[FLAG INVESTORS logo omitted]
VALUE BUILDER
FUND
Semi-Annual Report
September 30, 2000
<PAGE>
REPORT HIGHLIGHTS
--------------------------------------------------------------------------------
o Your Fund's returns (excluding sales charges), for the six, nine and
12-month periods ending September 30, 2000 for Class A Shares were 2.9%,
-3.3% and 8.0%, respectively. Your Fund's three- and five-year performance
as of September 30, 2000 has outpaced its Lipper Balanced Funds peer group1.
o The improvements in our recent results lead us to believe that investor
sentiment has shifted back toward evaluating the real business progress of
companies using cash flow and earnings and away from unrealistic
projections. In the current environment, common stock valuations are
beginning to better reflect economic reality.
o By early this year, of the eleven sectors of the S&P 500 Index2, only the
technology sector exceeded the S&P 500's returns over the prior year.
Perhaps the most interesting aspect of this market behavior was that in the
final phase of the period many investors, in pursuit of performance
superiority, sold shares in the underperforming sectors (where some of the
best values were) and reinvested the proceeds in the best performing sector
(where the fewest values were).
o More recently, leading economic indicators have turned down. We suspect that
the coming months could be quite challenging for those investors with a
short-term focus or momentum-oriented investment mentality. Therefore,
investors may need to lower their return expectations relative to the past
several years.
o We feel our energies are better devoted to identifying real investment
opportunities than making economic or political predictions. With the high
volatility in the markets, as well as the large number of new companies
entering the market in the last few years, we are as busy as ever with this
task.
----------
1 Past performance is not indicative of future results.
2 The S&P 500 Index is an unmanaged index used to portray the pattern of common
stock movement of 500 large companies.
<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Fellow Shareholders:
We are pleased to report the progress of your Fund for the period ended
September 30, 2000.
Although the equity market has experienced considerable volatility since
our last report to you (3/31/00), your Fund's Class A shares managed to eke out
a small gain of 2.9%. The year-to-date and 12-month returns for your Fund were
-3.3% and 8.0%, respectively. The gain over the past six months is mainly
attributable to a shift in investor sentiment more toward valuation and business
fundamentals and away from its past fascination with technology/Internet stocks
regardless of their valuation, profits or business progress. With only modest
changes in interest rates during the period, bond returns essentially reflected
the earned income portion of their respective coupons.
From a longer-term perspective, we are pleased to report that your Fund's
three- and five-year performance as of September 30, 2000 has outpaced its
Lipper Balanced Funds peer group. These results were achieved in spite of our
disappointing results in the first quarter of this calendar year.
The best performing stocks for the past nine months are listed below.
BEST PERFORMERS -- 12/31/99 - 9/30/00
--------------------------------------------------------------------------------
SECURITY PERCENT GAIN
---------- ------------
Cardinal Health 84.2%
SEI Corp. 78.3%
Concord EFS(a) 72.6%
Boeing 52.0%
Countrywide Credit 49.5%
MBIA(a) 47.4%
Wellpoint Health 45.6%
XL Capital 41.7%
MBNA 41.3%
Host Marriott 36.4%
----------
(a) Added during the period.
1
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
You will note that many of the securities have been held by the Fund 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 seeking to add new securities that represent good value.
While a number of the Fund's equity securities have given up some ground
this year, our two biggest losers were Novell and Cendant, declining 75% and
59%, respectively. Novell experienced an earnings shortfall but we expect the
company to get back on track in the next quarter. In the case of Cendant, quite
frankly, we are a bit puzzled by its disappointing performance. For the most
part, expectations for the company's businesses have been fulfilled and the
company produces an enormous amount of "free cash flow" of close to a billion
dollars a year.
These two stocks, along with America Online, the Fund's largest holding,
are the primary reasons that the Fund had a very disappointing first quarter.
The Fund has been gaining ground since then and we believe that once the America
Online/Time Warner merger is completed (4th quarter), our patience and long-term
view will be rewarded.
ASSET MIX
With our long-term investment focus and a decline in cash flow levels, the
modest change in asset mix over the past year has been driven more by investment
changes in the Fund and share price movements than any other factors.
[pie charts omitted]
plot points as follows:
September 30, 2000
Short-term Investments 2.11%
Fixed-Income 24.94%
Common Stocks and Convertibles 72.95%
September 30, 1999
Short-term Investments 3.93%
Fixed-Income~26.00%
Common Stocks and Convertibles 70.07%
2
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO DEVELOPMENTS AND LARGEST HOLDINGS
Since our last report to shareholders, we have remained active in our
pursuit to improve 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 9/30/00)
--------------------------------------------------------------------------------
SECURITY COST
---------- ----------
Priceline.com $7,978,084
Alltel Corp. 5,530,216
Westpoint Stevens 5,113,446
Electronic Data Systems 4,789,244
Conseco(a) 3,930,185
--------------------------------------------------------------------------------
-----------
(a) Addition to existing holding.
The five largest common stock holdings are listed below along with the
percentage change for each so far this year.
FIVE LARGEST HOLDINGS
--------------------------------------------------------------------------------
MARKET VALUE PERFORMANCE
SECURITY COST AS OF 9/30/00 12/31/99 - 9/30/00
---------- ----------- ------------- ------------------
AOL $ 2,273,720 $69,875,000 (29.2)%
SEICorp. 3,532,633 36,379,650 78.3%
Tyco International 21,674,006 35,300,937 33.0%
XLCapital 18,705,663 31,193,253 41.7%
Citigroup 4,002,265 27,950,312 29.4%
--------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
In our semi-annual letter to shareholders in the spring of 1998 we titled
our letter "As Good As It Gets," making reference to a then popular movie
starring Jack Nicholson. The primary impetus for this reference was the three
prior years of outstanding returns (20%+) for the S&P 500 Index and very
positive economic fundamentals ranging from inflation to corporate profits.
