[Flag Investors logo omitted]
EMERGING GROWTH
FUND
Semi-Annual Report
April 30, 2000
<PAGE>
<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to report performance results for the period ending April
30, 2000. For the six months ending April 30, 2000, the Flag Investors Emerging
Growth Fund, Class A, produced a total return of 36.7% (excluding sales charges)
as compared to 27.8% for the Russell 2000 Growth Index and 7.2% for the S&P 500.
For the three months ending April 30, 2000, the Fund returned 7.4%, (excluding
sales charges) as compared to -0.8% for the Russell 2000 Growth Index and 4.5%
for the S&P 500 for the same period. More important are the longer-term results
found in the table below.
ANNUALIZED RETURNS
ALL PERIODS ENDING APRIL 30, 2000
6 Months+ 1 Year 3 Years 5 Years
--------------------------------------------------------------------------------
Flag Investors Emerging Growth Fund
Class A Shares* 36.73% 59.60% 27.06% 22.99%
--------------------------------------------------------------------------------
Russell 2000 Growth Index 27.78% 31.38% 22.02% 16.96%
--------------------------------------------------------------------------------
Russell 2000 Index 18.72% 18.42% 15.24% 15.28%
--------------------------------------------------------------------------------
Nasdaq Industrials 26.64% 42.33% 28.61% 21.19%
--------------------------------------------------------------------------------
Lipper Small-Cap Growth 37.55% 63.05% 32.28% 21.80%
--------------------------------------------------------------------------------
S&P 500 7.19% 10.13% 23.69% 25.26%
--------------------------------------------------------------------------------
------------------
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. The Fund's investment
return and principal value will fluctuate so that upon redemption shares may
be worth more or less than their original cost. Please refer to the Additional
Performance Section of this report starting on page 5 for further information
regarding performance. These figures assume the reinvestment of dividends and
capital gain distributions and exclude the impact of any sales charge. The
Russell 2000 Index, Russell 2000 Growth Index, NASDAQ (OTC) Industrial Index
and Standard & Poor's (S&P) 500 Index are unmanaged. The Russell 2000 Index is
an indicator of small company growth performance; the Russell 2000 Growth
Index is comprised of the Russell 2000 Index securities with
greater-than-average growth orientations; the NASDAQ (OTC) Industrial Index is
comprised of more than 3,000 industrial issues covered by the NASDAQ Composite
Index; and the S&P 500 Index is an indicator of general market performance.
While the Lipper Small Capitalization Growth Fund Index is unmanaged, it is
comprised of the total return performance of the 30 largest funds in the
Lipper Small Capitalization Growth Fund Average, which are managed.
+ Cumulative.
As we have discussed in the past, volatility is a hallmark for the emerging
growth sector of the market. Over the past six months, the level of this
volatility has become extreme indeed. Internet-related and bio-pharmaceutical
stocks rose to historically high valuations in early March only to see large
portions of their value eliminated by the market in just a few trading days.
Day-to-day upward and downward moves of 10% or more have become the norm for
such companies. Managing the Fund with a primary focus on long-term growth and
solid company fundamentals has become both challenging and exciting: challenging
because so many investors seem to have developed shorter and shorter investment
time-horizons, exciting because the resulting volatility has created some
excellent buying opportunities in very exciting companies.
1
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
Our continued focus on companies exhibiting high sustainable growth has
created a diversified portfolio with an average earnings-per-share growth rate
in excess of 35%. Over the short-term such a portfolio cannot escape the
negative impact of a broad market decline. Longer term, however, if the Fund's
holdings achieve our growth expectations, their valuations become compelling and
they can appreciate faster than larger, slower growing companies. Thus, over the
long-term a high rate of portfolio earnings growth typically overwhelms
shorter-term market volatility.
The current market concerns surrounding the Federal Reserve's interest rate
increases, rising inflation and an economic slowdown have followed fast on the
heels of February's technology euphoria. The subsequent market decline has been
severe. It has not been selective and many rapidly growing companies with
sustainable businesses have declined as much as the most speculative issues.
Fund holdings falling into this category include QRS Corporation, RSA Security,
Inc. and Sipex Corp. We view the recent price declines of several of these
companies as buying opportunities, because of our confidence in their long-term
growth prospects, even in the face of an economic slowdown. In fact, empirical
evidence suggests that the current economic environment is favorable for our
sector.
