[LOGO OMITTED]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE(R)
COMMUNICATIONS
FUND
Semi-Annual Report
June 30, 2000
<PAGE>
REPORT HIGHLIGHTS
--------------------------------------------------------------------------------
o Our decline of 14% for the first half of fiscal year 2000 was disappointing
both in absolute terms and relative to the major indices. We consider our
six-month performance as a short-term measurement and it should be viewed in
the context of the exceptionally strong returns, (excluding sales charges), in
1998 and 1999 of 85.30% and 45.47%, respectively for Class A shares.
o Despite the perception that investing in a "hot" industry requires the
assumption of greater risk and a short-term perspective, we continue to
emphasize an investment discipline that has generated long-term results over
the years. Significant factors that influence our investment decisions like
management, market positioning, depressed valuation, free cash flow, and
growth catalysts have not changed.
o As in previous periods our top ten performers are well represented by most
industry segments. Offsetting our strong performers were three companies, AOL,
Lucent and Novell, that had been major contributors to the Fund's growth the
last two years but disappointed in the first half of this year. Each company
remains a very attractive investment, in spite of first half events.
o The Internet and Internet-related applications are changing the framework of
the communications industry. We see major trends influencing local networks,
long haul networks, and service provisioning.
<PAGE>
FUND PERFORMANCE
--------------------------------------------------------------------------------
Growth of a $10,000 Investment in Class A Shares 1
January 18, 1984 -- June 30, 2000
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
$10,000 invested in the Communciations Fund
Class A Shares at inception on January 18, 1984
was worth $229,318 on June 30, 2000.
