[GRAPHIC OMITTED]
FLAG INVESTORS
Investing With A Difference
BALANCED
Value Builder Fund
GROWTH
Equity Partners Fund
Emerging Growth Fund
SPECIALTY
Communications Fund
Real Estate Securities Fund
INTERNATIONAL
International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund
TOP 50 STRATEGY
Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 U.S.
FIXED INCOME
Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund
TAX-FREE INCOME
Managed Municipal 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.
VBANN (5/00)
<PAGE>
[LOGO OMITTED]
Flag Investors
(Investing With A Difference)
VALUE BUILDER
FUND
Annual Report
March 31, 2000
<PAGE>
REPORT HIGHLIGHTS
--------------------------------------------------------------------------------
o Your Fund's returns, (excluding sales charges), for the 6-months, 1-, 3- and
5-year periods ending March 31, 2000 for Class A Shares were 4.9%, 1.1%, 54.1%
and 138.1%, respectively.
o The Fund's asset mix continued to emphasize long-term holdings with stocks and
bonds representing 98% of the portfolio. New and existing shareholders
purchased $56 million in Fund Shares over the past 12 months.
o 1999 was generally not a great year for value-oriented investors. The dramatic
difference in performance by the various market sectors was so unusual that it
has been almost impossible to talk in general terms about "the stock market".
Value stocks, or "Old Economy" stocks, in the language of the financial press
have generally not participated in recent market gains. At the same time, the
NASDAQ, heavily weighted in New Economy technology/internet and
telecommunications stocks, has prospered.
o We think it is important for shareholders to remember that in the final
analysis common stock valuations eventually return to economic reality, that
is, profits rather than promise. We are participating in the "New Economy" in
ways that make economic sense to us. The recent purchases of Tyco
International, Ltd., Concord EFS, Inc. and Sabre Group Holdings, Inc. are such
examples. We would note that these companies make lots of real money which is
more than can be said for many internet related companies.
<PAGE>
FUND PERFORMANCE
--------------------------------------------------------------------------------
Growth of a $10,000 Investment in Class A Shares(1)
June 15, 1992-March 31, 2000
$10,000 invested in the Value Builder Fund
Class A Shares at inception on June 15, 1992
was worth $30,883 on March 31, 2000.
[GRAPH OMITTED]
PLOT POINTS AS FOLLOWS:
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
29,431
3/00 30,883
Total Return Performance(1)
<TABLE>
<CAPTION>
Class A Class B Class C Institutional
For the periods ended 3/31/00 Shares Shares Shares Shares
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year 1.11% 0.36% 0.31% 1.36%
3 Years (Cumulative) 54.13% 50.71% --% 55.23%
5 Years (Cumulative) 138.14% 129.33% --% --%
Since Inception 6/15/92 1/3/95 4/8/98 11/2/95
------- ------- ------- -------
(Cumulative) 208.83% 147.24% 11.88% 102.90%
----------
<FN>
(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 5.5% sales charge for Class A were reflected and if
there had been no fee waivers, the quoted performance would be lower.
Performance figures for the classes differ because each class maintains a
distinct expense structure. For further details on expense structures,
please refer to the fund's prospectus. Please review the Additional
Performance Information on page 7.
</FN>
</TABLE>
1
<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Fellow Shareholders:
We are pleased to report on the progress of your Fund for the year
ended March 31, 2000.
The Value Builder Fund had a respectable gain of 4.9% for the six-month
period and a not so good return of 1.1% for the twelve-month period for Class A
shares. For the three- and five-year periods your Fund gained 54.1% and 138.1%
respectively, (excluding sales charges). The Fund's equity performance was due
primarily to the earnings gains of the portfolio companies and the management
focus to build shareholder value. Even though interest rates rose for almost the
entire year, the Fund's bonds did reasonably well due to the heavy concentration
in intermediate maturity issues.
