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FLAG INVESTORS
Value Builder
Fund
Semi-Annual Report
September 30, 1999
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REPORT HIGHLIGHTS
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o Your Fund reached $1 billion in market value on July 1, 1999.
o Your Fund achieved excellent performance results for the 1-, 3- and 5-year
periods ended September 30, 1999 with cumulative gains of 20.24%, 62.56%
and 142.15%, respectively. Based on total return, Lipper, Inc. ranked your
Fund in the top 10% of balanced funds for these periods.
o The Fund's asset mix continued to emphasize long-term holdings with stocks
and bonds representing 96% of the portfolio. New and existing shareholders
purchased $134 million in Fund shares over the past 12 months.
o Your fund invests primarily in intermediate bonds with maturities of 2 to
10 years in an effort to mitigate price risk. Maturity risk in long-term
bonds is greater than is often realized. As was recently observed, the
yield on 30-year Treasury bonds rose 100 basis points from 5.1% to 6.1%
causing a 13% decline in the price of long-term Treasury bonds.
o The rise in interest rates has dampened investors' enthusiasm for common
stocks. Nonetheless, we are encouraged about the prospects of our
portfolio holdings because they represent very good value relative to bond
yields and the S&P 500.
o The returns of the Fund's best performers demonstrate our philosophy of
buying good value and having the patience for such value to be fully
recognized in the investment marketplace. We have remained active in our
pursuit of finding good value by adding to existing positions or creating
new ones. Net purchases of stocks and bonds totaled almost $168 million
over the past 12 months.
<PAGE>
FUND PERFORMANCE
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Growth of a $10,000 Investment in Class A Shares(1) June 15, 1992-September 30,
1999
[The following table was depicted as a mountain graph in the printed material]
$10,000 invested in the Value Builder Fund
Class A Shares at inception on June 15, 1992
was worth $29,431 on September 30, 1999
Year Value
- ---- -------
6/92 $10,000
$10,776
6/93 $11,526
$12,043
6/94 $11,666
$11,998
6/95 $14,076
$15,927
6/96 $17,217
$19,851
6/97 $22,132
$24,351
6/98 $27,094
$28,862
6/99 $30,544
9/99 $29,431
Total Return Performance(1)
Class A Class B Class C Institutional
For the periods ended 9/30/99 Shares Shares Shares Shares
- --------------------------------------------------------------------------------
1 Year 20.24% 19.34% 19.52% 20.51%
3 Years (Cumulative) 62.56% 58.95% --% 63.81%
5 Years (Cumulative) 142.15% --% --% --%
Since Inception 6/15/92 1/3/95 4/8/98 11/2/95
------ ------ ------ -------
(Cumulative) 194.31% 136.50% 7.03% 93.01%
(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. 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.
1
<PAGE>
LETTER TO SHAREHOLDERS
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Fellow Shareholders:
We are pleased to report the progress of your Fund for the period ended
September 30, 1999. We are also pleased to report that your Fund reached $1
billion in market value on July 1, 1999.
Although the equity market and your Fund have given back some of the gains
achieved earlier in the year, the Fund's Class `A' shares gained 2.0% for the
first nine months of this year. Since our report to you a year ago, the Fund has
gained 20.2%. Most of the gain over the past year is attributable to the
earnings gains of the portfolio companies and the low valuations this time a
year ago. With interest rates rising on long-term treasury bonds from 5.1% to
6.1%, we are especially pleased with the Fund's concentration in 2 to 10 year
maturity bonds and their performance relative to long-term treasury bonds.
From a longer-term perspective, we are pleased to report that your Fund's
performance continues to place it in the top decile of Balanced Funds. According
to Lipper, Inc., the Fund's Class `A' shares ranked #34 out of 427 Funds, #31
out of 316 Funds and #6 out of 202 Funds for the respective 1-, 3-, and 5-year
periods ending September 30, 1999. We are also pleased that Barrons has
recognized the success of the Value Builder Fund in each of the past 3 years in
its annual review of Mutual Funds.
The best performing common stocks over the past nine months are listed
below.
Best Performers 12/31/98-9/30/99
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Original
Security Percent Gain Investment Date
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Tandy Corp. 151.0% 2/94
Case Corp. 128.4% 10/98
LodgeNet Entertainment 89.1% 8/94
Harrah's Entertainment 76.9% 11/96
Amgen, Inc. 55.9% 4/94
Cognex Corp. 50.9% 2/98
First Data Corp. 37.6% 10/96
Hercules(w) 34.7% 8/94
America Online 34.2% 11/96
Citigroup 32.8% 6/95
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- ----------
(w) Sold mid-period
You will note that many have been held for quite some time. Again, 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.
2
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While a number of the Fund's equity securities have given up some ground
so far this year, our two biggest losers were Champion Enterprises and Sinclair
Broadcasting declining 67% and 54% respectively. Unlike last year where we
ridiculed ourselves for our purchase of Sunbeam, these disappointments do not
appear (at least for now) to reflect exceptionally poor judgement but rather
not-so-good timing. Whatever the case, in our annual letter to you in April when
we do our "scorecard" we will certainly admonish ourselves to the full extent
deserved.
Asset Mix and Five Largest Holdings
Although there was a small change in the asset mix over the past year, our
investment activity was considerably greater. With share purchases by new and
existing shareholders of $134 million over the past 12 months, our net purchases
of stocks and bonds totaled almost $168 million for the same period. We very
much appreciate this expression of confidence. The pie chart below reflects the
current asset mix as well as the asset mix a year ago.
[The following tables were depicted as pie charts in the printed material]
9/30/98 9/30/99
Common Stocks and Convertables 59.2% 70.0%
Fixed Income 32.1% 26.0%
Short-Term Investment 8.7% 4.0%
The five largest common stock holdings are listed below along with the
percentage change for each so far this year.
