[FLAG INVESTORS LOGO]
Value Builder
Fund
Annual Report
March 31, 1999
<PAGE>
REPORT HIGHLIGHTS
- -----------------------------------------------------------------------------
o Your Fund's performance for the 6 month and one-year periods ending March 31,
1999 were 24.8% and 13.9%, respectively.
o Your Fund achieved excellent performance results for the 1-, 3- and 5-year
periods ended March 31, 1999 comparing very favorably against other balanced
funds. Your Fund's 3- and 5-year period rankings that are in the top 5% of the
Lipper Balanced Fund category are especially noteworthy.
o The Fund's asset mix continued to emphasize long-term holdings with stocks and
bonds representing 95% of the portfolio. New and existing shareholders purchased
more than $157 million in Fund shares over the past 12 months.
o One of the more notable trends in the equity market over the past year has
been the large capitalization phenomenon. In the calendar year 1998, the
"Standard & Poor's 500 Index" outperformed the average stock in the same index
by a 4 to 1 ratio.
o Enormous potential is being quietly created in many companies that have
continued to make good business progress but their accomplishments are not
reflected in the prices of their shares. To have had the market gains of the
past several years and to have such modest valuations for the shares of many
companies is reason for optimism in these companies for investors with patience
and a long-term perspective.
<PAGE>
FUND PERFORMANCE
- -----------------------------------------------------------------------------
Growth of a $10,000 Investment in Class A Shares(1)
June 15, 1992-March 31, 1999
$10,000 invested in the Value Builder Fund
Class A Shares at inception on June 15, 1992
was worth $30,543 on March 31, 1999.
In the printed version there appears a line graph
with the following plot points depicted.
1/92 10000
12/92 10776
6/93 11526
12/93 12043
6/94 11666
12/94 11998
6/95 14076
12/95 15927
6/96 17217
12/96 19851
6/97 22132
12/97 24351
6/98 27094
12/98 28862
3/99 30543
Total Return Performance(1)
<TABLE>
<CAPTION>
Class A Class B Class C Institutional
For the periods ended 3/31/99 Shares Shares Shares Shares
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year 13.91% 13.05% --% 14.22%
..................................................................................
3 Years (Cumulative) 82.77% 78.67% --% 84.14%
..................................................................................
5 Years (Cumulative) 160.40% % --% --%
..................................................................................
Since Inception 6/15/92 1/3/95 4/8/98 11/2/95
------- ------ ------ -------
(Cumulative) 205.44% 146.35% 11.53% 100.18%
..................................................................................
</TABLE>
(1) Past performance is not an indicator of future results. Since investment
return and principal value will fluctuate, an investor's shares may be worth
more or less than their original cost when redeemed. These figures assume the
reinvestment of dividends and capital gain 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 7.
1
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Fellow Shareholders:
We are pleased to report on the progress of your Fund for the year ended
March 31, 1999.
The Value Builder Fund had a very good six months and one-year with a gain of
24.8% and 13.9% respectively for the Class A Shares. For the three- and
five-year periods your Fund has gained 82.8% and 160.4%, respectively. The
Fund's equity performance was due primarily to the earnings gains of the
portfolio companies and the management focus to build shareholder value. The
Fund's bond holdings did quite well with many achieving double digit returns.
We are especially pleased that the Fund continues to place in the very top
tier of Lipper Analytical's Balanced Fund category with a ranking in the top 15%
for the one-year period and in the top 5% for the three-and five-year
periods(1). We feel the three- and five-year rankings are very special
accomplishments for our shareholders. Additionally, the Fund has received an "A"
ranking from the Wall Street Journal for the one-, three- and five-year
periods(2). Illustrated in the chart on page 1 is the growth of a $10,000
investment in the Fund's Class A shares since inception. A full summary of
investment returns for the Fund is also provided on page 1.
Asset Mix
During the past year we have maintained the Fund's long-term focus with 95%
of the Fund's assets in stocks and bonds and the remaining 5% in short-term
investments. The pie charts below reflect the current asset mix as well as the
asset mix a year ago. The slight decrease in the short-term investments category
over the past year is primarily due to our normal investment activities which
include net purchases of stocks and bonds of $176 million while new and existing
shareholders purchased $157 million Value Builder shares.
In the printed version there appears a pie chart
with the following plot points depicted.
3/31/98 3/31/99
Short-term Investments 9.3% 4.1%
Fixed-Income 28.8% 26.8%
Common Stocks
and Convertibles 61.9% 69.1%
- -------------------
(1) The Lipper rankings are based on performance for the periods ended March 31,
1999 relative to other funds in the Balanced Funds category. In addition the
Fund ranked #58 out of 416 for the 1 year, #12 out of 294 for the 3 year, #4 out
of 174 for the 5 year. Performance figures used in these rankings exclude the
impact of any sales charge. Past performance is no guarantee of future results.
(2) Funds are categorized by The Wall Street Journal based on classifications by
Lipper and are ranked by the total return performance relative to other funds in
their respective categories. This ranking indicates that theFund's 1-, 3-year,
and 5-year total returns placed in the top 14%, 4% and 2%, respectively, of 416,
294 and 174 funds, respectively, in the Blended Funds category. Past performance
is no guarantee of future results.
2
<PAGE>
As we have said in the past, we very much appreciate this expression of
confidence and we will certainly make every effort to see that it is well
deserved. The Fund's net assets were $923 million at March 31, 1999, up from
$678 million this time last year.
Investment Environment
In our September letter to shareholders we noted how quickly some of the
prior months' gains were taken back by the market decline. At the same time, we
suggested that during periods of declining share prices, which are often driven
more by emotion than business fundamentals, opportunities are often created to
acquire shares at a much larger discount to intrinsic value than would normally
be possible. With the Dow Jones Industrial Average having recently climbed
through the 10,000 level, it is a good bit easier to appreciate the
opportunities created by the market decline only six months ago. Some of those
values are reflected in the purchases listed below.
Largest Purchases (for the twelve months ended 3/31/99)
Common Stock Purchases
Security Cost
- ------------------------------------------------------------------------------
Cendant $19,875,919
..............................................................................
Blyth Industries 13,959,989
..............................................................................
Richfood Holdings 9,916,176
..............................................................................
Bank of America Corp. 9,679,471
..............................................................................
COMSAT Corporation 8,364,471
Bond Purchases
Security Cost
- ------------------------------------------------------------------------------
Marriott International, 6.625% due 11/15/03 $ 9,980,800
..............................................................................
Cendant Corp., 7.75% due 12/01/03 7,991,952
..............................................................................
Millipore Corp., 7.20% due 04/01/02 7,611,816
..............................................................................
HMH Properties, 7.875% due 8/01/05 5,701,744
..............................................................................
Conseco Inc., 6.80% due 6/15/05 5,087,556
One of the more notable trends in the equity market over the past year has
been the large capitalization performance phenomenon, which has been very much
at work in almost all of the stock indices. Shareholders may recall that in 1998
the Standard and Poor's '500' (a capitalization weighted index) outperformed the
average stock in the same index (equal weighted) by a 4 to 1 ratio. In the
smaller stock indices, the divergence with the S&P '500' was even more
pronounced.