1/31/84 9,876
2/29/84 9,528
3/31/84 9,497
4/30/84 9,559
5/31/84 9,270
6/30/84 9,481
7/31/84 9,955
8/31/84 10,321
9/30/84 10,714
10/31/84 10,956
11/30/84 11,094
12/31/84 11,504
1/31/85 11,915
2/28/85 12,040
3/31/85 12,098
4/30/85 12,420
5/31/85 13,047
6/30/85 13,481
7/31/85 13,079
8/31/85 13,168
9/30/85 12,707
10/31/85 13,271
11/30/85 13,993
12/31/85 14,850
1/31/86 14,915
2/28/86 15,586
3/31/86 16,504
4/30/86 16,605
5/31/86 17,361
6/30/86 18,452
7/31/86 18,453
8/31/86 19,797
9/30/86 17,909
10/31/86 18,317
11/30/86 18,788
12/31/86 18,529
1/31/87 19,722
2/28/87 19,259
3/31/87 19,271
4/30/87 18,469
5/31/87 18,589
6/30/87 19,532
7/31/87 19,872
8/31/87 20,859
9/30/87 21,681
10/31/87 19,922
11/30/87 18,466
12/31/87 18,808
1/31/88 20,702
2/29/88 20,728
3/31/88 19,881
4/30/88 20,045
5/31/88 20,890
6/30/88 21,442
7/31/88 21,379
8/31/88 20,953
9/30/88 22,097
10/31/88 22,632
11/30/88 22,490
12/31/88 22,545
1/31/89 24,104
2/28/89 23,652
3/31/89 24,614
4/30/89 26,354
5/31/89 27,849
6/30/89 27,860
7/31/89 30,052
8/31/89 30,095
9/30/89 31,106
10/31/89 30,753
11/30/89 31,645
12/31/89 33,546
1/31/90 30,180
2/28/90 30,259
3/31/90 31,439
4/30/90 30,470
5/31/90 32,554
6/30/90 31,547
7/31/90 31,254
8/31/90 28,961
9/30/90 29,542
10/31/90 30,249
11/30/90 30,518
12/31/90 31,012
1/31/91 30,968
2/28/91 32,376
3/31/91 33,304
4/30/91 33,318
5/31/91 33,403
6/30/91 33,058
7/31/91 33,901
8/31/91 34,449
9/30/91 34,999
10/31/91 36,183
11/30/91 35,296
12/31/91 38,230
1/31/92 37,231
2/29/92 37,145
3/31/92 36,448
4/30/92 38,276
5/31/92 37,676
6/30/92 37,178
7/31/92 39,366
8/31/92 38,794
9/30/92 39,646
10/31/92 40,046
11/30/92 41,218
12/31/92 42,988
1/31/93 43,917
2/28/93 45,664
3/31/93 47,485
4/30/93 45,869
5/31/93 46,636
6/30/93 48,473
7/31/93 49,205
8/31/93 51,303
9/30/93 51,860
10/31/93 52,668
11/30/93 50,088
12/31/93 50,774
1/31/94 52,128
2/28/94 49,883
3/31/94 47,891
4/30/94 48,172
5/31/94 48,643
6/30/94 47,495
7/31/94 49,397
8/31/94 50,361
9/30/94 49,473
10/31/94 49,607
11/30/94 47,458
12/31/94 47,563
1/31/95 48,976
2/28/95 49,148
3/31/95 49,751
4/30/95 50,861
5/31/95 51,074
6/30/95 53,759
7/31/95 57,076
8/31/95 58,727
9/30/95 61,164
10/31/95 59,516
11/30/95 60,533
12/31/95 63,468
1/31/96 64,151
2/29/96 63,425
3/31/96 64,706
4/30/96 67,371
5/31/96 69,775
6/30/96 69,818
7/31/96 65,378
8/31/96 65,896
9/30/96 67,278
10/31/96 67,148
11/30/96 72,336
12/31/96 72,008
1/31/97 74,962
2/28/97 74,777
3/31/97 70,069
4/30/97 72,673
5/31/97 80,010
6/30/97 83,771
7/31/97 87,182
8/31/97 83,984
9/30/97 92,335
10/31/97 90,840
11/30/97 96,257
12/31/97 98,909
1/31/98 104,679
2/28/98 110,245
3/31/98 122,705
4/30/98 122,748
5/31/98 118,546
6/30/98 126,541
7/31/98 130,668
8/31/98 107,307
9/30/98 121,220
10/31/98 134,090
11/30/98 147,972
12/31/98 183,277
1/31/99 193,075
2/28/99 185,793
3/31/99 213,743
4/30/99 220,327
5/31/99 214,927
6/30/99 224,446
7/31/99 216,946
8/31/99 202,509
9/30/99 209,588
10/31/99 228,507
11/30/99 245,848
12/31/99 266,610
1/31/00 250,302
2/29/00 265,022
3/31/00 265,511
4/30/00 242,356
5/31/00 219,786
6/30/00 229,318
Average Annual Total Return 2
Class A Class B Class C Institutional
For the periods ended 6/30/00 Shares Shares Shares Shares
--------------------------------------------------------------------------------
One Year 2.17% 1.41% 1.38% 2.45%
--------------------------------------------------------------------------------
Five Years 33.66% 32.66% --% --%
--------------------------------------------------------------------------------
Ten Years 21.94% --% --% --%
--------------------------------------------------------------------------------
Since Inception 3 20.98% 32.19% 40.03% 37.47%
--------------------------------------------------------------------------------
------------
1 Excluding the applicable maximum sales charge.
2 PAST PERFORMANCE IS NOT AN INDICATOR OF FUTURE RESULTS. These figures assume
the reinvestment of dividend and capital gain distributions and exclude the
impact of any sales charge. If the maximum applicable sales charge was
reflected for each class, the quoted performance would be lower. Performance
figures for the classes differ because each class maintains a distinct expense
structure. For further details on expense structures, please refer to the
Fund's prospectus. Since investment return and principal value will fluctuate,
an investor's shares may be worth more or less than their original cost when
redeemed. Please review the Additional Performance Information on page 6.
3 Inception dates: Class A 1/18/84, Class B 1/3/95, Class C 10/28/98,
Institutional Class 6/4/98.
1
<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Fellow Shareholders:
Our decline of 14% for the first half of fiscal year 2000 was disappointing
both in absolute terms and relative to the major indices. We consider our
six-month performance as a short-term measurement and it should be viewed in the
context of the exceptionally strong returns in 1998 and 1999 (excluding sales
charges), of 85.30% and 45.47%, respectively. We remain very enthusiastic about
our long-term opportunities in this very exciting industry and we also want to
emphasize our belief that the Fund's holdings are strategically well positioned
to benefit from industry growth and represent excellent values.
Despite our short-term decline we maintain a five-star overall rating out
of 3,642 domestic equity funds from Morningstar.(TM)1 We are very proud of our
long-term performance. Your Fund's average annual returns for one, three, five
and ten years are 2.17%, 39.89%, 33.66% and 21.94%, respectively, very
productive rates of return for any investment.
CONSISTENT INVESTMENT PHILOSOPHY
Despite the perception that investing in a "hot" industry requires the
assumption of greater risk and a short-term perspective, we continue to
emphasize an investment discipline that has generated excellent long-term
results over the years. We are fundamental investors who focus on individual
stock selection. The significant factors that influence our investment decisions
and asset weighting have never changed. These factors include strong management,
market positioning, depressed stock price, free cash flow, and a catalyst for
growth.
An industry experiencing rapid change creates opportunities in emerging
industry market segments. Segments, like wireless data, that are measured in
millions of dollars in sales are expected to exceed billions of dollars in the
next few years, and we have been participating through several investments.
-------------
1 PAST PERFORMANCE IS NOT AN INDICATOR OF FUTURE RESULTS. Morningstar(TM)
proprietary ratings reflect historical risk-adjusted performance as of June
30, 2000 and are subject to change monthly. Morningstar ratings are calculated
from the fund's three-, five-, and 10-year average annual returns in excess of
90-day Treasury bill returns with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. Overall
rating is based on a weighted average of the Fund's three, five and ten year
performance. Flag Investors Communications Fund received a 5 star rating for
the 3-year, 5-year, and 10-year periods, respectively. The top 10% of the
funds in a broad asset class receive 5 stars, the next 22.5% receive 4 stars,
the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom
10% receive 1 star. The fund was rated among 3,642, 2,328 and 783 Domestic
Equity Funds for the 3-, 5- and 10-year periods, respectively. Ratings are for
Class A shares only; other classes may vary.
2
<PAGE>
--------------------------------------------------------------------------------
Nevertheless, leadership is important and we are weighted more heavily toward
those companies that are most likely to become or sustain themselves as dominant
players.
When evaluating emerging segments we spend a great deal of time
understanding management's goals. What is most important to us is how much
emphasis a rapidly growing company places on a strategy of translating potential
opportunity into long-term fundamental value. That strategic management
perspective is what attracted us to America Online (AOL) three years ago and we
see that focus with other holdings in emerging segments. We can only hope they
deliver similar stock performance.
PORTFOLIO UPDATE
The following is a list of our top ten performers for the first half of
fiscal year 2000. As in previous periods most segments are well represented
including communications applications, media, traditional telephone, emerging
carriers, telecommunications equipment, and specialty services.
TOP TEN BEST PERFORMERS PERCENT
SECURITY GAIN
------------------------------------------------
Convergys Corp. 68.7
------------------------------------------------
News Corporation, Ltd. 42.5
------------------------------------------------
COMSAT Corp. 24.2
------------------------------------------------
3Com Corp. 22.6
------------------------------------------------
U.S. West, Inc. 19.1
------------------------------------------------
Black Box Corp. 18.2
------------------------------------------------
Sun Microsystems, Inc. 16.2
------------------------------------------------
Sprint Corp. (PCS Group) 16.1
------------------------------------------------
Qwest Communications
International,Inc. 15.6
------------------------------------------------
Williams Communications Group 14.7
------------------------------------------------
Offsetting our top ten performers were three companies that had been major
contributors to the Fund the prior two years but disappointed in the first half
of this year. These companies include America Online, Lucent, and Novell. Each
company remains a very attractive investment today, in spite of events during
the first half of the year.