Five Largest Holdings
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Market Value Performance
Security Cost as of 9/30/99 12/31/98 to 9/30/99
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America Online $ 2,531,970 $ 72,800,000 34.2%
Cendant Corporation 33,593,748 39,977,189 -8.1%
Conseco 40,206,160 33,927,215 -37.7%
Blyth Industries 26,306,494 28,281,388 -10.2%
IBM 2,754,703 20,876,500 31.2%
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Total $105,393,075 $195,862,292
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3
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
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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 9/30/99)
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Common Stock Purchases
Security Cost
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Cendant Corporation (a) $34,602,417
Allied Waste Industries 16,258,193
Conseco (a) 13,725,835
SFX Entertainment 9,969,040
Countrywide Credit (a) 8,626,144
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Bond Purchases
Security Cost
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Textron, Inc., 6.75%, 9/15/02 $ 6,995,800
Ford Motor Credit, 6.70%, 7/16/04 6,139,914
Crown Castle Intl., 9.00%, 5/15/11 6,000,000
Marriott Intl., 7.875%, 9/15/09 5,663,691
Blyth Industries, 7.90%, 10/01/09 4,458,735
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(a) Addition to existing holding
Investment Environment
The year 1999 began with the yield on 30-year treasury bonds at 5.1%. By
the end of September, the yield on this same instrument had risen to 6.1%.
Although a 1.0% rise in interest rates may not seem like a lot, such a rise
resulted in a 13% decline in the price of long maturity treasury bonds or the
equivalent of more than two years of interest payments. For a triple `A'
security that is often viewed as having very little risk, this example is a
clear reminder that maturity risk in long-term bond ownership is considerably
greater than is often realized. This price risk, to a large degree, explains why
your Fund invests primarily in intermediate bonds of 2 to 10 years (98% of bond
holdings). In this sector we can typically earn 90% to 95% of the yield
available on 30-year bonds, but with considerably less price risk.
4
<PAGE>
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The rise in interest rates has also dampened investors' enthusiasm for
common stocks especially those in the financial sector (banks, insurance
companies, etc.). While it appears the Federal Reserve is still inclined to keep
upward pressure on interest rates, most common stock prices seem to have more
than adjusted to this environment. For this reason we are quite encouraged about
the prospects of our portfolio holdings for the coming year. Quite frankly, the
valuations for many portfolio companies in an absolute sense as well as relative
to bond yields and the S&P 500, is better than we have seen in quite some time.
As a consequence, we believe our optimism for the equity holdings in your Fund
is well founded.
For those shareholders who are curious as to what impact Y2K will have on
our investment activities in the coming months, the answer is very little, if
any. While we recognize that some companies, especially in the technology area,
may experience some deferral of sales during the 4th quarter, we do not expect
it to have a major impact on stock prices. Should we be wrong, we expect to use
any price volatility as an opportunity to improve the overall prospects of the
Fund's portfolio holdings. Lastly, it may be worth noting that one of our
largest holdings is Blyth Industries, the largest candle manufacturer in the
country. So if some of the lights do go out, we're ready.
We thank you for your continued interest and support. We look forward to
the ongoing process of building value for you.
Respectfully submitted,
Hobart C. Buppert, II
October 22, 1999
/s/ Hobart C. Buppert, II
5
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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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.
Average Annual Total Return
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For the periods ended 9/30/99 1 Year 3 Years 5 Years Since Inception(1)
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Class A Shares 14.83% 15.79% 18.26% 15.22%
Class B Shares 15.34% 15.97% -- 19.70%
Class C Shares 18.52% -- -- 4.70%
Institutional Shares 20.51% 17.88% -- 18.32%
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(1) Inception dates: Class A 6/15/92, Class B 1/3/95, Class C 4/8/98,
Institutional 11/2/95.
Past performance is not an indicator of future results. 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.
6
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Statement of Net Assets September 30, 1999
(Unaudited)
Shares Market Value
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- ------------------------------------
COMMON STOCK: 65.7%
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Banking: 1.4%
152,500 Bank of America Corp. ....................... $ 8,492,344
131,000 Wells Fargo & Company ....................... 5,190,875
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13,683,219
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Basic Industry: 1.2%
722,600 Airgas, Inc.* ............................... 8,400,225
140,000 Georgia Gulf Corp. .......................... 2,467,500
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10,867,725
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Business Services: 3.0%
294,700 First Data Corp. ............................ 12,929,962
176,400 SEI Corp. ................................... 15,749,212
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28,679,174
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Capital Goods: 1.9%
300,000 Case Corp. .................................. 14,943,750
36,000 Eaton Corp. ................................. 3,107,250
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18,051,000
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Consumer Durables/Non - Durables: 6.7%
1,007,800 Blyth Industries, Inc.* ..................... 28,281,387
33,500 Eastman Kodak Co. ........................... 2,527,156
200,000 Ford Motor Company .......................... 10,037,500
50,000 Liz Claiborne, Inc. ......................... 1,550,000
671,280 Mattel, Inc. ................................ 12,754,320
111,600 Philip Morris Cos., Inc. .................... 3,815,325
414,800 Unifi, Inc.* ................................ 4,562,800
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63,528,488
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Consumer Services: 14.2%