Despite a temporary market drop in the summer of 1998 (thanks to the economic
difficulties in Russia and the near collapse of Long-Term Capital Management)
equity prices continued their rise producing better than 20%
3
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
-------------------------------------------------------------------------------
gains in the S&P 500 Index for both 1998 and 1999. That made for five
consecutive years of greater than 20% gains in the S&P 500 Index, an
unprecedented record.
What was not so obvious during this period was that through a combination
of greed, money flows and irrational behavior only one sector of the equity
market was fully participating in this phenomenon; the technology/ Internet
sector. By early this year, of the eleven sectors of the S&P 500 Index, only the
technology sector exceeded the S&P 500's returns over the prior year. The other
ten were all lagging the index. Perhaps the most interesting aspect of the
market behavior was that in the final phase of this period many investors, in
pursuit of performance superiority, were selling shares in many of those
under-performing sectors (where some of the best values were) to reinvest the
proceeds of those sales in the best performing sector (where the fewest values
were). WHILE WE ALL KNOW THAT SUCH BEHAVIOR MUST EVENTUALLY END, HUMAN NATURE
MAKES IT HARD TO DEVIATE FROM EMBRACING THAT WHICH HAS PROVIDED THE MOST RECENT
PLEASURE.
Nevertheless, with the gap in valuation levels and the realization that
economic reality eventually prevails, it appears that investor sentiment has
shifted back toward real business progress (cash flow, earnings, etc.) and away
from unrealistic projections and hoped-for riches. The improvements in our
recent results appear to confirm this trend. In that context and given our
reference to a movie title two years ago, perhaps it would be appropriate to
title this letter "Survivor" in honor of the recent TV hit show.
Leading economic indicators having recently turned down and with a
considerable number of downward earnings revisions (some due to business
conditions and some due to the declining euro), we suspect that the coming
months could be quite challenging for many investors, especially those with a
short-term focus or momentum-oriented investment mentality. Although we may have
been premature in our past letters regarding the need to lower investment return
expectations from recent experiences, it would appear that our past concerns
will be validated this year.
Three months ago considerable investor attention was being given to the
Federal Reserve and the possibility of increasing rates. Today, there is good
reason to believe that in the coming months the economic news and the shift away
from "irrational exuberance" in the equity market will enhance the outlook for
lower interest rates.
4
<PAGE>
--------------------------------------------------------------------------------
Although many people will offer predictions for such things as energy
prices and the presidential election, we feel our energies are better devoted to
identifying real investment opportunities. With the high volatility and fallout
in the markets, as well as the large number of new companies entering the market
in the last few years, we are as busy as ever with that task. After all, many of
tomorrow's heroes are today's fallen angels.
We thank you for your continued interest and support. We look forward to
the on-going process of building value for you.
Respectfully Submitted,
/S/SIGNATURE Hobart C. Buppert
Hobart C. Buppert, II
Portfolio Manager
October 16, 2000
5
<PAGE>
FUND PERFORMANCE
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES1
JUNE 15, 1992 -- SEPTEMBER 30, 2000
$10,000 invested in the Value Builder Fund Class A Shares at inception on June
15, 1992 was worth $31,774 on September 30, 2000.
[line graph omitted]
plot points as follows
06/15/92 10000
06/30/92 10050
09/30/92 10350
12/31/92 10776
03/31/93 11372
06/30/93 11526
09/30/93 12069
12/31/93 12043
03/31/94 11729
06/30/94 11666
09/30/94 12154
12/31/94 11998
03/31/95 12969
06/30/95 14076
09/30/95 15275
12/31/95 15926
03/31/96 16712
06/30/96 17217
09/30/96 18105
12/31/96 19850
03/31/97 20037
06/30/97 22132
09/30/97 23928
12/31/97 24350
03/31/98 26814
06/30/98 27093
09/30/98 24477
12/31/98 28861
03/31/99 30543
06/30/99 32090
09/30/99 29431
12/31/99 32848
01/31/00 30180
06/30/00 30139
09/30/00 31774
CUMULATIVE TOTAL RETURN PERFORMANCE1
--------------------------------------------------------------------------------
FOR THE PERIODS
ENDED 9/30/00 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION2
------------------- ------- --------- --------- ---------------
Class A Shares 7.96% 32.79% 108.01% 217.74%
Class B Shares 7.14% 29.79% 100.38% 153.38%
Class C Shares 7.18% --% --% 14.71%
Institutional Shares 8.27% 33.73% --% 108.98%
--------------------------------------------------------------------------------
--------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions and exclude the impact
of any sales charges. Performance figures for the classes differ because each
class maintains a distinct expense structure. The "Since Inception"
performance figures would have been lower for Class A and Class B Shares if
certain fees and expenses had not been waived by the Fund prior to 1996.
2 Inception dates: Class A Shares 6/15/92, Class B Shares 1/3/95, Class C Shares
4/8/98, Institutional Shares 11/2/95.
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 the total return of each of the Fund's classes, according to a
standardized formula, for various time periods through the end of the most
recent calendar quarter.
The SEC standardized total return figures shown below include the impact of
the 5.50% maximum initial sales charge for the Fund's Class A Shares and the
maximum contingent deferred sales charge applicable to the specified time period
for Class B and Class C Shares. The contingent deferred sales charge for Class B
Shares declines over time from a maximum of 5.00% to 0.00% after six years. The
contingent deferred sales charge for theClass C Shares is 1.00% for shares
redeemed within one year of purchase. Returns would be higher for Class A Shares
investors who qualified for a lower initial sales charge or for Class B and
Class C Shares investors who continued to hold their shares past the end of the
specified time period.
AVERAGE ANNUAL TOTAL RETURN1
--------------------------------------------------------------------------------
FOR THE PERIODS
ENDED 9/30/00 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION2
------------------- ------ ------- -------- ---------------
Class AShares 2.02% 7.86% 14.47% 14.18%
Class BShares 2.14% 8.23% 14.68% 17.50%
Class CShares 6.18% --% --% 5.69%
InstitutionalShares 8.27% 10.18% --% 16.19%
------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions. Performance figures
for the classes differ because each class maintains a distinct sales charge
and expense structure. The "Since Inception" performance figures would have
been lower for Class A and Class B Shares if certain fees and expenses had not
been waived by the Fund prior to 1996.
