging Growth Fund for the fiscal year ended October 31, 2000. This is the
seventh year that the current team has managed your portfolio. We think that
these results speak for themselves, outperforming the Russell 2000 Growth Index
and the Russell 2000 Index consistently.
ANNUALIZED RETURNS (%)1
ALL PERIODS ENDING
OCTOBER 31, 2000 1-YEAR 2-YEARS 3-YEARS 4-YEARS 5-YEARS 6-YEARS 7-YEARS
------------------ ------ ------- ------- ------- ------- ------- -------
FLAG INVESTORS EMERGING
GROWTH CLASS A 33.32% 30.46% 13.77% 16.70% 16.99% 19.50% 17.11%
Russell 2000
Growth Index 16.16% 22.55% 8.11% 11.24% 11.65% 13.09% 10.98%
Russell 2000 Index 17.41% 16.13% 5.94% 11.36% 12.39% 13.36% 11.29%
S&P 500 Index 6.09% 15.46% 17.60% 21.07% 21.67% 22.45% 19.61%
---------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE FUND'S AVERAGE
ANNUAL TOTAL RETURNS FOR THE 1-, 5- AND 10-YEAR PERIODS AS OF 10/31/00,
INCLUDING THE MAXIMUM 5.50% SALES CHARGE, WERE 25.98%, 15.68% AND 16.71%
RESPECTIVELY. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.These figures assume the reinvestment of dividend and capital
gain distributions and exclude the impact of any sales charges.
The Russell 2000 Index, Russell 2000 Growth Index and Standard & Poor's (S&P)
500 Index are unmanaged. The Russell 2000 Index tracks the common stock price
movement of 2,000 of the smallest companies in the Russell 3000 Index; the
Russell 2000 Growth Index is comprised of the Russell 2000 Index securities
with greater-than-average growth orientations and the S&P 500 Index is an
indicator of general market performance. Index returns do not reflect
expenses, which have been deducted from the Fund's returns.
As we have often discussed, our philosophy and resulting strategy involve
identifying what we believe to be the best growth companies with the largest
opportunities early in their life cycles and holding them for the long-term.
The value of this strategy, which is demonstrated over the last year, is
even more apparent when placed in the broader context of the hostile environment
for small growth stocks during these last seven years. Since December 1993, the
environment for implementing this strategy has been challenging. Small
companies' stocks have significantly under-performed their larger counterparts
as measured by the Russell 2000 performance relative to S&P 500. The point is
illustrated in the chart on the following page.
As we have seen again and again, because we are long-term investors and do
not attempt to "time the market" by trading in and out of cash, we feel the
1
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW
Russell 2000 Performance
Relative to S&P 500
Jan-94 0.9974
Feb-94 1.0215
Mar-94 1.0118
Apr-94 1.0049
May-94 0.9776
Jun-94 0.9683
Jul-94 0.9529
Aug-94 0.9664
Sep-94 0.9873
Oct-94 0.9617
Nov-94 0.9577
Dec-94 0.9689
Jan-95 0.9325
Feb-95 0.9349
Mar-95 0.9237
Apr-95 0.9172
May-95 0.8971
Jun-95 0.9222
Jul-95 0.944
Aug-95 0.9612
Sep-95 0.9387
Oct-95 0.8999
Nov-95 0.8983
Dec-95 0.9046
Jan-96 0.8739
Feb-96 0.8928
Mar-96 0.9023
Apr-96 0.9367
May-96 0.9492
Jun-96 0.9068
Jul-96 0.8658
Aug-96 0.8972
Sep-96 0.8825
Oct-96 0.8456
Nov-96 0.8186
Dec-96 0.857
Jan-97 0.8227
Feb-97 0.7965
Mar-97 0.7915
Apr-97 0.749
May-97 0.7845
Jun-97 0.7831
Jul-97 0.7591
Aug-97 0.8225
Sep-97 0.8369
Oct-97 0.8278
Nov-97 0.7861
Dec-97 0.7863
Jan-98 0.7654
Feb-98 0.7667
Mar-98 0.7594
Apr-98 0.756
May-98 0.7277
Jun-98 0.7008
Jul-98 0.651
Aug-98 0.6132
Sep-98 0.6214
Oct-98 0.5981
Nov-98 0.5935
Dec-98 0.5959
Jan-99 0.5796
Feb-99 0.5497
Mar-99 0.5368
Apr-99 0.5631
May-99 0.5851
Jun-99 0.5794
Jul-99 0.5817
Aug-99 0.563
Sep-99 0.579
Oct-99 0.5467
Nov-99 0.5679
Dec-99 0.597
Jan-00 0.6184
Feb-00 0.7344
Mar-00 0.6249
Apr-00 0.6055
May-00 0.5821
Jun-00 0.6178
Jul-00 0.6073
Aug-00 0.6155
Sep-00 0.6307
Oct-00 0.5896
Source: Russell/Mellon Analytical Services
full impact of the volatility. Thus, when the overall small-cap sector declined,
so did the Fund, as seen in the declines of 1998 and 2000. On both occasions,
the Fund's decline was 7%-8% greater than the index (Table 1, Columns I and II).
More importantly, when the market recovered, your holdings also rebounded more
than the benchmark, in general. The best examples of relative out-performance
during a recovery would be following market bottoms in October 1998, March 1999,
and October 2000, when the Fund out-performed the index by 18%, 24% and 49%
respectively, thus illustrating our point (Table 1, Columns III, IV and V). This
data, we think, highlights the need to focus on the longer term and hold the
shares of the Fund and its constituent companies. It is extremely important to
do so at times when overall market psychology is at its most negative. This is
possible because, we believe, they are among the best, fastest growing smaller
companies. They have real business models that we can understand and monitor. We
have again and again used market sell-offs as opportunities to add to your
holdings of some of the best in these businesses only to see their shares
recover quickly in the market.
The year 2000 is an excellent case in point. It has been characterized by
extreme volatility, due in part to the `dot.com' mania that started in the early
months of the year followed by the `dot.com' panic over the spring and summer.
Many of the new Internet companies announced shortfalls, downsizing or worse.
2
<PAGE>
--------------------------------------------------------------------------------
TABLE 1
<TABLE>
<CAPTION>
MARKET DECLINES MARKET RECOVERIES
(MODEST UNDER- (SUBSTANTIAL OUT-
PERFORMANCE) PERFORMANCE)
--------------------- --------------------------------
I II III IV V
04/21/98- 03/09/00- 10/08/98- 03/23/99- 10/12/00-
10/08/98 10/12/00 03/09/00 03/09/00 10/31/00
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Flag Investors Emerging
Growth Fund Class A
Return 1 -45.7% -40.1% 224.2% 130.6% 17.0%
Russell 2000
Growth Index Return -41.9% -37.1% 183.5% 99.9% 8.7%
Difference (%) -3.8% -3.0% +40.6% +30.8% +8.2%
Percentage Change (%) -7% -8% +18% +24% +49%
<FN>
----------------
1 Performance returns are cumulative and include the applicable 5.50% maximum
sales charge.
</FN>
</TABLE>
We took advantage of the last sell-off in Internet-related stocks, by
adding to some of the holdings whose shares had declined with the overall
market, but whose businesses remained strong. We increased our exposure in
Internet-related holdings such as Keynote Systems, EBenx, and Digital Insight,
as well as ATMI, ArthroCare and Getty Images in the broader technology category.
While the Fund has continued to enjoy strong relative out-performance, it
is our belief that the best is yet to come. We believe the Fund will realize its
true potential when the sector related impediments described in this letter are
removed. While we cannot predict what the catalyst for change will be or when,
we believe that the Fund is well positioned due to the excellent quality growth
companies in which we seek to invest. For this reason, we are very excited about
the future potential of the Fund, and hope you share in our enthusiasm.
/S/ SIGNATURE FREDERICK L. MESERVE, JR.
Frederick L. Meserve,Jr.
Portfolio Manager
November 22, 2000
3
<PAGE>
FIVE LARGEST HOLDINGS
--------------------------------------------------------------------------------
PERCENT OF
COMPANY NET ASSETS
--------------------------------------------------------------------------------
o SIPEX CORPORATION (SIPX) 6.59%
Makes high-performance analog integrated circuits for
everything from computers and cell phones to thermostats and
low voltage power devices used for Timex's Indiglo watches
(which used 1/10th of the battery power of its competitors).