We are especially pleased that on a long-term basis your Fund continues
to place in the top half of Lipper Inc.'s Balanced Fund category with a ranking
in the top 43% for the three-year period and the top 14% for the five-year
period.(1) PERHAPS THE MOST GRATIFYING ACCOMPLISHMENT IS THAT EVERY YEAR FOR THE
PAST SIX CALENDAR YEARS YOUR FUND'S INVESTMENT RETURN HAS PLACED IN THE TOP
QUARTILE OF BOTH MORNINGSTAR'S HYBRID FUND CATEGORY AND LIPPER INC.'S BALANCED
FUND CATEGORY.(2) The Value Builder Fund is the only Fund in Lipper Inc.'s
Balanced Fund category that can make this statement. Illustrated in the chart on
page 1 is the growth of a $10,000 investment in the Fund's Class A shares since
inception. A full summary of investment returns for the Fund is also provided on
page 1.
ASSET MIX
During the past year we have maintained the Fund's long-term focus with
98% of the Fund's assets in stock and bonds and the remaining 2% in short-term
investments. The pie charts on the next page reflect the current asset mix as
well as the asset mix a year ago. The decrease in the short-term investment
category over the past year is primarily due to our normal investment activities
which include net purchases of stocks and bonds of $49 million while new and
existing shareholders purchased $56 million in Value Builder shares.
----------
(1) Past performance is not an indicator of future results. The Lipper rankings
are based on total return for the periods ended March 31, 2000 relative to
other funds in the Balanced Funds category. In addition the Fund ranked #396
out of 458 for the 1 year, #145 out of 340 for the 3 year, #34 out of 237
for the 5 year. Performance figures used in these rankings exclude the
impact of any sales charge.
(2) Past performance is not an indicator of future results. TheMorningstar
Category Rating System shows how well the Fund has balanced risk and return
for the periods ended March 31, 2000 relative to other funds in the Domestic
Hybrid Category.In addition, the Fund ranked #622 out of 724 for the 1 year,
#216 out of 553 for the 3 year and #41 out of 375 for the 5 year ended March
31, 2000. Performance figures used in these rankings exclude the impact of
sales charge.
2
<PAGE>
As we have said in the past, we very much appreciate this expression
of confidence and we will certainly make every effort to see that it is well
deserved. The Fund's net assets were $939 million at March 31, 2000 up from
$923 million this time last year.
PORTFOLIO DEVELOPMENT
In past shareholder reports we have periodically made candid reports to
you highlighting our success and our failures. In many respects such a
"scorecard" allows Fund shareholders the opportunity to see just how well we
have executed our game plan of buying good value. Listed below are our largest
holdings with costs and market values, as well as the percentage change over the
past 12 months.
Five Largest Holdings
Market Value Performance
Security Cost as of 3/31/00 3/31/99 to 3/31/00
-------------------------------------------------------------------------------
America Online, Inc. $ 2,377,020 $90,115,000 -9.2%
Cendant Corporation 38,090,589 47,295,916 17.3%
Tyco International, Ltd.* 21,674,006 33,939,938 56.6%
Novell,Inc. 10,385,382 28,710,875 13.5%
Blyth Industries, Inc. 26,306,495 27,525,537 15.6%
----------- ------------
Total $98,833,492 $227,587,266
----------
* Not owned on 3/31/99, cost vs. market percentage change.
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
3/31/99
Short-term Investments 4.0%
Fixed-Income 27.0%
Common Stocks and Convertibles 69.0%
3/31/00
Short-term Investments 2.0%
Fixed-Income 24.0%
Common Stocks and Convertibles 74.0%
The business progress of America Online,Inc. was excellent over the
past year although we did sell a modest portion for portfolio reasons. And while
the share price did not fulfill our expectations over the past 12 months, we
think this has more to do with its recently announced merger with Time Warner
than any fundamental issues.
3
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
It has been said that patience has its virtues and in the case of
Cendant Corporation (one of last year's worst performers) it has been
financially rewarding as well. We felt that the company's prospects were
considerably better than reflected by the company's share price and the
marketplace now seems to be agreeing with us.
Tyco International Ltd. is a recent addition to the portfolio and, to a
large degree, represents what we do best; buying companies that for one reason
or another fall into temporary disfavor with Wall Street. This behavior
oftentimes allows us to purchase shares in very good companies at a much larger
discount to intrinsic value than might otherwise be possible. In the case of
Tyco International Ltd., exaggerated accounting concerns raised by "short
sellers" caused the shares to decline from $50 to below $30. With the shares now
trading 50% higher and hopefully with more gains to come, we are forever
grateful when opportunities such as this present themselves. We would also note
that Tyco International Ltd. gives us some excellent participation in the
technology/New Economy area but at prices which we can reasonably relate to
long-term potential.