2 Inception dates:Class A Shares 6/15/92, Class B Shares 1/3/95, Class C Shares
4/8/98, Institutional Shares 11/2/95.
The SEC total return figures may differ from total return figures in the
shareholder letter because the SEC figures include the impact of sales charges
while the total return figures in the shareholder letter do not. Any performance
figures shown are for the full period indicated.
7
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
(UNAUDITED)
SHARES SECURITY MARKET VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 70.2%
--------------------------------------------------------------------------------
BANKING -- 0.9%
152,500 Bank of America Corp. ........................ $ 7,987,187
------------
7,987,187
------------
BASIC MATERIALS -- 1.1%
722,600 Airgas, Inc.* ................................ 4,922,712
194,000 USG Corp. .................................... 4,862,125
------------
9,784,837
------------
CAPITAL GOODS & INDUSTRIAL -- 8.3%
2,325,500 Allied Waste Industries, Inc.* ............... 21,365,531
156,000 Boeing Co. ................................... 9,828,000
680,500 Tyco International Ltd. ...................... 35,300,937
128,000 United Technologies Corp. .................... 8,864,000
------------
75,358,468
------------
COMMUNICATION SERVICES -- 4.3%
110,000 ALLTEL Corp. ................................. 5,740,625
100,000 Globalstar Telecommunications Ltd.* .......... 862,500
475,000 SBC Communications, Inc. ..................... 23,750,000
286,033 Worldcom, Inc.* .............................. 8,688,252
------------
39,041,377
------------
CONSUMER CYCLICAL -- 4.1%
2,556,536 Cendant Corp.* ............................... 27,802,329
900,000 Champion Enterprises, Inc.* .................. 3,825,000
162,700 TJX Companies, Inc. .......................... 3,660,750
186,086 Visteon Corp. ................................ 2,814,551
------------
38,102,630
------------
CONSUMER HEALTH CARE -- 2.6%
114,000 Johnson & Johnson ............................ 10,708,875
134,200 Wellpoint Health Networks, Inc.* ............. 12,883,200
------------
23,592,075
------------
8
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
SHARES SECURITY MARKET VALUE
--------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
--------------------------------------------------------------------------------
CONSUMER STAPLES -- 7.2%
1,007,800 Blyth Industries, Inc. ....................... $ 23,620,312
232,500 Cardinal Health, Inc. ........................ 20,503,594
226,100 Central Parking Corp. ........................ 4,479,606
107,000 Excite@Home Corp.* ........................... 1,511,375
311,600 Philip Morris Cos., Inc. ..................... 9,172,725
85,000 Unifi, Inc.* ................................. 865,937
429,200 WestPoint Stevens, Inc. ...................... 5,257,700
------------
65,411,249
------------
ENTERTAINMENT -- 4.1%
210,000 Clear Channel Communications, Inc.* .......... 11,865,000
878,600 Lodgenet Entertainment Corp.*(a) ............. 25,369,575
------------
37,234,575
------------
FINANCIAL SERVICES -- 9.1%
200,500 American Express Co. ......................... 12,180,375
517,000 Citigroup .................................... 27,950,312
306,500 Countrywide Credit Industries, Inc. .......... 11,570,375
172,000 Freddie Mac .................................. 9,298,750
899,136 Host Marriott Corp. .......................... 10,115,280
50,000 Knight Trading Group* ........................ 1,800,000
265,780 MBNA Corp. ................................... 10,232,530
------------
83,147,622
------------
INSURANCE -- 7.6%
2,506,749 Conseco, Inc. ................................ 19,113,961
107,100 MBIA, Inc. ................................... 7,617,487
500,000 Mutual Risk Management Ltd. .................. 10,968,750
424,398 XL Capital Limited - Class A ................. 31,193,253
------------
68,893,451
------------
9
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2000
(UNAUDITED)
SHARES SECURITY MARKET VALUE
--------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
--------------------------------------------------------------------------------
TECHNOLOGY -- 19.9%
1,300,000 America Online, Inc.* ........................ $ 69,875,000
575,900 Concord EFS, Inc.* ........................... 20,453,448
109,800 Electronic Data Systems Corp. ................ 4,556,700
294,700 First Data Corp. ............................. 11,511,719
172,000 International Business Machines Corp. ........ 19,350,000
1,003,000 Novell, Inc.* ................................ 9,967,313
299,700 Priceline.com, Inc.* ......................... 3,558,938
170,311 Sabre Group Holdings, Inc.* .................. 4,928,375
514,200 SEI Investments Corp. ........................ 36,379,650
------------
180,581,143
------------
TRANSPORTATION -- 1.0%
258,000 AMR Corp.* ................................... 8,433,375
35,000 Canadian National Railway Co. ................ 1,025,938
------------
9,459,313
------------
TOTAL COMMON STOCK (Cost $424,442,052) ........................ 638,593,927
------------
--------------------------------------------------------------------------------
NON-CONVERTIBLE PREFERRED STOCK -- 0.4%
--------------------------------------------------------------------------------
100,000 Conseco Financial Trust, 9.16%, 11/30/26 ..... 1,362,500
200,000 Conseco Financial Trust, 8.70%, 9/30/28 ...... 2,575,000
------------
TOTAL NON-CONVERTIBLE PREFERRED STOCK (Cost $7,500,000) ....... 3,937,500
------------
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 2.2%
--------------------------------------------------------------------------------
544,000 Central Park Trust, Cvt. Pfd., 5.25% ......... 7,004,000
40,000 Fleetwood Capital Trust, Cvt. Pfd., 6.00% .... 1,260,000
145,000 Sinclair Broadcast Group, Cvt. Pfd., 6.00% ... 4,504,063
523,600 US Restaurant Properties, Series A,
Cvt. Pfd., 7.72% ........................... 7,068,600
------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $28,224,367) .......... 19,836,663
------------
10
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
PAR (000) SECURITY MARKET VALUE