The company's interface, low-power analog, and data converter
products serve the data processing, communications, consumer,
and industrial markets. Sipex is concentrating on three
high-growth areas: data communications and
telecommunications, battery-powered and portable products and
industrial controls and instrumentation.
o RSA SECURITY, INC. (RSAS) 6.22%
The leading provider of enterprise network and information
security solutions that help organizations conduct business
securely, protect corporate information assets and facilitate
business-to-business electronic commerce.
O WIND RIVER SYSTEMS,INC. (WIND) 5.32%
Develops, markets, supports and provides consulting services
for advanced software operating systems and development
tools. The company's services enable customers to create
real-time software applications for embedded computers. Wind
River's TORNADO product standardizes design across projects
and shortens product development cycles. Wind River is the
surviving company of a merger with Integrated Systems, Inc.
which closed in February 2000.
o I2 TECHNOLOGIES (ITWO) 4.74%
Acquired Aspect Development (ASDV) on June 12, creating one
of the largest software providers for e-business and
e-marketplace solutions. I2, the leading provider of
intelligent e-business solutions, and Aspect Development
collectively provide the most comprehensive suite of
e-business solutions and e-marketplace platforms available
today for both private and public marketplaces.
o DOCUMENTUM, INC. (DCTM) 4.71%
Develops content-management platforms and applications for
managing the content that organizations rely on to conduct
global operations and bring their businesses online. The
Company's Internet-scale content management solutions
facilitate e-business connections with customers, business
partners and employees.
4
<PAGE>
FUND PERFORMANCE
--------------------------------------------------------------------------------
GROWTH OF $100 SINCE DECEMBER 31, 1993 1*
$349 S&P 500 Index
$309 Emerging Growth Fund
$211 Russell 2000 Index
$208 Russell 2000 Growth Index
$207 Russell 2000 Value Index
FLAG EG S&P 500 Russell 2000 R2000 Value R2000 Growth
Dec-93 100 100 100 100 100
Jan-94 102.054 103.4 103.133 103.562 102.662
Feb-94 105.177 100.594 102.759 103.259 102.21
Mar-94 99.4247 96.2078 97.3463 98.6377 95.9315
Apr-94 96.3843 97.4412 97.9236 99.6074 96.0783
May-94 94.9048 99.0402 96.822 99.4649 93.9252
Jun-94 88.085 96.6128 93.5552 96.8838 89.9117
Jul-94 91.4542 99.7855 95.0932 98.6742 91.193
Aug-94 99.4244 103.877 100.39 102.555 97.8847
Sep-94 101.643 101.337 100.05 101.464 98.2949
Oct-94 105.998 103.614 99.6454 99.603 99.3417
Nov-94 101.89 99.8404 95.6187 95.5821 95.3223
Dec-94 105.03 101.321 98.1784 98.4505 97.5681
Jan-95 106.514 103.948 96.9384 97.974 95.5807
Feb-95 113.439 107.999 100.974 101.602 99.9975
Mar-95 115.583 111.186 102.705 102.097 102.918
Apr-95 112.533 114.461 104.987 105.133 104.466
May-95 114.264 119.036 106.792 107.387 105.835
Jun-95 126.631 121.801 112.332 111.057 113.128
Jul-95 132.814 125.84 118.802 115.109 121.945
Aug-95 138.338 126.156 121.26 118.529 123.45
Sep-95 146.087 131.479 123.426 120.299 125.992
Oct-95 140.894 131.01 117.906 115.494 119.794
Nov-95 143.641 136.761 122.86 120.084 125.082
Dec-95 144.25 139.395 126.101 123.804 127.854
Jan-96 140.683 144.14 125.964 124.625 126.795
Feb-96 153.211 145.476 129.891 126.577 132.577
Mar-96 153.733 146.877 132.534 129.234 135.198
Apr-96 171.135 149.042 139.621 132.76 145.577
May-96 178.878 152.886 145.123 136.121 153.042
Jun-96 172.441 153.469 139.164 134.514 143.098
Jul-96 151.211 146.688 127.01 127.363 125.628
Aug-96 163.391 149.782 134.384 132.889 134.929
Sep-96 175.311 158.212 139.636 136.517 141.877
Oct-96 166.524 162.575 137.484 138.101 135.757
Nov-96 171.92 174.864 143.148 145.532 139.532
Dec-96 170.51 171.4 146.9 150.256 142.253
Jan-97 182.957 182.109 149.835 152.565 145.806
Feb-97 168.485 183.537 146.202 154.013 137.001
Mar-97 153.827 175.996 139.301 149.886 127.329
Apr-97 154.365 186.503 139.691 152.089 125.852
May-97 183.232 197.857 155.225 164.195 144.767
Jun-97 192.815 206.721 161.884 172.503 149.675
Jul-97 197.423 223.17 169.411 179.749 157.338
Aug-97 205.656 210.668 173.291 182.607 162.059
Sep-97 223.116 222.206 185.976 194.75 174.991
Oct-97 209.64 214.784 177.811 189.453 164.474
Nov-97 208.277 224.727 176.656 191.537 160.559
Dec-97 205.798 228.585 179.747 198.03 161.523
Jan-98 203.699 231.113 176.907 194.445 159.375
Feb-98 224.232 247.781 189.98 206.209 173.447
Mar-98 240.87 260.47 197.808 214.582 180.732
Apr-98 235.932 263.09 198.896 215.633 181.835
May-98 209.508 258.565 188.175 208 168.633
Jun-98 213.887 269.068 188.57 206.835 170.353
Jul-98 189.846 266.189 173.296 190.64 156.129
Aug-98 147.168 227.704 139.642 160.785 120.094
Sep-98 164.564 242.29 150.576 169.87 132.272
Oct-98 181.399 261.998 156.716 174.913 139.171
Nov-98 192.718 277.878 164.927 179.648 149.967
Dec-98 219.506 293.889 175.132 185.282 163.537
Jan-99 209.716 306.18 177.462 181.076 170.896
Feb-99 189.268 296.663 163.087 168.709 152.952
Mar-99 190.877 308.533 165.631 167.325 158.397
Apr-99 198.493 320.482 180.472 182.602 172.384
May-99 200.855 312.916 183.107 188.208 172.66
Jun-99 214.453 330.283 191.383 195.021 181.759
Jul-99 204.074 319.971 186.14 190.399 176.143
Aug-99 201.972 318.371 179.252 183.449 169.555
Sep-99 215.383 309.648 179.288 179.78 172.827
Oct-99 231.45 329.249 180.023 176.185 177.252
Nov-99 258.275 335.933 190.771 177.101 195.987
Dec-99 327.7 355.719 212.366 182.538 230.54
Jan-00 295.159 337.862 208.947 177.755 228.396
Feb-00 428.335 331.476 243.444 188.616 281.543
Mar-00 352.434 363.895 227.401 189.503 251.953
Apr-00 316.873 352.941 213.711 190.621 229
Oct-00 308.75 349.33 211.41 207.19 207.86
ANNUALIZED RETURNS*
ALL PERIODS ENDING OCTOBER 31, 2000 1-YEAR 3-YEARS 5-YEARS
----------------------------------- ------ ------- -------
Flag Investors Emerging
Growth Fund Class A Shares 33.32% 13.77% 16.99%
Russell 2000 Growth Index 16.16% 8.11% 11.65%
Russell 2000 Value Index 17.30% 2.93% 12.33%
Russell 2000 Index 17.41% 5.94% 12.39%
NASDAQ Industrials Index 10.21% 13.31% 14.43%
Lipper Small-Cap Growth Funds Average 38.47% 17.56% 17.79%
S&P 500 Index 6.09% 17.60% 21.67%
----------
1 The current management team assumed responsibility for managing the Fund's
assets in November, 1993.
* PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.These figures assume the
reinvestment of dividend and capital gain distributions and exclude the impact
of any sales charges.
The Russell 2000 Value Index is comprised of securities found in the Russell
2000 Index with a less-than-average growth orientation. Companies in this
index have low price-to-book and price-to-earnings ratios.
The NASDAQ (OTC) Industrial Index is unmanaged and is comprised of more than
3,000 industrial issues covered by the NASDAQ Composite Index. Lipper figures
represent the average of the total returns reported by all of the mutual funds
designated by Lipper Inc. as falling into the catagory indicated. These
figures do not reflect sales charges.