3
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
- -----------------------------------------------------------------------------
So far in 1999 a very similar picture is developing with the S&P '500' up 5%
and the average stock in the same index up only 1%. Shareholders may wonder how
this could happen? To make the picture a little clearer, the top 10% (50 stocks)
in the index (Microsoft, General Electric, Intel, Wal-Mart, etc.) makes up a
whopping 55% of the index on a capitalization basis. The bottom 10% (50 stocks)
in the index (Harnischfeger, Foster Wheeler, ASARCO, etc.) makes up an
unbelievably meager 1/2 of 1% of the index. As a consequence, the top 10% of
stocks in the index have a 100 times greater impact on the index's return than
the bottom 10%.
Since there is almost always a "silver lining" to every cloud, it appears to
us that the real "silver lining" in this case is the enormous potential which is
being quietly created in many companies outside the top 50 stocks that have
continued to make good business progress but have been essentially ignored in
the marketplace. To have had the market gains of the past several years and to
have such modest valuations for the shares of many companies is reason for
optimism in these companies for investors with patience and a long-term
perspective.
Portfolio Developments
In past shareholder reports we have stated quite clearly that we intend to
periodically make candid reports to you highlighting our successes and our
failures. In many respects such a "scorecard" allows a shareholder the
opportunity to see just how well we have executed our game plan of buying good
value. Listed below are our largest holdings with costs and market values, as
well as the percent changes over the past 12 months.
Largest Holdings
<TABLE>
<CAPTION>
Market Value Performance
Security Cost 3/31/99 3/31/98 to 3/31/99
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
America Online $ 2,717,910 $107,456,000 760.8%
...................................................................................
Conseco 26,480,325 38,802,125 -45.5%
...................................................................................
Cendant 20,571,474 25,710,300 NA*
...................................................................................
Novell 8,652,772 22,744,313 135.0%
...................................................................................
Blyth Industries 22,544,160 20,336,400 -30.8%
...................................................................................
MCI Worldcom 4,370,243 16,887,895 122.5%
---------- ----------
..................................................................................
Total $85,336,884 $231,937,033
- ----------------------------------------------------------------------------------
</TABLE>
*Not calculated since most of the shares were purchased during the past twelve
months.
Since I have already commented on the success of America Online in prior
letters, I will not comment further here except to say that I wish I had a
nickel for every time over the past two years someone suggested that it was
overpriced and should be sold. Perhaps now shareholders have a better
appreciation for my
4
<PAGE>
suggestion in previous letters that our greatest losses will not be the stocks
bought and then sold at a loss in the portfolio, but rather the winners we sell
too early. Just imagine if we would have sold America Online after it doubled in
price!
While the price change in the shares of Conseco and Blyth Industries was
disappointing, their business progress was not. Each company exceeded our
expectations but the market's narrow focus chose to ignore their
accomplishments. Actually, we are somewhat thankful for this condition as it
allows us to purchase additional shares at an even better bargain.
In an effort to complete the scorecard, we have also provided a list of the
biggest gainers in the portfolio over the past 12 months. Hopefully, this
scorecard reinforces what we have emphasized in previous letters about buying
"good value" and allowing sufficient time for such value to be recognized in the
investment marketplace.
Ten Best Performers 3/31/98-3/31/99
Percent Original
Security Change Investment Date
- -----------------------------------------------------------------------------
America Online 760.8% 11/96
............................................................................
Amgen 146.0% 4/94
............................................................................
Novell 135.0% 12/97
............................................................................
MCI Worldcom 122.5% 8/92
............................................................................
IBM 70.6% 11/93
............................................................................
United Technologies 46.7% 10/92
............................................................................
Tandy 35.8% 2/94
............................................................................
SEI Corp. 35.5% 10/95
............................................................................
First Data Corp. 31.5% 10/93
............................................................................
American Express 28.3% 12/92
As much as we would like to have nothing but successes, we know from experience
that we cannot make a hit every time we swing the bat. Occasionally we will
misjudge the pitch (companies) and take a strike. During the past year we
misjudged several pitches (some might say of Sunbeam that we misjudged more than
the pitch) and we have listed them below.
Three Worst Performers 3/31/98-3/31/99
Security Percent Change
- -----------------------------------------------------------------------------
Sunbeam -69.2%
............................................................................
Cendant -59.9%*
............................................................................
Airgas -51.4%
- -----------
*Only for shares held the entire period
5
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
- -----------------------------------------------------------------------------
In the case of Sunbeam, we will graciously take the dunce cap and go sit
quietly in the corner. As much as we like to rationally defend our purchase of
the shares, we find a toothpick provides little to hide behind. The management
and business progress of Sunbeam were worse than even our lowest expectations.
We wondered if Cendant might suffer a similar fate as we started buying the
shares at $20 after having watched them decline from the mid thirties. Because
we believed in the management and the high cash flow characteristics of
Cendant's businesses we continued to buy Cendant shares as they fell to $18,
then $16, then $14. As the shares continued to fall all the way down to $7 per
share we kept buying but wondering what could we possibly be missing. I am
pleased to report that the shares have risen back to $20 (with an average cost
of less than $13), and the prospects for further gains are very good.
Reminders
In our annual report to shareholders, we like to remind you that while we are
advisors to your Fund we prefer to think of ourselves as your partners. We say
this because we are all meaningful shareholders of the Fund just like you, and
we do not intend to do anything with your money that we would not do with our
own. Or as stated in the Fund's first annual report "we intend to eat our own
cooking."
Sincerely.
/s/ Hobart C. Buppert, II
- -------------------------
Hobart C. Buppert, II
Portfolio Manager
April 20, 1999
6
<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. To further
assist in this evaluation, the Securities and Exchange Commission (SEC) requires
that we include, on an annual basis, a line graph comparing the performance of
each of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent calendar quarter.
Both the line graph and the SEC standardized total return figures include
the impact of the maximum initial sales charge for the Class A Shares and the
contingent deferred sales charge applicable to the specified time period for the
Class B and Class C Shares. Returns would be higher for Class A Shares investors
who qualified for a lower initial sales charge or for Class B or Class C Shares
investors who continued to hold their shares past the end of the specified time
period.
While the graphs and the total return figures are required by SEC rules,
such comparisons are of limited utility since the total return of the Fund's
classes are adjusted for sales charges and expenses while the total return of
the indices are not. In fact, if you wished to replicate the total return of
these indices, you would have to purchase the securities they represent, an
effort that would require a considerable amount of money and would incur
expenses that are not reflected in the index results.
The SEC total return figures may differ from total return figures in the
shareholder letter because the time periods may be different and because the SEC
figures include the impact of sales charges while the total return figures in
the shareholder letter do not. Any performance figures shown are for the full
period indicated. Since investment return and principal value will fluctuate,
and investor's shares may be worth more or less than their original cost when
redeemed. Past performance is not an indicator of future results.
7
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Additional Performance Information (continued)
Change in Value of a $10,000 Investment in Class A Shares(1)
June 15, 1992-March 31, 1999
In the printed version there appears a line graph
with the following plot points depicted.
Flag 91-Day
Investors U.S.