--------------------------------------------------------------------------------
CONVERTIBLE CORPORATE NOTES & BONDS -- 0.6%
--------------------------------------------------------------------------------
$ 5,020 Integrated Process Equipment, 6.25%, 9/15/04 . $ 3,275,550
5,250 Rite Aid, 5.25%, 9/15/02 ..................... 1,903,125
------------
TOTAL CONVERTIBLE CORPORATE NOTES & BONDS
(Cost $7,899,569) .......................................... 5,178,675
------------
--------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 24.5%
--------------------------------------------------------------------------------
11,000 Allied Waste North America, 10.00%, 8/1/09 ... 9,652,500
9,230 Amazon.com, Inc., 0.00%, 5/1/08 .............. 4,891,900
3,000 Avon Products, Inc., 6.55%, 8/1/07 ........... 2,853,195
4,500 Blyth Industries, Inc., 7.90%, 10/1/09 ....... 4,306,428
CalEnergy Co., Inc.:
2,975 7.23%, 9/15/05 ............................. 2,961,187
5,000 7.63%, 10/15/07 ............................ 5,024,675
3,000 Campbell Soup Co., 6.15%, 12/1/02 ............ 2,977,362
1,000 Capstar Hotel Co., Sr. Sub. Notes,
8.75%, 8/15/07 ............................. 945,000
8,000 Cendant Corp., 7.75%, 12/1/03 ................ 7,832,536
2,000 Chattem, 8.875%, 4/1/08 ...................... 1,590,000
3,000 Circus Circus, 6.75%, 7/15/03 ................ 2,820,000
5,100 Conseco, Inc., 6.80%, 6/15/05 ................ 3,442,500
6,000 Crown Castle International Corp.,
9.00%, 5/15/11 ............................. 5,730,000
Cytec Industries:
5,000 6.50%, 3/15/03 ............................. 4,840,745
5,000 6.75%, 3/15/08 ............................. 4,471,245
2,150 First Tennessee Bank, 6.40%, 4/1/08 .......... 1,967,828
FMC Corp.:
1,500 6.75%, 5/5/05 .............................. 1,426,832
5,000 7.00%, 5/15/08 ............................. 4,721,260
6,150 Ford Motor Credit Co., 6.70%, 7/16/04 ........ 6,029,196
5,000 Frontier Corp., 7.25%, 5/15/04 ............... 4,760,840
1,000 Fund American Enterprise, 7.75%, 2/1/03 ...... 996,173
3,500 Globalstar LP Capital, 11.375%, 2/15/04 ...... 1,067,500
5,000 GTE Corp., 6.46%, 4/15/08 .................... 4,741,770
11
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED) SEPTEMBER 30, 2000
(UNAUDITED)
PAR (000) SECURITY MARKET VALUE
--------------------------------------------------------------------------------
CORPORATE NOTES & BONDS (CONTINUED)
--------------------------------------------------------------------------------
HMH Properties, Inc.:
$ 5,700 7.875%, 8/1/05 ............................. $ 5,400,750
1,000 8.45%, 12/1/08 ............................. 955,000
5,000 ICI, 6.95%, 9/15/04 .......................... 4,888,460
2,000 ITT Corp., 6.75%, 11/15/03 ................... 1,926,032
5,000 J.P. Morgan & Co., Inc., 6.875%, 1/15/07 ..... 4,919,490
4,000 Jefferies Group, Inc., 7.50%, 8/15/07 ........ 3,869,788
2,000 John Q. Hammons Hotels, 8.875%, 2/15/04 ...... 1,910,000
3,000 Knight-Ridder, Inc., 6.625%, 11/1/07 ......... 2,867,427
5,000 Lilly Industries, 7.75%, 12/1/07 ............. 4,577,330
2,500 Lockheed Martin Corp., 7.25%, 5/15/06 ........ 2,479,055
5,000 Lodgenet Entertainment, 10.25%, 12/15/06 ..... 5,031,250
1,285 Markel Corp., 7.25%, 11/1/03 ................. 1,268,260
Marriott International, Inc.:
10,000 6.625%, 11/15/03 ........................... 9,764,310
5,700 7.875%, 9/15/09 ............................ 5,715,025
1,000 Masco Corp., 6.125%, 9/15/03 ................. 962,051
2,000 McDonnell Douglas Corp., 6.875%, 11/1/06 ..... 1,976,746
500 MCI Communication Corp., 7.50%, 8/20/04 ...... 505,495
Millipore Corp.:
9,800 7.20%, 4/1/02 .............................. 9,617,737
7,100 7.50%, 4/1/07 .............................. 6,739,569
2,000 Nabisco, Inc., 6.70%, 6/15/02 ................ 1,958,034
Norfolk Southern Corp.:
1,500 6.95%, 5/1/02 .............................. 1,494,977
1,500 7.35%, 5/15/07 ............................. 1,480,893
Premier Parks Corp.:
5,000 9.25%, 4/1/06 .............................. 4,687,500
4,000 9.75%, 1/15/07 ............................. 3,960,000
3,400 9.75%, 6/15/07 ............................. 3,196,000
3,815 Raychem Corp., Sr. Notes, 7.20%, 10/15/08 .... 3,650,684
Raytheon Co.:
3,000 6.45%, 8/15/02 ............................. 2,965,938
5,000 6.50%, 7/15/05 ............................. 4,847,840
5,500 Solutia, Inc., 6.50%, 10/15/02 ............... 5,326,706
12
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
PAR (000) SECURITY MARKET VALUE
--------------------------------------------------------------------------------
CORPORATE NOTES & BONDS (CONCLUDED)
--------------------------------------------------------------------------------
Sun Microsystems:
$ 2,000 7.00%, 8/15/02 ............................. $ 2,000,090
2,000 7.50%, 8/15/06 ............................. 2,034,164
1,000 7.65%, 8/15/09 ............................. 1,007,706
3,000 Tandy Corp., 6.95%, 9/1/07 ................... 2,915,622
1,000 Tektronix, 7.50%, 8/1/03 ..................... 1,015,303
7,000 Textron, Inc., 6.75%, 9/15/02 ................ 6,963,558
5,000 United Defense Inds., Inc., 8.75%, 11/15/07 .. 4,712,500
2,660 USG Corp., 8.50%, 8/1/05 ..................... 2,772,513
500 Xerox Corp., 7.15%, 8/1/04 ................... 482,838
------------
TOTAL CORPORATE NOTES & BONDS (Cost $232,783,965) ............. 222,897,313
------------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.6%
--------------------------------------------------------------------------------
14,173 Goldman Sachs & Co., dated 9/29/00, 6.42%
principal and interest in the amount of
$14,180,583 due 10/02/00, collateralized by
US Treasury Bonds, par value of 11,045,000,
coupon rate of, 8.875%, due 2/15/19, market
value of $14,336,929
(Cost $14,173,000) ......................... 14,173,000
------------
TOTAL INVESTMENTS (Cost $715,022,953)** ............. 99.5% $904,617,078
OTHER ASSETS IN EXCESS OFLIABILITIES ................ 0.5 5,013,066
------ ------------
NET ASSETS .......................................... 100.0% $909,630,144
====== ============
----------
* Non-income producing security within the last six month period.