5
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
ADDITIONAL PERFORMANCE INFORMATION
The shareholder letter included in this report contains statistics designed
to help you evaluate the performance of your Fund's management. To further
assist in this evaluation, the Securities and Exchange Commission (SEC) requires
that we include, on an annual basis, a line graph comparing the performance of
each of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent fiscal year.
Both the line graph and the SEC standardized total return figures include
the impact of the 5.50% maximum initial sales charge for theClass A Shares and
the contingent deferred sales charge applicable to the specified time period for
the Class B and Class C Shares. Returns would be higher for Class A Shares
investors who qualified for a lower initial sales charge or for Class B or Class
C Shares investors who continued to hold their shares past the end of the
specified time period.
While the graphs and the total return figures are required by SEC rules,
such comparisons are of limited utility since the total return of the Fund's
classes are adjusted for sales charges and expenses while the total return of
the indices are not. In fact, if you wished to replicate the total return of
these indices, you would have to purchase the securities they represent, an
effort that would require a considerable amount of money and would incur
expenses that are not reflected in the index results.
The SEC total return figures may differ from total return figures in the
shareholder letter because the SEC figures include the impact of sales charges
while the total return figures in the shareholder letter do not. Any performance
figures shown are for the full period indicated.
6
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT IN CLASS A SHARES 1
JUNE 15, 1988-OCTOBER 31, 2000
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW
Flag Investors S&P 500 NASDAQ (OTC)
Emerging Growth Fund Index 2 Composite Index 3
06/13/88 9,450 10,000 10,000
07/31/88 9,721 9,962 9,668
08/31/88 9,442 9,624 9,218
09/30/88 9,721 10,034 9,434
10/31/88 9,486 10,313 9,168
11/30/88 9,364 10,166 8,850
12/31/88 10,192 10,343 9,209
01/31/89 11,199 11,100 9,638
02/28/89 11,567 10,823 9,581
03/31/89 11,628 11,076 9,688
04/30/89 12,487 11,650 10,214
05/31/89 13,029 12,122 10,755
06/30/89 12,522 12,053 10,249
07/31/89 12,959 13,141 10,719
08/31/89 13,730 13,398 11,070
09/30/89 13,677 13,343 11,154
10/31/89 13,056 13,033 10,767
11/30/89 12,819 13,299 10,822
12/31/89 13,474 13,618 10,888
01/31/90 11,635 12,705 10,093
02/28/90 11,985 12,868 10,452
03/31/90 12,395 13,209 10,949
04/30/90 11,975 12,881 10,677
05/31/90 13,544 14,136 11,889
06/30/90 13,554 14,042 12,128
07/31/90 12,585 13,997 11,491
08/31/90 10,666 12,731 9,891
09/30/90 9,556 12,111 8,955
10/31/90 8,926 12,059 8,570
11/30/90 10,226 12,838 9,464
12/31/90 10,636 13,197 9,868
01/31/91 11,095 13,771 11,150
02/28/91 12,295 14,755 12,271
03/31/91 13,095 15,112 13,246
04/30/91 12,885 15,149 13,087
05/31/91 13,684 15,801 13,757
06/30/91 12,555 15,078 12,810
07/31/91 13,524 15,780 13,537
08/31/91 14,494 16,154 14,274
09/30/91 14,534 15,885 14,344
10/31/91 15,224 16,097 14,875
11/30/91 14,074 15,449 14,332
12/31/91 15,913 17,216 16,258
01/31/92 16,383 16,896 17,302
02/29/92 16,693 17,115 17,546
03/31/92 15,274 16,783 16,430
04/30/92 14,414 17,277 15,300
05/31/92 14,204 17,361 15,419
06/30/92 13,245 17,103 14,622
07/31/92 13,714 17,802 15,085
08/31/92 13,274 17,437 14,512
09/30/92 13,384 17,643 15,088
10/31/92 13,524 17,705 15,817
11/30/92 14,484 18,309 17,127
12/31/92 14,452 18,534 17,618
01/31/93 14,379 18,689 18,060
02/28/93 13,762 18,944 16,944
03/31/93 14,296 19,343 17,343
04/30/93 13,501 18,875 16,507
05/31/93 14,306 19,379 17,824
06/30/93 13,971 19,435 17,731
07/31/93 13,668 19,358 17,430
08/31/93 14,337 20,091 18,392
09/30/93 14,682 19,937 18,960
10/31/93 14,651 20,349 19,379
11/30/93 13,752 20,156 19,026
12/31/93 14,340 20,400 19,586
01/31/94 14,635 21,094 20,365
02/28/94 15,083 20,522 20,286
03/31/94 14,258 19,627 18,935
04/30/94 13,822 19,878 18,579
05/31/94 13,610 20,204 18,137
06/30/94 12,632 19,709 17,360
07/31/94 13,115 20,356 17,713
08/31/94 14,258 21,190 18,746
09/30/94 14,576 20,671 18,897
10/31/94 15,201 21,136 19,149
11/30/94 14,611 20,367 18,389
12/31/94 15,062 20,668 18,324
01/31/95 15,275 21,204 18,229
02/28/95 16,268 22,031 18,887
03/31/95 16,575 22,681 19,489
04/30/95 16,138 23,347 19,727
05/31/95 16,386 24,281 20,094
06/30/95 18,159 24,845 21,515
07/31/95 19,046 25,669 23,174
08/31/95 19,838 25,734 23,357
09/30/95 20,949 26,820 23,863
10/31/95 20,205 26,723 22,871
11/30/95 20,599 27,896 23,609
12/31/95 20,686 28,435 23,451
01/31/96 20,174 29,401 23,569
02/29/96 21,971 29,675 24,459
03/31/96 22,046 29,960 24,912
04/30/96 24,541 30,400 27,199
05/31/96 25,652 31,184 28,776
06/30/96 24,728 31,303 26,992
07/31/96 21,684 29,919 23,993
08/31/96 23,431 30,551 25,546
09/30/96 25,140 32,271 26,925
10/31/96 23,880 33,161 26,171
11/30/96 24,654 35,668 27,127
12/31/96 24,452 34,962 26,975
01/31/97 26,243 37,147 28,175
02/28/97 24,166 37,437 26,656
03/31/97 22,063 35,898 24,745
04/30/97 22,141 38,041 24,233
05/31/97 26,281 40,358 27,570
06/30/97 27,657 42,170 28,750
07/31/97 28,319 45,523 30,644
08/31/97 29,500 42,973 31,211
09/30/97 32,005 45,328 33,430
10/31/97 30,071 43,814 30,840
11/30/97 29,877 45,843 30,396
12/31/97 29,522 46,631 29,681
01/31/98 29,222 47,149 29,479
02/28/98 32,167 50,549 31,861
03/31/98 34,553 53,137 33,104
04/30/98 33,844 53,673 33,773
05/31/98 30,054 52,750 32,351
06/30/98 30,681 54,892 32,428
07/31/98 27,231 54,304 30,606
08/31/98 21,108 46,463 23,554
09/30/98 23,604 49,427 25,081
10/31/98 26,017 53,451 27,110
11/30/98 27,640 56,695 29,544
12/31/98 31,472 59,961 31,707
01/31/99 30,067 62,467 34,231
02/28/99 27,135 60,524 31,698
03/31/99 27,367 62,945 33,710
04/30/99 28,458 65,381 36,225
05/31/99 28,785 63,838 35,722
06/30/99 30,735 67,381 39,655
07/31/99 29,249 65,279 38,544
08/31/99 28,949 64,959 38,055
09/30/99 30,872 63,179 39,128
10/31/99 33,217 67,178 40,716
11/30/99 37,021 68,556 47,076
12/31/99 46,973 72,580 54,434
01/31/00 42,309 68,936 53,482
02/29/00 61,398 67,633 63,788
03/31/00 50,516 74,248 58,838
04/30/00 45,418 72,013 51,566
05/31/00 42,085 70,537 44,965
06/30/00 46,469 72,279 51,215
07/31/00 43,276 71,152 48,199
08/31/00 45,051 75,570 55,072
09/30/00 40,631 71,580 49,757
10/31/00 41,848 71,279 44,871
AVERAGE ANNUAL TOTAL RETURN 1
PERIODS ENDED
10/31/00 1-YEAR 5-YEARS 10-YEARS SINCE INCEPTION 4
------------------ ------ ------- -------- -----------------
Class A Shares 25.98% 15.68% 16.71% 12.26%
-------------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions and include the Fund's
maximum 5.50% sales charge. Performance figures for the classes differ because
each class maintains a distinct sales charge and expense structure.