While the Internet euphoria may have driven many stock prices to excessive
valuations, on a case-by-case basis we are buying Internet-related companies
with great business opportunities and the proven ability to execute. Recent
portfolio additions fitting this description are Net Perceptions, Inc., Digital
Insight Corp. and Latitude Communications, Inc. These companies have also been
punished by the market along with high-flying early-stage Internet concepts that
never deserved the valuations attributed to them.
We also think that selectivity is the key in today's market and we continue
to seek only the best companies as additions to the Fund. With all stocks
recently under pressure, we have identified a number of opportunities to upgrade
the Fund by selling holdings whose growth may have slowed or whose prospects are
more fully discounted in the market. We re-deployed the proceeds in several new
and exciting companies, with representation in the technology and consumer
sectors, whose shares have declined just as much or even more than some of the
speculative issues.
Thus, as exciting as the market's dramatic upward moves in the closing
months of 1999 and the early months of 2000 were, we think that the current,
more uncertain environment is far better for the long-term investor. We are
seeing greater opportunities than we have in a long time to invest in terrific
companies at very attractive valuation levels.
We are very excited about the Fund's potential when the current market
volatility subsides and hope you share in our enthusiasm.
Sincerely yours,
/S/SIGNATURE Frederick L. Meserve, Jr.
Frederick L. Meserve,Jr.
Portfolio Manager
May 5, 2000
2
<PAGE>
FIVE LARGEST HOLDINGS
--------------------------------------------------------------------------------
Percent of
Company Net Assets
--------------------------------------------------------------------------------
O ASPECT DEVELOPMENT,INC. (ASDV) 10.5%
Develops, markets and supports enterprise client/server software and
reference data products that enable manufacturers to improve product
development and business processes by enabling them to search for,
organize and compare the design and other technical information of
several thousand components.
O ARTHROCARE CORP. (ARTC) 7.2%
Designs, develops, manufactures and markets medical devices for use in
arthroscopic and orthopedic procedures. ArthroCare's Coblation
technology enables surgeons to remove soft tissues from the body.
Their products are used to perform closed joint surgery in knees and
shoulders, cosmetic surgery and in ear, nose and throat surgery. The
company recently announced an introduction into spinal surgery.
O RSA SECURITY, INC. (RSAS) 6.6%
Is 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 BROADVISION, INC. (BVSN) 6.1%
Supplies application solutions for enterprise-class, personalized
business in the Internet. The company's solutions enable companies to
deploy and operate electronic business and knowledge management
applications for the retail/distribution, financial services, high
technology and telecommunications industries.
O WIND RIVER SYSTEMS,INC. (WIND) 5.9%
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.
3
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
GROWTH OF $100 SINCE DECEMBER 31, 1993*
[line graph omitted]
plot points as follows:
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
---------
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RETURN. This chart represents the
performance of the Fund's Class A Shares for the period beginning December
31, 1993 through April 30, 2000.Prior to November 1993 the Fund operated
under a different portfolio management team, utilizing a different portfolio
investment style. The average annual return of the Fund's Class A Shares
ending 4/30/00 for the 1 year, 5 year, and 10 year time frames are 59.60%,
22.99%, and 14.26%, respectively. The performance listed assumes the
reinvestment of dividends and capital gains and exclude the impact of any
sales charges. Due to current market volatility, the Fund's performance may
be less than the figures presented. Please review additional performance
information on page 5.
4
<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 the total return of each of the Fund's classes, according to a
standardized formula.
The SEC standardized total return figures include the impact of the maximum
5.5% initial sales charge for the Class A Shares and the contingent deferred
sales charge applicable to the specified time period for the Class B Shares. The
contingent deferred sales charge declines over time from a maximum of 5% to 0%
after six years. Returns would be higher for Class A Shares investors who
qualified for a lower initial sales charge or for Class B Shares investors who
continued to hold their shares past the end of the specified time period.