Value Builder S&P 500 Treasury
Fund Composite Bill
---- --------- ----
6/92 9550 10000 10000
9884 10315 10101
10291 10835 10179
10861 11308 10258
6/93 11007 11364 10338
11526 11657 10422
11501 11927 10504
11202 11475 10584
6/94 11141 11524 10686
11607 12087 10801
11458 12085 10944
12385 13626 11108
6/95 13442 14528 11275
14588 15683 11436
15210 16627 11604
15960 17520 11747
6/96 16442 18307 11898
17290 18872 12062
18975 20445 12220
19136 20992 12375
6/97 21136 24660 12544
22851 26504 12712
23255 27265 12871
25608 31069 13039
6/98 25608 31069 13039
25608 31069 13039
25608 31069 13039
3/99 29170 36804 13654
Flag Investors Value Builder Fund $29,170
S&P 500 Composite $36,806
91-Day U.S. Treasury Bill $13,654
Average Annual Total Return(1)
<TABLE>
<CAPTION>
Periods Ended 3/31/99 1 Year 5 Years Since Inception(2)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 8.78% 19.99% 17.07%
....................................................................................
</TABLE>
(1) These figures assume the reinvestment of dividends and capital gain
distributions. Past performance is not an indicator of future results. The
indices listed above are unmanaged and are widely recognized as indicators of
the performance in their respective sectors. The S&P 500 Composite is an
indicator of general market performance and the 91-Day U.S. Treasury Bill is a
measure of short-term market performance.
(2) June 15, 1992.
8
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Change in Value of a $10,000 Investment in Class B Shares(1)
January 3, 1995-March 31, 1999
In the printed version there appears a line graph
with the following plot points depicted.
Flag 91-Day
Investors U.S.
Value Builder S&P 500 Treasury
Fund Composite Bill
---- --------- ----
1/95 10000 10000 10000
10781 10696 10099
6/95 11686 11717 10251
12645 12649 10397
13160 13410 10550
13788 14131 10680
6/96 14179 14765 10817
14878 15221 10967
16280 16489 11110
16404 16931 11251
6/97 18086 19889 11404
19522 21377 11557
19827 21990 11702
21491 25058 11854
6/98 21491 25058 11854
21491 25058 11854
21491 25058 11854
3/99 24438 29685 12414
Flag Investors Value Builder Fund $24,438
S&P 500 Composite $29,685
91-Day U.S. Treasury Bill $12,414
Average Annual Total Return(1)
<TABLE>
<CAPTION>
Periods Ended 3/31/99 1 Year 5 Years Since Inception(2)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class B Shares 9.05% --% 23.47%
....................................................................................
</TABLE>
(1) These figures assume the reinvestment of dividends and capital gain
distributions. Past performance is not an indicator of future results. The
indices listed above are unmanaged and are widely recognized as indicators of
the performance in their respective sectors. The S&P500 Composite is an
indicator of general market performance and the 91-Day U.S. Treasury Bill is a
measure of short-term market performance.
(2) January 3, 1995.
9
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Additional Performance Information (continued)
Change in Value of a $10,000 Investment in Class C Shares(1)
April 6, 1998-March 31, 1999
In the printed version there appears a line graph
with the following plot points depicted.
Flag 91-Day
Investors U.S.
Value Builder S&P 500 Treasury
Fund Composite Bill
---- --------- ----
4/8/98 10000 10000 10000
4/30/98 9873 10000 10000
9/30/98 8855 9210 10205
3/31/99 11053 11728 10429
Flag Investors Value Builder Fund $11,053
S&P 500 Composite $11,728
91-Day U.S. Treasury Bill $10,429
Average Annual Total Return(1)
<TABLE>
<CAPTION>
Periods Ended 3/31/99 1 Year 5 Years Since Inception(2)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class C Shares --% --% 10.53%
....................................................................................
</TABLE>
(1) These figures assume the reinvestment of dividends and capital gain
distributions. Past performance is not an indicator of future results. The
indices listed above are unmanaged and are widely recognized as indicators of
the performance in their respective sectors. The S&P 500 Composite is an
indicator of general market performance and the 91-Day U.S. Treasury Bill is a
measure of short-term market performance.
(2) April 6, 1998.
10
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Change in Value of a $10,000 Investment in Institutional Shares(1)
November 2, 1995-March 31, 1999
In the printed version there appears a line graph
with the following plot points depicted.
Flag 91-Day
Investors U.S.
Value Builder S&P 500 Treasury
Fund Composite Bill
---- --------- ----
11/95 10000 10000 10000
12/95 10349 10193 10055
3/96 10871 10740 10178
6/96 11205 11223 10309
9/96 11783 11569 10452
12/96 12935 12533 10588
3/97 13071 12869 10723
6/97 14436 15117 10869
9/97 15622 16248 11015
12/97 15904 16714 11153
3/98 17526 19046 11298
6/98 17526 19046 11298
9/98 17526 19046 11298
12/98 17526 19046 11298
3/99 20018 22563 11831
Flag Investors Value Builder Fund $20,018
S&P 500 Composite $22,563
91-Day U.S. Treasury Bill $11,831
Average Annual Total Return(1)
<TABLE>
<CAPTION>
Periods Ended 3/31/99 1 Year 5 Years Since Inception(2)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Shares 14.22% --% 22.59%
....................................................................................
</TABLE>
(1) These figures assume the reinvestment of dividends and capital gain
distributions. Past performance is not an indicator of future results. The
indices listed above are unmanaged and are widely recognized as indicators of
the performance in their respective sectors. The S&P 500 Composite is an
indicator of general market performance and the 91-Day U.S. Treasury Bill is a
measure of short-term market performance.
(2) November 2, 1995.