1,339,900 Allied Waste Industries, Inc.* .............. 15,660,081
700,000 America Online, Inc.* ....................... 72,800,000
2,252,236 Cendant Corp.* .............................. 39,977,189
60,000 Gannett Co. ................................. 4,151,250
202,000 Sinclair Broadcasting Group A* .............. 1,830,625
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134,419,145
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7
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Statement of Net Assets (continued) September 30, 1999
(Unaudited)
Shares Market Value
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- ------------------------------------
COMMON STOCK (continued)
- ------------------------------------
Defense/Aerospace: 0.9%
156,000 Boeing Co. .................................. $ 6,649,500
62,342 Lockheed Martin Corp. ....................... 2,037,804
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8,687,304
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Energy: 1.0%
125,000 Burlington Resources, Inc. .................. 4,593,750
250,000 Petroleum Geo Services* ..................... 4,765,625
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9,359,375
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Entertainment: 2.2%
896,700 Lodgenet Entertainment Corp.* ............... 11,657,100
300,000 SFX Entertainment, Inc. - Class A* .......... 9,150,000
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20,807,100
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Financial Services: 5.6%
83,500 American Express Co. ........................ 11,241,187
387,750 Citigroup ................................... 17,061,000
306,500 Countrywide Credit Industries, Inc. ......... 9,884,625
172,000 Freddie Mac ................................. 8,944,000
265,780 MBNA Corp. .................................. 6,063,106
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53,193,918
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Health Care Services: 4.3%
190,000 Amgen, Inc.* ................................ 15,485,000
40,000 Baxter International, Inc. .................. 2,410,000
76,000 Bristol-Myers Squibb Co. .................... 5,130,000
26,000 Cardinal Health, Inc. ....................... 1,417,000
114,000 Johnson & Johnson ........................... 10,473,750
99,700 Wellpoint Health Networks, Inc.* ............ 5,682,900
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40,598,650
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Gaming: 0.6%
200,000 Harrah's Entertainment* ..................... 5,550,000
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8
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Shares Market Value
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COMMON STOCK (continued)
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Housing: 1.6%
900,000 Champion Enterprises, Inc.* ................. $ 8,100,000
144,000 USG Corp. ................................... 6,840,000
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14,940,000
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Insurance: 5.7%
1,756,749 Conseco, Inc. ............................... 33,927,215
65,000 Hartford Financial Services Group, Inc. ..... 2,656,875
66,000 RenaissanceRe Holdings Limited .............. 2,289,375
340,998 XL Capital Limited - Class A ................ 15,344,910
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54,218,375
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Multi - Industry: 0.8%
128,000 United Technologies Corp. ................... 7,592,000
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Real Estate: 1.1%
899,136 Host Marriott Corp. ......................... 8,541,792
100,500 U.S. Restaurant Properties, Inc. ............ 1,909,500
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10,451,292
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Retail: 1.6%
500,000 Kmart Corp.* ................................ 5,843,750
180,000 Tandy Corp. ................................. 9,303,750
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15,147,500
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Technology: 6.1%
70,400 Autodesk, Inc. .............................. 1,540,000
321,100 Cognex Corp.* ............................... 9,693,206
125,000 Electronic Data Systems Corp. ............... 6,617,187
172,000 International Business Machines Corp. ....... 20,876,500
903,000 Novell, Inc.* ............................... 18,680,813
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57,407,706
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Telecommunications: 3.8%
182,498 COMSAT Corp. ................................ 5,406,521
100,000 Global Telesystems Group, Inc.* ............. 1,971,875
190,689 MCI Worldcom, Inc.* ......................... 13,705,772
200,000 Qwest Communications International, Inc.* ... 5,912,500
150,500 U.S. West, Inc. ............................. 8,587,906
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35,584,574
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9
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Statement of Net Assets (continued) September 30, 1999
(Unaudited)
Shares/
Par (000) Market Value
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COMMON STOCK (continued)
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Transportation: 1.0%
270,000 Canadian National Rail Co. ................... $ 8,184,375
34,982 Delta Air Lines, Inc. ........................ 1,696,627
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9,881,002
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Utilities: 1.0%
204,700 MidAmerican Energy Holdings* ................. 6,038,650
100,000 Unicom Corp. ................................. 3,693,750
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9,732,400
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Total Common Stock
(Cost $392,489,361) ........................ 622,379,947
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PREFERRED STOCK: 0.7%
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200,000 Conseco Financial Trust, 8.70% ............... 4,450,000
100,000 Conseco Financial Trust, 9.16%, .............. 2,356,250
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Total Preferred Stock
(Cost $7,500,000) .......................... 6,806,250
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CONVERTIBLE PREFERRED STOCK: 2.0%
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255,000 Central Park Trust Cvt. Pfd., 5.25% .............. 4,590,000
40,000 Fleetwood Capital Trust, Cvt. Pfd., 6.00% ........ 1,425,000
145,000 Sinclair Broadcast Group, Cvt. Pfd., 6.00% ....... 4,812,188
423,600 U.S. Restaurant properties, series A, Cvt.