Periods Ended 4/30/00 1 Year 5 Years 10 Years Since Inception*
--------------------------------------------------------------------------------
Class A Shares 50.82% 21.61% 13.62% 13.06%
--------------------------------------------------------------------------------
Class B Shares 50.41% --% --% 16.09%
--------------------------------------------------------------------------------
Institutional Shares 60.07% --% --% 19.59%
--------------------------------------------------------------------------------
BIAT Shares 60.01% --% --% 23.95%
--------------------------------------------------------------------------------
---------
Past performance is not an indicator of future results. Any performance figures
shown are for the full period indicated. Since investment return and principal
value will fluctuate, an investor's shares may be worth more or less than their
original cost when redeemed.
*Inception dates: Class A 6/15/88, Class B 6/20/96, Institutional 11/2/95, BIAT
5/9/97.
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.
These figures include the reinvestment of dividends and capital gain
distributions.
5
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS APRIL 30, 2000
(UNAUDITED)
Percent of
Shares Security Value Net Assets
--------------------------------------------------------------------------------
COMMON STOCK -- 98.8%
--------------------------------------------------------------------------------
AUTOMATED DESIGN -- 3.6%
158,546 Synopsys, Inc.* $ 6,658,932 3.6%
----------- ----
BUILDING & CONSTRUCTION -- 0.8%
35,750 Trex Company, Inc.* 1,436,703 0.8
----------- ----
BUSINESS SERVICES -- 13.5%
134,500 AHL Services, Inc.* 1,302,969 0.7
45,800 Ebenx Inc.* 752,122 0.4
32,900 Digital Insight Corp. * 1,287,213 0.7
86,350 Documentum, Inc.* 5,094,650 2.8
164,900 MemberWorks, Inc.* 5,325,755 2.9
62,400 Net Perceptions, Inc.* 1,209,000 0.7
199,600 QRS Corporation* 6,586,800 3.6
31,225 Sitel Corp.* 214,672 0.1
177,750 Wilmar Industries, Inc.* 3,043,969 1.6
----------- ----
24,817,150 13.5
----------- ----
CAPITAL GOODS -- 12.9%
176,500 Advanced Lighting Technologies, Inc.* 2,691,625 1.5
281,300 Aspect Development, Inc.* 19,444,862 10.5
183,150 Railworks Corp.* 1,739,925 0.9
----------- ----
23,876,412 12.9
----------- ----
CONSUMER SERVICES -- 12.7%
257,037 Apollo Group, Inc.-- Class A* 7,454,073 4.0
66,400 Bright Horizons Family Solutions* 1,195,200 0.6
263,912 O'Charleys, Inc.* 3,348,383 1.8
217,125 Papa John's International* 5,970,937 3.2
107,300 Starbucks Corp.* 3,244,148 1.8
159,400 Sylvan Learning Systems, Inc.* 2,400,962 1.3
----------- ----
23,613,703 12.7
----------- ----
HEALTH CARE -- 7.4%
48,450 Collagenex Pharmaceuticals, Inc.* 490,556 0.2
221,637 Eclipsys Corp.* 1,773,096 1.0
30,800 Guilford Pharmaceuticals, Inc.* 535,150 0.3
41,650 Incyte Pharmaceuticals, Inc.* 3,207,050 1.7
291,050 Sunrise Assisted Living, Inc.* 4,584,037 2.5
889,075 US Oncology, Inc.* 3,056,195 1.7
----------- ----
13,646,084 7.4
----------- ----
6
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
Percent of
Shares Security Value Net Assets
--------------------------------------------------------------------------------
HEALTH EQUIPMENT & SERVICES -- 7.6%
131,350 ArthroCare Corp.* $ 13,381,281 7.2%
38,850 Epix Medical Inc. * 675,019 0.4
------------ ----
14,056,300 7.6
------------ ----
MEDIA/COMMUNICATIONS -- 2.1%
128,700 Getty Images, Inc.* 3,909,262 2.1
------------ ----
SPECIALIZED MATERIALS -- 4.2%
200,300 ATMI, Inc.* 7,711,550 4.2
------------ ----
TECHNOLOGY SOFTWARE/SERVICES -- 13.3%
256,200 BroadVision, Inc.* 11,256,788 6.1
47,300 Novadigm, Inc.* 647,419 0.4
100,525 Transactions Systems Architects, Inc. -
Class A* 1,639,814 0.9
255,959 Wind River Systems, Inc.* 10,926,250 5.9
------------ ----
24,470,271 13.3
------------ ----
TECHNOLOGY SYSTEMS/SEMI CONDUCTORS -- 10.6%
96,750 Astropower, Inc.* 1,977,328 1.1
207,000 RSA Security, Inc.* 12,148,313 6.6
233,700 Sipex Corp.* 5,345,888 2.9
------------ ----
19,471,529 10.6
------------ ----
TELECOMMUNICATIONS -- 4.9%
71,100 Latitude Communications,Inc.* 1,030,950 0.6
228,925 Tekelec, Inc.* 8,012,375 4.3
------------ ----
9,043,325 4.9
------------ ----
TRANSPORTATION -- 5.2%
98,750 Atlantic Coast Airlines, Inc.* 2,950,156 1.6
182,975 Forward Air Corp.* 6,289,766 3.4
61,075 Landair Corporation* 274,838 0.2
------------ ----
9,514,760 5.2
------------- -----
TOTAL COMMON STOCK
(Cost $101,798,165) 182,225,981 98.8
------------ ----
7
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED) APRIL 30, 2000
(UNAUDITED)
Percent of
Par Security Value Net Assets