** Aggregate cost for federal tax purposes.
(a) Affiliated holding.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
SEPTEMBER 30,
--------------------------------------------------------------------------------
2000
Assets:
Investments, at value (cost $715,022,953) .................. $904,617,078
Receivable for shares of beneficial interest subscribed .... 931,276
Dividends and interest receivable .......................... 6,007,570
Prepaid expenses and other ................................. 188,498
------------
Total assets ............................................. 911,744,422
------------
Liabilities:
Payable for shares of beneficial interest redeemed ......... 1,029,769
Accrued expenses and other ................................. 1,084,509
------------
Total liabilities ........................................ 2,114,278
------------
Net assets .................................................... $909,630,144
------------
Composition of Net Assets
Paid-in capital
Class A Shares ........................................... 356,362,000
Class B Shares ........................................... 95,399,671
Class C Shares ........................................... 32,366,441
Institutional Shares ..................................... 155,418,267
Accumulated net realized gain from investment transactions . 77,695,645
Net unrealized appreciation on investments ................. 189,594,125
Undistributed net investment income ........................ 2,793,995
------------
Net assets .................................................... 909,630,144
------------
Net Asset Value Per Share:
Class A Shares ($580,582,062 / 24,527,772 shares) .......... $23.67
======
Class B Shares ($112,337,757 / 4,757,551 shares) ........... $23.611
======
Class C Shares ($32,932,075 / 1,394,434 shares) ............ $23.622
======
Institutional Shares ($183,754,607 / 7,701,037 shares) ..... $23.86
======
Maximum Offering Price Per Share:
Class A Shares ($23.67 / 0.945) ............................ $25.05
======
Class B Shares ............................................. $23.61
======
Class C Shares ............................................. $23.62
======
Institutional Shares ....................................... $23.86
======
-------------
1 Redemption value is $22.44 following a 5% maximum contingent deferred sales
charge.
2 Redemption value is $23.38 following a 1% maximum contingent deferred sales
charge.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30,
--------------------------------------------------------------------------------
2000
Investment Income:
Dividends ................................................... $ 5,324,168
Interest .................................................... 9,914,910
Less:Foreign taxes withheld ................................. (9,180)
-----------
Total income ...................................... 15,229,898
-----------
Expenses:
Investment advisory fee ..................................... 3,319,763
Distribution fees:
Class A Shares ............................................ 742,258
Class B Shares ............................................ 571,596
Class C Shares ............................................ 164,809
Transfer agent fee .......................................... 176,901
Accounting fees ............................................. 67,672
Professional fees ........................................... 56,207
Registration fees ........................................... 49,161
Custody fees ................................................ 48,801
Shareholder reporting fees .................................. 38,450
Directors' fees ............................................. 15,985
Miscellaneous ............................................... 20,883
-----------
Total expenses .................................... 5,272,486
-----------
Net investment income ....................................... 9,957,412
-----------
Realized and unrealized gain (loss) on investments:
Net realized gain from securities transactions .............. 21,680,923
Change in unrealized appreciation/depreciation
of investments ............................................ (7,113,483)
-----------
Net gain on investments ..................................... 14,567,440
-----------
Net increase in net assets resulting from operations ........... $24,524,852
===========
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
---------------------------------------------------------------------------------
20001 2000
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ......................... $ 9,957,412 $ 19,059,728
Net realized gain from securities transactions 21,680,923 79,177,235
Change in unrealized appreciation/depreciation
of investments .............................. (7,113,483) (91,414,939)
------------- -------------
Net increase in net assets
resulting from operations ................... 24,524,852 6,822,024
------------- -------------
Distributions to Shareholders from:
Net investment income and short-term
gains:
Class A Shares .............................. (6,804,600) (20,460,182)
Class B Shares .............................. (906,506) (2,925,870)
Class C Shares .............................. (258,950) (709,061)
Institutional Shares ........................ (1,992,147) (4,990,684)
Net realized long-term gains:
Class A Shares .............................. -- (12,231,556)
Class B Shares .............................. -- (2,305,977)
Class C Shares .............................. -- (591,874)
Institutional Shares ........................ -- (2,697,818)
------------- -------------
Total distributions ........................... (9,962,203) (46,913,022)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares .................. 59,237,753 198,166,745
Value of shares issued in reinvestment
of dividends ................................ 8,654,172 42,631,746
Cost of shares repurchased .................... (111,501,527) (184,819,312)
------------- -------------
Increase (decrease) in net assets derived from
capital share transactions .................. (43,609,602) 55,979,179
------------- -------------
Total increase (decrease) in net assets ....... (29,046,953) 15,888,181
Net Assets:
Beginning of period ........................... 938,677,097 922,788,916
------------- -------------
End of period (including undistributed net
investment income of $2,798,786 for the
year ended March 31, 2000) .................. $ 909,630,144 $ 938,677,097
============= =============
<FN>
--------
1 Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
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<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
20001 2000
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ....................... $ 23.27
-------- $ 24.15
Income from Investment Operations: --------
Net investment income ........................................ 0.26
Net realized and unrealized gain (loss) on investments ....... 0.40 0.49
-------- (0.20)
Total from Investment Operations ............................. 0.66 --------
-------- 0.29
Less Distributions: --------
Net investment income and short-term capital gains ........... (0.26)
Net realized long-term capital gains ......................... -- (0.73)
-------- (0.44)
Total distributions .......................................... (0.26) --------
-------- (1.17)