AOL's announcement of its proposed merger with Time Warner was initially
met with a great deal of concern within the investment community. Admittedly, we
had questions about, among other issues, proposed synergies and the valuation of
Time Warner. After a complete strategic review, we have become very enthusiastic
about AOL Time Warner's future growth prospects and its ability to generate
strong, free cash flow. We believe the combined company will continue to be a
dominant player in both traditional media and in emerging on-line services.
3
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
--------------------------------------------------------------------------------
Lucent's first fiscal quarter results fell short of expectations. In part,
the company failed to properly gauge demand for its new fiber optics products.
Nevertheless, we believe that Lucent's problems can be corrected and are
short-term in nature. An error in execution is never good news and we will be
paying close attention to issues related to execution both in fiber optics and
other segments of its market.
Novell's management, since taking over in 1997, made significant strides in
developing new products and repositioning the company as a provider of key
Internet infrastructure products. Unfortunately, management was not completely
successful in shifting its marketing focus from indirect distribution to direct
sales. Management has been forthcoming about issues relating to the distribution
channel and has moved quickly to resolve the problem. Novell's products in
management and security of Internet content are well positioned in its markets
and we feel the company remains an excellent value.
INDUSTRY UPDATE
We don't look at total groups and make blanket conclusions by saying
telephone companies and long distance companies are immediate winners or losers
or a new entrant is guaranteed to succeed at the incumbent carrier's expense.
Our analysis within the context of industry transition is based on an individual
company's management, its addressable market, and its strategy to build a
business based on its existing set of assets. Clearly, the Internet and the
development of Internet-related applications are changing the basic framework of
the communications industry. We see major trends influencing local network, long
haul networks, and service provisioning.
Demand for basic access, the connection between a user's home or business
to the wide area network, is continuing to experience rapid growth. Increased
Internet usage and more sophisticated applications, like electronic commerce,
have created the need for faster communications speeds (e.g. broadband). We
believe that the traditional local telephone network remains a very valuable
asset and is well positioned to benefit from increasing demand. Although our
investment in local access is weighted towards the traditional telephone
companies, we also view a select few new entrants, like Winstar, as viable
long-term competitors in the market.
4
<PAGE>
--------------------------------------------------------------------------------
In an environment of declining prices, long distance market conditions will
put more pressure on carriers to operate low cost networks. Our investment focus
is on emerging carriers, like Qwest, that operate next generation networks at
lower cost. However, we not only concentrate on the network technology but also
the company's strategy for attracting and retaining customers.
Telecommunications users are becoming more sophisticated and their needs
are becoming more complex. In this increasingly challenging market, providers
must have the assets to serve changing needs. Clearly, with demands ranging from
local telephone service to web hosting, no one company owns all the essential
assets. We believe the most successful companies will be the ones that will
leverage core assets through ventures and partnerships and pursue a capital
efficient strategy for providing the customer a complete set of services.
We would like to close by thanking our fellow shareholders for their
continued support. We are looking forward to enjoying the benefits of the
industry with solid long-term growth prospects.
Sincerely,
/S/ SIGNATURE /S/ SIGNATURE
BRUCE E. BEHRENS LIAM D. BURKE
Bruce E. Behrens Liam D. Burke
Co-Portfolio Manager Co-Portfolio Manager
July 21, 2000
5
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
Communications Holdings Percent of Net Assets
--------------------------------------------------------------------------------
I. NATIONAL CARRIERS
AT&T Corp 1.0%
Bell Atlantic Corp. 1.7
SBC Communications, Inc. 10.3
Sprint Corp. 1.2
----
14.2
II. REGIONAL CARRIERS
ALLTEL Corp. 4.4
General Communication, Inc. 0.1
GTE Corp. 3.6
U.S. West, Inc. 6.4
----
14.5
III. EMERGING CARRIERS
Global Crossing Ltd. 3.0
Qwest Communications International, Inc. 3.3
Williams Communications Group 3.5
----
9.8
IV. INTERNATIONAL NETWORK OPERATORS
Clearnet Communications, Inc.-- Class A 1.0
Global Telesystems Group, Inc. 0.9
Royal KPN N.V. 2.4
Telefonica de Espana ADR 1.1
Telefonos de Mexico SA ADR 1.3
Teleglobe, Inc. 2.6
Vodafone Airtouch PLC ADR 2.1
----
11.4
V. COMMUNICATION EQUIPMENT
3Com Corp. 2.7
Black Box Corp. 2.1
Celestica, Inc. 1.7
Lucent Technologies, Inc. 4.9
Qualcomm, Inc. 1.1
Solectron Corp. 1.7
Sun Microsystems, Inc. 4.6
----
18.8
VI. SOFTWARE & APPLICATIONS
Convergys Corp. 3.5
Genuity, Inc. 0.8
Novell, Inc. 1.9
----
6.2
VII. MEDIA
America Online, Inc. 9.2
General Motors Corp. -- Class H (Hughes Electronics) 2.6
News Corporation Ltd. ADR 1.3
XM Satellite Radio Holdings -- Class A 0.7
----
13.8
VIII. SPECIALTY SERVICES
COMSAT Corp. 0.4
Globalstar Telecommunications, Ltd. 0.6
Loral Space and Communications Ltd. 0.3
Motient Corp 0.5
Orbital Sciences Corp. 0.3
Paging Network, Inc. 0.1
Sprint Corp. (PCS Group) 0.5
WinStar Communications, Inc. 2.4
----
5.1
----
Total Communications Industry 93.8%
====
6
<PAGE>
FLAG INVESTORS COMMUNICATIONS 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 the total return of each of the Fund's classes, according to a
standardized formula, for various time periods through the end of the most
recent calendar quarter.