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.1%
--------------------------------------------------------------------------------
$3,897,000 Goldman Sachs & Co., 5.63%,
Dated 4/28/00, to be repurchased
for $3,898,828 on 5/1/00,
collateralized by U.S. Treasury
Bond, 5.63% due 2/28/01 with
a market value of $3,980,507. $ 3,897,000 2.1%
------------ =====
TOTAL INVESTMENTS
(Cost $105,695,164) 186,122,981 100.9%
LIABILITIES IN EXCESS OF OTHER ASSETS (1,609,134) (0.9)%
------------ =====
NET ASSETS -- 100.0% 184,513,847 100.0%
============ =====
NET ASSET VALUE AND REDEMPTION PRICE PER:
Class A Share
($90,805,441 / 2,800,002 shares outstanding) $32.43
======
Class B Share
($6,321,108 / 201,578 shares outstanding) $31.36**
======
Institutional Share
($6,699,523 / 204,753 shares outstanding) $32.72
======
BIAT Share
($80,687,775 / 2,464,130 shares outstanding) $32.74
======
MAXIMUM OFFERING PRICE PER:
Class A Share
($32.43 / 0.945) $34.32
======
Class B Share $31.36
======
Institutional Share $32.72
======
BIAT Share $32.74
======
------------
* Non-income producing security.
** Redemption value is $29.79 following a 5% maximum contingent deferred sales
charge.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000(1)
--------------------------------------------------------------------------------
Investment Income:
Dividends ................................................... $ 6,155
Interest .................................................... 209,000
-------------
Total investment income ............................ 215,155
-------------
Expenses:
Investment advisory fees .................................... 820,665
Distribution fees ........................................... 145,739
Professional fees ........................................... 66,245
Transfer agent fees ......................................... 48,430
Accounting fees ............................................. 34,393
Custodian fees .............................................. 25,360
Registration fees ........................................... 23,299
Printing and Postage ........................................ 17,450
Directors' fees ............................................. 2,916
Miscellaneous ............................................... 3,525
-------------
Total expenses ........................................ 1,188,022
-------------
Expenses in excess of investment income ........................ (972,867)
-------------
Realized and unrealized gain on investments:
Net realized gain from security transactions ................ 18,506,539
Change in unrealized appreciation/depreciation of investments 34,601,613
-------------
Net gain on investments ..................................... 53,108,152
-------------
Net increase in net assets resulting from operations ........... $ 52,135,285
=============
--------------
1 Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
April 30, October 31,
--------------------------------------------------------------------------------
2000(1) 1999
Increase/(Decrease) in Net Assets:
Operations:
Expenses in excess of investment income ....... $ (972,867) $ (1,502,607)
Net realized gain from security
transactions ............................... 18,506,539 6,595,357
Change in unrealized appreciation/
(depreciation) of investments .............. 34,601,613 28,398,384
------------ ------------
Net increase in net assets resulting
from operations ............................ 52,135,285 33,491,134
------------ ------------
Dividends to Shareholders from:
Net realized short-term gains:
Class A Shares ............................. (1,000,134) --
Class B Shares ............................. (56,275) --
Institutional Shares ....................... (111,186) --
BIAT Shares ................................ (934,598) --
Net realized long-term gains:
Class A Shares ............................. (1,111,273) --
Class B Shares ............................. (62,527) --
Institutional Shares ....................... (123,540) --
BIAT Shares ................................ (1,038,442) --
------------ ------------
Total distributions ........................... (4,437,975) --
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares .................. 17,980,876 62,295,373
Value of shares issued in
reinvestment of dividends .................. 4,247,011 --
Cost of shares repurchased .................... (31,908,756) (72,562,378)
------------ ------------
Decrease in net assets derived from
capital share transactions ................. (9,680,869) (10,267,005)
------------ ------------