2 The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. Benchmark returns
are for the period beginning June 30, 1988.
3 The NASDAQ Composite Index is a market capitalization price only index that
tracks the performance of domestic common stocks traded in the regular NASDAQ
market and which are classified as industrial companies. Benchmark returns are
for the period beginning June 30, 1988.
4 June 15, 1988.
7
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
ADDITIONAL PERFORMANCE INFORMATION (CONTINUED)
CHANGE IN VALUE OF A $10,000 INVESTMENT IN CLASS B SHARES 1
JUNE 20, 1996-OCTOBER 31, 2000
Flag Investors S&P 500 NASDAQ (OTC)
Growth B Index 2 Composite Index 3
06/30/96 10,000 10,000 10,000
07/31/96 9,022 9,558 8,889
08/31/96 9,761 9,760 9,464
09/30/96 10,468 10,309 9,975
10/31/96 9,932 10,594 9,696
11/30/96 10,250 11,395 10,050
12/31/96 10,133 11,169 9,993
01/31/97 10,864 11,867 10,438
02/28/97 10,003 11,960 9,876
03/31/97 9,126 11,468 9,168
04/30/97 9,148 12,153 8,978
05/31/97 10,853 12,893 10,214
06/30/97 11,416 13,472 10,651
07/31/97 11,681 14,543 11,353
08/31/97 12,163 13,728 11,563
09/30/97 13,186 14,481 12,385
10/31/97 12,385 13,997 11,425
11/30/97 12,293 14,645 11,261
12/31/97 12,139 14,897 10,996
01/31/98 12,014 15,062 10,921
02/28/98 13,215 16,148 11,804
03/31/98 14,194 16,975 12,264
04/30/98 13,892 17,146 12,512
05/31/98 12,327 16,852 11,985
06/30/98 12,577 17,536 12,014
07/31/98 11,155 17,348 11,339
08/31/98 8,645 14,843 8,726
09/30/98 9,658 15,790 9,292
10/31/98 10,637 17,075 10,044
11/30/98 11,291 18,112 10,945
12/31/98 12,851 19,155 11,747
01/31/99 12,270 19,956 12,682
02/28/99 11,064 19,335 11,743
03/31/99 11,149 20,108 12,489
04/30/99 11,587 20,887 13,421
05/31/99 11,718 20,394 13,234
06/30/99 12,498 21,526 14,691
07/31/99 11,889 20,854 14,280
08/31/99 11,758 20,752 14,098
09/30/99 12,526 20,183 14,496
10/31/99 13,471 21,461 15,085
11/30/99 15,008 21,901 17,441
12/31/99 19,030 23,186 20,167
01/31/00 17,129 22,022 19,814
02/29/00 24,833 21,606 23,632
03/31/00 20,416 23,719 21,798
04/30/00 18,345 23,005 19,104
05/31/00 16,988 22,534 16,659
06/30/00 18,749 23,090 18,974
07/31/00 17,450 22,730 17,856
08/31/00 18,827 24,142 20,403
09/30/00 16,970 22,867 18,434
10/31/00 17,625 22,771 16,624
AVERAGE ANNUAL TOTAL RETURN 1
PERIODS ENDED 10/31/00 1-YEAR SINCE INCEPTION 4
---------------------- ------ -----------------
Class B Shares 27.32% 13.87%
------------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions and include the Fund's
contingent deferred sales charge applicable to the specified time periods. The
contingent deferred sales charge for Class B shares declines over time from a
maximum of 5.00% to 0% after six years.Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure.
2 The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. Benchmark returns
are for the period beginning June 30, 1996.
3 The NASDAQ Composite Index is a market capitalization price only index that
tracks the performance of domestic common stocks traded in the regular NASDAQ
market and which are classified as industrial companies. Benchmark returns are
for the period beginning June 30, 1996.
4 June 20, 1996.
8
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT IN CLASS C SHARES 1
JULY 31, 2000-OCTOBER 31, 2000
Flag Investors Emerging NASDAQ National Market
Growth Fund S&P 500 Index 2 Composite Index 3
07/31/00 10,000 10,000 10,000
08/31/00 10,909 10,621 11,426
09/30/00 9,841 10,060 10,323
10/31/00 10,115 10,018 9,310
CUMMULATIVE TOTAL RETURN 1
PERIODS ENDED 10/31/00 SINCE INCEPTION 4
---------------------- -----------------
Class C Shares 1.15%
----------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions and include the Fund's
contingent deferred sales charge applicable to the specified time periods. The
contingent deferred sales charge for Class C shares is 1.00% for shares
redeemed within one year of purchase. Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure.
2 The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. Benchmark returns
are for the period beginning July 31, 2000.
3 The NASDAQ Composite Index is a market capitalization price only index that
tracks the performance of domestic common stocks traded in the regular NASDAQ
market and which are classified as industrial companies. Benchmark returns are
for the period beginning July 31, 2000.
4 July 31, 2000.
9
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
ADDITIONAL PERFORMANCE INFORMATION (CONCLUDED)
CHANGE IN VALUE OF A $500,000 INVESTMENT IN INSTITUTIONAL SHARES 1
NOVEMBER 2, 1995-OCTOBER 31, 2000
Flag Investors Emerging S&P 500 NASDAQ (OTC)
Growth Fund Index 2 Composite Index 3
11/2/95 500,000 500,000 500,000
11/30/95 498,900 521,950 516,150
12/31/95 503,600 532,024 512,692
01/31/96 491,400 550,112 515,255
02/29/96 534,950 555,228 534,732
03/31/96 537,050 560,559 544,624
04/30/96 597,900 568,799 594,621
05/31/96 625,000 583,474 629,109
06/30/96 602,500 585,691 590,104
07/31/96 528,550 559,804 524,544
08/31/96 571,150 571,615 558,482
09/30/96 613,450 603,797 588,640
10/31/96 582,400 620,462 572,158
11/30/96 601,600 667,369 593,041
12/31/96 596,950 654,155 589,720
01/31/97 640,650 695,040 615,963
02/28/97 590,000 700,461 582,763
03/31/97 539,050 671,672 540,979
04/30/97 540,950 711,771 529,780
05/31/97 642,250 755,118 602,731
06/30/97 676,400 789,023 628,528
07/31/97 692,550 851,750 669,948
08/31/97 721,700 804,052 682,342
09/30/97 782,750 848,114 730,856
10/31/97 735,900 819,787 674,215
11/30/97 731,150 857,743 664,506
12/31/97 722,850 872,496 648,890
01/31/98 715,500 882,181 644,478
02/28/98 787,650 945,786 696,552
03/31/98 846,850 994,211 723,717
04/30/98 828,250 1,004,250 738,336
05/31/98 735,450 986,979 707,252
06/30/98 751,100 1,027,050 708,950
07/31/98 666,650 1,016,060 669,107
08/31/98 517,000 869,342 514,945
09/30/98 578,200 924,806 548,313
10/31/98 637,400 1,000,080 592,672
11/30/98 677,300 1,060,790 645,894
12/31/98 771,350 1,121,890 693,173
01/31/99 737,100 1,168,790 748,349
02/28/99 665,650 1,132,440 692,972
03/31/99 671,300 1,177,730 736,975
04/30/99 697,900 1,223,310 791,954
05/31/99 706,550 1,194,440 780,946
06/30/99 754,400 1,260,730 866,928
07/31/99 718,150 122,140 842,654
08/31/99 710,850 1,215,410 831,952
09/30/99 758,050 1,182,110 855,413
10/31/99 815,900 1,256,940 890,143
11/30/99 909,700 1,282,710 1,029,180
12/31/99 1,154,350 13,580 1,190,040
01/31/00 1,039,950 1,289,830 1,169,220
02/29/00 1,509,750 1,265,450 1,394,530
03/31/00 1,242,450 1,389,210 1,286,310
04/30/00 111,710 134,740 1,127,320
05/31/00 1,035,550 1,319,780 983,026
06/30/00 114,340 1,352,380 1,119,670
07/31/00 106,490 1,3312,800 1,053,720
08/31/00 1,173,450 1,413,950 1,203,980
09/30/00 1,058,750 1,339,290 1,087,790
10/31/00 1,090,050 1,333,669 980,973
AVERAGE ANNUAL TOTAL RETURN 1
PERIODS ENDED 10/31/00 1-YEAR SINCE INCEPTION 4
--------------------------- ------ -----------------
Institutional Shares 33.65% 16.89%
------------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions. Performance figures
for the classes differ because each class maintains a distinct sales charge
and expense structure.