The SEC standardized total return figures include the impact of the 5.50%
maximum initial sales charge for the Fund's Class A Shares and the contingent
deferred sales charge applicable to the specified time period for the Class B
Shares and Class C Shares. The contingent deferred sales charge for Class B
Shares declines over time from a maximum of 5.00% to 0.00% after six years.The
contingent deferred sales charge for Class C Shares is 1.00% for shares redeemed
within one year of purchase. 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.
Average Annual Total Return 1
Periods Ended 6/30/00 1 Year 5 Years 10 Years Since Inception 2
--------------------------------------------------------------------------------
Class A Shares (3.45)% 32.16% 21.25% 20.56%
--------------------------------------------------------------------------------
Class B Shares (3.66)% 32.12% --% 31.94%
--------------------------------------------------------------------------------
Class C Shares 0.37% --% --% 40.00%
--------------------------------------------------------------------------------
Institutional Shares 2.45% --% --% 37.47%
--------------------------------------------------------------------------------
------------
1 PAST PERFORMANCE IS NOT AN INDICATOR OF FUTURE RESULTS. Since investment
return and principal value will fluctuate, an investor's shares may be worth
more or less than their original cost. These figures assume the reinvestment
of dividend and capital gain distributions.
2 Inception dates: Class A 1/18/84, Class B 1/3/95, Class C 10/28/98,
Institutional 6/4/98.
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.
7
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 2000
(UNAUDITED)
SHARES SECURITY MARKET VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 94.2%
NATIONAL CARRIERS -- 14.2%
800,000 AT&T Corp. ................................. $ 25,300,000
833,216 Bell Atlantic Corp. ........................ 42,337,788
5,923,789 SBC Communications, Inc. ................... 256,203,874
556,000 Sprint Corp. ............................... 28,356,000
---------------
352,197,662
---------------
REGIONAL CARRIERS -- 14.5%
1,780,000 ALLTEL Corp. ............................... 110,248,750
500,000 General Communication, Inc.1 ............... 2,562,500
1,425,000 GTE Corp. .................................. 88,706,250
1,848,200 U.S. West, Inc. ............................ 158,483,150
---------------
360,000,650
---------------
EMERGING CARRIERS -- 9.8%
2,794,610 Global Crossing Ltd.1 ...................... 73,533,176
1,649,800 Qwest Communications International, Inc.1 .. 81,974,438
2,649,200 Williams Communications Group 1 ............ 87,920,325
---------------
243,427,939
---------------
INTERNATIONAL NETWORK OPERATORS -- 11.4%
850,000 Clearnet Communications, Inc. -- Class A 1 . 23,600,781
1,950,000 Global Telesystems Group, Inc.1 ............ 23,521,875
1,327,888 Royal KPN N.V. ............................. 59,671,967
407,503 Telefonica de Espana ADR 1 ................. 26,105,661
570,000 Telefonos de Mexico SA ADR ................. 32,561,250
3,085,200 Teleglobe, Inc.1 ........................... 64,982,025
1,276,020 Vodafone Airtouch PLC ADR .................. 52,875,079
---------------
283,318,638
---------------
COMMUNICATION EQUIPMENT -- 18.8%
1,146,300 3Com Corp.1 ................................ 66,055,537
666,428 Black Box Corp.1 ........................... 52,762,354
850,000 Celestica, Inc.1 ........................... 42,181,250
2,060,940 Lucent Technologies, Inc. .................. 122,110,695
450,000 Qualcomm, Inc.1 ............................ 27,000,000
1,000,000 Solectron Corp.1 ........................... 41,875,000
1,260,000 Sun Microsystems, Inc.1 .................... 114,581,250
---------------
466,566,086
---------------
8
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
SHARES SECURITY MARKET VALUE
--------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
SOFTWARE & APPLICATIONS -- 6.2%
1,668,000 Convergys Corp.1 ........................... $ 86,527,500
2,250,000 Genuity, Inc.1 ............................. 20,601,563
5,185,000 Novell, Inc.1 .............................. 47,961,250
---------------
155,090,313
---------------
MEDIA -- 13.8%
4,308,000 America Online, Inc.1 ...................... 227,247,000
725,000 General Motors Corp. -- Class H
(Hughes Electronics)1 .................... 63,618,750
600,000 News Corporation Ltd. ADR .................. 32,700,000
500,000 XM Satellite Radio Holdings -- Class A 1 ... 18,718,750
---------------
342,284,500
---------------
SPECIALTY SERVICES -- 5.1%
368,927 COMSAT Corp. ............................... 9,107,885
1,650,000 Globalstar Telecommunications, Ltd.1 ....... 14,850,000
1,189,200 Loral Space and Communications Ltd.1 ....... 8,250,075
853,900 Motient Corp.1 ............................. 13,395,556
645,347 Orbital Sciences Corp.1 .................... 7,865,167
3,000,000 Paging Network, Inc.1 ...................... 2,156,250
200,000 Sprint Corp. (PCS Group)1 .................. 11,900,000
1,731,100 WinStar Communications, Inc.1 .............. 58,641,013
---------------
126,165,946
---------------
NON-TELEPHONE INDUSTRY -- 0.4%
626,900 Center Trust, Inc. ......................... 3,173,681
620,548 Conseco, Inc. .............................. 6,050,343
---------------
9,224,024
---------------
TOTAL COMMON STOCK (Cost $1,504,593,281) .................... 2,338,275,758
---------------
9
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED) JUNE 30, 2000
(UNAUDITED)
PAR (000) SECURITY MARKET VALUE
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 6.6%
$61,495 Goldman Sachs & Co., dated 6/30/00, 6.25%,
principal and interest in the amount of
$61,527,797 due 7/3/00, collateralized by
U.S. Treasury Bond, par value of $53,249,000,
coupon rate of 11.875%, due 11/15/03,
market value of $61,935,243 .................... $ 61,495,000
61,495 J.P. Morgan Securities, Inc., dated 6/30/00, 6.25%,
principal and interest in the amount of
$61,527,029, due 7/3/00, collateralized by
U.S. Treasury Notes, par value of $63,302,000,
coupon rate from 4.75% to 6.625%, due
11/5/08, market value of $62,725,810 ........... 61,495,000
40,995 Morgan Stanley & Co., dated 6/30/00, 6.50%,
principal and interest in the amount of
$41,017,206, due 7/3/00, collateralized by U.S.