11
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1999
Shares Market Value
- --------------------------------------------------------------------------------
Common Stock: 66.5%
Banking: 2.3%
152,500 Bank of America Corporation ................ $ 10,770,312
200,000 KeyCorp .................................... 6,062,500
131,000 Wells Fargo & Company ...................... 4,593,187
------------
21,425,999
------------
Basic Industry: 1.3%
707,600 Airgas, Inc.* .............................. 5,926,150
140,000 Georgia Gulf Corp. ......................... 1,566,250
30,000 Hercules, Inc. ............................. 757,500
44,654 Potash Corp. of Saskatchewan, Inc. ......... 2,388,989
31,600 Schulman (A.), Inc. ........................ 430,550
28,000 Solutia, Inc. .............................. 486,500
------------
11,555,939
------------
Business Services: 3.1%
294,700 First Data Corp. ........................... 12,598,425
176,400 SEI Corp. .................................. 16,317,000
------------
28,915,425
------------
Capital Goods: 1.3%
300,000 Case Corp. ................................. 7,612,500
36,000 Eaton Corp. ................................ 2,574,000
96,200 Westinghouse Air Brake Co. ................. 2,008,175
------------
12,194,675
------------
Consumer Durables/Non-Durables: 5.7%
860,800 Blyth Industries, Inc.* .................... 20,336,400
33,500 Eastman Kodak Co. .......................... 2,139,812
140,000 Ford Motor Company ......................... 7,945,000
50,000 Liz Claiborne, Inc. ........................ 1,631,250
111,600 Philip Morris Cos., Inc. ................... 3,926,925
510,100 Richfood Holdings, Inc. .................... 10,999,031
414,800 Unifi, Inc.* ............................... 5,288,700
------------
52,267,118
------------
Consumer Services: 17.2%
736,000 America Online, Inc.* ...................... 107,456,000
1,632,400 Cendant Corp.* ............................. 25,710,300
60,000 Gannett Co. ................................ 3,780,000
202,000 Sinclair Broadcasting Group A* ............. 2,941,625
12
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Common Stock (continued)
Consumer Services (concluded)
559,400 The Learning Co., Inc.* ...................... $16,222,600
50,000 Times Mirror Co.-Class A ..................... 2,703,125
-----------
158,813,650
-----------
Defense/Aerospace: 0.8%
156,000 Boeing Co. ................................... 5,323,500
62,342 Lockheed Martin Corp. ........................ 2,349,514
-----------
7,673,014
-----------
Energy: 1.0%
125,000 Burlington Resources, Inc. ................... 4,992,187
250,000 Petroleum Geo Services* ...................... 3,812,500
-----------
8,804,687
-----------
Entertainment: 0.6%
796,700 Lodgenet Entertainment Corp.* ................ 5,228,344
-----------
Financial Services: 5.0%
83,500 American Express Co. ......................... 9,811,250
258,500 Citigroup .................................... 16,511,687
87,500 Countrywide Credit Industries, Inc. .......... 3,281,250
172,000 Freddie Mac .................................. 9,825,500
265,780 MBNA Corp. ................................... 6,345,497
-----------
45,775,184
-----------
Health Care Services: 4.2%
190,000 Amgen, Inc.* ................................. 14,226,250
40,000 Baxter International, Inc. ................... 2,640,000
76,000 Bristol-Myers Squibb Co. ..................... 4,887,750
114,000 Johnson & Johnson ............................ 10,680,375
77,200 Wellpoint Health Networks, Inc.* ............. 5,852,725
-----------
38,287,100
-----------
Hotels/Gaming: 0.4%
200,000 Harrah's Entertainment, Inc.* ................ 3,812,500
-----------
Housing: 1.5%
367,800 Champion Enterprises, Inc.* .................. 7,126,125
128,000 USG Corp. .................................... 6,576,000
-----------
13,702,125
-----------
13
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) March 31, 1999
Shares/
Par (000) Market Value
- --------------------------------------------------------------------------------
Common Stock (continued)
Insurance: 7.2%
1,256,749 Conseco, Inc. ................................ $38,802,125
65,000 Hartford Financial Services Group ............ 3,692,812
77,900 NAC Re Corp. ................................. 4,182,256
150,000 RenaissanceRe Holdings Limited ............... 5,240,625
236,720 XL Capital Limited - Class A ................. 14,380,740
-----------
66,298,558
-----------
Multi - Industry: 0.9%
64,000 United Technologies Corp. .................... 8,668,000
-----------
Real Estate: 1.7%
89,913 Crestline Capital Corp.* ..................... 1,382,412
60,200 General Growth Properties, Inc. .............. 1,952,738
899,136 Host Marriott Corp. .......................... 10,002,888
35,000 National Health Investors, Inc. .............. 752,500
100,500 U.S. Restaurant Properties, Inc. ............. 1,940,906
-----------
16,031,444
-----------
Retail: 1.6%
53,164 J.C. Penney Co., Inc. ........................ 2,153,142
400,000 Kmart Corp.* ................................. 6,725,000
90,000 Tandy Corp. .................................. 5,743,125
-----------
14,621,267
-----------
Technology: 5.9%
70,400 Autodesk, Inc. ............................... 2,846,800
326,800 Cognex Corp.* ................................ 7,741,075
125,000 Electronic Data Systems Corp. ................ 6,085,938
86,000 International Business Machines Corp. ........ 15,243,500
903,000 Novell, Inc.* ................................ 22,744,313
-----------
54,661,626
-----------
Telecommunications: 2.7%
300,000 Comsat Corp. ................................. 8,681,250
190,689 MCI Worldcom, Inc.* .......................... 16,887,895
-----------
25,569,145
-----------
14
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
March 31, 1999
Shares/
Par (000) Market Value
- --------------------------------------------------------------------------------
Common Stock (concluded)
Transportation: 1.1%
135,000 Canadian National Railway Co. ............ $ 7,509,375
34,982 Delta Air Lines, Inc. .................... 2,431,249
------------
9,940,624
------------
Utilities: 1.0%
204,700 Midamerican Energy Hldgs* ................ 5,731,600
881 Star Gas Partners L.P.* .................. 12,340
100,000 Unicom Corp. ............................. 3,656,250
------------
9,400,190
------------
Total Common Stock
(Cost $324,609,023) ...................... 613,646,614
------------
Preferred Stock: 0.8%
200,000 Conseco Financial Trust, 8.70% ............. 4,950,000
100,000 Conseco Financial Trust, 9.16% ............. 2,506,250
---------
Total Preferred Stock
(Cost $7,500,000) ........................ 7,456,250
---------
Convertible Preferred Stock: 1.8%
40,000 Fleetwood Capital Trust, Cvt. Pfd., 6.00% .. 1,620,000
75,000 Host Marriott Financial Trust,
Cvt. Pfd., 6.75% ........................... 3,075,000
95,000 Sinclair Broadcast Group Cvt. Pfd., 6.00% .. 3,877,188
423,600 U.S. Restaurant Properties, Series A,
Cvt. Pfd., 7.72% ........................... 7,889,550
----------
Total Convertible Preferred Stock
(Cost $20,341,867) ....................... 16,461,738
----------
15
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) March 31, 1999
Par
(000) Market Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS: 2.4%
$ 2,000 Healthcare Realty Trust, Cvt. Deb.,
6.55%, 3/14/02 ............................ $ 1,830,000
8,800 Platinum Technology International, Inc.,
Cvt. Deb. 6.25%, 12/15/02 ................. 8,338,000
1,661 Richardson Electronics, Cvt. Deb.