Although we discussed Blyth Industries, Inc. in last year's report, I
want to mention it again because the company's business progress has been
nothing short of excel lent yet investors continue to essentially ignore the
shares. We know well that scented candle/home fragrance products may not have
the sizzle of ".com" but with a price earnings multiple of roughly half its 20%
growth rate and $100 million in annual after tax profits we feel very good about
the "value" and we can be very patient.
Ten Best Performers -- One year ended 3/31/00
PERCENT ORIGINAL INVESTMENT
SECURITY CHANGE DATE
----------------------------------------------------------------------------
Lodgenet Entertainment Corp. 205.7% August 1994
Case Corp. (W) 116.8 October 1998
Georgia Gulf Corp. (W) 112.9 April 1998
Amgen, Inc. (W) 77.6 April 1994
Mutual Risk Management Ltd. (A) 74.2 October 1999
Tandy Corp. 59.1 February 1994
Tyco International Ltd. (A) 56.6 November 1999
Hercules, Inc. (W) 46.0 August 1994
Schulman (A.), Inc. (W) 44.0 October 1998
Cognex Corp. (W) 43.4 February 1998
----------
(W) Sold mid-period.
(A) Added mid-period.
4
<PAGE>
--------------------------------------------------------------------------------
In an effort to complete the scorecard, we have also provided a list
of the biggest gainers in the portfolio over the past 12 months. Hopefully,
this scorecard reinforces what we have emphasized in previous letters about
buying "good value" and allowing sufficient time for such value to be recognized
in the investment marketplace.
As much as we would like to have nothing but success, we know from
experience that we cannot make a hit every time we swing the bat. Occasionally
we will misjudge the pitch (companies) and take a strike. During the past year
we misjudged a few pitches and we have listed the three worst:
Three Worst Performers -- One year ended 3/31/00
Percent
Security Change
------------------------------------------
Champion Enterprises, Inc. -70.3%
------------------------------------------
Conseco, Inc. -63.0%
------------------------------------------
Mattel, Inc. (A) -57.0%
------------------------------------------
----------
(A) Added mid-period, due to acquisition of The Learning Co., Inc.
In the case of Champion Enterprises, Inc. and Mattel, Inc., we think
that while the business progress has not been nearly as bad as the decline
suggests, the current investment environment is simply not very forgiving where
there is no catalyst or an earnings disappointment. I do not expect the shares
to be in the portfolio this time next year. In the case of Conseco, Inc., to say
we are disappointed in the company's business progress and management since the
acquisition of Greentree Financial in 1998 would be the understatement of the
year. And the share price decline over the past year has caused us considerable
pain. While we risk even further embarrassment by retaining the shares, our best
judgement suggests that this is the right thing to do. If it turns out that we
are wrong, you may want to save next year's Easter eggs for target practice.
INVESTMENT ENVIRONMENT
Even though your Fund managed to finish the calendar year 1999 with a
first quartile Morningstar ranking, (13.8% return) it was generally not a very
good year for value-oriented investors. Even the famed "Oracle of Omaha"
Warren Buffett found the going rather tough with a return of negative 20% for
his Berkshire Hathaway shares. With blue chip holdings of companies such as
American Express, Coke, Gillette, Freddie Mac, GEICO and General Reassurance,
it is hard to imagine how the investment markets moved ahead the way they did in
1999 while Mr. Buffett's Berkshire Hathaway was giving up so much ground.