Treasury Note, par value of $40,825,000,
coupon rate of 6.625%, due 5/17/15, market
value of $41,644,562 ........................... 40,995,000
--------------
TOTAL REPURCHASE AGREEMENTS .................................... 163,985,000
--------------
TOTAL INVESTMENTS -- 100.8% (Cost $1,668,578,281)2 ............. 2,502,260,758
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8)% ................ (20,658,718)
--------------
NET ASSETS -- 100.0% ........................................... $2,481,602,040
==============
----------
1 Non-income producing security.
2 Aggregate cost for federal tax purposes was $1,668,578,281.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
JUNE 30,
-------------------------------------------------------------------------------
2000
Assets:
Investments, at value (Cost $1,668,578,281) ............ $2,502,260,758
Receivable for Collateral Under Security
Loan Agreements ...................................... 182,376,024
Cash ................................................... 428
Receivable for Shares of Beneficial
Interest Subscribed ................................. 9,294,704
Dividend, Interest and Income Receivable ............... 1,821,846
Prepaid Expenses & Other ............................... 225,035
--------------
Total Assets ......................................... 2,695,978,795
--------------
Liabilities:
Payable for Collateral Under Security
Loan Agreements ..................................... 182,376,024
Payable for Shares of Beneficial
Interest Redeemed ................................... 4,725,443
Payable for Securities Sold ............................ 25,244,110
Accrued Expenses & Other ............................... 2,031,178
--------------
Total Liabilities .................................... 214,376,755
--------------
Net Assets ................................................ $2,481,602,040
--------------
Composition of Net Assets
Paid-in Capital
Class A Shares ....................................... 856,227,825
Class B Shares ....................................... 512,354,541
Class C Shares ....................................... 110,315,521
Institutional Shares ................................. 28,467,978
Accumulated Net Realized Gain from
Investment Transactions .............................. 140,374,592
Net Unrealized Appreciation on Investments ............. 833,682,477
Undistributed Net Investment Income .................... 179,106
--------------
Net Assets ................................................ 2,481,602,040
--------------
Net Asset Value Per Share:
Class A ($1,793,748,210 (DIVIDE) 48,099,656 shares) .... $37.29
======
Class B ($557,520,564 (DIVIDE) 15,279,763 shares) ...... $36.49 1
======
Class C ($103,213,594 (DIVIDE) 2,826,300 shares) ....... $36.52 2
======
Institutional Class Share ($27,119,672 (DIVIDE)
725,143 shares) .................................... $37.40
======
Maximum Offering Price Per Share:
Flag Class A ($37.29 (DIVIDE) 0.945)3 .................. $39.46
======
Flag Class B ........................................... $36.49
======
Flag Class C ........................................... $36.52
======
Institutional Class .................................... $37.40
======
-----------
1 Redemption value is $34.67 following a 5.00% maximum contingent deferred sales
charge.
2 Redemption value is $36.15 following a 1.00% maximum contingent deferred sales
charge.
3 Maximum offering price for Class A represents the effect of the 5.50% front
end sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
JUNE 30,
--------------------------------------------------------------------------------
2000
Investment Income:
Dividends (net of foreign withholding taxes $27,717) ..... $ 9,332,948
Interest ................................................. 6,473,525
Securities lending income ................................ 495,941
-------------
Total income ................................... 16,302,414
-------------
Expenses:
Investment advisory fee .................................. 7,546,015
Distribution fees:
Class A Shares ......................................... 2,457,244
Class B Shares ......................................... 2,941,839
Class C Shares ......................................... 510,046
Transfer agent fee ....................................... 576,334
Registration fees ........................................ 100,526
Accounting fee ........................................... 78,268
Professional fees ........................................ 68,394
Printing and postage ..................................... 66,991
Custodian fee ............................................ 50,278
Directors' fees .......................................... 27,506
Miscellaneous ............................................ 37,830
-------------
Total expenses ................................. 14,461,271
-------------
Net investment income .................................... 1,841,143
-------------
Realized and unrealized gain (loss) on investments:
Net realized gain from securities transactions ........... 139,384,238
Change in unrealized appreciation/depreciation
of investments ......................................... (545,812,444)
-------------
Net loss on investments .................................. (406,428,206)
-------------
Net decrease in net assets resulting from operations ....... $(404,587,063)
=============
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------------------------------------------------------------------------------
2000 1 1999
<S> <C> <C>
Increase/(Decrease) in Net Assets:
Operations:
Net investment income ........................ $ 1,841,143 $ 9,728,797
Net realized gain from securities transactions 139,384,238 246,532,613
Change in unrealized appreciation/
depreciation of investments ................ (545,812,444) 542,251,518
--------------- ---------------
Net increase/(decrease) in net assets
resulting from operations .................. (404,587,063) 798,512,928
--------------- ---------------
Distributions to Shareholders from:
Net investment income and short-term gains:
Class A Shares ............................. (1,454,921) (14,398,569)
Class B Shares ............................. (4,066) (2,243,422)
Class C Shares ............................. -- (313,813)
Institutional Class ........................ (41,742) (177,344)
Net realized long-term gains:
Class A Shares ............................. (12,102,558) (228,017,933)
Class B Shares ............................. (3,724,256) (56,779,941)
Class C Shares ............................. (664,867) (7,495,878)
Institutional Class ........................ (173,772) (2,435,534)
