FLAG INVESTORS
FLAG
INVESTORS
VALUE
BUILDER
FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1998
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
o Despite the market turmoil, your Fund earned a positive return of 0.5% for the
first 9 months of 1998. From a longer-term perspective, your Fund achieved
excellent performance results for the 3- and 5-year periods ended September
30, 1998, comparing favorably against other balanced funds.
o New and existing shareholders purchased more than $205 million in Fund shares
over the past 12 months.
o Foreign economic instability negatively impacted the domestic equity market.
The average NYSE stock declined by almost 40% from its high for the year,
comparable to declines in 1987 and 1990.
o Because of the market decline, stock valuations present today for many
companies offer significantly greater opportunities than may have been
available for some time. The current level of interest rates offers a very
strong under-pinning to equity valuations assuming U.S. economic activity is
not severely impacted by the current global instabilities.
o Our "flexible value" strategy focuses on "stock picking" and not economic
forecasts. We look for fundamentally sound companies that are temporarily out
of favor on Wall Street. Many of these companies offer above-average return
potential for the long-term investor.
<PAGE>
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment in Class A Shares*
June 15, 1992-September 30, 1998
[GRAPH APPEARS BELOW - SEE PLOT POINTS]
$10,000 invested in the Value Builder Fund
Class A Shares at inception on June 15, 1992
was worth $24,478 on September 30, 1998.
6/92 $10,000
12/92 10,776
6/93 11,526
12/93 12,043
6/94 11,666
12/94 11,998
6/95 14,076
12/95 15,927
6/96 17,217
12/96 19,851
6/97 22,132
9/97 23,928
9/98 24,478
Total Return Performance*
<TABLE>
<CAPTION>
Class A Class B Class C Class D Institutional
For the periods ended 9/30/98 Shares Shares Shares Shares** Shares
- --------------------------------------------------------------------------------------
<S><C>
1 Year 2.30% 1.51% -- 1.91% 2.52%
3 Years (Cumulative) 60.24% 56.72% -- 58.55%
5 Years (Cumulative) 102.81% -- -- 99.32%
Since Inception 6/15/92 1/3/95 4/8/98 11/9/92 11/2/95
------- ------ ------ ------- -------
(Cumulative) 144.78% 98.17% -10.45% 129.07% 60.17%
</TABLE>
*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 when redeemed. These figures assume the
reinvestment of dividends and capital gains distributions and exclude the
impact of any sales charge. Also, some of the Fund's fees were waived during
the period. If the maximum 4.5% sales charge were reflected and if there had
been no fee waivers, 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. Please review the Additional Performance Information on
page 6.
**The Fund has not sold Class D Shares since November 18, 1994, but existing
shareholders may reinvest their dividends.
1
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Fellow Shareholders:
We are pleased to report the progress of your Fund for the period ended
September 30, 1998.
In spite of the turmoil in the equity market during the past several months, the
Value Builder Fund finished in the plus column (just barely) for the first nine
months with a return of 0.5% for the Fund's Class 'A' shares. Although the
earnings progress of the companies held in the portfolio continued essentially
on target, investor behavior turned decidedly negative during the third quarter
and the market took back the year's earlier gains to place equities in slightly
negative territory for the year-to-date. On the other hand, the bond or fixed
income portion of the Fund did quite well with the downward movement in interest
rates since the beginning of the year.
From a longer-term perspective, we are pleased to report that your Fund's
performance continues to place it in the very top tier of Balanced Funds.
According to Lipper Analytical, the Fund's Class A shares ranked #20 out of 274
Funds and #7 out of 146 Funds for the respective 3- and 5-year periods ending
September 30, 1998.(1)
The best performing common stocks (see next page) over the past nine months
represent companies owned for various time periods. This clearly demonstrates
that long-term holdings continue to contribute to the Fund's performance, but it
also highlights the fact that we are always adding new securities that represent
good value.
While a number of securities declined during the period, our two biggest
losers were Sunbeam and Cendant, declining 69% and 66% respectively. In our
annual letter in April when we do our "scorecard" you can rest assured we will
give ourselves an appropriate flogging for these mistakes.
During the past year, the Fund maintained its long-term focus with
approximately 91% of the Fund's assets in stocks and bonds. The pie chart on the
next page reflects the current asset mix as well as the asset mix a year ago.
- ---------------
(1)The Lipper rankings are based on performance for the periods ended September
30, 1998 relative to other funds in the Balanced Funds category. In addition
the Fund ranked #233 out of 395 for the 1 year period. Performance figures
used in these rankings exclude the impact of any sales charge.
2
<PAGE>
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Best Performers 12/31/97 - 9/30/98
Original
Security Percent Gain Investment Date
- ----------------------------------------------------------------------
America Online 146.7% 11/96
SEI Corp. 65.5% 10/95
Novell 63.3% 12/97
MCI Worldcom 42.0% 8/92
Amgen 39.6% 4/94
Tandy Corp. 38.7% 2/94
Monsanto 30.9% (w) 11/94
Eastman Kodak 26.9% 1/93
The Learning Company 23.3% 7/97
IBM 22.8% 11/93
- ---------------
(w)Sold mid-period.
Asset Mix
[PIE CHARTS APPEAR BELOW; SEE VALUES BELOW]
9/30/97 9/30/98
Short-term Investments 10.8% Short-term Investments 8.7%
Fixed-Income 26.9% Fixed-Income 32.1%
Common Stocks and Convertibles 62.3% Common Stocks and Convertibles 59.2%
Although there was very little change in the asset mix during the period, our
investment activity was considerably greater. With share purchases by new and
existing shareholders of $205 million over the past 12 months, our net purchases
of stocks and bonds totaled almost $200 million for this same period. We also
note that during the past three months investors remained net purchasers of
Value Builder shares. We very much appreciate this expression of confidence.