8.25%, 6/15/06 ............................ 1,407,698
339 Richardson Electronics, Cvt. Deb.
7.25%, 12/15/06 ........................... 224,164
10,907 Softkey International Cvt. Deb.,
5.50%, 11/1/00 ............................ 10,716,128
-----------
Total Convertible Bonds
(Cost $21,052,282) ........................ 22,515,990
-----------
CORPORATE BONDS: 23.0%
7,400 Amazon.com Inc., 0.00%, 5/1/08 .............. 5,032,000
3,000 Avon Products, Inc., 6.55%, 8/1/07 .......... 2,970,000
1,000 Caesar's World, 8.875%, 8/15/02 ............. 1,007,500
2,975 Calenergy Co., Inc., 7.23%, 9/15/05 ......... 3,082,844
5,000 Calenergy Co., Inc., 7.63%, 10/15/07 ........ 5,300,000
3,000 Campbell Soup Co., 6.15%, 12/1/02 ........... 3,056,250
1,000 Capstar Hotel, 8.75%, 8/15/07 ............... 957,500
8,000 Cendant Corp., 7.75%, 12/1/03 ............... 8,220,000
873 Chattem Inc., Sr Sub Deb, 12.75%, 6/15/04 ... 977,760
3,000 Circus Circus, 6.75%, 7/15/03 ............... 2,857,500
1,000 Citigroup, Inc, 6.125%, 6/15/00 ............. 1,004,270
5,100 Conseco, Inc., 6.80%, 6/15/05 ............... 4,927,875
700 CSX Corp., Nt, 7.00%, 9/15/02 ............... 720,125
5,000 Cytec Industries, Inc., 6.50%, 3/15/03 ...... 4,743,750
5,000 Cytec Industries, Inc., 6.75%, 3/15/08 ...... 5,031,250
300 Exxon Capital Corp., Nt, 6.50%, 7/15/99 ..... 300,993
2,150 First Tennessee Bank, 6.40%, 4/1/08 ......... 2,158,063
2,000 FMC Corp., Nt, 8.75%, 4/1/99 ................ 2,000,000
1,500 FMC Corp., Nt, 6.75%, 5/5/05 ................ 1,428,750
5,000 FMC Corp., Nt, 7.00%, 5/15/08 ............... 4,868,750
5,000 Frontier Corp., 7.25%, 5/15/04 .............. 5,112,500
1,000 Fund America Enterprise, Nt, 7.75%, 2/1/03 .. 1,020,000
5,000 Furon Co., 8.12%, 3/1/08 .................... 4,912,500
5,000 GTE Corp., 6.46%, 4/15/08 ................... 5,118,750
5,700 HMH Properties, Nt, 7.875%, 8/1/05 .......... 5,543,250
1,000 HMH Properties, Nt, 8.45%, 12/1/08 .......... 995,000
16
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Par
(000) Market Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (continued)
$ 3,000 Host Marriott Travel Plaza, 9.50%, 5/15/05 ... $ 3,131,250
5,000 HVIDE Marine, Inc., 8.375%, 2/15/08 .......... 3,425,000
5,000 ICI, 6.95%, 9/15/04 .......................... 4,968,750
1,775 ITT Corp., Nt, 6.25%, 11/15/00 ............... 1,723,969
2,000 ITT Corp., Nt, 6.75%, 11/15/03 ............... 1,870,000
5,000 J.P. Morgan, Nt, 6.875%, 1/15/07 ............. 5,143,750
4,000 Jeffries Group, Inc., 7.50%, 8/15/07 ......... 4,200,000
2,000 John Q. Hammons Hotels LP, Nt,
8.875%, 2/15/04 ............................ 1,870,000
3,000 Knight-Ridder, Inc., 6.625%, 11/1/07 ......... 3,082,500
5,000 Lilly Industries, Inc., 7.75%, 12/1/07 ....... 5,087,500
2,500 Lockheed Martin Corp., 7.25%, 5/15/06 ........ 2,646,875
2,200 Lockheed Martin Corp., Nt, 6.85%, 5/15/01 .... 2,244,000
5,000 LodgeNet Entertainment, Nt,
10.25%, 12/15/06 ........................... 5,112,500
1,285 Markel Corp., Nt, 7.25%, 11/1/03 ............. 1,338,006
10,000 Marriot International, Inc.,
6.625%, 11/15/03 ........................... 10,012,500
1,100 Masco Corp., Nt, 6.625%, 9/15/99 ............. 1,105,500
1,000 Masco Corp., Nt, 6.125%, 9/15/03 ............. 1,005,000
2,000 McDonnell Douglas Corp., Nt,
6.875%, 11/1/06 ............................ 2,100,000
500 MCI Communication, Nt, 7.50%, 8/20/04 ........ 532,500
9,800 Millipore Corp., 7.20%, 4/1/02 ............... 9,800,000
7,100 Millipore Corp., Nt, 7.50%, 4/1/07 ........... 6,984,625
4,000 Morgan Guaranty Trust Co., Nt,
5.75%, 10/8/99 ............................. 4,014,360
2,000 Nabisco, Inc., 6.70%, 6/15/02 ................ 2,012,500
1,500 Norfolk Southern, 6.95%, 5/1/02 .............. 1,537,500
1,500 Norfolk Southern, 7.35%, 5/15/07 ............. 1,603,125
5,000 Premier Parks, Nt, 9.25%, 4/1/06 ............. 5,225,000
4,000 Premier Parks, Nt, 9.75%, 1/15/07 ............ 4,350,000
3,815 Raychem Corp.,7.20%, 10/15/08 ................ 3,829,306
3,000 Raytheon Co., 6.45%, 8/15/02 ................. 3,052,500
5,000 Raytheon Co., 6.50%, 7/15/05 ................. 5,081,250
1,500 Salomon, Inc., Nt, 7.125%, 8/1/99 ............ 1,510,050
5,500 Solutia, Inc., 6.50%, 10/15/02 ............... 5,527,500
3,000 Tandy Corp., 6.95%, 09/1/07 .................. 3,120,000
1,000 Tektronix, Inc., Nt, 7.50%, 8/1/03 ........... 1,022,500
1,000 Tenneco, Inc., Nt, 8.075%, 10/1/02 ........... 1,042,500
5,000 United Defense Inds, Inc.,
8.75%, 11/15/07 ............................ 5,025,000
2,660 USG Corp., 8.50%, 8/1/05 ..................... 2,859,500
500 Xerox Corp., Nt, 7.15%, 8/1/04 ............... 522,500
-----------
Total Corporate Bonds (Cost $210,757,633) .... 212,066,496
-----------
17
<PAGE>
- -----------------------------------------------------------------------------
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Statement of Net Assets (concluded) March 31, 1999
Par
(000) Market Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES: 1.4%
$ 1,000 Federal National Mortgage Assoc.,
7.60%, 5/24/06 .......................... $ 1,003,280
-----------
U.S. Treasury Notes
4,000 6.25%, 5/31/00 .......................... 4,058,720
4,000 5.75%, 10/31/00 ......................... 4,043,760
4,000 6.125%, 12/31/01 ........................ 4,106,600
-----------
12,209,080
-----------
Total U.S. Government Agency Securities
(Cost $12,976,097) ...................... 13,212,360
-----------
Repurchase Agreement: 3.5%
32,211 Goldman Sachs & Co., 4.80%
Dated 3/31/99, to be repurchased on 4/1/99,
collateralized by U.S. Treasury Note with a
par value of $30,327,000, coupon rate of
6.375%, due 8/15/27, with a market value of
$32,620,328 (Cost $32,211,000) ................. 32,211,000
----------
Total Investments in Securities (Cost $629,447,902)** .. 99.4% $917,570,448
Other Assets in Excess of Liabilities .................. 0.6% 5,218,468
----- ------------
Net Assets ............................................. 100.0% $922,788,916
===== ============
Net Asset Value and Redemption Price Per:
Class A Share ($649,663,851 / 26,897,803 shares) .......... $ 24.15
=========
Class B Share ($110,679,674 / 4,590,241 shares) ........... $ 24.11***
=========
Class C Share ($17,450,549 / 723,521 shares) .............. $ 24.12****
=========
Institutional Share ($144,994,842 / 5,953,220 shares) ..... $ 24.36
=========
Maximum Offering Price Per:
Class A Share ($24.15 / 0.955) ............................ $ 25.29
=========
Class B Share ............................................. $ 24.11
=========
Class C Share ............................................. $ 24.12
=========
Institutional Share ....................................... $ 24.36
=========
- --------
* Non-income producing security.