2 The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. Benchmark returns
are for the period beginning October 31, 1995.
3 The NASDAQ Composite Index is a market capitalization price only index that
tracks the performance of domestic common stocks traded in the regular NASDAQ
market and which are classified as industrial companies. Benchmark returns are
for the period beginning October 31, 1995.
4 November 2, 1995.
10
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT IN BROWN INVESTMENT
ADVISORY & TRUST (BIAT) SHARES 1 MAY 9, 1997-OCTOBER 31, 2000
Flag Investors Emerging S&P 500 NASDAQ (OTC)
Growth Fund Index Composite Index
05/09/97 10,000 10,000 10,000
06/30/97 11,459 10,449 10,428
07/31/97 11,733 11,280 11,115
08/31/97 12,232 10,648 11,321
09/30/97 13,262 11,232 12,126
10/31/97 12,468 10,856 11,186
11/30/97 12,387 11,359 11,025
12/31/97 12,246 11,554 10,766
01/31/98 12,117 11,683 10,693
02/28/98 13,345 12,525 11,557
03/31/98 14,343 13,166 12,007
04/30/98 14,044 13,299 12,250
05/31/98 12,477 13,071 11,734
06/30/98 12,742 13,601 11,762
07/31/98 11,311 13,456 11,101
08/31/98 8,775 11,513 8,544
09/30/98 9,806 12,247 9,097
10/31/98 10,815 13,244 9,833
11/30/98 11,485 14,048 10,716
12/31/98 13,086 14,857 11,501
01/31/99 12,505 15,478 12,416
02/28/99 11,288 14,997 11,497
03/31/99 11,390 15,597 12,227
04/30/99 11,840 16,200 13,139
05/31/99 11,981 15,818 12,957
06/30/99 12,799 16,696 14,383
07/31/99 12,179 16,175 13,981
08/31/99 12,060 16,096 13,803
09/30/99 12,861 15,655 14,192
10/31/99 13,841 16,646 14,768
11/30/99 15,430 16,987 17,075
12/31/99 19,583 17,984 19,744
01/31/00 17,644 17,081 19,399
02/29/00 25,607 16,758 23,137
03/31/00 21,070 18,397 21,341
04/30/00 18,946 17,844 18,704
05/31/00 17,563 17,478 16,310
06/30/00 19,398 17,909 18,577
07/31/00 18,067 17,630 17,482
08/31/00 19,907 18,725 19,975
09/30/00 17,957 17,736 18,048
10/31/00 18,501 17,662 16,275
AVERAGE ANNUAL TOTAL RETURN 1
PERIODS ENDED 10/31/00 1-YEAR SINCE INCEPTION 4
--------------------------- ------ -----------------
BIAT Shares 33.62% 19.34%
------------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.These figures assume the
reinvestment of dividend and capital gain distributions. Performance figures
for the classes differ because each class maintains a distinct sales charge
and expense structure.
2 The Standard & Poor's 500 Composite Index is an unmanaged index that is a
widely recognized benchmark of general market performance. Benchmark returns
are for the period beginning May 31, 1997.
3 The NASDAQ Composite Index is a market capitalization price only index that
tracks the performance of domestic common stocks traded in the regular NASDAQ
market and which are classified as industrial companies. Benchmark returns are
for the period beginning May 31, 1997.
4 May 9, 1997.
11
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2000
PERCENT OF
SHARES SECURITY VALUE NET ASSETS
--------------------------------------------------------------------------------
COMMON STOCK -- 98.62%
BASIC MATERIALS -- 4.49%
282,067 ATMI, Inc.1 $ 5,324,015 3.10%
63,810 Trex Company, Inc.1 2,384,899 1.39
-------------- -----
7,708,914 4.49
BUSINESS SERVICES -- 14.96%
51,957 Costar Group, Inc.1 1,623,656 0.94
95,248 Documentum, Inc.1 8,096,080 4.71
47,864 I2 Technologies, Inc.1 8,136,880 4.74
155,214 MemberWorks, Inc.1 5,335,481 3.11
208,993 QRS Corporation1 1,763,378 1.03
263,441 Sitel Corp.1 740,928 0.43
-------------- -----
25,696,403 14.96
CAPITAL GOODS -- 4.59%
157,936 Advanced Lighting Technologies, Inc.1 1,885,361 1.10
100,029 Astropower, Inc.1 5,826,689 3.39
70,144 Railworks Corp.1 179,913 0.10
-------------- -----
7,891,963 4.59
CONSUMER CYCLICALS -- 9.61%
195,837 Apollo Group, Inc. - Class A 1 7,662,123 4.46
62,438 Bright Horizons Family Solutions 1 1,560,950 0.91
27,750 I-Many, Inc.1 572,344 0.33
272,191 Sunrise Assisted Living, Inc.1 6,362,465 3.70
14,800 Tweeter Home Entertainment
Group, Inc.1 356,125 0.21
-------------- -----
16,514,007 9.61
CONSUMER STAPLES -- 7.34%
7,074 Krispy Kreme Doughnuts, Inc.1 697,231 0.41
248,293 O'Charleys, Inc.1 3,631,285 2.11
153,680 Papa John's International, Inc.1 3,861,210 2.25
98,908 Starbucks Corp.1 4,419,951 2.57
-------------- -----
12,609,677 7.34
12
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED) OCTOBER 31, 2000
PERCENT OF
SHARES SECURITY VALUE NET ASSETS
--------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
HEALTH CARE -- 10.58%
316,871 ArthroCare Corp.1 $ 7,189,011 4.18%
27,452 Collagenex Pharmaceuticals, Inc.1 132,971 0.08
22,387 Emisphere Technologies, Inc.1 566,671 0.33
35,970 Epix Medical, Inc.1 379,933 0.22
29,061 Guilford Pharmaceuticals, Inc.1 717,443 0.42
86,850 Incyte Pharmaceuticals, Inc.1 3,180,881 1.85
40,100 Sonosight, Inc.1 511,275 0.30
1,021,996 US Oncology, Inc.1 5,493,228 3.20
-------------- -----
18,171,413 10.58
MEDIA/TELECOMMUNICATIONS -- 8.21%
156,974 Getty Images, Inc.1 4,983,924 2.90
208,494 Latitude Communications 1 1,198,841 0.70
215,417 Tekelec, Inc.1 7,930,038 4.61
-------------- -----
14,112,803 8.21
TECHNOLOGY -- 32.91%
67,977 Alpha Industries, Inc.1 2,710,583 1.58
241,686 BroadVision, Inc.1 7,190,159 4.19
29,700 Digimarc Corp.1 443,644 0.26
60,211 Digital Insight Corp.1 1,162,825 0.68
80,542 EBenx, Inc.1 961,470 0.56
212,913 Eclipsys Corp.1 5,256,290 3.06
98,263 Keynote Systems, Inc.1 2,358,312 1.37
92,623 Novadigm, Inc.1 926,230 0.54
184,311 RSA Security, Inc.1 10,690,038 6.22
287,593 Sipex Corp.1 11,323,974 6.59
105,993 Synopsys, Inc.1 3,696,506 2.15
47,650 Synplicity, Inc.1 601,581 0.35
2,100 Tripath Technology, Inc.1 61,425 0.04
222,824 Wind River Systems 1 9,149,711 5.32
-------------- -----
56,532,748 32.91
13
<PAGE>
SHARES/ PERCENT OF
PAR (000) SECURITY VALUE NET ASSETS
--------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
TRANSPORTATION -- 5.93%
103,603 Atlantic Coast Airlines, Inc.1 $ 3,703,807 2.16%
157,522 Forward Air Corp.1 6,478,092 3.77
------------ ------
10,181,899 5.93
TOTAL COMMON STOCK
(Cost $98,481,878) 169,419,827 98.62
------------ ------
REPURCHASE AGREEMENTS -- 1.74%
$2,991 Goldman Sachs & Co.,
Dated 10/31/00, 6.50%
principal & interest in the
amount of $2,991,540 due
11/01/00, collateralized by
US Treasury Note with a par
value of $2,871,000, coupon
rate of 6.50%, due 2/15/10,
with a market value of
$3,051,131 2,991,000 1.74%
------------ ------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,991,000) 2,991,000 1.74%
------------ ------
TOTAL INVESTMENTS
(Cost $101,472,878)2 172,410,827 100.36%
LIABILITIES IN EXCESS OF OTHER ASSETS (624,969) (0.36)