3
<PAGE>
Letter to Shareholders (concluded)
- --------------------------------------------------------------------------------
Investment Environment
In our April letter to shareholders, we cautioned that investment returns for
the prior three years had been substantially above the norm ("as good as it
gets") and that shareholders should tone down their expectations. Little did we
know that the equity market's response would be quite so immediate. The global
instabilities in foreign economies such as Russia and Asia caused the domestic
equity market to take on a decidedly negative tone. While the S&P 500
(capitalization weighted) held up relatively well, the average stock on the New
York Stock Exchange declined by almost 40% from its 52-week high for the year;
comparable to declines in 1987 and 1990. Although painful, it does suggest to us
that most of the agony is behind us and that stock valuations present today for
many companies offer significantly greater opportunities than have been
available for some time. Furthermore, the current level of interest rates in the
5% area offers a very strong under-pinning to equity valuations as long as
economic activity is not severely impacted by the current global instabilities.
For any shareholders who wonder why we did not take a more defensive position
in light of our comments about future returns, the answer is rather simple. We
are long-term investors and raising and lowering cash levels in an attempt to
predict the market (market timing) is fraught with risks and requires two
decisions; when to get out and when to get back in. It is a challenge enough to
decide which companies offer above-average value much less guessing the
short-term direction of the market. We are also reminded of Warren Buffett's
characterization that the equity market in the short-term is a voting machine
driven by emotion and in the long-term it is a weighing machine reflecting
business progress. We will take the latter as our measure of success.
We would remind shareholders that equity markets and our economy have
overcome many challenges in the past. For example, eight years ago when the
Savings and Loan crisis was in full swing and a balanced budget was not even a
possibility, the financial markets managed to work their way through that
experience. We would also note that our "flexible value" strategy that focuses
on "stock picking" and not economic forecasts allows us to pick and choose among
companies which are fundamentally sound, but for one reason or another are
temporarily out of favor on Wall Street. Many of these companies offer
above-average return potential for the long-term investor. With the market
decline over the past several months the number of potential candidates has
grown considerably.
4
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Developments
Since our last report to shareholders, we have remained active in our pursuit
of improving the prospects of your Fund by adding to existing positions or
creating new ones. Our largest purchases in the Fund are listed below.
Largest Purchases (For the six months ended 9/30/98)
Common Stock Purchases Bond Purchases
- -------------------------------------------------------------------------------
Security Cost Security Cost
- -------------------------------------------------------------------------------
Cendant $14,720,989 Millipore 7.20%, 4/01/02 $6,194,316
Richfood Holdings 8,501,249 HMH Properties 7.875% 8/01/05 5,701,744
Canadian National Rail 7,924,720 Conseco 6.80%, 6/15/05 5,087,556
CalEnergy 6,526,459 GTE Corp 6.46%, 4/15/08 4,998,400
Petroleum Geo Services 5,961,800 Millipore 7.50%, 4/01/07 4,992,450
The Fund's five largest common stock holdings are listed below along with the
percentage change for each so far this year.
Five Largest Holdings
Market Value Performance
Security Cost as of 9/30/98 12/31/97--9/30/98
- ---------------------------------------------------------------------------
Conseco $18,223,877 $28,523,461 -32.7%
America Online 2,717,910 20,470,000 146.7
SEI Corp. 3,646,320 12,259,800 65.5
Cendant 15,416,544 12,001,650 -66.2
Novell 8,652,772 11,061,750 63.3
----------- -----------
Total $48,657,423 $84,385,661
We thank you for your continued interest and support. We look forward to the
ongoing process of building value for you.
Respectfully submitted,
/s/ Hobart C. Buppert, II
_________________________
Hobart C. Buppert, II
Portfolio Manager
November 2, 1998
5
<PAGE>
FLAG INVESTORS VALUE BUILDER 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. The Securities
and Exchange Commission (SEC) requires that when we report such figures, we also
include the Fund's total return, according to a standardized formula, for
various time periods through the end of the most recent calendar quarter. The
SEC total return figures differ from those we reported because the time periods
may be different and because the SEC calculation includes the impact of the
currently effective 4.50% maximum sales charge for the Fund's Class A Shares,
4.00% maximum contingent deferred sales charge for the Fund's Class B Shares,
1.00% maximum contingent deferred sales charge for the Fund's Class C Shares and
1.50% maximum sales charge and 1.00% maximum contingent deferred sales charge
for the Fund's Class D Shares.
Average Annual Total Return
For the periods ended 9/30/98 1 Year 5 Years Since Inception*
- -------------------------------------------------------------------------------
Class A Shares -2.31% 14.14% 14.45%
Class B Shares -2.49% -- 19.58%
Class C Shares -- -- -11.45%**
Class D Shares -.6% 14.45% 14.81%
Institutional Shares 2.52% -- 17.57%
*Inception dates: Class A 6/15/92, Class B 1/3/95, Class C 4/8/98, Class D
11/2/92, Institutional 11/2/95.
**Aggregated.
The Fund's total returns correspond to those experienced by individual
shareholders only if their shares were purchased on the first day of each time
period and the maximum sales charge was paid. 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. Past performance is not an indicator of future results.