** Aggregate cost for federal tax purposes is $629,224,848.
*** Redemption value is $23.15 following a 4% maximum contingent deferred
sales charge.
**** Redemption value is $23.88 following a 1% maximum contingent deferred
sales charge.
See accompanying Notes to Financial Statements.
18
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Statement of Operations
For the
Year Ended
March 31,
- --------------------------------------------------------------------------------
1999
Investment Income:
Dividends ................................................ $ 8,804,013
Interest ................................................. 19,627,795
Less:Foreign taxes withheld .............................. (19,778)
-------------
Total income .................................... 28,412,030
-------------
Expenses:
Investment advisory fee .................................. 5,619,259
Distribution fee ......................................... 2,321,058
Transfer agent fee ....................................... 335,996
Accounting fee ........................................... 127,817
Registration fees ........................................ 119,352
Custodian fees ........................................... 92,747
Directors' fees .......................................... 36,141
Miscellaneous ............................................ 239,029
-------------
Total expenses .................................. 8,891,399
-------------
Net investment income .................................... 19,520,631
-------------
Realized and unrealized gain on investments:
Net realized gain from security transactions ............. 13,846,863
Change in unrealized appreciation/depreciation
of investments ......................................... 76,741,086
-------------
Net gain on investments .................................. 90,587,949
-------------
Net increase in net assets resulting from operations ........ $ 110,108,580
=============
See accompanying Notes to Financial Statements.
19
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended March 31,
- ------------------------------------------------------------------------------
1999 1998
Increase in Net Assets:
Operations:
Net investment income .................... $ 19,520,631 $ 12,089,775
Net realized gain from security
transactions ........................... 13,846,863 4,718,485
Change in unrealized appreciation/
depreciation of investments ............ 76,741,086 124,787,999
------------- -------------
Net increase in net assets
resulting from operations .............. 110,108,580 141,596,259
------------- -------------
Distributions to Shareholders from:
Net investment income and short-term gains:
Class A Shares ......................... (13,804,511) (8,528,277)
Class B Shares ......................... (1,569,776) (625,533)
Class C Shares ......................... (128,906) --
Class D Shares ......................... (257,548) (351,052)
Institutional Shares ................... (3,045,076) (1,539,023)
Net realized long-term gains:
Class A Shares ......................... (8,542,386) (5,136,333)
Class B Shares ......................... (1,338,049) (601,637)
Class C Shares ......................... (156,874) --
Class D Shares ......................... -- (224,735)
Institutional Shares ................... (1,772,147) (1,098,467)
------------- -------------
Total distributions ...................... (30,615,273) (18,105,057)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares ............. 273,356,523 233,685,893
Value of shares issued in reinvestment
of dividends ........................... 27,465,074 16,203,251
Cost of shares repurchased ............... (135,894,760) (40,437,180)
------------- -------------
Increase in net assets derived from
capital share transactions ............. 164,926,837 209,451,964
------------- -------------
Total increase in net assets ............. 244,420,144 332,943,166
Net Assets:
Beginning of period ...................... 678,368,772 345,425,606
------------- -------------
End of period (including undistributed net
investment income of $4,505,377 and
$3,766,431, respectively) .............. $ 922,788,916 $ 678,368,772
============= =============
See accompanying Notes to Financial Statements.
20
<PAGE>
This page intentionally left blank.
21
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
Year Ended
March 31,
----------
1999
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period .......... $ 22.09
---------
Income from Investment Operations:
Net investment income ........................... 0.56
Net realized and unrealized gain on investments . 2.40
---------
Total from Investment Operations ................ 2.96
---------
Less Distributions:
Net investment income and short-term gains ...... (0.57)
Net realized mid-term and long-term capital gains (0.33)
---------
Total distributions ............................. (0.90)
---------
Net asset value at end of period ................ $ 24.15
=========
Total Return ....................................... 13.91%
Ratios to Average Net Assets:
Expenses ........................................ 1.12%
Net investment income ........................... 2.64%
Supplemental Data:
Net assets at end of period (000) ............... $ 649,664
Portfolio turnover rate ......................... 10%
</TABLE>
- ------
(1) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 1.40% for the year ended March 31, 1995.
(2) Without the waiver of advisory fees, the ratio of net investment income to
average net assets would have been 3.02% for the year ended March 31, 1995.
22
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended March 31,
---------------------------------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .......... $ 17.14 $ 14.68 $ 12.02 $ 11.23
--------- --------- --------- ---------
Income from Investment Operations:
Net investment income ........................... 0.47 0.39 0.36 0.35
Net realized and unrealized gain on investments . 5.21 2.49 3.03 0.80
--------- --------- --------- ---------
Total from Investment Operations ................ 5.68 2.88 3.39 1.15
--------- --------- --------- ---------
Less Distributions:
Net investment income and short-term gains ...... (0.47) (0.36) (0.41) (0.35)
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)
--------- --------- --------- ---------
Net asset value at end of period ................ $ 22.09 $ 17.14 $ 14.68 $ 12.02
========= ========= ========= =========
Total Return ....................................... 33.82% 19.90% 28.86% 10.57%
Ratios to Average Net Assets:
Expenses ........................................ 1.14% 1.27% 1.31% 1.35%(1)
Net investment income ........................... 2.49% 2.51% 2.72% 3.07%(2)
Supplemental Data:
Net assets at end of period (000) ............... $ 491,575 $ 278,130 $ 200,020 $ 146,986
Portfolio turnover rate ......................... 7% 13% 15% 18%
</TABLE>
See accompanying Notes to Financial Statements.
23
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
Year Ended
March 31,
----------
1999
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period .......... $ 22.08
---------
Income from Investment Operations:
Net investment income ........................... 0.41
Net realized and unrealized gain on investments . 2.38
---------
Total from Investment Operations ................ 2.79
---------
Less Distributions:
Net investment income and short-term gains ...... (0.43)
Net realized mid-term and long-term capital gains (0.33)
---------
Total distributions ............................. (0.76)
---------
Net asset value at end of period ................ $ 24.11
=========
Total Return ....................................... 13.10%
Ratios to Average Net Assets:
Expenses ........................................ 1.87%
Net investment income ........................... 1.90%
Supplemental Data:
Net assets at end of period (000) ............... $ 110,680
Portfolio turnover rate ......................... 10%
</TABLE>
- -------------
(1) Annualized
(2) Commencement of Operations.
(3) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 2.17% annualized for the period ended March 31, 1995.
(4) Without the waiver of advisory fees, the ratio of net investment income to
average net assets would have been 2.87% annualized for the period ended
March 31, 1995.
24
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Jan. 3, 1995(2)
through
For the Years Ended March 31, March 31,
--------------------------------------------------
1998 1997 1996 1995
<S> <C> <C> <C> <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 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%(1,3)
Net investment income ........................... 1.75% 1.84% 1.97% 2.94%(1,4)
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.