Pfd., 7.72% ...................................... 7,413,000
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Total Convertible Preferred Stock
(Cost $23,093,742) ............................. 18,240,188
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CONVERTIBLE BONDS: 2.4%
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$ 2,000 Healthcare Realty Trust, Cvt. Deb., 6.55%,
3/14/02 ........................................ 1,860,000
10,970 Integrated Process Equipment, Cvt. Deb.,
6.25%, 09/15/04 ................................ 8,268,638
1,661 Richardson Electronics, Cvt Deb., 8.25%,
6/15/06 ........................................ 1,376,554
10,907 Softkey International, Cvt. Deb., 5.50%,
11/01/00 ....................................... 10,743,395
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Total Convertible Bonds (Cost $21,973,568) ....... 22,248,587
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10
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Par
(000) Market Value
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CORPORATE BONDS: 25.4%
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$ 1,000 Allied Waste North America, 10.00%, 08/1/09 ........ $ 915,000
9,230 Amazon.com Inc., 0.00%, 05/1/08 .................... 6,253,325
3,000 Avon Products Inc., 6.55%, 08/1/07 ................. 2,836,590
4,500 Blyth Industries, 7.90%, 10/1/09 ................... 4,427,010
2,975 CalEnergy Co., Inc., 7.23%, 09/15/05 ............... 2,911,841
5,000 CalEnergy Co., Inc., 7.63%, 10/15/07 ............... 4,961,500
3,000 Campbell Soup Co., 6.15%, 12/1/02 .................. 3,000,540
1,000 Capstar Hotel Co. Sr. Sub. Notes,
8.75%, 08/15/07 .................................. 917,500
8,000 Cendant Corp., 7.75%, 12/1/03 ...................... 7,993,120
873 Chattem Inc., 12.75%, 06/15/04 ..................... 947,205
2,000 Chattem, 8.875%, 04/1/08 ........................... 1,900,000
3,000 Circus Circus, 6.75%, 07/15/03 ..................... 2,730,000
1,000 Citigroup Inc., 6.125%, 06/15/00 ................... 1,000,790
5,100 Conseco Inc., 6.80%, 06/15/05 ...................... 4,764,063
6,000 Crown Castle Intl. Corp., 9.00%, 05/15/11 .......... 5,625,000
5,000 Cytec Industries, 6.50%, 03/15/03 .................. 4,686,650
5,000 Cytec Industries, 6.75%, 03/15/08 .................. 4,789,200
2,150 First Tennessee Bank, 6.40%, 04/1/08 ............... 2,039,512
1,500 FMC Corp., 6.75%, 05/5/05 .......................... 1,444,695
5,000 FMC Corp., 7.00%, 05/15/08 ......................... 4,719,100
6,150 Ford Motor Credit Co, 6.70%, 07/16/04 .............. 6,119,435
5,000 Frontier Corp., 7.25%, 05/15/04 .................... 4,797,850
1,000 Fund America Enterprise, 7.75%, 02/1/03 ............ 995,800
5,000 Furon Co., 8.125%, 03/1/08 ......................... 4,712,500
5,000 GTE Corp., 6.46%, 04/15/08 ......................... 4,825,500
2,000 Hammons, (J.Q.) Hotel Group First Mtge.,
8.875%, 02/15/04 ................................. 1,830,000
5,700 HMH Properties, Inc., 7.875%, 08/1/05 .............. 5,258,250
1,000 HMH Properties, Inc., 8.45%, 12/1/08 ............... 927,500
3,000 Host Marriott Travel Plaza, 9.50%, 05/15/05 ........ 3,157,500
5,000 ICI, 6.95%, 09/15/04 ............................... 4,970,900
1,775 ITT Corp., 6.25%, 11/15/00 ......................... 1,752,316
2,000 ITT Corp., 6.75%, 11/15/03 ......................... 1,900,260
5,000 J.P. Morgan, 6.875%, 01/15/07 ...................... 4,913,950
4,000 Jeffries Group Inc., 7.50%, 08/15/07 ............... 4,006,480
3,000 Knight-Ridder, Inc., 6.625%, 11/1/07 ............... 2,916,930
11
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Statement of Net Assets (concluded) September 30, 1999
(Unaudited)
Par
(000) Market Value
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CORPORATE BONDS (continued)
- --------------------------------------------------------------------------------
$ 5,000 Lilly Industries, 7.75%, 12/1/07 ................... $ 4,762,000
2,500 Lockheed Martin, 7.25%, 05/15/06 ................... 2,462,500
2,200 Lockheed Martin Corp., 6.85%, 05/15/01 ............. 2,200,440
5,000 Lodgenet Entertainment, 10.25%, 12/15/06 ........... 5,062,500
1,285 Markel Corp., 7.25%, 11/1/03 ....................... 1,298,814
10,000 Marriot International Inc., 6.625%, 11/15/03 ....... 9,780,100
5,700 Marriot International Inc., 7.875%, 09/15/09 ....... 5,705,358
1,000 Masco Corp., 6.125%, 09/15/03 ...................... 987,080
2,000 McDonnell Douglas Corp., 6.875%, 11/1/06 ........... 2,007,040
500 MCI Communication Corp., 7.50%, 08/20/04 ........... 512,805
9,800 Millipore Corp., 7.20%, 04/1/02 .................... 9,662,604
7,100 Millipore Corp., 7.50%, 04/1/07 .................... 6,693,667
4,000 Morgan Guaranty Trust Co., 5.75%, 10/8/99 .......... 4,000,000
1,500 Norfolk Southern, 6.95%, 05/1/02 ................... 1,506,165
1,500 Norfolk Southern Corp., 7.35%, 05/15/07 ............ 1,516,320
5,000 Premier Parks, 9.25%, 04/1/06 ...................... 4,800,000
4,000 Premier Parks Corp. Sr. Notes, 9.75%, 01/15/07 ..... 4,080,000
3,400 Premier Parks, 9.75%, 06/15/07 ..................... 3,298,000
3,815 Raychem Corp., 7.20%, 10/15/08 ..................... 3,760,331
3,000 Raytheon, 6.45%, 08/15/02 .......................... 2,962,860
5,000 Raytheon Co. Notes, 6.50%, 07/15/05 ................ 4,824,800
2,000 RJR Nabisco, Inc., 6.70%, 06/15/02 ................. 1,985,220
4,000 SFX Entertainment, 9.125%, 02/1/08 ................. 3,680,000
5,500 Solutia, Inc., 6.50%, 10/15/02 ..................... 5,430,315
2,000 Sun Microsystems, 7.00%, 08/15/02 .................. 2,009,480
2,000 Sun Microsystems, 7.50%, 08/15/06 .................. 2,017,800
1,000 Sun Microsystems, 7.65%, 08/15/09 .................. 1,015,740
3,000 Tandy Corp., 6.95%, 09/1/07 ........................ 2,972,850
1,000 Tektronix, 7.50%, 08/1/03 .......................... 997,880
1,000 Tenneco, Inc. Notes, 8.075%, 10/1/02 ............... 1,029,070
7,000 Textron Inc., 6.75%, 09/15/02 ...................... 6,997,760
5,000 United Defense Inds Inc., 8.75%, 11/15/07 .......... 4,862,500
2,660 USG Corp. Sr. Notes, 8.50%, 08/1/05 ................ 2,826,250
500 Xerox Corp., 7.15%, 08/1/04 ........................ 506,205
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Total Corporate Bonds
(Cost $245,048,575) ................................ 240,162,266
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12
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
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Par
(000) Market Value
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U.S. GOVERNMENT AND AGENCY SECURITIES: 0.4%
- --------------------------------------------------------------------------------
$ 4,000 U.S. Treasury Note, 6.125%, 12/31/01 ............... $ 4,036,600
------------
Total U.S. Government and Agency Securities
(Cost $3,976,676) ................................ 4,036,600