Total increase in net assets .................. 38,016,441 23,224,129
Net Assets:
Beginning of period ........................... 146,497,406 123,273,277
------------ ------------
End of period including accumulated expenses
in excess of investment income of $6,233
for the year ended October 31, 1999 ........ $184,513,847 $146,497,406
============ ============
-------------
(1) Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000(3)
--------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value at beginning of period ...................... $ 24.36
Income from Investment Operations:
Expenses in excess of investment income ..................... (0.46)
Net realized and unrealized gain/(loss) on investments ...... 9.29
---------
Total from Investment Operations ............................ 8.83
Less Distributions:
Distributions from net realized short-term gains ............ (0.36)
Distributions from net realized long-term gains .......... (0.40)
---------
Total distributions ......................................... (0.76)
---------
Net asset value end of period ............................... $ 32.43
=========
Total Return(1) ................................................ 36.73
Ratios to Average Daily Net Assets:
Expenses .................................................... 1.38%(4)
Expenses in excess of investment income ..................... (0.86)%(4)
Supplemental Data:
Net assets at end of period (000) ........................... $ 90,805
Portfolio turnover rate ..................................... 19%
-----------------
(1) Total return excludes the effect of sales charge.
(2) Calculated based on average shares.
(3) Unaudited.
(4) Annualized.
12
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended October 31,
-------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ................. $ 19.08 $ 23.17 $ 19.14 $ 17.09 $ 12.90
Income from Investment Operations:
Expenses in excess of investment income ................ (0.28) (0.22)(2) (0.18) (0.15) (0.09)
Net realized and unrealized gain/(loss) on investments . 5.56 (2.82) 4.95 3.10 4.32
------- -------- -------- -------- --------
Total from Investment Operations ....................... 5.28 (3.04) 4.77 2.95 4.23
Less Distributions:
Distributions from net realized short-term gains ....... -- (0.21) (0.21) (0.30) --
Distributions from net realized long-term gains ..... -- (0.84) (0.53) (0.60) (0.04)
------- -------- -------- -------- --------
Total distributions .................................... -- (1.05) (0.74) (0.90) (0.04)
------- -------- -------- -------- --------
Net asset value end of period .......................... $ 24.36 $ 19.08 $ 23.17 $ 19.14 $ 17.09
======= ======== ======== ======== ========
Total Return(1) ........................................... 27.67% (13.48)% 25.93% 18.19% 32.92%
Ratios to Average Daily Net Assets:
Expenses ............................................... 1.40% 1.41% 1.44% 1.50% 1.50%
Expenses in excess of investment income ................ (1.19)% (1.03)% (0.97)% (0.83)% (0.64)%
Supplemental Data:
Net assets at end of period (000) ...................... $70,236 $65,247 $71,123 $45,325 $38,127
Portfolio turnover rate ................................ 38% 23% 42% 24% 39%
----------------------
<FN>
(1) Total return excludes the effect of sales charge.
(2) Calculated based on average shares.
(3) Unaudited.
(4) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000(5)
Per Share Operating Performance:
Net asset value at beginning of period ....................... $ 23.67
Income from Investment Operations:
Expenses in excess of investment income ...................... (0.40)
Net realized and unrealized gain/(loss) on investments
Total from Investment Operations ............................. 8.45
-------
Less Distributions:
Distributions from net realized short-term gains ............. (0.36
Distributions from net realized long-term gains .............. (0.40)
-------
Total distributions .......................................... (0.76)
-------
Net asset value at end of period ............................. $ 31.36
-------
Total Return(3) ................................................. 36.18%
Ratios to Average Daily Net Assets:
Expenses ..................................................... 1.94%(4)
Expenses in excess of investment
income ....................................................... (0.84)%(4)
Supplemental Data:
Net assets at end of period (000) ............................ $ 6,321
Portfolio turnover rate ...................................... 19%
----------
(1) Commencement of operations.