25
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)
For the Period
April 8, 1998(1)
through
March 31,
----------------
1999
Per Share Operating Performance:
Net asset value at beginning of period .......... $ 22.31
-------
Income from Investment Operations:
Net investment income ........................... 0.39
Net realized and unrealized gain on investments . 2.10
-------
Total from Investment Operations ................ 2.49
-------
Less Distributions:
Net investment income and short-term gains ...... (0.35)
Net realized mid-term and long-term capital gains (0.33)
-------
Total distributions ............................. (0.68)
-------
Net asset value at end of period ................ $ 24.12
=======
Total Return ....................................... 11.50%(3)
Ratios to Average Net Assets:
Expenses ........................................ 1.91%(2)
Net investment income ........................... 2.05%(2)
Supplemental Data:
Net assets at end of period (000) ............... $17,450
Portfolio turnover rate ......................... 10%
See accompanying Notes to Financial Statements.
- ----------
(1) Commencement of operations.
(2) Annualized
(3) Total return is since inception.
26
<PAGE>
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<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Financial Highlights -- Class D Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
April 1, 1998
through
November 20,(1)
---------------
1999
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period ........ $22.05
------
Income from Investment Operations:
Net investment income ......................... 0.29
Net realized and unrealized gain on investments (0.06)
------
Total from Investment Operations .............. 0.23
------
Less Distributions:
Net investment income and short-term gains .... (0.32)
Net realized long-term capital gains .......... --
------
Total distributions ........................... (0.32)
------
Net asset value at end of period .............. $21.96
======
Total Return ..................................... 1.09%
Ratios to Average Net Assets:
Expenses ...................................... 1.50%
Net investment income ......................... 2.04%
Supplemental Data:
Net assets at end of period (000) ............. $ --
Portfolio turnover rate ....................... 10%
</TABLE>
- --------
(1) Class D Shares were converted to Class A Shares on November 20, 1998.
(2) Without the waiver of advisory fees, the ratio of expenses to average net
assets would have been 1.74% for Class D Shares for the year ended
March 31, 1995.
(3) Without the waiver of advisory fees, the ratio of net investment income
to average net assets would have been 2.68% for Class D Shares for the year
ended March 31, 1995.
28
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------------------
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ........ $ 17.11 $ 14.66 $ 12.01 $ 11.22
------- ------- ------- -------
Income from Investment Operations:
Net investment income ......................... 0.43 0.35 0.33 0.31
Net realized and unrealized gain on investments 5.17 2.47 3.02 0.80
------- ------- ------- -------
Total from Investment Operations .............. 5.60 2.82 3.35 1.11
------- ------- ------- -------
Less Distributions:
Net investment income and short-term gains .... (0.40) (0.31) (0.38) (0.31)
Net realized long-term capital gains .......... (0.26) (0.06) (0.32) (0.01)
------- ------- ------- -------
Total distributions ........................... (0.66) (0.37) (0.70) (0.32)
------- ------- ------- -------
Net asset value at end of period .............. $ 22.05 $ 17.11 $ 14.66 $ 12.01
======= ======= ======= =======
Total Return ..................................... 33.33% 19.46% 28.44% 10.18%
Ratios to Average Net Assets:
Expenses ...................................... 1.49% 1.62% 1.66% 1.70%(2)
Net investment income ......................... 2.14% 2.15% 2.37% 2.72%(3)
Supplemental Data:
Net assets at end of period (000) ............. $18,478 $15,213 $13,757 $11,717
Portfolio turnover rate ....................... 7% 13% 15% 18%
</TABLE>
See accompanying Notes to Financial Statements.
29
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Financial Highlights -- Institutional Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
Year Ended
March 31,
----------
1999
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period ........ $ 22.26
--------
Income from Investment Operations:
Net investment income ......................... 0.63
Net realized and unrealized gain on investments 2.41
--------
Total from Investment Operations .............. 3.04
--------
Less Distributions:
Net investment income and short-term gains .... (0.61)
Net realized long-term capital gains .......... (0.33)
--------
Total distributions ........................... (0.94)
--------
Net asset value at end of period .............. $ 24.36
========
Total Return ..................................... 14.20%
Ratios to Average Net Assets:
Expenses ...................................... 0.87%
Net investment income ......................... 2.88%
Supplemental Data:
Net assets at end of period (000) ............. $144,995
Portfolio turnover rate ....................... 10%
</TABLE>
- --------
(1) Commencement of operations.
(2) Annualized
30
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Jan. 3, 1995(2)
through
For the Years Ended March 31, March 31,
--------------------------------------------------
1998 1997 1996
<S> <C> <C> <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 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 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%(2)
Net investment income ......................... 2.75% 2.83% 2.89%(2)
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.
31
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- ---------------------------------------------------------------------
Notes to Financial Statements
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 in vestments
in a professionally managed balanced portfolio of equity and debt securities.
The Fund consists of four share classes: Class A Shares, which were first
offered June 15, 1992; Class B Shares, which were first offered January 3, 1995;
Institutional Shares, which were first offered November 2, 1995; and Class C
Shares, which were first offered April 8, 1998. The Fund previously offered
Class DShares which were converted to Class A Shares on November 20, 1998.
The Class A, Class B, and Class C Shares are subject to different sales
charges. The Class A Shares have a front-end sales charge and the Class B and C
Shares have a contingent deferred sales charge. In addition each of the 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-- 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.
32
<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 seller agrees to repurchase at a set time and price.
The third party, which is the seller'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 seller defaults.
The Fund's access to the collateral may be delayed or limited if the
seller defaults and the value of the collateral declines or if the
seller enters into an insolvency proceeding.
C. Federal Income Taxes-- 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. The Fund designates $11,809,456
as being paid from long-term capital gains.
D. Securities Transactions, Investment Income, Distributions and Other--
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
amortization of premiums and accretion of discounts when appropriate.
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.
33
<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. 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.
For the year ended March 31, 1999 ICC's advisory fee was $5,619,259 of
which $559,244 was payable at the end of the period.
ICC also provides accounting services to the Fund for which the Fund pays
ICCan annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets. For the year ended March 31, 1999 ICC's fee was
$127,817 of which $11,441 was payable at the end of the period.
ICC also provides transfer agency services to the Fund for which the Fund
pays ICC a per account fee that is calculated and paid monthly. For the year
ended March 31, 1999 ICC's fee was $335,996 of which $25,461 was payable at the
end of the period.
Bankers Trust Corporation is the Fund's custodian. For the year ended March
31, 1999, custody fees amounted to $92,747, of which $35,500 was payable at the
end of the period.
Certain officers and directors of the Fund are also officers or directors
of ICC.
Alex. Brown Investment Management ("ABIM") is the Fund's sub-advisor. As
compensation for its sub-advisory services, ICC pays ABIMa fee based on the
Fund's average daily net assets. This fee 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 Distributors, Inc., a member of the Forum Group of companies, provides
distribution services to the Fund for which the Fund pays ICC Distributors an
annual fee that is calculated daily and paid monthly at the following annual
rates: 0.25% of the Class A Shares' average daily net assets and 1.00% of the
Class B and Class C Shares' average daily net assets. The fees for the Class B
and Class C Shares include a 0.25% shareholder servicing fee.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
March 31, 1999 was $14,319 and the accrued liability was $31,300.