6
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets September 30, 1998
(Unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 54.3%
Banking: 2.0%
35,000 Citicorp $ 3,252,813
200,000 KeyCorp 5,775,000
13,100 Wells Fargo & Company 4,650,500
------------
13,678,313
------------
Basic Industry: 2.6%
400,000 Airgas, Inc.* 4,850,000
140,000 Georgia Gulf Corp. 2,187,500
30,000 Hercules, Inc. 901,875
140,000 International Paper Company 6,527,500
44,654 Potash Corp. of Saskatchewan 2,349,917
28,000 Solutia, Inc. 631,750
------------
17,448,542
------------
Business Services: 2.8%
294,700 First Data Corp. 6,925,450
176,400 SEI Corp. 12,259,800
------------
19,185,250
------------
Capital Goods: 0.6%
36,000 Eaton Corp. 2,256,750
96,200 Westinghouse Air Brake Co. 1,899,950
------------
4,156,700
------------
Consumer Durables/Non-Durables: 4.7%
366,700 Blyth Industries, Inc.* 10,061,331
33,500 Eastman Kodak Co. 2,589,969
140,000 Ford Motor Company 6,571,250
50,000 Liz Claiborne, Inc. 1,309,375
111,600 Philip Morris Cos., Inc. 5,140,575
410,100 Richfood Holdings, Inc. 6,305,287
------------
31,977,787
------------
Consumer Services: 7.0%
184,000 America Online, Inc.* 20,470,000
1,032,400 Cendant Corp.* 12,001,650
60,000 Gannett Co. 3,213,750
455,200 The Learning Co., Inc.* 9,018,650
50,000 Times Mirror Co. Class A 2,656,250
------------
47,360,300
------------
7
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) September 30, 1998
(Unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (continued)
Defense/Aerospace: 1.3%
156,000 Boeing Co. $ 5,352,750
31,171 Lockheed Martin Corp. 3,142,426
------------
8,495,176
------------
Electric Utilities: 0.6%
100,000 Unicom Corp. 3,737,500
------------
Energy: 2.1%
125,000 Burlington Resources, Inc. 4,671,875
204,700 Calenergy Company, Inc.* 5,424,550
250,000 Petroleum Geo-Services* 3,968,750
------------
14,065,175
------------
Entertainment: 0.8%
796,700 LodgeNet Entertainment Corp.* 5,626,694
------------
Financial Services: 4.8%
83,500 American Express Co. 6,481,688
36,691 Associates First Capital Corp., Class A 2,394,088
87,500 Countrywide Credit Industries, Inc. 3,642,188
172,000 Freddie Mac 8,503,250
177,187 MBNA Corp. 5,071,978
171,000 Travelers Group, Inc. 6,412,500
------------
32,505,692
------------
Health Care: 3.9%
95,000 Amgen, Inc.* 7,178,437
40,000 Baxter International, Inc. 2,380,000
38,000 Bristol-Myers Squibb Co. 3,947,250
114,000 Johnson & Johnson 8,920,500
77,200 Wellpoint Health Networks* 4,328,025
------------
26,754,212
------------
Hotels/Gaming: 0.4%
200,000 Harrah's Entertainment, Inc.* 2,662,500
------------
8
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (continued)
Housing: 1.7%
275,000 Champion Enterprises, Inc.* $ 6,393,750
118,000 USG Corp. 5,103,500
------------
11,497,250
------------
Insurance: 7.2%
933,283 Conseco, Inc. 28,523,462
161,720 EXEL Limited - Class A 10,188,360
65,000 Hartford Financial Services Group 3,083,437
150,000 RenaissanceRe Holdings Ltd. 6,806,250
------------
48,601,509
------------
Multi-Industry: 0.7%
64,000 United Technologies Corp. 4,892,000
------------
Real Estate: 1.7%
60,200 General Growth Properties, Inc. 2,144,625
474,136 Host Marriott Corp.* 6,015,600
35,000 National Health Investors, Inc. 1,085,000
100,500 U.S. Restaurant Properties, Inc. 2,556,469
------------
11,801,694
------------
Retail: 2.2%
124,664 J.C. Penney Company, Inc. 5,602,088
400,000 Kmart Corp.* 4,775,000
90,000 Tandy Corp. 4,815,000
------------
15,192,088
------------
Technology: 4.7%
70,400 Autodesk, Inc. 1,848,000
261,500 Cognex Corp.* 3,039,937
125,000 Electronic Data Systems Corp. 4,148,438
86,000 International Business Machines Corp. 11,008,000
33,400 Millipore Corp. 636,687
903,000 Novell, Inc.* 11,061,750
------------
31,742,812
------------
Telecommunications: 1.4%
190,689 MCI WorldCom, Inc.* 9,319,967
------------
9
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) September 30, 1998
(Unaudited)
Shares
Par (000) Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (concluded)
Transportation: 1.1%
135,000 Canadian National Rail Co. $ 6,024,375
17,491 Delta Air Lines, Inc. 1,701,000
------------
7,725,375
------------
TOTAL COMMON STOCK
(Cost $250,383,511) 368,426,536
------------
CONVERTIBLE PREFERRED STOCK: 2.8%
32,300 Conseco Inc., $4.28, 7% Cvt. Pfd., Series E 3,488,400
40,000 Fleetwood Capital Trust, Cvt. Pfd., 6.00% 1,900,000
100,000 Host Marriott Financial Trust, Cvt. Pfd., 6.75% 4,225,000
383,600 U.S. Restaurant Properties, Series A, Cvt. Pfd., 7.72% 9,566,025
------------
Total Convertible Preferred Stock
(Cost $18,793,260) 19,179,425
------------
PREFERRED SECURITIES: 1.1%
100,000 Conseco Financial Trust, 9.16% 2,562,500