------------ ------
NET ASSETS -- 100.0% $171,785,858 100.00%
============ ======
----------
1 Non-income producing security.
2 Aggregate cost for federal tax purposes is $102,971,382.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31,
--------------------------------------------------------------------------------
2000
Assets:
Investments, at value (cost $101,472,878) ..................... $172,410,827
Receivable for shares of beneficial interest subscribed ....... 7,093
Receivable for securities sold ................................ 222,146
Dividend and interest receivable .............................. 540
Prepaid expenses and other .................................... 45,687
------------
Total assets ................................................ 172,686,293
------------
Liabilities:
Payable for shares of beneficial interest redeemed ............ 514,642
Payable for securities purchased .............................. 119,507
Accrued expenses and other .................................... 266,286
------------
Total liabilities ........................................... 900,435
------------
Net assets ....................................................... $171,785,858
------------
Composition of Net Assets
Paid-in capital ............................................... 81,465,063
Accumulated net realized gain from investment transactions .... 19,394,100
Net unrealized appreciation on investments .................... 70,937,949
Accumulated net investment loss ............................... (11,254)
------------
Net assets ....................................................... 171,785,858
------------
Net Asset Value Per Share:
Flag Investors Class A Shares
($84,321,976 (DIVIDE) 2,666,918 shares) ........................... $31.62
======
Flag Investors Class B Shares
($8,135,953 (DIVIDE) 267,067 shares) .............................. $30.46
======
Flag Investors Class C Shares
($102,138 (DIVIDE) 3,352 shares) .................................. $30.47
======
Flag Investors Institutional Shares
($2,358,071 (DIVIDE) 73,832 shares) ............................... $31.94
======
BIAT Shares
($76,867,720 (DIVIDE) 2,405,453 shares) ........................... $31.96
======
Maximum OfferingPrice Per Share:
Flag Investors Class A Shares
($31.62 (DIVIDE) 0.945) ........................................... $33.46
======
Flag Investors Class B Shares ....................................... $30.46
======
Flag Investors Class C Shares ....................................... $30.47
======
Flag Investors Institutional Shares ................................. $31.94
======
BIAT Shares ......................................................... $31.96
======
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
OCTOBER 31,
--------------------------------------------------------------------------------
2000
Investment Income:
Dividends ................................................. $ 6,155
Interest .................................................. 335,111
------------
Total investment income ......................... 341,266
------------
Expenses:
Investment advisory fees .................................. 1,572,346
Distribution fees
Flag Investors Class A Shares ........................... 226,155
Flag Investors Class B Shares ........................... 63,525
Flag Investors Class C Shares ........................... 254
Professional fees ......................................... 125,566
Transfer agent fees ....................................... 88,746
Accounting fees ........................................... 67,766
Shareholder reporting fees ................................ 49,260
Registration fees ......................................... 49,013
Custodian fees ............................................ 25,530
Directors' fees ........................................... 1,818
Miscellaneous ............................................. 6,678
------------
Total expenses .................................. 2,276,657
------------
Expenses in excess of investment income ...................... (1,935,391)
------------
Realized and unrealized gain on investments:
Net realized gain from securities transactions ............ 24,275,644
Change in unrealized appreciation/depreciation
of investments .......................................... 25,111,745
------------
Net gain on investments ................................... 49,387,389
------------
Net increase in net assets resulting from operations ......... $ 47,451,998
============
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31,
--------------------------------------------------------------------------------
2000 1999
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of investment income ...... $ (1,935,391) $ (1,502,607)
Net realized gain from securities transactions 24,275,644 6,595,357
Change in unrealized appreciation/depreciation
of investments ............................. 25,111,745 28,398,384
------------- -------------
Net increase in net assets resulting
from operations ............................ 47,451,998 33,491,134
------------- -------------
Dividends to Shareholders from:
Net realized short-term gains:
Flag Investors Class A Shares .............. (1,000,134) --
Flag Investors Class B Shares .............. (56,275) --
Flag Investors Institutional Shares ........ (111,186) --
BIAT Shares ................................ (934,598) --
Net realized long-term gains:
Flag Investors Class A Shares .............. (1,111,273) --
Flag Investors Class B Shares .............. (62,528) --
Flag Investors Institutional Shares ........ (123,540) --
BIAT Shares ................................ (1,038,442) --
------------- -------------
Total distributions .......................... (4,437,976) --
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares ................. 27,137,624 62,295,373
Value of shares issued in
reinvestment of dividends .................. 4,247,011 --
Cost of shares repurchased ................... (49,110,205) (72,562,378)
------------- -------------
Decrease in net assets derived from
capital share transactions ................. (17,725,570) (10,267,005)
------------- -------------
Total increase in net assets ................. 25,288,452 23,224,129
Net Assets:
Beginning of year ............................ 146,497,406 123,273,277
------------- -------------
End of year (including accumulated net
investment loss of $(11,254) and ($6,233),
respectively) .............................. $ 171,785,858 $ 146,497,406
============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- FLAG INVESTORS CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31,
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of year ...................... $ 24.36 $ 19.08 $ 23.17 $ 19.14 $ 17.09
------- ------- ------- -------- --------
Income from Investment Operations:
Expenses in excess of investment income ................... (0.39) (0.28) (0.22)1 (0.18) (0.15)
Net realized and unrealized gain (loss) on investments .... 8.41 5.56 (2.82) 4.95 3.10
------- ------- ------- -------- --------
Total from investment operations .......................... 8.02 5.28 (3.04) 4.77 2.95
------- ------- ------- -------- --------
Less Distributions:
Distributions from net realized short-term gains .......... (0.36) -- (0.21) (0.21) (0.30)
Distributions from net realized long-term gains ........... (0.40) -- (0.84) (0.53) (0.60)
------- ------- ------- -------- --------
Total distributions ....................................... (0.76) -- (1.05) (0.74) (0.90)
------- ------- ------- -------- --------
Net asset value at end of year ............................ $ 31.62 $ 24.36 $ 19.08 $ 23.17 $ 19.14
======= ======= ======= ======== ========
Total return 2 ............................................... 33.32% 27.67% (13.48)% 25.93% 18.19%
Ratios to Average Daily Net Assets:
Expenses .................................................. 1.32% 1.40% 1.41% 1.44% 1.50%
Expenses in excess of investment income ................... (1.14)% (1.19)% (1.03)% (0.97)% (0.83)%
Supplemental Data:
Net assets at end of year (000s) .......................... $84,322 $70,236 $65,247 $71,123 $45,325
Portfolio turnover rate ................................... 36% 38% 23% 42% 24%
<FN>
----------
1 Calculated based on average shares.
2 Total return excludes the effect of sales charge.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18-19
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- FLAG INVESTORS CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JUNE 20, 1996 1
YEAR ENDED THROUGH
OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31, OCTOBER 31,
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ..................... 23.67 $18.69 $22.88 $19.10 $19.22
------ ------ ------ ------ ------
Income from Investment Operations:
Expenses in excess of investment income .................... (0.45) (0.55) (0.37)2 (0.18) (0.12)
Net realized and unrealized gain (loss) on investments ..... 8.00 5.53 (2.77) 4.70 --
------ ------ ------ ------ ------
Total from investment operations ........................... 7.55 4.98 (3.14) 4.52 (0.12)
------ ------ ------ ------ ------
Less Distributions:
Distributions from net realized short-term gains ........... (0.36) -- (0.21) (0.21) --
Distributions from net realized long-term gains ............ (0.40) -- (0.84) (0.53) --
------ ------ ------ ------ ------
Total distributions ........................................ (0.76) -- (1.05) (0.74) --
------ ------ ------ ------ ------
Net asset value at end of period ........................... $30.46 $23.67 $18.69 $22.88 $19.10
====== ====== ====== ====== ======
Total return 3 ................................................ 32.32% 26.65% (14.11)% 24.69% (0.62)%
Ratios to Average Daily Net Assets:
Expenses ................................................... 2.07% 2.15% 2.16% 2.19% 2.25%4
Expenses in excess of investment income .................... (1.89)% (1.94)% (1.77)% (1.73)% (1.67)%4
Supplemental Data:
Net assets at end of period (000s) ......................... $8,136 $3,662 $5,155 $5,719 $ 772