Net asset value at end of period ............................. $ 23.67 --------
======== $ 23.27
Total Return2 ................................................... 2.88% ========
Ratios to Average Net Assets: 1.11%
Expenses ..................................................... 1.10%3
Net investment income ........................................ 2.27%3 1.09%
Supplemental Data: 2.06%
Net assets at end of period (000) ............................ $580,582
Portfolio turnover rate ...................................... 5% $622,580
26%
<FN>
---------
1 Unaudited.
2 Total Return excludes the effect of sales charge.
3 Annualized.
</FN>
</TABLE>
18
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .................... $ 22.09 $ 17.14 $ 14.68 $ 12.02
-------- -------- -------- --------
Income from Investment Operations:
Net investment income ..................................... 0.56 0.47 0.39 0.36
Net realized and unrealized gain (loss) on investments .... 2.40 5.21 2.49 3.03
-------- -------- -------- --------
Total from Investment Operations .......................... 2.96 5.68 2.88 3.39
-------- -------- -------- --------
Less Distributions:
Net investment income and short-term capital gains ........ (0.57) (0.47) (0.36) (0.41)
Net realized long-term capital gains ...................... (0.33) (0.26) (0.06) (0.32)
-------- -------- -------- --------
Total distributions ....................................... (0.90) (0.73) (0.42) (0.73)
-------- -------- -------- --------
Net asset value at end of period .......................... $ 24.15 $ 22.09 $ 17.14 $ 14.68
======== ======== ======== ========
Total Return2 ................................................ 13.91% 33.82% 19.90% 28.86%
Ratios to Average Net Assets:
Expenses .................................................. 1.12% 1.14% 1.27% 1.31%
Net investment income ..................................... 2.64% 2.49% 2.51% 2.72%
Supplemental Data:
Net assets at end of period (000) ......................... $649,664 $491,575 $278,130 $200,020
Portfolio turnover rate ................................... 10% 7% 13% 15%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31
---------------------------------------------------------------------------------------------------
20001 2000
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......................... $ 23.22 $ 24.11
-------- --------
Income from Investment Operations:
Net investment income .......................................... 0.18 0.31
Net realized and unrealized gain (loss) on investments ......... 0.39 (0.20)
-------- --------
Total from Investment Operations ............................... 0.57 0.11
-------- --------
Less Distributions:
Net investment income and short-term capital gains ............. (0.18) (0.56)
Net realized long-term capital gains ........................... -- (0.44)
-------- --------
Total distributions ............................................ (0.18) (1.00)
-------- --------
Net asset value at end of period ............................... $ 23.61 $ 23.22
======== ========
Total Return2 ..................................................... 2.48% 0.36%
Ratios to Average Net Assets:
Expenses ....................................................... 1.85%3 1.84%
Net investment income .......................................... 1.54%3 1.30%
Supplemental Data:
Net assets at end of period (000) .............................. $112,338 $121,117
Portfolio turnover rate ........................................ 5% 26%
<FN>
--------
1 Unaudited.
2 Total Return excludes the effect of sales charge.
3 Annualized.
</FN>
</TABLE>
20
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ................... $ 22.08 $ 17.16 $ 14.71 $12.01
-------- ------- ------- ------
Income from Investment Operations:
Net investment income .................................... 0.41 0.34 0.26 0.21
Net realized and unrealized gain (loss) on investments ... 2.38 5.20 2.51 3.05
-------- ------- ------- ------
Total from Investment Operations ......................... 2.79 5.54 2.77 3.26
-------- ------- ------- ------
Less Distributions:
Net investment income and short-term capital gains ....... (0.43) (0.36) (0.26) (0.24)
Net realized long-term capital gains ..................... (0.33) (0.26) (0.06) (0.32)
-------- ------- ------- ------
Total distributions ...................................... (0.76) (0.62) (0.32) (0.56)
-------- ------- ------- ------
Net asset value at end of period ......................... $ 24.11 $ 22.08 $ 17.16 $14.71
======== ======= ======= ======
Total Return2 ............................................... 13.10% 32.84% 19.00% 27.89%
Ratios to Average Net Assets:
Expenses ................................................. 1.87% 1.89% 2.02% 2.06%
Net investment income .................................... 1.90% 1.75% 1.84% 1.97%
Supplemental Data:
Net assets at end of period (000) ........................ $110,680 $64,498 $17,311 $4,178
Portfolio turnover rate .................................. 10% 7% 13% 15%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
--------------------------------------------------------------------------------
FLAG INVESTORS VALUE BUILDER FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR APRIL 8, 19982
MONTHS ENDED ENDED THROUGH
SEPTEMBER 30, MARCH 31, MARCH 31,
---------------------------------------------------------------------------------------
20001 2000 1999
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at
beginning of period .................... $ 23.22 $ 24.12 $ 22.31
------- ------- -------
Income from Investment Operations:
Net investment income .................... 0.18 0.31 0.39
Net realized and unrealized
gain (loss) on investments ............. 0.40 (0.21) 2.10
------- ------- -------
Total from Investment Operations ......... 0.58 0.10 2.49
------- ------- -------
Less Distributions:
Net investment income and
short-term gains ....................... (0.18) (0.56) (0.35)
Net realized long-term
capital gains .......................... -- (0.44) (0.33)
------- ------- -------
Total distributions ...................... (0.18) (1.00) (0.68)
------- ------- -------
Net asset value at
end of period .......................... $ 23.62 $ 23.22 $ 24.12
======= ======= =======
Total Return3 ............................... 2.53% 0.31% 11.50%
Ratios to Average Net Assets:
Expenses ................................. 1.85%4 1.85% 1.91%4
Net investment income .................... 1.54%4 1.34% 2.05%4
Supplemental Data:
Net assets at end of period (000) ........ $32,932 $33,989 $17,450
Portfolio turnover rate .................. 5% 26% 10%
<FN>
---------
1 Unaudited.
2 Commencement of operations.
3 Total Return excludes the effect of sales charge.
4 Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
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<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31
------------------------------------------------------------------------------------------------
20001 2000
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period $ 23.45 $ 24.36
-------- --------
Income from Investment Operations:
Net investment income 0.29 0.55
Net realized and unrealized gain (loss) on investments 0.41 (0.21)
-------- --------
Total from Investment Operations 0.70 0.34
-------- --------
Less Distributions:
Net investment income and short-term capital gains (0.29) (0.81)
Net realized long-term capital gains -- (0.44)
-------- --------
Total distributions (0.29) (1.25)
-------- --------
Net asset value at end of period $ 23.86 $ 23.45
======== ========
Total Return 2.99% 1.36%
Ratios to Average Net Assets:
Expenses 0.85%3 0.84%
Net investment income 2.56%3 2.32%
Supplemental Data:
Net assets at end of period (000) $183,755 $160,991
Portfolio turnover rate 5% 26%
<FN>
--------
1 Unaudited.
2 Commencement of operations.
3 Annualized.
</FN>
</TABLE>
24
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
NOV. 2, 19952
THROUGH
FOR THE YEARS ENDED MARCH 31, MARCH 31,
------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .................... $ 22.26 $ 17.27 $ 14.77 $ 13.89
-------- -------- ------- -------
Income from Investment Operations:
Net investment income ..................................... 0.63 0.51 0.41 0.13
Net realized and unrealized gain (loss) on investments .... 2.41 5.25 2.53 1.17
-------- -------- ------- -------
Total from Investment Operations .......................... 3.04 5.76 2.94 1.30
-------- -------- ------- -------
Less Distributions:
Net investment income and short-term capital gains ........ (0.61) (0.51) (0.38) (0.10)
Net realized long-term capital gains ...................... (0.33) (0.26) (0.06) (0.32)
-------- -------- ------- -------
Total distributions ....................................... (0.94) (0.77) (0.44) (0.42)
-------- -------- ------- -------
Net asset value at end of period .......................... $ 24.36 $ 22.26 $ 17.27 $ 14.77
======== ======== ======= =======
Total Return ................................................. 14.20% 34.08% 20.24% 21.12%
Ratios to Average Net Assets:
Expenses .................................................. 0.87% 0.89% 1.02% 1.03%3
Net investment income ..................................... 2.88% 2.75% 2.83% 2.89%3
Supplemental Data:
Net assets at end of period (000) ......................... $144,995 $103,817 $34,771 $11,768
Portfolio turnover rate ................................... 10% 7% 13% 15%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- ORGANIZATION AND 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 amended (the "40
Act") as a diversified, open-end management investment company. The Fund seeks
to maximize total return through a combination of long-term growth of capital
and current income by investing primarily in a portfolio of common stocks and
corporate bonds.
The Fund consists of four share classes: Class A Shares, which began
operations June 15, 1992; Class B Shares, which began operations January 3,
1995; Class C Shares, which began operations April 8, 1998; and Institutional
Shares, which began operations November 2, 1995. 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 the Class A Shares
have a different distribution fee than the Class B and Class C Shares. The
Institutional Shares have neither a sales charge nor a distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions in accordance with accounting principles generally accepted in
the United States. These estimates affect 1) the assets and liabilities that we
report at the date of the financial statements; 2) the contingent assets and
liabilities that we disclose at the date of the financial statements; and 3) the
revenues and expenses that we report for the period. Our estimates could be
different from the actual results.
The Fund's significant accounting policies are:
A. VALUATION OF SECURITIES -- values a portfolio security that is primarily
traded on a national exchange by using the last sales price reported for
the day. If there are no sales or the security is not traded on a listed
exchange, the Fund values the security at the average of the last bid
and asked prices in the over-the-counter market. When a market quotation
is unavailable, the Investment Advisor determines a fair value using
procedures that the Board of Directors establishes and monitors. At
September 30, 2000 there were no Board valued securities. 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 -- Fund determines its distributions according to
income tax regulations, which may be different from accounting
principles generally accepted in the United States. As a result, the
Fund occasionally makes reclassifications within its capital accounts to
reflect income and gains that are available for distribution under
income tax regulations.
The Fund is organized as a regulated investment company. As long as
it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net realized
capital gains, it will be exempt from most, if not all, federal income
and excise taxes. As a result, the Fund has made no provisions for
federal income taxes.
D. SECURITIES TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER --
Fund uses the trade date to account for securities transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed. Interest
income is recorded on an accrual basis and includes amortization of
premiums and accretion of discounts when appropriate. Income, gains and
common expenses are allocated to each class based on its respective
average net assets. Class specific expenses are charged directly to each
class. Dividend income, less foreign taxes withheld, if any, 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. ("ICCC"), an indirect subsidiary of
Deutsche Bank AG, is the Fund's investment advisor.
As compensation for its advisory services, the Fund pays ICCC an annual
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.
Alex. Brown Investment Management ("ABIM") is the Fund's sub-advisor. As
compensation for its sub-advisory services, ICCC 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: 0.65% of the first $50 million, 0.50% of the next
$150 million, and 0.40% of the amount over $200 million. Prior to September 1,
2000, the fee was 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.