(2) Calculation based on average shares.
(3) Total return excludes the effect of sales charge.
(4) Annualized.
(5) Unaudited.
14
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
June 20, 1996(1)
through
For the Years Ended October 31, October 31,
---------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ................. $ 18.69 $ 22.88 $ 19.10 $ 19.22
------- ------- ------- -------
Income from Investment Operations:
Expenses in excess of investment income ................ (0.55) (0.37)(2) (0.18) (0.12)
Net realized and unrealized gain/(loss) on investments . 5.53 (2.77) 4.70 --
------- ------- ------- -------
Total from Investment Operations ....................... 4.98 (3.14) 4.52 (0.12)
------- ------- ------- -------
Less Distributions:
Distributions from net realized short-term gains ....... -- (0.21) (0.21) --
Distributions from net realized long-term gains ........ -- (0.84) (0.53) --
------- ------- ------- -------
Total distributions .................................... -- (1.05) (0.74) --
------- ------- ------- -------
Net asset value at end of period ....................... $ 23.67 $ 18.69 $ 22.88 $ 19.10
======= ======= ======= =======
Total Return(3) ........................................... 26.65% (14.11)% 24.69% (0.62)%
Ratios to Average Daily Net Assets:
Expenses ............................................... 2.15% 2.16% 2.19% 2.25%(4)
Expenses in excess of investment
income ................................................. (1.94)% (1.77)% (1.73)% (1.67)%(4)
Supplemental Data:
Net assets at end of period (000) ...................... $ 3,662 $ 5,155 $ 5,719 $ 772
Portfolio turnover rate ................................ 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.
(5) Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000(4)
Per Share Operating Performance:
Net asset value at beginning of period ........................ $ 24.54
-------
Income from Investment Operations:
Expenses in excess of investment income ....................... (0.77)
Net realized and unrealized gain/(loss) on investments ........ 9.71
-------
Total from Investment Operations .............................. 8.94
-------
Less Distributions:
Distributions from net realized short-term gains .............. (0.36)
Distributions from net realized long-term gains ............... (0.40)
-------
Total distributions ........................................... (0.76)
-------
Net asset value at end of period .............................. $ 32.72
=======
Total Return ..................................................... 36.92%
Ratios to Average Daily Net Assets:
Expenses ...................................................... 1.19%(3)
Expenses in excess of investment income ....................... (0.86)%(3)
Supplemental Data:
Net assets at end of period (000) ............................. $ 6,700
Portfolio turnover rate ....................................... 19%
-----------
(1) Commencement of operations.
(2) Calculation based on average shares.
(3) Annualized.
(4) Unaudited.
16
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
November 2, 1995(1)
through
For the Years Ended October 31, October 31,
-----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ................... $ 19.17 $ 23.25 $ 19.15 $ 17.45
------- ------- -------- --------
Income from Investment Operations:
Expenses in excess of investment income .................. (0.21) (0.17)2 (0.26) (0.12)
Net realized and unrealized gain/(loss) on investments ... 5.58 (2.86) 5.10 2.72
------- ------- -------- --------
Total from Investment Operations ......................... 5.37 (3.03) 4.84 2.60
------- ------- -------- --------
Less Distributions:
Distributions from net realized short-term gains ......... -- (0.21) (0.21) (0.30)
Distributions from net realized long-term gains .......... -- (0.84) (0.53) (0.60)
------- ------- -------- --------
Total distributions ...................................... -- (1.05) (0.74) (0.90)
------- ------- -------- --------
Net asset value at end of period ......................... $ 24.54 $ 19.17 $ 23.25 $ 19.15
======= ======= ======== =========
Total Return ........................................... 28.01% (13.39)% 26.36% 16.48%
Ratios to Average Daily Net Assets:
Expenses ................................................. 1.15% 1.16% 1.19% 1.25%(3)
Expenses in excess of investment income .................. (0.94)% (0.76)% (0.74)% (0.61)%(3)
Supplemental Data:
Net assets at end of period (000) ........................ $7,578 $6,243 $13,068 $19,751
Portfolio turnover rate .................................. 38% 23% 42% 24%
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Commencement of operations.