Portfolio turnover rate .................................... 36% 38% 23% 42% 24%
<FN>
-----------
1 Commencement of operations.
2 Calculation based on average shares.
3 Total return excludes the effect of sales charge.
4 Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20-21
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- FLAG INVESTORS CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD) FOR THE PERIOD
JULY 31, 2000 1
THROUGH
OCTOBER 31,
--------------------------------------------------------------------------------
2000
Per Share Operating Performance:
Net asset value at beginning of period ......................... $29.83
------
Income from Investment Operations:
Expenses in excess of investment income ........................ (0.14)
Net realized and unrealized gain on investments ................ 0.78
------
Total from investment operations ............................... 0.64
------
Less Distributions:
Distributions from net realized short-term gains ............... --
Distributions from net realized long-term gains ................ --
------
Total distributions ............................................ --
------
Net asset value at end of period ............................... $30.47
======
Total return 2 .................................................... 2.15%3
Ratios to Average Daily Net Assets:
Expenses ....................................................... 2.07%4
Expenses in excess of investment income ........................ (1.89)%4
Supplemental Data:
Net assets at end of period (000s) ............................. $102
Portfolio turnover rate ........................................ 36%
-----------
1 Commencement of operations.
2 Total return excludes the effect of sales charges.
3 Performance since inception.
4 Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
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<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- FLAG INVESTORS INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOV. 2, 1995 1
YEAR ENDED THROUGH
OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31, OCTOBER 31,
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ................... $24.54 $ 19.17 $ 23.25 $ 19.15 $ 17.45
------ ------- ------- ------- -------
Income from Investment Operations:
Expenses in excess of investment income .................. (0.73) (0.21) (0.17)2 (0.26) (0.12)
Net realized and unrealized gain (loss) on investments ... 8.89 5.58 (2.86) 5.10 2.72
------ ------- ------- ------- -------
Total from investment operations ......................... 8.16 5.37 (3.03) 4.84 2.60
------ ------- ------- ------- -------
Less Distributions:
Distributions from net realized short-term gains ......... (0.36) -- (0.21) (0.21) (0.30)
Distributions from net realized long-term gains .......... (0.40) -- (0.84) (0.53) (0.60)
------ ------- ------- ------- -------
Total distributions ...................................... (0.76) -- (1.05) (0.74) (0.90)
------ ------- ------- ------- -------
Net asset value at end of period ......................... $31.94 $ 24.54 $ 19.17 $ 23.25 $ 19.15
====== ======= ======= ======= =======
Total return ................................................ 33.65% 28.01% (13.39)% 26.36% 16.48%
Ratios to Average Daily Net Assets:
Expenses ................................................. 1.07% 1.15% 1.16% 1.19% 1.25%3
Expenses in excess of investment income .................. (0.88)% (0.94)% (0.76)% (0.74)% (0.61)%3
Supplemental Data:
Net assets at end of period (000s) ....................... $2,358 $7,578 $6,243 $13,068 $19,751
Portfolio turnover rate .................................. 36% 38% 23% 42% 24%
<FN>
---------
1 Commencement of operations.
2 Calculation based on average shares.
3 Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24-25
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- BIAT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MAY 9, 1997 1
YEAR ENDED THROUGH
OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31, OCTOBER 31,
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .................... $ 24.56 $ 19.19 $ 23.24 $ 18.64
------- ------- ------- -------
Income from Investment Operations:
Expenses in excess of investment income ................... (0.30) (0.21) (0.17)2 (0.06)
Net realized and unrealized gain (loss) on investments .... 8.46 5.58 (2.83) 4.66
------- ------- ------- -------
Total from investment operations .......................... 8.16 5.37 (3.00) 4.60
------- ------- ------- -------
Less Distributions:
Distributions from net realized short-term gains .......... (0.36) -- (0.21) --
Distributions from net realized long-term gains ........... (0.40) -- (0.84) --
------- ------- ------- -------
Total distributions ....................................... (0.76) -- (1.05) --
------- ------- ------- -------
Net asset value at end of period .......................... $ 31.96 $ 24.56 $ 19.19 $ 23.24
======= ======= ======= =======
Total return ................................................. 33.62% 27.98% (13.26)% 24.68%
Ratios to Average Daily Net Assets:
Expenses .................................................. 1.07% 1.15% 1.16% 1.19%3
Expenses in excess of investment income ................... (0.89)% (0.94)% (0.80)% (0.69)%3
Supplemental Data:
Net assets at end of period (000s) ........................ $76,868 $65,021 $46,628 $35,653
Portfolio turnover rate ................................... 36% 38% 23% 42%
<FN>
--------
1 Commencement of operations.
2 Calculation based on average shares.
3 Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26-27
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Flag Investors Emerging Growth Fund, Inc. (the "Fund"), which was organized
as a Maryland Corporation on July 2, 1987 and began operations December 30,
1987, is registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. Its objective is to seek long-term
capital appreciation primarily through investment in a diversified portfolio of
common stocks of small and mid-sized emerging growth companies.
The Fund consists of five share classes: Flag Investors Class A Shares,
which began operations June 15, 1988; Flag Investors Class B Shares, which began
operations June 20, 1996; Flag Investors Class C Shares, which began operations
July 31, 2000; Flag Investors Institutional Shares, which began operations
November 2, 1995; and Brown Investment Advisory & Trust (BIAT) Shares (formerly,
Alex. Brown Capital Advisory & Trust Shares), which began operations May 9,
1997.
The Flag Investors Class A, Class B and Class C Shares are subject to
different sales charges and distribution fees. The Flag Investors Class A Shares
have a front-end sales charge and the Flag Investors Class B and Class C Shares
each have a contingent deferred sales charge. The Flag Investors Institutional
Shares and BIAT Shares have neither a front-end sales charge, a contingent
deferred sales charge nor a distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions in accordance with accounting principles generally accepted in
the United States. These estimates affect 1) the assets and liabilities that we
report at the date of the financial statements; 2) the contingent assets and
liabilities that we disclose at the date of the financial statements; and 3) the
revenues and expenses that we report for the year. Our estimates could be
different from the actual results.
The Fund's significant accounting policies are:
A. VALUATION OF SECURITIES -- The Fund values a portfolio security that is
primarily traded on a national exchange, or the NASDAQ National Market,
by using the last price reported for the day. If there are no sales or
the security is not traded on a listed exchange, the Fund values the
security at the average of the last bid and asked prices in the
over-the-counter market. When a market quotation is not
28
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTE 1 (CONTINUED)
readily available, or may be unreliable, the security is priced at its
fair value using procedures that the Board of Directors establishes and
monitors. At October 31, 2000 there were no Board Valued Securities.
The Fund values short-term obligations with maturities of 60 days or
less at amortized cost which approximates fair market value.
B. REPURCHASE AGREEMENTS -- The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
collateral in a separate account until the repurchase agreement
matures. The agreement requires that the collateral's market value,
including any accrued interest, exceed the broker's repurchase
obligation. The Fund's access to the collateral may be delayed or
limited if the broker defaults and the value of the collateral declines
or if the broker enters into an insolvency proceeding.
C. FEDERAL INCOME TAXES -- The Fund is organized as a regulated investment
company. As long as it maintains this status and distributes to its
shareholders substantially all of its taxable net investment income and
net realized capital gains, it will be exempt from most, if not all,
federal income and excise taxes. As a result, the Fund has made no
provisions for federal income or excise taxes.
The Fund may periodically make reclassifications among certain of
its capital accounts as a result of differences in the characterization
and allocation of certain income and capital gain distributions
determined annually in accordance with federal tax regulations which
may differ from accounting principles generally accepted in the United
States.