200,000 Conseco Financial Trust, 8.70% 5,062,500
------------
Total Preferred Securities
(Cost $7,500,000) 7,625,000
------------
CONVERTIBLE BONDS: 2.0%
$2,000 Capstone Capital Corp., Cvt. Deb., 6.55%, 3/14/02 2,010,000
339 Richardson Electronics, Cvt. Deb., 7.25%, 12/15/06 267,810
1,661 Richardson Electronics, Cvt. Deb., 8.25%, 6/15/06 1,436,765
10,907 Softkey International, Cvt. Deb., 5.50%, 11/01/00 9,884,469
------------
Total Convertible Bonds
(Cost $13,718,581) 13,599,044
------------
CORPORATE BONDS: 29.1%
3,000 Argosy Gaming, 13.25%, 6/1/04 3,165,000
3,000 Avon Products, Inc., 6.55%, 8/1/07 3,146,250
1,000 Caesar's World, 8.875%, 8/15/02 1,022,500
2,975 Calenergy Co., Inc., 7.23%, 9/15/05 3,041,938
10
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Par
(000) Market Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (continued)
$ 5,000 Calenergy Co., Inc., 7.63%, 10/15/07 $ 5,218,750
3,000 Campbell Soup Co., 6.15%, 12/1/02 3,161,250
1,000 Capstar Hotel, 8.75%, 8/15/07 952,500
873 Chattem, Inc., Sr Sub Deb, 12.75%, 6/15/04 955,935
3,000 Circus Circus, 6.75%, 7/15/03 3,063,750
5,100 Conseco, Inc., 6.80%, 6/15/05 5,253,000
700 CSX Corp., Nt, 7.00%, 9/15/02 742,000
5,000 Cytec Industries, Inc., 6.50%, 3/15/03 5,212,500
5,000 Cytec Industries, Inc., 6.75%, 3/15/08 5,350,000
3,000 Eckerd Corp., Nt, 9.25%, 2/15/04 3,150,000
300 Exxon Capital Corp., Nt, 6.50%, 7/15/99 303,429
2,150 First Tennessee Bank, 6.40%, 4/1/08 2,276,312
5,000 FMC Corp., Nt, 7.00%, 5/15/08 5,162,500
2,000 FMC Corp., Nt, 8.75%, 4/1/99 2,030,000
5,000 Frontier Corp., 7.25%, 5/15/04 5,362,500
1,000 Fund American Enterprise, Nt, 7.75%, 2/1/03 1,075,000
5,000 Furon Co., Nt, 8.125%, 3/1/08 4,900,000
5,000 GTE Corp., 6.46%, 4/15/08 5,362,500
5,700 HMH Properties, Nt, 7.875%, 8/01/05 5,714,250
3,000 Host Marriott Travel Plaza, Nt, 9.5%, 5/15/05 3,112,500
5,000 HVIDE Marine, Inc., 8.375%, 2/15/08 4,012,500
5,000 ICI, 6.95%, 9/15/04 5,331,250
2,000 ITT Corp., Nt, 6.75%, 11/15/03 1,995,000
2,775 ITT Corp., Nt, 6.25%, 11/15/00 2,785,406
2,000 John Q. Hammons Hotels LP, Nt, 8.875%, 2/15/04 1,957,500
4,000 Jefferies Group, Inc., 7.50%, 8/15/07 4,430,000
3,000 Knight-Ridder, Inc., 6.625%, 11/1/07 3,277,500
5,000 Lilly Industries, Inc., 7.75%, 12/1/07 5,387,500
2,200 Lockheed Martin Corp., Nt, 6.85%, 5/15/01 2,293,500
2,500 Lockheed Martin Corp., Nt, 7.25%, 5/15/06 2,778,125
5,000 LODGENET ENTERTAINMENT, NT, 10.25%, 12/15/06 5,012,500
1,285 Markel Corp., Nt, 7.25%, 11/1/03 1,395,831
1,000 Masco Corp., Nt, 6.125%, 9/15/03 1,042,500
1,100 Masco Corp., Nt, 6.625%, 9/15/99 1,115,125
2,000 McDonnell Douglas Corp., Nt, 6.875%, 11/1/06 2,242,500
500 MCI Communications, Nt, 7.50%, 8/20/04 551,250
8,300 Millipore Corp., Nt, 7.2%, 4/1/02 8,517,875
7,100 Millipore Corp., Nt, 7.5%, 4/1/07 7,401,750
11
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) September 30, 1998
(Unaudited)
Par
(000) Market Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (concluded)
$ 5,000 J.P. Morgan, Nt, 6.875%, 1/15/07 $ 5,381,250
4,000 Morgan Guaranty Trust Co., Nt, 5.75%, 10/8/99 4,025,000
2,000 Nabisco, Inc., 6.70%, 6/15/02 2,085,000
1,500 Norfolk Southern, 6.95%, 5/1/02 1,584,375
1,500 Norfolk Southern, 7.35%,5/15/07 1,676,250
2,000 Petroleum Heat & Power, Nt, 9.375%, 2/1/06 1,787,500
5,000 Premier Parks, Nt, 9.25%, 4/1/06 4,937,500
4,000 Premier Parks, Nt, 9.75%, 1/15/07 4,260,000
3,000 Raytheon Co., 6.45%, 8/15/02 3,127,500
5,000 Raytheon Co., 6.50%, 7/15/05 5,318,750
1,500 Salomon, Inc., Nt, 7.125%, 8/1/99 1,524,480
5,500 Solutia Inc., 6.50%, 10/15/02 5,768,125
3,000 Tandy Corp., 6.95%, 9/1/07 3,315,000
1,000 Tektronix, Inc., Nt, 7.50%, 8/1/03 1,085,000
1,000 Tenneco, Inc., Nt, 8.075%, 10/1/02 1,100,000
1,000 Travelers Group, Inc., Nt, 6.125%, 6/15/00 1,020,000
1,000 Union Pacific Co., 6.25%, 3/15/99 1,003,750
2,660 USG Corp., 8.50%, 8/1/05 2,766,400
5,000 United Defense Inds, Inc., 8.75%, 11/15/07 5,000,000
500 Xerox Corp., Nt, 7.15%, 8/1/04 554,375
------------
Total Corporate Bonds
(Cost $190,141,909) 197,582,231
------------
U.S. GOVERNMENT AND AGENCY SECURITIES: 3.0%
1,000 Federal National Mortgage Assoc., 7.6%, 5/24/06 1,016,720
------------
U.S. Treasury Notes
3,000 5.875%, 2/28/99 3,015,510
4,000 5.625%, 10/31/99 4,044,280
4,000 5.75%, 10/31/00 4,107,480
4,000 6.25%, 5/31/00 4,115,880
4,000 6.125%, 12/31/01 4,208,800
------------
19,491,950
------------
Total U.S. Government Securities
(Cost $19,967,052) 20,508,670
------------
12
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Par
(000) Market Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT: 7.2%
$ 48,422 Goldman Sachs & Co., 5.3%
Dated 9/30/98, to be repurchased on
10/1/98, collateralized by U.S. Treasury
Notes with a market value of $49,391,080.