(2) Calculation based on average shares.
(3) Annualized.
(4) Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- BIAT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
For the Period
For the Six For the May 9, 19971
Months Ended Years Ended through
April 30, October 31, October 31,
--------------------------------------------------------------------------------------------------
2000(4) 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 ............................... (0.22) (0.21) (0.17)(2) (0.06)
Net realized and unrealized
gain/(loss) on investments ........ 9.16 5.58 (2.83) 4.66
------- ------- ------- -------
Total from Investment Operations .. 8.94 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 ..... $ 32.74 $ 24.56 $ 19.19 $ 23.24
======= ======= ======= =======
Total Return ............................ 36.89% 27.98% (13.26)% 24.68%
Ratios to Average Daily Net Assets:
Expenses ............................. 1.16%(3) 1.15% 1.16% 1.19%(3)
Expenses in excess of investment
income .............................. (0.86)%(3) (0.94)% (0.80)% (0.69)%(3)
Supplemental Data:
Net assets at end of period (000) ....... $80,688 $65,021 $46,628 $35,653
Portfolio turnover rate .............. 19% 38% 23% 42%
------------
<FN>
(1) Commencement of operations.
(2) Calculation based on average shares.
(3) Annualized.
(4) Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- 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 four share classes: Class A Shares, which began
operations June 15, 1988; Institutional Shares, which began operations November
2, 1995; Class B Shares, which began operations June 20, 1996; and Brown
Investment Advisory & Trust (BIAT) Shares (formerly, Alex. Brown Capital
Advisory & Trust Shares), which began operations May 9, 1997.
The Class A and Class B Shares are subject to different sales charges and
distribution fees. The Class A Shares have a front-end sales charge and the
Class B Shares have a contingent deferred sales charge. The 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. SECURITY VALUATION -- 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 readily available, the Investment
Advisor determines a fair value using procedures that the Board of
Directors establishes and monitors. At April 30, 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
19
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- concluded
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 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 or excise
taxes.
D. SECURITIES TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER -- The
Fund uses the trade date to account for security 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 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 six
months ended April 30, 2000, ICCC's advisory fee was $820,665, of which $128,878
was payable at the end of the period.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisors.
20
<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 six months ended April 30, 2000, ICCC's fee was
$34,393, of which $5,553 was payable at the end of the period.
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 six
months ended April 30, 2000, ICCC's fee was $48,430, of which $20,967 was
payable at the end of the period.
Bankers Trust Company, an affiliate of the advisor, is the Fund's
custodian. For the six months ended April 30, 2000, Banker's Trust's fee was
$25,360 of which $29,035 was payable at the end of the period.
ICC Distributors, Inc. ("ICC Distributors") a member of the Forum Financial
Group of Companies, 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
Class A Shares' average daily net assets and 1.00% (including a 0.25%
shareholder servicing fee) of the Class B Shares' average daily net assets. For
the six months ended April 30, 2000, ICC Distributors fee was $145,739, of which
$23,930 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 six months ended April 30, 2000 was $2,916, and the accrued
liability was $3,482.
21
<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 Class A, 1 million Class B, 15 million Class C, 5
million Institutional, 5 million BIAT and 1 million undesignated). Transactions
in shares of the Fund are listed below.
Class A Shares
------------------------------------
For the For the
Six Months Ended Year Ended
April 30, 2000(1) Oct. 31, 1999
------------------ -------------
Shares sold ........................... 321,274 1,515,812
Shares issued to shareholders on
reinvestment of dividends .......... 70,927 --
Shares redeemed ....................... (475,816) (2,051,847)
----------- ------------
Net decrease in shares outstanding .... (83,615) (536,035)
=========== ============
Proceeds from sale of shares .......... $12,395,133 $31,943,780
Value of reinvested dividends ......... 1,990,933 --
Cost of shares redeemed ............... (15,696,509) (43,621,960)
----------- ------------
Net decrease from capital share
transactions ....................... $(1,310,443) $(11,678,180)
=========== ============
Class B Shares
-------------------------------------
For the For the
Six Months Ended Year Ended
April 30, 2000(1) Oct. 31, 1999
------------------ ---------------
Shares sold ........................... 113,985 20,443
Shares issued to shareholders on
reinvestment of dividends .......... 3,893 --
Shares redeemed ....................... (71,003) (141,506)
----------- ------------
Net increase/(decrease) in shares
outstanding ........................ 46,875 (121,063)
=========== ============
Proceeds from sale of shares .......... $ 4,292,255 $ 408,881
Value of reinvested dividends ......... 106,032 --
Cost of shares redeemed ............... (2,677,102) (2,902,871)
----------- ------------
Net increase/(decrease) from capital
share transactions ................. $(1,721,185) $ (2,493,990)
=========== ============
------------
(1) Unaudited.