--------------- ---------------
Total distributions .......................... (18,166,182) (311,862,434)
--------------- ---------------
Capital Share Transactions
Proceeds from sale of shares ................. 509,664,997 1,037,923,365
Value of shares issued in reinvestment
of dividends ............................... 16,128,578 277,388,583
Cost of shares redeemed ...................... (449,172,449) (419,371,458)
--------------- ---------------
Increase in net assets derived from
capital share transactions ................. 76,621,126 895,940,490
--------------- ---------------
Total increase/(decrease) in net assets ...... (346,132,119) 1,382,590,984
Net Assets:
Beginning of period .......................... 2,827,734,159 1,445,143,175
--------------- ---------------
End of period (including distributions in
excess of net investment income of $161,307
for the year ended December 31, 1999) ...... $ 2,481,602,040 $ 2,827,734,159
=============== ===============
<FN>
------------
1 Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------------------------------
2000 3 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ................... $ 43.65 $ 34.23 $ 19.37 $ 15.59 $ 14.87 $ 12.30
---------- ---------- ---------- -------- -------- --------
Income from Investment Operations:
Net investment income .................................... 0.07 0.23 0.12 0.27 0.27 0.40
Net realized and unrealized gain/(loss) on investments ... (6.15) 14.83 16.05 5.41 1.67 3.58
---------- ---------- ---------- -------- -------- --------
Total from Investment Operations ......................... (6.08) 15.06 16.17 5.68 1.94 3.98
Less Distributions from:
Net investment income and net realized short-term gains .. (0.03) (0.33) (0.40) (0.40) (0.38) (0.41)
Net realized long-term gains ............................. (0.25) (5.31) (0.91) (1.50) (0.84) (1.00)
---------- ---------- ---------- -------- -------- --------
Total distributions ...................................... (0.28) (5.64) (1.31) (1.90) (1.22) (1.41)
---------- ---------- ---------- -------- -------- --------
Net asset value at end of period ............................ $ 37.29 $ 43.65 $ 34.23 $ 19.37 $ 15.59 $ 14.87
========== ========== ========== ======== ======== ========
Total Return1 ............................................... (13.99)% 45.47% 85.30% 37.36% 13.46% 33.44%
Ratios to Average Daily Net Assets:
Expenses ................................................. 0.89%4 0.96% 1.05% 1.11% 1.14% 0.93%2
Net investment income .................................... 0.33%4 0.62% 0.48% 1.07% 1.74% 2.85%
Supplemental Data:
Net assets at end of period (000) ........................ $1,793,748 $2,115,885 $1,275,775 $622,865 $505,371 $492,454
Portfolio turnover rate .................................. 9% 17% 14% 26% 20% 24%
<FN>
------------
1 Total return excludes the effect of sales charge.
2 Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 0.99% for the year ended December 31, 1995.
3 Unaudited.
4 Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14 15
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JANUARY 3, 1995 1
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, THROUGH DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
2000 5 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......... $ 42.85 $ 33.80 $ 19.22 $ 15.51 $ 14.83 $12.28
-------- -------- -------- ------- ------- ------
Income from Investment Operations:
Net investment income/(expenses in
excess of income) ............................ (0.08) (0.03) (0.02) 0.18 0.19 0.30
Net realized and unrealized gain/(loss)
on investments ............................... (6.03) 14.58 15.83 5.34 1.63 3.56
-------- -------- -------- ------- ------- ------
Total from Investment Operations ............... (6.11) 14.55 15.81 5.52 1.82 3.86
-------- -------- -------- ------- ------- ------
Less Distributions from:
Net investment income and net realized
short-term gains ............................ 0.00 6 (0.19) (0.32) (0.31) (0.30) (0.31)
Net realized long-term gains ................... (0.25) (5.31) (0.91) (1.50) (0.84) (1.00)
-------- -------- -------- ------- ------- ------
Total distributions ............................ (0.25) (5.50) (1.23) (1.81) (1.14) (1.31)
-------- -------- -------- ------- ------- ------
Net asset value at end of period .................. $ 36.49 $ 42.85 $ 33.80 $ 19.22 $ 15.51 $14.83
======== ======== ======== ======= ======= ======
Total Return 2 .................................... (14.31)% 44.42% 83.91% 36.36% 12.60% 32.42%
Ratios to Average Daily Net Assets:
Expenses ....................................... 1.65%4 1.71% 1.80% 1.86% 1.92% 1.70%3,4
Net investment income/(expenses in excess
of income) ................................... (0.43)%4 (0.15)% (0.35)% 0.29% 0.95% 2.13%4
Supplemental Data:
Net assets at end of period (000) .............. $557,521 $592,520 $165,308 $32,474 $17,661 $7,504
Portfolio turnover rate ........................ 9% 17% 14% 26% 20% 24%
<FN>
---------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.74% (annualized) for the period ended December
31, 1995.
4 Annualized.
5 Unaudited.
6 Represents distributions less than a $0.01 per share.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16 17
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
FOR THE SIX FOR THE YEAR OCT. 28, 1998 1
MONTHS ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------
2000 4 1999 1998
Per Share Operating Performance:
Net asset value at beginning
of period ..................... $ 42.88 $ 33.84 $25.50
-------- ------- ------
Income from Investment Operations:
Expenses in excess of income .... (0.07) (0.02) (0.01)
Net realized and unrealized
gain/(loss) on investments .... (6.04) 14.56 9.21
-------- ------- ------
Total from Investment
Operations .................... (6.11) 14.54 9.20
-------- ------- ------
Less Distributions from:
Net investment income and net
realized short-term gains ..... -- (0.19) (0.21)
Net realized long-term gains .... (0.25) (5.31) (0.65)
-------- ------- ------
Total distributions ............. (0.25) (5.50) (0.86)
-------- ------- ------
Net asset value at
end of period ................. $ 36.52 $ 42.88 $33.84
======== ======= ======
Total Return 2 .................. (14.30)% 44.33% 36.70%
Ratios to Average Daily Net Assets:
Expenses ........................ 1.65%3 1.70% 1.85%3
Net investment income/(expenses
in excess of income) .......... (0.44)%3 (0.20)% (0.61)%3
Supplemental Data:
Net assets at end of
period (000) .................. $103,214 $91,176 $3,247
Portfolio turnover rate ......... 9% 17% 14%
-----------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Annualized.