(Cost $48,422,000) $ 48,422,000
------------
Total Investment In Securities: 99.5%
(Cost $548,926,313) ** 675,342,906
Other Assets in Excess of Liabilities, Net: 0.5% 3,064,015
------------
Net Assets: 100.0% $678,406,921
============
Net Asset Value and Redemption Price Per:
Class A Share
($482,622,457 / 24,207,320 shares outstanding) $19.94
======
Class B Share
($76,440,315 / 3,839,795 shares outstanding) $19.91(1)
======
Class C Share
($7,284,241 / 366,339 shares outstanding) $19.88(3)
======
Class D Share
($15,124,456 / 759,821 shares outstanding) $19.91(2)
======
Institutional Class Share
($96,935,452 / 4,822,767 shares outstanding) $20.10
======
Maximum Offering Price Per:
Class A Share ($19.94/ .955) $20.88
======
Class B Share $19.91
======
Class C Share $19.88
======
Class D Share ($19.91/ .985) $20.21
======
Institutional Class Share $20.10
======
- ---------------
* Non-income producing security.
** Also aggregate cost for federal tax purposes.
(1) Redemption value is $19.11 following 4.00% maximum contingent deferred sales
charge.
(2) Redemption value is $19.71 following 1.00% maximum contingent deferred sales
charge.
(3) Redemption value is $19.68 following 1.00% maximum contingent deferred sales
charge.
See accompanying Notes to Financial Statements.
13
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Operations
(Unaudited)
For the Six
Months Ended
September 30,
- --------------------------------------------------------------------------------
1998
Investment Income
Interest $ 9,442,496
Dividends 3,073,357
------------
Total income 12,515,853
------------
Expenses:
Investment advisory fees 2,634,264
Distribution fee 1,068,561
Transfer agent fees 142,839
Registration fees 76,439
Accounting fees 62,776
Printing and postage 49,589
Custodian fee 24,615
Directors' fees 10,085
Miscellaneous 89,177
------------
Total expenses 4,158,345
------------
Net investment income 8,357,508
------------
Realized and unrealized gain on investments:
Net realized gain from security transactions 11,324,419
Change in unrealized appreciation/depreciation of investments (84,964,867)
------------
Net loss on investments (73,640,448)
------------
Net decrease in net assets resulting from operations $(65,282,940)
============
See accompanying Notes to Financial Statements.
14
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the Six For the
Months Ended Year Ended
September 30, March 31,
- --------------------------------------------------------------------------------
1998(+) 1998
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 8,357,508 $ 12,089,775
Net realized gain from security transactions 11,324,419 4,718,485
Change in unrealized appreciation/
depreciation of investments (84,964,867) 124,787,999
------------ ------------
Net increase (decrease) in net assets resulting
from operations (65,282,940) 141,596,259
------------ ------------
Distributions to Shareholders from:
Net investment income and short-term
capital gains:
Class A Shares (5,710,824) (8,528,277)
Class B Shares (595,273) (625,533)
Class C Shares (20,933) --
Class D Shares (173,968) (351,052)
Institutional Shares (1,269,575)) (1,539,023)
Net realized mid-term and long-term
capital gains:
Class A Shares -- (5,136,333)
Class B Shares -- (601,637)
Class C Shares -- --
Class D Shares -- (224,735)
Institutional Shares -- (1,098,467)
------------ ------------
Total distributions (7,770,573) (18,105,057)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares 103,956,967 233,685,893
Value of shares issued in reinvestment
of dividends 6,747,717 16,203,251
Cost of shares repurchased (37,613,022) (40,437,180)
------------ ------------
Increase in net assets derived from
capital share transactions 73,091,662 209,451,964
------------ ------------
Total increase in net assets 38,149 332,943,166
------------ ------------
Net Assets:
Beginning of period 678,368,772 345,425,606
------------ ------------
End of period (including undistributed net
investment income of $4,353,366 and
$3,766,431, respectively) $678,406,921 $678,368,772
============ ============
- ---------------
(+)Unaudited.
See accompanying Notes to Financial Statements.
15
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
September 30,
- --------------------------------------------------------------------------------
1998(+)
Per Share Operating Performance:
Net asset value at beginning of period $ 22.09
-------
Income from Investment Operations:
Net investment income 0.26
Net realized and unrealized gain/(loss) on investments (2.16)
-------
Total from Investment Operations (1.90)
-------
Less Distributions:
Net investment income and short-term gains (0.25)
Net realized mid-term and long-term capital gains --
-------
Total distributions (0.25)
-------
Net asset value at end of period $19.94
=======
Total Return (8.72)%
Ratios to Average Net Assets:
Expenses 1.13(3)
Net investment income 2.42(3)
Supplemental Data:
Net assets at end of period (000) $482,622
Portfolio turnover rate 6%
- ---------------
(+) Unaudited
(1) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 1.40% and 1.38% for Class A Shares for the years
ended March 31, 1995 and 1994, respectively.
(2) Without the waiver of advisory fees, the ratio of net investment income to
average net assets would have been 3.02% and 3.11% for Class A Shares for
the years ended March 31, 1995 and 1994, respectively.
(3) Annualized
16
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended March 31,
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 17.14 $ 14.68 $ 12.02 $ 11.23 $ 11.25
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income 0.47 0.39 0.36 0.35 0.40
Net realized and unrealized gain/(loss) on investments 5.21 2.49 3.03 0.80 (0.04)
-------- -------- -------- -------- --------
Total from Investment Operations 5.68 2.88 3.39 1.15 0.36
-------- -------- -------- -------- --------
Less Distributions:
Net investment income and short-term gains (0.47) (0.36) (0.41) (0.35) (0.38)
Net realized mid-term and long-term capital gains (0.26) (0.06) (0.32) (0.01) --
-------- -------- -------- -------- --------
Total distributions (0.73) (0.42) (0.73) (0.36) (0.38)
-------- -------- -------- -------- --------
Net asset value at end of period $ 22.09 $ 17.14 $ 14.68 $ 12.02 $ 11.23
======== ======== ======== ======== ========
Total Return 33.82% 19.90% 28.86% 10.57% 3.14%
Ratios to Average Net Assets:
Expenses 1.14% 1.27% 1.31% 1.35%(1) 1.35%(1)
Net investment income 2.49% 2.51% 2.72% 3.07%(2) 3.14%(2)
Supplemental Data:
Net assets at end of period (000) $491,575 $278,130 $200,020 $146,986 $131,097
Portfolio turnover rate 7% 13% 15% 18% 8%
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
September 30,
- --------------------------------------------------------------------------------
1998(+)
Per Share Operating Performance:
Net asset value at beginning of period $ 22.08
-------
Income from Investment Operations:
Net investment income 0.18
Net realized and unrealized gain/(loss)
on investments (2.16)
-------
Total from Investment Operations (1.98)
-------
Less Distributions:
Net investment income and short-term gains (0.19)
Net realized mid-term and long-term capital gains --
-------
Total distributions (0.19)
-------
Net asset value at end of period $ 19.91
=======
Total Return (9.06)%
Ratios to Average Net Assets:
Expenses 1.88%(1)
Net investment income 1.69%(1)
Supplemental Data:
Net assets at end of period (000) $76,440
Portfolio turnover rate 6%
- ---------------
(+) Unaudited
* Commencement of operations.