34
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
NOTE 2 -- concluded
On November 30, 1998, Bankers Trust Corporation entered into an Agreement
and Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation
would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is
a major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. The transaction is contingent upon
various regulatory approvals, and continuation of the Fund's advisory
relationship with ICC thereafter is subject to the approval of Fund
shareholders. On March 30, 1999, the Board of Directors approved a new advisory
agreement between ICC and the Fund in the event the merger is approved and
completed. The new advisory agreement and a new sub-advisory agreement will be
subject to shareholder approval. If the transaction is approved and completed,
Deutsche Bank AG, as ICC's new parent company, will control its operations as
investment advisor. ICC believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
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,
15 million Class C, 3 million Class D and 2 million undesignated). Transactions
in shares of the Fund were as follows:
<TABLE>
<CAPTION>
Class A Shares
----------------------------------
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Shares sold ................................ 7,667,470 7,042,839
Shares issued to shareholders on
reinvestment of dividends ................ 927,793 641,162
Shares converted from Class D .............. 744,609 --
Shares redeemed ............................ (4,698,072) (1,656,511)
------------- -------------
Net increase in shares outstanding ......... 4,641,800 6,027,490
============ =============
Proceeds from sale of shares ............... $ 167,786,940 $ 140,113,104
Value of reinvested dividends .............. 20,162,879 12,406,231
Value of shares converted from Class D ..... 16,366,512 --
Cost of shares redeemed .................... (102,312,507) (32,747,372)
------------- -------------
Net increase from capital share
transactions .............................. $ 102,003,824 $ 119,771,963
============= =============
</TABLE>
35
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 3 continued
<TABLE>
<CAPTION>
Class B Shares
----------------------------------
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Shares sold ................................ 1,963,448 1,916,773
Shares issued to shareholders on
reinvestment of dividends ................ 119,699 58,431
Shares redeemed ............................ (414,281) (62,652)
----------- -----------
Net increase in shares outstanding ......... 1,668,866 1,912,552
=========== ===========
Proceeds from sale of shares ............... $42,732,188 $37,749,769
Value of reinvested dividends .............. 2,606,348 1,143,662
Cost of shares redeemed .................... (8,899,431) (1,250,962)
----------- -----------
Net increase from capital share
transactions ............................. $36,439,105 $37,642,469
=========== ===========
</TABLE>
Class C Shares
------------
For Period
April 8, 1998(1)
through
March 31, 1999
---------------
Shares sold ................................ 735,840
Shares issued to shareholders on
reinvestment of dividends ................ 12,033
Shares redeemed ............................ (24,353)
------------
Net increase in shares outstanding ......... 723,520
============
Proceeds from sale of shares ............... $ 16,181,630
Value of reinvested dividends .............. 261,764
Cost of shares redeemed .................... (544,762)
------------
Net increase from capital share
transactions ............................. $ 15,898,632
============
- ----------
(1) Commencement of operations.
36
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
NOTE 3 -- concluded
Class D Shares(1)
--------------------------------------
For the Period
April 1, 1998 For the
through Year Ended
November 20, 1998 March 31, 1998
----------------- --------------
Shares sold ........................ -- --
Shares issued to shareholders on
reinvestment of dividends ........ 9,988 26,051
Shares converted to Class A ........ (745,254) --
Shares redeemed .................... (102,674) (77,261)
------------ ------------
Net decrease in shares outstanding . (837,940) (51,210)
============ ============
Proceeds from sale of shares ....... $ -- $ --
Value of reinvested dividends ...... 212,526 500,413
Value of shares converted to Class A (16,366,512)
Cost of shares redeemed ............ (2,130,846) (1,566,659)
------------ ------------
Net decrease from capital share
transactions ..................... $(18,284,832) $ (1,066,246)
============ ============
- -----------
(1) Converted to Class A Shares on November 20, 1998.
Institutional Shares
-----------------------------------
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
------------ ------------
Shares sold ...................... 2,172,982 2,782,404
Shares issued to shareholders on
reinvestment of dividends ...... 192,473 109,243
Shares redeemed .................. (1,076,590) (241,221)
------------ ------------
Net increase in shares outstanding 1,288,865 2,650,426
============ ============
Proceeds from sale of shares ..... $ 46,655,765 $ 55,823,020
Value of reinvested dividends .... 4,221,557 2,152,945
Cost of shares redeemed .......... (22,007,214) (4,872,187)
------------ ------------
Net increase from capital share
transactions ................... $ 28,870,108 $ 53,103,778
============ ============
37
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE4 -- Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $248,879,467 and sales of investment securities
aggregated $70,765,644 for the year ended March 31, 1999. Purchases of U.S.
government obligations aggregated $1,012,734, and sales of U.S. government
obligations aggregated $7,034,903 for the period.
On March 31, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $312,827,053
and aggregate gross unrealized depreciation of all securities in which there is
an excess of tax cost over value was $24,481,453.
Note 5 -- Net Assets
On March 31, 1999, net assets consisted of:
Paid-in capital:
Class A Shares $407,144,016
Class B Shares 90,075,405
Class C Shares 15,898,631
Institutional Shares 114,058,757
Accumulated net realized gain from security transactions 2,984,183
Unrealized appreciation of investments 288,122,547
Undistributed net investment income 4,505,377
------------
$922,788,916
============
38
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Report of Independent Accountants
To the Shareholders and Directors of
Flag Investors Value Builder Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Value Builder Fund, Inc. (the "Fund"), at March 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, MD
April 30, 1999
- -----------------------------------------------------------------------------
Tax Information (Unaudited)
For the Tax Year Ended March 31, 1999
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $11,809,456 from
long-term capital gains; of which $11,809,456 was subject to the 20% rate gains
category.
Of ordinary distributions made during the fiscal year ended March 31, 1999,
41.71% qualifies for the dividends received deduction available to corporate
shareholders.
39
<PAGE>
This page intentionally left blank.
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- -----------------------------------------------------------------------------
Directors and Officers
TRUMAN T. SEMANS
Director
JAMES J. CUNNANE
Chairman
RICHARD T. HALE
Director
JOSEPH R. HARDIMAN
Director
LOUIS E. LEVY
Director
EUGENE J. MCDONALD
Director
REBECCA W. RIMEL
Director
CARL W. VOGT, ESQ.
Director
HARRY WOOLF
President
AMY M. OLMERT
Secretary
JOSEPH A. FINELLI
Treasurer
SCOTT J. LIOTTA
Assistant Secretary
Investment Objective
A balanced mutual fund designed to maximize total return through a combination
of long-term growth of capital and current income.
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]
Growth
Flag Investors Emerging Growth Fund
Flag Investors Equity Partners Fund
Flag Investors International Fund
Specialty
Flag Investors Communications Fund
Flag Investors Real Estate Securities Fund
Balanced
Flag Investors Value Builder Fund
Fixed 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
Money Market
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
Distributed by:
ICC Distributors, Inc.
VBANN
(5/99)