ICCC provides accounting services to the Fund for which the Fund pays
ICCCan annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets.
ICCC also provides transfer agency services to the Fund for which the Fund
pays ICCC a per account fee that is calculated and paid monthly.
Certain officers and directors of the Fund are also officers or directors
of ICCC.
ICC Distributors, Inc. ("ICC Distributors") provides distribution services
to the Fund for which the Fund pays ICC Distributors an annual fee, pursuant to
Rule 12b-1, that is calculated daily and paid monthly at the following annual
rates: 0.25% of the Class A Shares' average daily net assets and 1.00% of the
Class B and Class C Shares' average daily net assets. The fees for the Class B
and Class C Shares also include a 0.25% shareholder servicing fee.
Bankers Trust Company, an affiliate of the advisor, is the Fund's
custodian.
The Fund participates along with other Flag Investors Funds in a retirement
plan for eligible Directors.
28
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTE 3 -- CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 97 million shares of $.001 par value
capital stock (50 million Class A Shares, 15 million Class B Shares, 15 million
Class C Shares, 15 million Institutional Shares and 2 million undesignated).
Transactions in shares of the Fund were as follows:
CLASS A SHARES
--------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 20001 MARCH 31, 2000
------------------- --------------
Shares sold .............................. 967,219 4,644,618
Shares issued to shareholders on
reinvestment of dividends .............. 263,551 1,246,224
Shares redeemed .......................... (3,459,324) (6,032,319)
------------ -------------
Net (decrease) in shares outstanding ..... (2,228,554) (141,477)
============ =============
Proceeds from sale of shares ............. $ 21,906,609 $ 111,848,190
Value of reinvested dividends ............ 6,004,477 29,878,743
Cost of shares redeemed .................. (79,393,628) (141,026,400)
------------ -------------
Net increase (decrease) from capital
share transactions ..................... $(51,482,542) $ 700,533
============ =============
CLASS B SHARES
---------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 20001 MARCH 31, 2000
------------------- ---------------
Shares sold ............................... 237,194 1,418,819
Shares issued to shareholders on
reinvestment of dividends ............... 36,301 202,275
Shares redeemed ........................... (732,359) (994,920)
------------ ------------
Net increase (decrease) in shares outstanding (458,864) 626,174
============ ============
Proceeds from sale of shares .............. $ 5,413,732 $ 34,087,833
Value of reinvested dividends ............. 826,528 4,844,150
Cost of shares redeemed ................... (16,728,326) (23,119,651)
------------ ------------
Net increase (decrease) from capital
share transactions ...................... $(10,488,066) $ 15,812,332
============ ============
-------
1 Unaudited.
29
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 (CONTINUED)
CLASS C SHARES
--------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 20001 MARCH 31, 2000
------------------- --------------
Shares sold ............................ 95,469 876,029
Shares issued to shareholders on
reinvestment of dividends ............ 10,340 49,343
Shares redeemed ........................ (175,012) (185,256)
----------- -----------
Net increase (decrease) in shares outstanding (69,203) 740,116
=========== ===========
Proceeds from sale of shares ........... $ 2,191,243 $21,144,728
Value of reinvested dividends .......... 235,546 1,179,480
Cost of shares redeemed ................ (3,989,399) (4,293,788)
----------- -----------
Net increase (decrease) from capital
share transactions ................... $(1,562,610) $18,030,420
=========== ===========
INSTITUTIONAL SHARES
--------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 20001 MARCH 31, 2000
------------------- --------------
Shares sold ............................ 1,265,386 1,334,488
Shares issued to shareholders on
reinvestment of dividends ............ 69,186 278,818
Shares redeemed ........................ (497,871) (702,190)
------------ ------------
Net increase in shares outstanding ..... 836,701 911,116
============ ============
Proceeds from sale of shares ........... $ 29,726,168 $ 31,085,994
Value of reinvested dividends .......... 1,587,621 6,729,373
Cost of shares redeemed ................ (11,390,173) (16,379,473)
------------ ------------
Net increase from capital
share transactions ................... $ 19,923,616 $ 21,435,894
============ ============
-------
1 Unaudited.
30
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FLAG INVESTORS VALUE BUILDER FUND
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NOTE 4 -- INVESTMENT TRANSACTIONS
Excluding short-term and US government obligations, purchases of investment
securities aggregated $43,217,891 and sales of investment securities aggregated
$90,984,307 for the six months ended September 30, 2000.
On September 30, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $286,418,176
and aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over value was $96,824,051.
31
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FLAG INVESTORS VALUE BUILDER FUND
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DIRECTORS AND OFFICERS
TRUMAN T. SEMANS
CHAIRMAN AND DIRECTOR
RICHARD R. BURT ROBERT H. WADSWORTH
DIRECTOR DIRECTOR
RICHARD T. HALE CARL W. VOGT, ESQ.
DIRECTOR PRESIDENT
JOSEPH R. HARDIMAN CHARLES A. RIZZO
DIRECTOR TREASURER
LOUIS E. LEVY AMY M. OLMERT
DIRECTOR SECRETARY
EUGENE J. MCDONALD DANIEL O. HIRSCH
DIRECTOR ASSISTANT SECRETARY
REBECCA W. RIMEL
DIRECTOR
INVESTMENT OBJECTIVE
The Fund seeks to maximize total return through a combination of long-term
growth of capital and current income by investing primarily in a portfolio of
common stocks and corporate bonds.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.
For more complete information regarding other Flag Investors Funds,
including charges and expenses, obtain a prospectus from your investment
representative or directly from the Fund at 1-800-767-FLAG. Read it carefully
before you invest.
<PAGE>
[FLAG INVESTORS logo omitted]
DOMESTIC EQUITY
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund
INTERNATIONAL EQUITY
European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World
FIXED INCOME
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares
MONEY MARKET
Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
WWW.FLAGINVESTORS.COM
Distributed by:
ICC DISTRIBUTORS, INC.
VBSA(11/00)