(1) Annualized
(2) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 2.17% (annualized) for Class B Shares for the period
ended March 31, 1995.
(3) Without the waiver of advisory fees, the ratio of net investment income to
average net assets would have been 2.87% (annualized) for Class B Shares for
the period ended March 31, 1995.
18
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Jan. 3, 1995*
through
For the Years Ended March 31, March 31,
- ---------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 17.16 $ 14.71 $12.01 $11.14
------- ------- ------ ------
Income from Investment Operations:
Net investment income 0.34 0.26 0.21 0.08
Net realized and unrealized gain/(loss)
on investments 5.20 2.51 3.05 0.79
------- ------- ------ ------
Total from Investment Operations 5.54 2.77 3.26 0.87
------- ------- ------ ------
Less Distributions:
Net investment income and short-term gains (0.36) (0.26) (0.24) --
Net realized mid-term and long-term capital gains (0.26) (0.06) (0.32) --
------- ------- ------ ------
Total distributions (0.62) (0.32) (0.56) --
------- ------- ------ ------
Net asset value at end of period $ 22.08 $ 17.16 $14.71 $12.01
======= ======= ====== ======
Total Return 32.84% 19.00% 27.89% 7.81%
Ratios to Average Net Assets:
Expenses 1.89% 2.02% 2.06% 2.10%(1,2)
Net investment income 1.75% 1.84% 1.97% 2.94%(1,3)
Supplemental Data:
Net assets at end of period (000) $64,498 $17,311 $4,178 $ 341
Portfolio turnover rate 7% 13% 15% 18%
</TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)
For Period
April 8, 1998*
through
September 30,
- --------------------------------------------------------------------------------
1998(+)
Per Share Operating Performance:
Net asset value at beginning of period $ 22.31
-------
Income from Investment Operations:
Net investment income 0.15
Net realized and unrealized loss
on investment (2.47)
-------
Total from Investment Operations (2.32)
-------
Less Distributions:
Net investment income and short-term gains (0.11)
Net realized mid-term and long-term capital gains --
-------
Total distributions (0.11)
-------
Net asset value at end of period $ 19.88
=======
Total Return (10.89)%
Ratios to Average Net Assets:
Expenses 1.88%(1)
Net investment income 1.87%(1)
Supplemental Data:
Net assets at end of period (000) $ 7,284
Portfolio turnover rate 6%
- ---------------
* Commencement of operations.
(+) Unaudited
(1) Annualized
See accompanying Notes to Financial Statements.
20
<PAGE>
This page intentionally left blank.
21
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class D Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
September 30,
- --------------------------------------------------------------------------------
1998*
Per Share Operating Performance:
Net asset value at beginning of period $ 22.05
-------
Income from Investment Operations:
Net investment income 0.24
Net realized and unrealized gain/(loss) on investments (2.17)
-------
Total from Investment Operations (1.93)
-------
Less Distributions:
Net investment income and short-term gains (0.21)
Net realized mid-term and long-term capital gains --
-------
Total distributions (0.21)
-------
Net asset value at end of period $ 19.91
=======
Total Return (8.85)%
Ratios to Average Net Assets:
Expenses 1.48%(3)
Net investment income 2.05%(3)
Supplemental Data:
Net assets at end of period (000) $15,124
Portfolio turnover rate 6%
- ---------------
* Unaudited
(1) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 1.74% and 1.73% for Class D Shares for the years
ended March 31, 1995 and 1994, respectively.
(2) Without the waiver of advisory fees, the ratio of net investment income to
average net assets would have been 2.68% and 2.76% for Class D Shares for
the years ended March 31, 1995 and 1994.
(3) Annualized
22
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended March 31,
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 17.11 $ 14.66 $ 12.01 $ 11.22 $ 11.24
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income 0.43 0.35 0.33 0.31 0.36
Net realized and unrealized gain/(loss) on investments 5.17 2.47 3.02 0.80 (0.04)
------- ------- ------- ------- -------
Total from Investment Operations 5.60 2.82 3.35 1.11 0.32
------- ------- ------- ------- -------
Less Distributions:
Net investment income and short-term gains (0.40) (0.31) (0.38) (0.31) (0.34)
Net realized mid-term and long-term capital gains (0.26) (0.06) (0.32) (0.01) --
------- ------- ------- ------- -------
Total distributions (0.66) (0.37) (0.70) (0.32) (0.34)
------- ------- ------- ------- -------
Net asset value at end of period $ 22.05 $ 17.11 $ 14.66 $ 12.01 $ 11.22
======= ======= ======= ======= =======
Total Return 33.33% 19.46% 28.44% 10.18% 2.78%
Ratios to Average Net Assets:
Expenses 1.49% 1.62% 1.66% 1.70%(1) 1.70%(1)
Net investment income 2.14% 2.15% 2.37% 2.72%(2) 2.79%(2)
Supplemental Data:
Net assets at end of period (000) $18,478 $15,213 $13,757 $11,717 $11,051
Portfolio turnover rate 7% 13% 15% 18% 8%
</TABLE>
See accompanying Notes to Financial Statements.