4 Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JUNE 4, 1998 1
MONTHS ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------
2000 3 1999 1998
Per Share Operating Performance:
Net asset value at beginning
of period ..................... $ 43.76 $ 34.27 $23.26
------- ------- ------
Income from Investment Operations:
Net investment income ........... 0.11 0.27 0.06
Net realized and unrealized
gain/(loss) on investments .... (6.16) 14.93 12.17
------- ------- ------
Total from Investment
Operations .................... (6.05) 15.20 12.23
------- ------- ------
Less Distributions from:
Net investment income and net
realized short-term gains ..... (0.06) (0.40) (0.31)
Net realized long-term gains .... (0.25) (5.31) (0.91)
------- ------- ------
Total distributions ............. (0.31) (5.71) (1.22)
------- ------- ------
Net asset value at
end of period ................. $ 37.40 $ 43.76 $34.27
======= ======= ======
Total Return 1 .................. (13.89)% 45.89% 53.95%
Ratios to Average Daily Net Assets:
Expenses ........................ 0.65%2 0.72% 0.83%2
Net investment income ........... 0.59%2 0.86% 0.49%2
Supplemental Data:
Net assets at end of
period (000) .................. $27,120 $28,153 $ 813
Portfolio turnover rate ......... 9% 17% 14%
-----------
1 Commencement of operations.
2 Annualized.
3 Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Flag Investors Communications Fund, Inc. (the "Fund"), which is organized
as a Maryland Corporation and began operations January 18, 1984, is registered
under the Investment Company Act of 1940 as a non-diversified, open-end
investment management company. Its objective is to seek to maximize total return
through long-term growth of capital and, to a lesser extent, current income. The
Fund invests primarily in common stocks of companies in the communications
field.
The Fund consists of four share classes: Class A Shares, which began
operations January 18, 1984; Class B Shares, which began operations January 3,
1995; Class C Shares, which began operations October 28, 1998; and Institutional
Shares, which began operations June 4, 1998.
The Class A, Class B and Class C Shares are subject to different sales
charges. The Class A Shares have a front-end sales charge and the Class B and
Class C Shares have a contingent deferred sales charge. In addition, each class
has a separate distribution fee. The Institutional Shares have neither a 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 period. 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 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 unavailable, the Investment Advisor determines a fair value
using procedures that the Board of Directors establishes and monitors.
At June 30, 2000 there were no Board valued securities. The Fund values
short-term obligations with maturities of 60 days or less at amortized
cost.
B. REPURCHASE AGREEMENTS -- The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A
20
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
NOTE 1 -- CONTINUED
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 TAX -- The Fund determines its distributions according to
income tax regulations, which may be different from accounting
principles generally accepted in the United States. As a result, the
Fund occasionally makes reclassifications within its capital accounts to
reflect income and gains that are available for distribution under
income tax regulations.
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
taxes.
D. SECURITIES TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER --
The Fund uses the trade date to account for securities transactions and
the specific identification 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
amortization of premiums and accretion of discounts when appropriate.
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.
E. SECURITY LOANS -- The Fund receives compensation in the form of fees or
it retains a portion of interest on the investment of any cash received
as collateral. The Fund also continues to receive interest or dividends
on these securities loaned. The loans are secured by collat-
21
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- CONTINUED
eral at least equal, at all times, to the fair value of the securities
loaned plus accrued interest. Gain or loss in the fair value of the
securities loaned that may occur during the term of the loan will be for
the accounts of the Fund.
NOTE 2 -- INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES
Investment Company Capital Corp. ("ICCC"), an indirect subsidiary of
Deutsche Bank AG, is the Fund's investment advisor.
As compensation for its advisory services, the Fund pays ICCC an annual
This fee is calculated daily and paid monthly at the following annual rates:
0.85% of the first $100 million,0.75% of the next $100 million, 0.70% of the
next $100 million, 0.65% of the next $200 million, 0.58% of the next $500
million, 0.53% of the next $500 million and 0.50% of the amount over $1.5
billion. For the six months ended June 30, 2000, ICCC's advisory fee was
$7,546,015 of which $1,182,292 was payable at the end of the period.
Alex. Brown Investment Management ("ABIM") is the Fund's sub-advisor. As
compensation for its sub-advisory services, ICCCpays ABIM a fee based on the
Fund's average daily net assets. This fee is calculated daily and paid monthly
at the following annual rates:0.60% of the first $100 million, 0.55% of the next
$100 million, 0.50% of the next $100 million, 0.45% of the next $200 million,
0.40% of the next $500 million, 0.37% of the next $500 million and 0.35% of the
amount over $1.5 billion.
At meetings held on March 21-22, 2000 and June 21-22, 2000, the Fund's
Board of Directors considered and approved changes to the Fund's fee
arrangements, subject to approval by the Fund's shareholders at a meeting
scheduled for August 31, 2000. The new arrangements include a new advisory
agreement with ICCC, a new sub-advisory agreement with ABIM and a new
administrative services agreement with ICCC in its capacity as Fund
administrator. These new agreements increase the advisory fees paid to ICCC by
0.15% of the Fund's average daily net assets, increase the sub-advisory fees
ICCC pays to ABIM by 0.05% of the Fund's average daily net assets, and provide
for payments for administrative services equal to 0.15% of the Fund's average
daily net assets, calculated daily and paid monthly. ICCC, in its capacity as
the Fund's advisor and administrator, has agreed to an aggregate fee waiver
equal to 0.15% of the Fund's average daily net assets. The Fund's new fee
arrangements will go into effect immediately upon shareholder approval.