------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS: 2.3%
- --------------------------------------------------------------------------------
22,194 Goldman Sachs Dated 9/30/99, to be repurchased
on 10/1/99, collateralized by U.S Treasury
Bonds with a par value of $22,985,000,
coupon rate of 6.125%, due 11/27/15, with a
market value of $22,638,426 ....................... 22,194,000
------------
Total Investments (Cost $716,275,922)** ................... 98.9% $936,067,838
Liabilities in Excess of Assets ........................... 1.1% 9,991,850
----- ------------
Net Assets ................................................ 100.0% $946,059,688
===== ============
Net Asset Value and Redemption Price Per:
Class A Share ($650,086,225 divided by 28,289,585 shares)....... $22.98
======
Class B Share ($122,554,623 divided by 5,347,482 shares) ....... $22.92***
======
Class C Share ($30,416,547 divided by 1,326,734 shares) ........ $22.93****
======
Institutional Share ($143,002,293 divided by 6,170,346 shares).. $23.18
======
Maximum Offering Price Per:
Class A Share ($22.98 divided by 0.955) ........................ $24.06
======
Class B Share .................................................. $22.92
======
Class C Share .................................................. $22.93
======
Institutional Share ............................................ $23.18
======
- --------
* Non-income producing security.
** Aggregate cost for federal tax purposes is $716,052,868.
*** Redemption value is $22.00 following a 4% maximum contingent deferred sales
charge.
**** Redemption value is $22.70 following a 1% 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,
- --------------------------------------------------------------------------------
1999
- --------------------------------------------------------------------------------
Investment Income:
Dividends ............................................ $ 4,421,330
Interest ............................................. 10,648,742
Less: Foreign taxes withheld ......................... (11,427)
------------
Total income ................................... 15,058,645
------------
Expenses:
Investment advisory fee ...................................... 3,560,647
Distribution fee ............................................. 1,579,970
Transfer agent fee ........................................... 193,023
Custodian fees ............................................... 75,089
Accounting fee ............................................... 69,337
Registration fees ............................................ 64,575
Directors' fees .............................................. 18,732
Miscellaneous ................................................ 58,857
------------
Total expenses ......................................... 5,620,230
------------
Net investment income ........................................ 9,438,415
------------
Realized and unrealized gain on investments:
Net realized gain from security transactions ................. 20,448,497
Change in unrealized appreciation/depreciation of investments (68,330,631)
------------
Net loss on investments ...................................... (47,882,134)
------------
Net decrease in net assets resulting from operations ........... $(38,443,719)
============
See accompanying Notes to Financial Statements.
14
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
September 30, March 31,
- --------------------------------------------------------------------------------
1999(1) 1999
------- ----
Increase in Net Assets:
Operations:
Net investment income ........................ $ 9,438,415 $ 19,520,631
Net realized gain from security
transactions ............................... 20,448,497 13,846,863
Change in unrealized appreciation/depreciation
of investments ............................. (68,330,631) 76,741,086
------------- -------------
Net increase (decrease) in net assets
resulting from operations .................. (38,443,719) 110,108,580
------------- -------------
Distributions to Shareholders from:
Net investment income and short-term gains:
Class A Shares ........................... (6,523,374) (13,804,511)
Class B Shares ........................... (822,507) (1,569,776)
Class C Shares ........................... (155,845) (128,906)
Class D Shares ........................... -- (257,548)
Institutional Shares ..................... (1,610,960) (3,045,076)
Net realized long-term gains:
Class A Shares ........................... (1,783,163) (8,542,386)
Class B Shares ........................... (325,519) (1,338,049)
Class C Shares ........................... (68,188) (156,874)
Class D Shares ........................... -- --
Institutional Shares ..................... (388,515) (1,772,147)
------------- -------------
Total distributions ........................ (11,678,071) (30,615,273)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares ............... 117,350,386 273,356,523
Value of shares issued in reinvestment
of dividends ............................. 10,286,344 27,465,074
Cost of shares repurchased ................. (54,244,168) (135,894,760)
------------- -------------
Increase in net assets derived from
capital share transactions ............... 73,392,562 164,926,837
------------- -------------
Total increase in net assets ............... 23,270,772 244,420,144
Net Assets:
Beginning of period ........................ 922,788,916 678,368,772
------------- -------------
End of period (including undistributed net
investment income of $5,225,781 and
$4,505,377, respectively) ................ $ 946,059,688 $ 922,788,916
============= =============
- ----------
(1) 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,
- --------------------------------------------------------------------------------
1999(1)
- --------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value at beginning of period .................... $ 24.15
---------
Income from Investment Operations:
Net investment income ..................................... 0.12
Net realized and unrealized gain on investments ........... (0.99)
---------
Total from Investment Operations .......................... (0.87)
---------
Less Distributions:
Net investment income and short-term capital gains ........ (0.24)
Net realized mid-term and long-term capital gains ......... (0.06)
---------
Total distributions ....................................... (0.30)
---------
Net asset value at end of period .......................... $ 22.98
=========
Total Return ................................................ (3.64)%
Ratios to Average Net Assets:
Expenses .................................................. 1.09%(4)
Net investment income ..................................... 2.03%(4)
Supplemental Data:
Net assets at end of period (000) ......................... $ 650,086
Portfolio turnover rate ................................... 20%
- ----------
(1) Unaudited.