23
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Institutional Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
September 30,
- --------------------------------------------------------------------------------
1998*
Per Share Operating Performance:
Net asset value at beginning of period $ 22.26
-------
Income from Investment Operations:
Net investment income 0.29
Net realized and unrealized gain/(loss)
on investments (2.18)
-------
Total from Investment Operations (1.89)
-------
Less Distributions:
Net investment income and
short-term gains (0.27)
Net realized mid-term and
long-term capital gains --
-------
Total distributions (0.27)
-------
Net asset value at end of period $ 20.10
=======
Total Return (8.61)%
Ratios to Average Net Assets:
Expenses 0.88%(1)
Net investment income 2.66%(1)
Supplemental Data:
Net assets at end of period (000) $96,935
Portfolio turnover rate 6%
- ---------------
* Unaudited
(+) Commencement of operations.
(1) Annualized
24
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Nov. 2, 1995(+)
through
For the Years Ended March 31, March 31,
- --------------------------------------------------------------------------------------------------------
1998 1997 1996
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 17.27 $ 14.77 $ 13.89
-------- ------- -------
Income from Investment Operations:
Net investment income 0.51 0.41 0.13
Net realized and unrealized gain/(loss)
on investments 5.25 2.53 1.17
-------- ------- -------
Total from Investment Operations 5.76 2.94 1.30
-------- ------- -------
Less Distributions:
Net investment income and
short-term gains (0.51) (0.38) (0.10)
Net realized mid-term and
long-term capital gains (0.26) (0.06) (0.32)
-------- ------- -------
Total distributions (0.77) (0.44) (0.42)
-------- ------- -------
Net asset value at end of period $ 22.26 $ 17.27 $ 14.77
======== ======= =======
Total Return 34.08% 20.24% 21.12%
Ratios to Average Net Assets:
Expenses 0.89% 1.02% 1.03%(1)
Net investment income 2.75% 2.83% 2.89%(1)
Supplemental Data:
Net assets at end of period (000) $103,817 $34,771 $11,768
Portfolio turnover rate 7% 13% 15%
</TABLE>
See accompanying Notes to Financial Statements.
25
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
NOTE 1 -- Significant Accounting Policies
Flag Investors Value Builder Fund, Inc. ("the Fund"), which was organized as
a Maryland Corporation on March 5, 1992, commenced operations June 15, 1992. The
Fund is registered under the Investment Company Act of 1940 as a diversified,
open-end Investment Management Company. Its objective is to seek long-term
growth of capital and current income through diversified investments in a
professionally managed balanced portfolio of equity and debt securities.
The Fund consists of five share classes: Class A Shares, which commenced June
15, 1992; Class D Shares (formerly Class B Shares), which commenced November 9,
1992; Class B Shares, which commenced January 3, 1995; Institutional Shares,
which commenced November 2, 1995; and Class C Shares, which commenced April 8,
1998. The Fund has not sold Class D Shares since November 18, 1994, but existing
shareholders may reinvest their dividends. Effective November 20, 1998, all
Class D shares will be converted to Class A shares in a non-taxable conversion.
The Class A, Class B, Class C, and Class D Shares are subject to different
sales charges. The Class A Shares have a front-end sales charge, the Class B and
C Shares have a contingent deferred sales charge and the Class D Shares have
both a front-end sales charge and a contingent deferred sales charge. In
addition each of the other classes has a different distribution fee. The
Institutional Shares do not have a front-end sales charge, a contingent deferred
sales charge or a distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. 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. Security Valuation--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. The Fund
values short-term obligations with maturities of 60 days or less at
amortized cost.
26
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
NOTE 1 -- concluded
B. Repurchase Agreements--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase agreement
is a short-term investment in which the Fund buys a debt security that the
broker agrees to repurchase at a set time and price. The third party,
which is the broker's custodial bank, holds the collateral in a separate
account until the repurchase agreement matures. The agreement ensures that
the collateral's market value, including any accrued interest, is
sufficient if the broker defaults. 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 generally accepted
accounting principles. 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 security 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 the pro rata
scientific method for amortization of premiums and accretion of discounts
when appropriate. Expenses are recorded as incurred. Income 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.
27
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2 -- Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust Corporation, is the Fund's investment advisor and Alex. Brown Investment
Management ("ABIM") is the Fund's subadvisor. As compensation for its advisory
services, the Fund pays ICC an annual fee. This fee is based on the Fund's
average daily net assets and is calculated daily and paid monthly at the
following annual rates: 1.00% of the first $50 million, 0.85% of the next $50
million, 0.80% of the next $100 million and 0.70% of the amount over $200
million.
As compensation for its subadvisory services, ICC pays ABIM a fee from its
advisory fee. This fee is based on the Fund's average daily net assets and is
calculated daily and paid monthly at the following annual rates: 0.75% of the
first $50 million, 0.60% of the next $150 million and 0.50% of the amount over
$200 million.
ICC has agreed to reduce its aggregate fees so that ordinary Fund expenses
for any fiscal year do not exceed 1.35% of the Class A Shares' average daily net
assets, 2.10% of the Class B and C Shares' average daily net assets, 1.70% of
the Class D Shares' average daily net assets, and 1.10% of the Institutional
Shares' average daily net assets. No fees were reduced for the six-month period
ended September 30, 1998.
As compensation for its accounting services, the Fund pays ICC an annual fee
that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $62,776 for accounting services for the six-month
period ended September 30, 1998.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $142,839 for
transfer agent services for the six-month period ended September 30, 1998.
As compensation for providing distribution services, the Fund pays ICC
Distributors, Inc. ("ICC Distributors") an annual fee 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, 1.00% (includes 0.25% shareholder servicing
fee) of the Class B and C Shares' average daily net assets and 0.60% of the
Class D Shares' average daily net assets. For the six-month period ended
September 30, 1998, distribution fees aggregated $1,068,561, of which $634,692
was attributable to the Class A Shares, $361,626 was attributable to the Class B
Shares, $52,978 was attributable to the Class D Shares, $19,265 was attributable
to the Class C Shares. The Fund did not pay BT Alex. Brown any commissions for
the six-month period ended September 30, 1998.