22
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
NOTE 2 -- CONTINUED
ICCC provides accounting services to the Fund for which the Fund pays ICCC
an annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets. For the six months ended June 30, 2000, ICCC's fee was
$78,268 of which $12,778 was payable at the end of the period.
ICCC also provides transfer agency services to the Fund for which the Fund
pays ICCC a per account fee that is calculated and paid monthly. For the six
months ended June 30, 2000, ICCC's fee was $576,334 of which $101,333 was
payable at the end of the period.
Certain officers and directors of the Fund are also officers or directors
of ICCC.
ICC Distributors, Inc., provides distribution services to the Fund for
which the Fund pays ICC Distributors an annual fee, pursuant to Rule 12b-1, that
is calculated daily and paid monthly at the following annual rates: 0.25% of the
Class A Shares' average daily net assets and 0.75% of the Class B and Class C
Shares' average daily net assets. The fees for the Class B and Class C Shares
include a 0.25% shareholder servicing fee. For the six months ended June 30,
2000, the distribution fees were $5,909,129, of which $933,900 was payable at
the end of the period.
Bankers Trust Company, an affiliate of the advisor, is the Fund's
custodian. For the period ended June 30, 2000, custody fees amounted to $50,278,
of which $8,840 was payable at the end of the period.
The Fund participates along with other Flag Investors Funds in a retirement
plan for eligible Directors. The actuarially computed pension expense allocated
to the Fund for the period ended June 30, 2000 was $22,959 and the accrued
liability was $117,872.
NOTE 3 -- CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 127 million shares of $.001 par value
capital stock (75 million Class A Shares, 20 million Class B Shares, 15 million
Class C Shares, 15 million Institutional Shares and 2 million undesignated).
Transactions in shares of the Fund were as follows:
23
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- CONTINUED
CLASS A SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold ............................ 8,202,979 15,431,133
Shares issued to shareholders
on reinvestment of dividends ......... 287,548 5,099,826
Shares redeemed ........................ (8,861,874) (9,333,388)
------------- -------------
Net increase/(decrease)
in shares outstanding ................ (371,347) 11,197,571
============= =============
Proceeds from sale of shares ........... $ 335,056,738 $ 602,295,609
Value of reinvested dividends .......... 11,793,064 211,096,175
Cost of shares redeemed ................ (361,480,214) (366,305,193)
------------- -------------
Net increase/(decrease) from
capital share transactions ........... $ (14,630,412) $ 447,086,591
============= =============
CLASS B SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold .............................. 2,795,319 8,689,423
Shares issued to shareholders
on reinvestment of dividends ........... 87,772 1,379,540
Shares redeemed .......................... (1,432,300) (1,131,119)
------------- -------------
Net increase in shares outstanding ....... 1,450,791 8,937,844
============= =============
Proceeds from sale of shares ............. $ 113,186,210 $ 332,813,853
Value of reinvested dividends ............ 3,530,269 56,356,025
Cost of shares redeemed .................. (57,682,666) (43,429,347)
------------- -------------
Net increase from capital
share transactions ..................... $ 59,033,813 $ 345,740,531
============= =============
-----------
1 Unaudited.
24
<PAGE>
FLAG INVESTORS COMMUNICATIONS FUND
--------------------------------------------------------------------------------
NOTE 3 -- CONCLUDED
CLASS C SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold ................................ 954,373 2,010,012
Shares issued to shareholders
on reinvestment of dividends ............. 15,807 180,808
Shares redeemed ............................ (270,130) (160,531)
------------ ------------
Net increase in shares outstanding ......... 700,050 2,030,289
============ ============
Proceeds from sale of shares ............... $ 38,822,763 $ 77,856,408
Value of reinvested dividends .............. 636,419 7,417,986
Cost of shares redeemed .................... (10,848,335) (6,384,715)
------------ ------------
Net increase from capital
share transactions ....................... $ 28,610,847 $ 78,889,679
============ ============
INSTITUTIONAL SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold .............................. 536,499 640,450
Shares issued to shareholders
on reinvestment of dividends ........... 4,408 60,123
Shares redeemed .......................... (459,088) (80,971)
------------ ------------
Net increase in shares outstanding ....... 81,819 619,602
============ ============
Proceeds from sale of shares ............. $ 22,608,376 $ 24,957,495
Value of reinvested dividends ............ 181,359 2,518,397
Cost of shares redeemed .................. (19,182,824) (3,252,203)
------------ ------------
Net increase from capital
share transactions ..................... $ 3,606,911 $ 24,223,689
============ ============
-----------
1 Unaudited.
NOTE 4 -- INVESTMENT TRANSACTIONS
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $457,689,847 and sales of investment securities
aggregated $225,032,619 for the period ended June 30, 2000.
At June 30, 2000, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $990,374,167
and aggregate unrealized depreciation for all securities in which there is an
excess of tax cost over value was $156,691,690.
25
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FLAG INVESTORS COMMUNICATIONS FUND
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5 -- LENDING OF SECURITIES
The Fund has the ability to lend its securities to brokers, dealers and
other financial organizations. Loans of the Fund's securities are collateralized
by cash and/or government securities that are maintained at all times in an
amount equal to 102% of the current market value of the loaned securities for
domestic securities.
At June 30, 2000
Market Value Market Value % of Portfolio
of Loaned Securities of Collateral on Loan
-------------------- --------------- --------------
$176,354,489 $182,376,024 7.63
26
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FLAG INVESTORS COMMUNICATIONS FUND
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DIRECTORS AND OFFICERS
TRUMAN T. SEMANS
CHAIRMAN
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
This mutual fund (the "Fund") is designed to maximize total return. The
Fund will seek to achieve this objective through a combination of long-term
growth of capital and, to a lesser extent, current income. The Fund invests
primarily in common stocks of companies in the communications field.
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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FLAG INVESTORS
INVESTING WITH A DIFFERENCE(R)
[GRAPHIC OMITTED]
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 U.S. 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.
COMMSA (8/00)