(2) 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.
(3) 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.
(4) Annualized.
16
<PAGE>
Flag Investors Value Builder Fund
- --------------------------------------------------------------------------------
For the Years Ended March 31,
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
$ 22.09 $ 17.14 $ 14.68 $ 12.02 $ 11.23
- -------- -------- -------- -------- --------
0.56 0.47 0.39 0.36 0.35
2.40 5.21 2.49 3.03 0.80
- -------- -------- -------- -------- --------
2.96 5.68 2.88 3.39 1.15
- -------- -------- -------- -------- --------
(0.57) (0.47) (0.36) (0.41) (0.35)
(0.33) (0.26) (0.06) (0.32) (0.01)
- -------- -------- -------- -------- --------
(0.90) (0.73) (0.42) (0.73) (0.36)
- -------- -------- -------- -------- --------
$ 24.15 $ 22.09 $ 17.14 $ 14.68 $ 12.02
======== ======== ======== ======== ========
13.91% 33.82% 19.90% 28.86% 10.57%
1.12% 1.14% 1.27% 1.31% 1.35%(2)
2.64% 2.49% 2.51% 2.72% 3.07%(3)
$649,664 $491,575 $278,130 $200,020 $146,986
10% 7% 13% 15% 18%
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,
- --------------------------------------------------------------------------------
1999(1)
- --------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value at beginning of period .................... $ 24.11
--------
Income from Investment Operations:
Net investment income ..................................... 0.13
Net realized and unrealized gain on investments ........... (1.09)
--------
Total from Investment Operations .......................... (0.96)
--------
Less Distributions:
Net investment income and short-term capital gains ........ (0.17)
Net realized mid-term and long-term capital gains ......... (0.06)
--------
Total distributions ....................................... (0.23)
--------
Net asset value at end of period .......................... $ 22.92
========
Total Return ................................................ (4.00)%
Ratios to Average Net Assets:
Expenses .................................................. 1.84%(2)
Net investment income ..................................... 1.28%(3)
Supplemental Data:
Net assets at end of period (000) ......................... $122,555
Portfolio turnover rate ................................... 20%
- ----------
(1) Unaudited.
(2) Annualized
(3) Commencement of Operations.
(4) 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.
(5) 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.
18
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
For the Period
Jan. 3, 1995(3)
through
For the Years Ended March 31, March 31,
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
$ 22.08 $ 17.16 $ 14.71 $ 12.01 $ 11.14
- -------- ---------- ---------- ---------- ----------
0.41 0.34 0.26 0.21 0.08
2.38 5.20 2.51 3.05 .79
- -------- ---------- ---------- ---------- ----------
2.79 5.54 2.77 3.26 0.87
- -------- ---------- ---------- ---------- ----------
(0.43) (0.36) (0.26) (0.24) --
(0.33) (0.26) (0.06) (0.32) --
- -------- ---------- ---------- ---------- ----------
(0.76) (0.62) (0.32) (0.56) --
- -------- ---------- ---------- ---------- ----------
$ 24.11 $ 22.08 $ 17.16 $ 14.71 $ 12.01
======== ========== ========== ========== ==========
13.10% 32.84% 19.00% 27.89% 7.81%
1.87% 1.89% 2.02% 2.06% 2.10%(2),(4)
1.90% 1.75% 1.84% 1.97% 2.94%(2),(5)
$110,680 $ 64,498 $ 17,311 $ 4,178 $ 341
10% 7% 13% 15% 18%
19
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
September 30,
- -------------------------------------------------------------------------------
1999(2)
Per Share Operating Performance:
Net asset value at beginning of period ..................... $ 24.12
-------
Income from Investment Operations:
Net investment income ...................................... 0.14
Net realized and unrealized gain (loss) on investments ..... (1.10)
-------
Total from Investment Operations ........................... (0.96)
-------
Less Distributions:
Net investment income and short-term gains ................. (0.17)
Net realized mid-term and long-term capital gains .......... (0.06)
-------
Total distributions ........................................ (0.23)
-------
Net asset value at end of period ........................... $ 22.93
=======
Total Return .................................................. (4.04)%
Ratios to Average Net Assets:
Expenses ................................................... 1.84%(3)
Net investment income ...................................... 1.28%(3)
Supplemental Data:
Net assets at end of period (000) .......................... $30,417
Portfolio turnover rate .................................... 20%
- --------------
1 Commencement of operations.
2 Unaudited.
3 Annualized.
4 Total return is from inception.
20
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
For the Period
April 8, 1998(1)
through
March 31,
- --------------------------------------------------------------------------------
1999
$ 22.31
-------
0.39
2.10
-------
2.49
-------
(0.35)
(0.35)
-------
(0.68)
-------
$ 24.12
=======
11.50%(4)
1.91%(3)
2.05%(3)
$17,450
10%
See accompanying Notes to Financial Statements.
21
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Financial Highlights -- Class D Shares
(For a share outstanding throughout each period) For the Period
April 1, 1998
through
November 20,(1)
- --------------------------------------------------------------------------------
1998
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%
- -------------
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.