These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged
or credited to paid-in-capital or accumulated net realized gain, as
appropriate, in the period that the differences arise. Accordingly,
permanent differences as of October 31, 2000 have been primarily
attributable to certain net operating losses and the utiliza-
29
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- (CONCLUDED)
tion of earnings and profits distributed to shareholders on redemption
of shares as part of the dividends paid deduction for income tax
purposes, and have been reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
FUND INCOME (LOSS) GAINS (LOSSES) CAPITAL
---- -------------- -------------- ----------
Emerging Growth $1,930,370 $(3,414,158) $1,483,788
D. SECURITIES TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER --
The Fund uses the trade date to account for securities transactions and
the specific identification cost method for financial reporting and
income tax purposes to determine the cost of investments sold or
redeemed. Interest income is recorded on an accrual basis and includes
the amortization of premiums and accretion of discounts. Income, gains
and common expenses are allocated to each class based on its respective
average net assets. Class specific expenses are charged directly to each
class. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
NOTE 2 -- INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES
Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, is the Fund's investment advisor and Brown
Investment Advisory & Trust (BIAT) is the Fund's sub-advisor. As compensation
for its advisory services the Fund pays ICCC an annual fee equal to 0.85% of the
Fund's average daily net assets. As compensation for its subadvisory services,
ICCC pays BIAT an annual fee equal to 0.55% of the Fund's average daily net
assets. For the year ended October 31, 2000, ICCC's advisory fee was $1,572,346,
of which $115,383 was payable at October 31, 2000.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisors. These persons are not paid by the Fund for
serving in these capacities.
30
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTE 2 -- (CONCLUDED)
ICCC also provides accounting services to the Fund for which the Fund pays
ICCC an annual fee that is calculated daily based upon its average daily net
assets and paid monthly. For the year ended October 31, 2000, ICCC's fee was
$67,766, of which $5,424 was payable at October 31, 2000.
ICCC also provides transfer agency services for the Fund for which the Fund
pays ICCC a per account fee that is calculated and paid monthly. For the year
ended October 31, 2000, ICCC's fee was $88,746, of which $19,789 was payable at
October 31, 2000.
Bankers Trust Company, an affiliate of the advisor, is the Fund's
custodian. At October 31, 2000, $29,205 was payable to Bankers Trust.
ICC Distributors, Inc. ("ICC Distributors") a non-affiliated entity,
provides distribution services to the Fund for which ICC Distributors is paid an
annual fee, pursuant to Rule 12b-1 that is calculated daily and paid monthly.
This fee is paid at an annual rate equal to 0.25% of the Flag Investors Class A
Shares' average daily net assets and 1.00% (including a 0.25% shareholder
servicing fee) of the Flag Investors Class B and Class C Shares' average daily
net assets. No distribution fees are charged to the Institutional or BIAT share
classes.
The Fund complex offers a retirement plan for eligible Directors.The
actuarially computed pension expense allocated to the Fund for the year ended
October 31, 2000 was $2,768 and the accrued liability was $9,405.
31
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 35 million shares of $.001 par value
capital stock (8 million Flag Investors Class A, 1 million Flag Investors Class
B, 15 million Flag Investors Class C, 5 million Flag Investors Institutional, 5
million BIAT and 1 million undesignated). Transactions in shares of the Fund are
listed below.
FLAG INVESTORS CLASS A SHARES
------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
Shares sold ............................. 426,108 1,515,812
Shares issued to shareholders on
reinvestment of dividends ............ 70,927 --
Shares redeemed ......................... (713,733) (2,051,847)
------------ ------------
Net decrease in shares outstanding ...... (216,698) (536,035)
============ ============
Proceeds from sale of shares ............ $ 15,695,330 $ 31,943,780
Value of reinvested dividends ........... 1,990,933 --
Cost of shares redeemed ................. (23,051,067) (43,621,960)
------------ ------------
Net decrease from capital share
transactions ......................... $ (5,364,804) $(11,678,180)
============ ============
FLAG INVESTORS CLASS B SHARES
------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
Shares sold .............................. 281,564 20,443
Shares issued to shareholders on
reinvestment of dividends ............. 3,893 --
Shares redeemed .......................... (173,094) (141,506)
----------- ------------
Net increase (decrease) in
shares outstanding ................... 112,363 (121,063)
=========== ============
Proceeds from sale of shares ............. $ 9,329,207 $ 408,881
Value of reinvested dividends ............ 106,032 --
Cost of shares redeemed .................. (5,764,560) (2,902,871)
----------- ------------
Net increase (decrease) from capital share
transactions .......................... $ 3,670,679 $ (2,493,990)
=========== ============
32
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTE 3 (CONTINUED)
FLAG INVESTORS
CLASS C SHARES
------------------
FOR THE PERIOD
JULY 31, 2000 1
THROUGH
OCTOBER 31, 2000
------------------
Shares sold .................................. 3,352
Shares issued to shareholders on
reinvestment of dividends ................. --
Shares redeemed .............................. --
--------
Net increase in shares outstanding ........... 3,352
========
Proceeds from sale of shares ................. $100,000
Value of reinvested dividends ................ --
Cost of shares redeemed ...................... --
--------
Net increase from capital share
transactions .............................. $100,000
========
-------
1 Commencement of operations.
FLAG INVESTORS INSTITUTIONAL SHARES
------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
Shares sold ............................ 13,569 569,819
Shares issued to shareholders on
reinvestment of dividends ........... 7,771 --
Shares redeemed ........................ (256,358) (586,592)
----------- ------------
Net decrease in shares outstanding ..... (235,018) (16,773)
=========== ============
Proceeds from sale of shares .......... $ 555,831 $ 12,357,525
Value of reinvested dividends 219,845 --
Cost of shares redeemed ................ (8,389,236) (12,773,882)
----------- -----------
Net decrease from capital share
transactions ........................ $(7,613,560) $ (416,357)
=========== ============
33
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 3 (CONCLUDED)
BIAT SHARES
-----------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
----------------- ----------------
Shares sold ................................ 44,374 840,979
Shares issued to shareholders on
reinvestment of dividends ............... 68,181 --
Shares redeemed ............................ (354,868) (623,346)
------------ ------------
Net increase (decrease) in shares
outstanding ............................. (242,313) 217,633
============ ============
Proceeds from sale of shares ............... $ 1,457,256 $ 17,585,187
Value of reinvested dividends .............. 1,930,201 --
Cost of shares redeemed .................... (11,905,342) (13,263,665)
------------ ------------
Net increase (decrease) from capital share
transactions ............................ $ (8,517,885) $ 4,321,522
============ ============
NOTE 4 -- INVESTMENT TRANSACTIONS
Excluding short-term obligations, purchases of investment securities
aggregated $63,789,198 and sales of investment securities aggregated $89,117,332
for the year ended October 31, 2000.
On October 31, 2000, aggregate net unrealized appreciation over tax cost
for portfolio securities was $69,439,445, of which $82,597,766 related to
appreciated securities and $13,158,321 related to depreciated securities.
34
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTE 5 -- RISKS OF INVESTING IN SMALL AND EMERGING GROWTH COMPANIES
There are risks to investors inherent in the characteristics of emerging
growth companies. The Fund may invest in companies that 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.
35
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Flag Investors Emerging Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Flag Investors Emerging Growth
Fund, Inc.(hereafter referred to as the "Fund") at October 31, 2000, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Baltimore,Maryland
December 20, 2000
36
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
FOR THE TAX YEAR ENDED OCTOBER 31, 2000
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund hereby designates the following earned amount as 20% rate capital
gain dividends for the fiscal year ended October 31, 2000, $24,334,028. The
Fund's distributions to shareholders included $0.40 per share from long term
capital gains, all of which is taxable at the 20% capital gains rate.
Of the ordinary income distributions made during the fiscal year ended
October 31, 2000, 0.29% qualifies for the dividends received deduction available
to corporate shareholders.
37
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<PAGE>
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<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
TRUMAN T. SEMANS
CHAIRMAN AND 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
DIRECTOR
CARL W. VOGT, ESQ.
PRESIDENT
CHARLES A. RIZZO
TREASURER
AMY M. OLMERT
SECRETARY
DANIEL O. HIRSCH
ASSISTANT SECRETARY
INVESTMENT OBJECTIVE
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.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.
For more complete information regarding other Flag Investors Funds,
including charges and expenses, obtain a prospectus from your investment
representative or directly from the Fund at 1-800-767-FLAG. Read it carefully
before you invest.
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[LOGO OMITTED]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE(REGISTRATION MARK)
DOMESTIC EQUITY
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund
INTERNATIONAL EQUITY
European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World
FIXED INCOME
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares
MONEY MARKET
Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
WWW.FLAGINVESTORS.COM
Distributed by:
ICC DISTRIBUTORS, INC.
EGANN (12/00)