22
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTE 3 -- concluded
Institutional Shares
------------------------------------
For the For the
Six Months Ended Year Ended
April 30, 2000(1) Oct. 31, 1999
------------------ ---------------
Shares sold ........................... 13,421 569,819
Shares issued to shareholders on
reinvestment of dividends .......... 7,771 --
Shares redeemed ....................... (125,289) (586,592)
----------- ------------
Net decrease in shares outstanding .... (104,097) (16,773)
=========== ============
Proceeds from sale of shares .......... $ 550,831 $ 12,357,525
Value of reinvested dividends ......... 219,845 --
Cost of shares redeemed ............... (4,232,930) (12,773,882)
----------- ------------
Net decrease from capital share
transactions ....................... $(3,462,254) $ (416,357)
=========== ============
BIAT Shares
------------------------------------------
For the For the
Six Months Ended Year Ended
April 30, 20001 Oct. 31, 1999
--------------------------------
Shares sold ........................... 21,037 840,979
Shares issued to shareholders on
reinvestment of dividends .......... 68,181 --
Shares redeemed ....................... (272,855) (623,346)
----------- ------------
Net increase/(decrease) in shares
outstanding ........................ (183,637) 217,633
=========== ============
Proceeds from sale of shares .......... $ 742,657 $ 17,585,187
Value of reinvested dividends ......... 1,930,201 --
Cost of shares redeemed ............... (9,302,212) (13,263,665)
----------- ------------
Net increase/(decrease) from capital
share transactions .................. $(6,629,354) $ 4,321,522
=========== ============
--------------------------------------------------------------------------------
1 Unaudited.
23
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 4 -- Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $34,952,621 and sales of investment securities aggregated $53,905,376
for the six months ended April 30, 2000.
On April 30, 2000, aggregate net unrealized appreciation over tax cost for
portfolio securities was $80,427,817, of which $95,620,967 related to
appreciated securities and $15,193,150 related to depreciated securities.
NOTE 5 -- Net Assets
On April 30, 2000, net assets consisted of:
Paid-in capital
Class A Shares .............................................. $ 35,162,322
Class B Shares .............................................. 5,023,411
Institutional Shares ........................................ (153,337)
BIAT Shares ................................................. 47,993,581
Accumulated net realized gain from security transactions ....... 17,039,153
Unrealized appreciation of investments ......................... 80,427,817
Accumulated expenses in excess of investment income ............ (979,100)
------------
$184,513,847
============
NOTE 6 -- 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.
24
<PAGE>
FLAG INVESTORS EMERGING GROWTH FUND
--------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
TRUMAN T. SEMANS
CHAIRMAN
RICHARD R. BURT ROBERT H. WADSWORTH
DIRECTOR DIRECTOR
RICHARD T. HALE CARL W. VOGT, ESQ.
DIRECTOR PRESIDENT
JOSEPH R. HARDIMAN CHARLES A. RIZZO
DIRECTOR TREASURER
LOUIS E. LEVY AMY M. OLMERT
DIRECTOR SECRETARY
EUGENE J. MCDONALD DANIEL O. HIRSCH
DIRECTOR ASSISTANT SECRETARY
REBECCA W. RIMEL
DIRECTOR
INVESTMENT OBJECTIVE
An open-end mutual fund seeking 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 any of the 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.
----------------------------------------------------------------------
<PAGE>
[Flag Investors logo omitted]
DOMESTIC EQUITY
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 U.S.
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.
EGSA(6/00)