22
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
For the Years Ended March 31,
- --------------------------------------------------------------------------------
1998 1997 1996 1995
$ 17.11 $ 14.66 $ 12.01 $ 11.22
------- ------- ------- -------
0.43 0.35 0.33 0.31
5.17 2.47 3.02 0.80
------- ------- ------- -------
5.60 2.82 3.35 1.11
------- ------- ------- -------
(0.40) (0.31) (0.38) (0.31)
(0.26) (0.06) (0.32) (0.01)
------- ------- ------- -------
(0.66) (0.37) (0.70) (0.32)
------- ------- ------- -------
$ 22.05 $ 17.11 $ 14.66 $ 12.01
======= ======= ======= =======
33.33% 19.46% 28.44% 10.18%
1.49% 1.62% 1.66% 1.70%(2)
2.14% 2.15% 2.37% 2.72%(3)
$18,478 $15,213 $13,757 $11,717
7% 13% 15% 18%
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,
- --------------------------------------------------------------------------------
1999(1)
Per Share Operating Performance:
Net asset value at beginning of period ...................... $ 24.36
-------
Income from Investment Operations:
Net investment income ....................................... 0.15
Net realized and unrealized gain (loss) on investments ...... (1.00)
-------
Total from Investment Operations ............................ (0.85)
-------
Less Distributions:
Net investment income and short-term capital gains .......... (0.27)
Net realized long-term capital gains ........................ (0.06)
-------
Total distributions ......................................... (0.33)
-------
Net asset value at end of period ............................ $ 23.18
=======
Total Return ................................................... (3.58)%
Ratios to Average Net Assets:
Expenses .................................................... 0.84%(3)
Net investment income ....................................... 2.28%(3)
Supplemental Data:
Net assets at end of period (000) ........................... $143,002
Portfolio turnover rate ..................................... 20%
- ------------
1 Unaudited.
2 Commencement of operations.
3 Annualized
24
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
For the Period
Nov. 2, 1995(2)
through
For the Years Ended March 31, March 31,
- --------------------------------------------------------------------------------
1999 1998 1997 1996
$ 22.26 $ 17.27 $ 14.77 $ 13.89
------- ------- ------- -------
0.63 0.51 0.41 0.13
2.41 5.25 2.53 1.17
------- ------- ------- -------
3.04 5.76 2.94 1.30
------- ------- ------- -------
(0.61) (0.51) (0.38) (0.10)
(0.33) (0.26) (0.06) (0.32)
------- ------- ------- -------
(0.94) (0.77) (0.44) (0.42)
------- ------- ------- -------
$ 24.36 $ 22.26 $ 17.27 $14.77
======= ======= ======= ======
14.20% 34.08% 20.24% 21.12%
0.87% 0.89% 1.02% 1.03%(3)
2.88% 2.75% 2.83% 2.89%(3)
$144,995 $103,817 $34,771 $11,768
10% 7% 13% 15%
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, began 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 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 D Shares 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-- 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 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--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
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.
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
Deutsche Banc, 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 six months ended September 30, 1999 ICC's advisory fee was
$3,560,647 of which $579,043 was payable at the end of the period.
ICC also provides accounting services to the Fund for which the Fund pays
ICC an annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets. For the six months ended September 30, 1999 ICC's fee
was $69,337 of which $11,343 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 six
months ended September 30, 1999 ICC's fee was $193,023 of which $35,548 was
payable at the end of the period.
Bankers Trust Corporation is the Fund's custodian. For the six months ended
September 30, 1999, custody fees amounted to $75,089, of which $48,000 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 ABIM a fee based on the
Fund's average daily net assets. This fee is calculated daily and paid monthly
at the following annual rates: 0.75% 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 six months
ended September 30, 1999 was $2,747 and the accrued liability was $32,235.
28
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
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, and 5 million undesignated). Transactions in shares of the
Fund were as follows:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------
For the Six For the
Months Ended Year Ended
September 30, 1999(1) March 31, 1999
--------------------- ---------------
<S> <C> <C>
Shares sold ...................................... 3,024,400 7,667,470
Shares issued to shareholders on
reinvestment of dividends ...................... 296,196 927,793
Shares converted from Class D -- 744,609
Shares redeemed .................................. (1,928,814) (4,698,072)
------------ -------------
Net increase in shares outstanding ............... 1,391,782 4,641,800
============ =============
Proceeds from sale of shares ..................... $ 74,385,994 $167,786,940
Value of reinvested dividends .................... 7,428,325 20,162,879
Value of shares converted from Class D ........... -- 16,366,512
Cost of shares redeemed .......................... (46,999,643) (102,312,507)
------------ -------------
Net increase from capital share transactions ..... $ 34,814,676 $102,003,824
============ =============
</TABLE>
- ---------
1 Unaudited.
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 3 -- continued
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------
For the Six For the
Months Ended Year Ended
September 30, 1999(1) March 31, 1999
---------------------- ---------------
<S> <C> <C>
Shares sold ......................................... 915,468 1,963,448
Shares issued to shareholders on
reinvestment of dividends ........................ 41,412 119,699
Shares redeemed .................................... (199,639) (414,281)
----------- -----------
Net increase in shares outstanding ................. 757,241 1,668,866
=========== ===========
Proceeds from sale of shares ....................... $22,410,794 $42,732,188
Value of reinvested dividends ...................... 1,040,426 2,606,348
Cost of shares redeemed ............................ (4,869,924) (8,899,431)
----------- -----------
Net increase from capital share transactions ....... $18,581,296 $36,439,105
=========== ===========
<CAPTION>
Class C Shares
----------------------------------------
For Period
For the Six April 8, 1998(2)
Months Ended through
September 30, 1999(1) March 31, 1999(1)
--------------------- -----------------
<S> <C> <C>
Shares sold ........................................ 620,190 735,840
Shares issued to shareholders on
reinvestment of dividends ........................ 7,951 12,033
Shares redeemed .................................... (24,927) (24,353)
----------- -----------
Net increase in shares outstanding 603,214 723,520
=========== ===========
Proceeds from sale of shares ....................... $15,144,924 $16,181,630
Value of reinvested dividends ...................... 200,163 261,764
Cost of shares redeemed ............................ (602,661) (544,762)