28
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
NOTE 2 -- concluded
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the six-month
period ended September 30, 1998 was $7,505, and the accrued liability was
$30,280.
NOTE 3 -- Capital Share Transactions
The Fund is authorized to issue up to 90 million shares of $.001 par value
capital stock (40 million Class A, 15 million Class B, 15 million Institutional,
150 million Class C, 3 million Class D and 2 million undesignated).
Transactions in shares of the Fund were as follows:
Class A Shares
-----------------------------------
For the six-month For the
Period ended Year Ended
September 30, 1998* March 31, 1998
------------------- --------------
Shares sold 3,203,845 7,042,839
Shares issued to shareholders on
reinvestment of dividends 224,253 641,162
Shares redeemed (1,476,781) (1,656,511)
------------ ------------
Net increase in shares outstanding 1,951,317 6,027,490
============ ============
Proceeds from sale of shares $ 69,565,643 $140,113,104
Value of reinvested dividends 4,989,522 12,406,231
Cost of shares redeemed (31,270,175) (32,747,372)
------------ ------------
Net increase from capital share transactions $ 43,284,990 $119,771,963
============ ============
Class B Shares
-----------------------------------
For the six-month For the
Period ended Year Ended
September 30, 1998* March 31, 1998
------------------- --------------
Shares sold 1,037,886 1,916,773
Shares issued to shareholders on
reinvestment of dividends 23,904 58,431
Shares redeemed (143,370) (62,652)
----------- -----------
Net increase in shares outstanding 918,420 1,912,552
=========== ===========
Proceeds from sale of shares $22,261,595 $37,749,769
Value of reinvested dividends 532,114 1,143,662
Cost of shares redeemed (2,996,769) (1,250,962)
----------- -----------
Net increase from capital share transactions $19,796,940 $37,642,469
=========== ===========
- ---------------
*Unaudited.
29
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 3 -- continued
Class C Shares
-------------------------
For Period April 8, 1998+
through
September 30, 1998*
-------------------------
Shares sold 368,432
Shares issued to shareholders on reinvestment of dividends 873
Shares redeemed (2,966)
----------
Net increase in shares outstanding 366,339
==========
Proceeds from sale of shares $7,982,167
Value of reinvested dividends 19,441
Cost of shares redeemed (59,432)
----------
Net increase from capital share transactions $7,942,176
==========
Class D Shares
-----------------------------------
For the six-month For the
Period ended Year Ended
September 30, 1998* March 31, 1998
------------------- --------------
Shares sold -- --
Shares issued to shareholders on
reinvestment of dividends 6,461 26,051
Shares redeemed (84,580) (77,261)
----------- -----------
Net decrease in shares outstanding (78,119) (51,210)
=========== ===========
Proceeds from sale of shares $ -- $ --
Value of reinvested dividends 143,617 500,413
Cost of shares redeemed (1,762,150) (1,566,659)
----------- -----------
Net decrease from capital share transactions $(1,618,533) $(1,066,246)
=========== ===========
- ---------------
* Unaudited.
(+) Commencement of Operations
30
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
NOTE 3 -- concluded
Institutional Shares
-----------------------------------
For the six-month For the
Period ended Year Ended
September 30, 1998* March 31, 1998
-----------------------------------
Shares sold 183,190 2,782,404
Shares issued to shareholders on
reinvestment of dividends 47,437 109,243
Shares redeemed (72,216) (241,221)
----------- -----------
Net increase in shares outstanding 158,411 2,650,426
=========== ===========
Proceeds from sale of shares $ 4,147,562 $55,823,020
Value of reinvested dividends 1,063,023 2,152,945
Cost of shares redeemed (1,524,496) (4,872,187)
----------- -----------
Net increase from capital share transactions $ 3,686,089 $53,103,778
=========== ===========
- ---------------
* Unaudited.
NOTE 4 -- Investment Transactions
Excluding short-term and U.S. government obligations, purchases of investment
securities aggregated $121,952,868 and sales of investment securities aggregated
$38,377,094 for the six-month period ended September 30, 1998. Purchases of U.S.
Government obligations aggregated $1,012,734, and there were no sales of U.S.
Government obligations for the period.
On September 30, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $152,845,969
and aggregate gross unrealized depreciation of all securities in which there is
an excess of tax cost over value was $26,429,375.
31
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 5 -- Net Assets
On September 30, 1998, net assets consisted of:
Paid-in capital:
Class A Shares $358,327,816
Class B Shares 73,433,240
Class C Shares 7,942,176
Class D Shares 6,763,664
Institutional Shares 88,874,738
Accumulated net realized gain from security transactions 12,295,327
Unrealized appreciation of investments 126,416,594
Undistributed net investment income 4,353,366
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$678,406,921
============
32
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Directors and Officers
TRUMAN T. SEMANS
Chairman
JAMES J. CUNNANE CARL W. VOGT, ESQ.
Director Director
RICHARD T. HALE HARRY WOOLF
Director President
JOE HARDIMAN AMY M. OLMERT
Director Secretary
LOUIS E. LEVY JOSEPH A. FINELLI
Director Treasurer
EUGENE J. MCDONALD SCOTT J. LIOTTA
Director Assistant Secretary
REBECCA W. RIMEL
Director
Investment Objective
A balanced mutual fund designed to maximize total return through a combination
of long-term growth of capital and current income.
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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.
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<PAGE>
[FLAG INVESTORS LOGO]
FLAG INVESTORS
Growth
Flag Investors Emerging Growth Fund
Flag Investors Equity Partners Fund
Flag Investors International Fund
Specialty
Flag Investors Communications Fund
(formerly Flag Investors Telephone Income Fund)
Flag Investors Real Estate Securities Fund
Balanced
Flag Investors Value Builder Fund
Income
Flag Investors Short-Intermediate Income Fund
Flag Investors Total Return U.S. Treasury Fund Shares
Tax-Free Income
Flag Investors Managed Municipal Fund Shares
Current Income
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
Distributed by:
ICC DISTRIBUTORS, INC.
VBSA