----------- -----------
Net increase from capital share transactions ....... $14,742,426 $15,898,632
=========== ===========
</TABLE>
- ---------
1 Unaudited.
2 Commencement of operations.
30
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
NOTE 3 -- concluded
Class D Shares(1)
-------------------
For the Period
April 1, 1998
through
November 20, 1998
-------------------
Shares sold ....................................... --
Shares issued to shareholders on
reinvestment of dividends ....................... 9,988
Shares converted to Class A ....................... (745,254)
Shares redeemed ................................... (102,674)
Net decrease in shares outstanding ................ (837,940)
============
Proceeds from sale of shares ...................... $ --
Value of reinvested dividends ......................... 212,526
Value of shares converted to Class A .............. (16,366,512)
Cost of shares redeemed ........................... (2,130,846)
------------
Net decrease from capital share transactions ...... $(18,284,832)
============
- ----------
1 Converted to Class A Shares on November 20, 1998.
<TABLE>
<CAPTION>
Institutional Shares
--------------------------------------
For the Six For the
Months Ended Year Ended
September 30, 1999(1) March 31, 1999
------------------ --------------
<S> <C> <C>
Shares sold ....................................... 225,816 2,172,982
Shares issued to shareholders on .................
reinvestment of dividends ...................... 63,950 192,473
Shares redeemed .................................. (72,640) (1,076,590)
------------ ------------
Net increase in shares outstanding ............... 217,126 1,288,865
============ ============
Proceeds from sale of shares ..................... $5,402,663 $46,655,765
Value of reinvested dividends .................... 1,617,430 4,221,557
Cost of shares redeemed .......................... (1,771,939) (22,007,214)
------------ ------------
Net increase from capital share transactions ..... $5,248,154 $28,870,108
============ ============
</TABLE>
- --------
1 Unaudited.
31
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 4 -- Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $185,220,424 and sales of investment
securities aggregated $177,465,437 for the six months ended September 30, 1999.
Sales of U.S. government obligations aggregated $9,205,936 for the period.
On September 30, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $258,010,319
and aggregate gross unrealized depreciation of all securities in which there is
an excess of tax cost over value was $37,995,349.
Note 5 -- Net Assets
On September 30, 1999, net assets consisted of:
Paid-in capital:
Class A Shares ............................................... $441,964,702
Class B Shares ............................................... 108,656,701
Class C Shares ............................................... 30,641,057
Institutional Shares ......................................... 119,306,911
Accumulated net realized gain from security transactions ....... 20,472,621
Unrealized appreciation of investments ......................... 219,791,916
Undistributed net investment income ............................ 5,225,781
------------
$946,059,689
============
NOTE 6 -- Subsequent Event
On June 4, 1999, Bankers Trust Corporation, the parent company of Investment
Company Capital Corp ("ICC"), the investment advisor to the Fund was acquired by
Deutsche Bank AG. As a result, ICC also became an indirect wholly-owned
subsidiary of Deutsche Bank AG.
A Special Meeting of Shareholders of the Flag Investors Value Builder Fund,
Inc. (the "Special Meeting") was held on October 7, 1999, at which time
shareholders voted to approve a new investment advisory agreement (the "Advisory
Agreement") with ICC. Shareholders also approved a new sub-advisory agreement
with Alex. Brown Investment Management (the "Sub-Advisory Agreement").
Shareholders also elected the Board of Directors. The Special Meeting was
reconvened on October 22, 1999, at which time shareholders voted not to
eliminate, modify or reclassify certain fundamental restrictions of the
Fund.
32
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
NOTE 6 -- (concluded)
The results of the shareholder voting at the Special Meeting are as follows:
<TABLE>
<CAPTION>
Withheld/ Broker
Proposal For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Elect Truman T. Semans 30,908,960 251,084
Elect Richard R. Burt 30,907,876 252,168
Elect Richard T. Hale 30,929,003 231,041
Elect Joseph R. Hardiman 30,899,894 260,150
Elect Louis E. Levy 30,921,188 238,856
Elect Eugene J. McDonald 30,900,550 259,494
Elect Rebecca W. Rimel 30,925,003 259,494
Elect Robert H. Wadsworth 30,894,279 265,765
Investment Advisory Agreement
with ICC 30,758,521 139,927 261,596
Sub-Advisory Agreement with
Alex. Brown Investment
Management 30,759,357 136,760 263,927
Eliminate policy regarding
short sales 11,202,134 480,283 321,406 19,156,221
Eliminate policy regarding
purchasing securities on margin 11,132,801 543,853 327,169 19,156,221
Eliminate policy regarding oil,
gas and mineral leases 11,081,290 567,358 355,175 19,156,221
Modify policy regarding
commodities 11,132,023 527,619 344,181 19,156,221
Modify policy regarding borrowing 11,165,429 512,391 326,003 19,156,221
Modify policy regarding loans 11,196,914 493,047 313,862 19,156,221
Modify and reclassify as non-
fundamental the policy
regarding illiquid and
restricted securities 11,160,524 485,467 357,832 19,156,221
</TABLE>
33
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<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
- --------------------------------------------------------------------------------
Directors and Officers
TRUMAN T. SEMANS
Chairman and Director
JAMES J. CUNNANE CARL W. VOGT, ESQ.
Director Director
RICHARD T. HALE HARRY WOOLF
Director President
JOSEPH R. HARDIMAN AMY M. OLMERT
Director Secretary
LOUIS E. LEVY CHARLES A. RIZZO
Director Treasurer
EUGENE J. MCDONALD DANIEL O. HIRSCH
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.
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>
[LOGO]
FLAG INVESTORS
Investing With A Difference
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
www.flaginvestors.com
Distributed by:
ICC Distributors, Inc.
VBSA
(11/99)