5
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
--------------------------------------------------------------------------------
The dramatic difference in performance by the various market sectors
was so unusual that it has been almost impossible to talk in general terms about
"the stock market"; for the past year there have been two stock markets. Value
stocks, or "Old Economy stocks" in the language of the financial press, have
generally not participated in recent market gains. At the same time, the NASDAQ,
heavily weighted in New Economy technology/internet and telecommunications
stocks has prospered. It appears to us that it is overly simplistic to view the
financial world in Old Economy/New Economy terms. Many of the so called Old
Economy companies will continue to thrive and play an important role in the New
Economy, while many of the New Economy stocks will ultimately disappear as
competition intensifies or will disappoint if ambitious expectations are not
met. We think it is important for shareholders to remember that in the final
analysis common stock valuations eventually return to economic reality, that is,
profits rather than promise. The recent 30% decline of the NASDAQ in one month's
time should be a clear reminder.
In spite of these issues, we have not kept our heads in the sand; or as
Thomas Rowe Price often said "change is the investors only certainty." It is
just that we have tried to participate in the New Economy in a way that makes
economic sense to us. The purchases of Tyco International Ltd., Concord EFS,
Inc. and Sabre Group Holdings, Inc. are recent examples. Tyco
International,Ltd., for its electronics (AMP) and optical fiber (Tycom)
activities; Concord EFS, Inc. for its electronic payment activities and Sabre
Group Holdings, Inc. for its information technology activities and its 70%
ownership in Travelocity.com. We would also note that all these companies make
real money which is more than can be said for many of the internet companies.
Although momentum investing and the flow of money into mutual funds
with the largest recent gains continues unabated, we are very much in accord
with one investment manager's quote in a recent Wall Street Journal article,
"Universal acclaim is never the birthplace of great investment opportunities."
We thank you for your continued interest and support. We look forward
to the ongoing process of building value for you.
Sincerely,
/s/ Hobart C.Buppert,II
Hobart C.Buppert,II
Portfolio Manager
April 24, 2000
6
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
ADDITIONAL PERFORMANCE INFORMATION
The shareholder letter included in this report contains statistics
designed to help you evaluate the performance of your Fund's management. To
further assist in this evaluation, the Securities and Exchange Commission (SEC)
requires that we include, on an annual basis, a line graph comparing the
performance of each of the Fund's classes to that of an appropriate market
index. This graph measures the growth of a $10,000 hypothetical investment from
the inception date of the respective class through the end of the most recent
fiscal year-end. The SEC also requires that we report the total return of each
class, according to a standardized formula, for various time periods through the
end of the most recent calendar quarter.
Both the line graph and the SEC standardized total return figures
include the impact of the 5.50% maximum initial sales charge for the Class A
Shares and the 5.00% and 1.00% contingent deferred sales charge applicable to
the specified time period for the Class B and Class C Shares, respectively.
Returns would be higher for Class A Shares investors who qualified for a lower
initial sales charge or for Class B or Class C Shares investors who continued to
hold their shares past the end of the specified time period.
While the graphs and the total return figures are required by SEC
rules, such comparisons are of limited utility since the total return of the
Fund's classes are adjusted for sales charges and expenses while the total
return of the indices are not. In fact, if you wished to replicate the total
return of these indices, you would have to purchase the securities they
represent, an effort that would require a considerable amount of money and would
incur expenses that are not reflected in the index results.
The SEC total return figures may differ from total return figures in
the shareholder letter because the time periods may be different and because the
SEC figures include the impact of sales charges while the total return figures
in the shareholder letter do not. Any performance figures shown are for the full
period indicated. Since investment return and principal value will fluctuate,
investor's shares may be worth more or less than their original cost when
redeemed. Past performance is not an indicator of future results.
7
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
ADDITIONAL PERFORMANCE INFORMATION (CONTINUED)
Change in Value of a $10,000 Investment in Class A Shares(1)
June 15, 1992-March 31, 2000
Flag Investors Value Builder Fund $29,185
S&P 500 Composite $43,402
91-Day U.S. Treasury Bill $14,000
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Flag Investor S&P 91-Day
6/92 9,550 10,000 10,000
9,884 10,315 10,101
10,291 10,835 10,179
10,861 11,308 10,258
6/93 11,007 11,364 10,338
11,526 11,657 10,422
11,501 11,927 10,504
11,202 11,475 10,584
6/94 11,141 11,524 10,686
11,607 12,087 10,801
11,458 12,085 10,944
12,385 13,626 11,108
6/95 13,442 14,528 11,275
14,588 15,683 11,436
15,210 16,627 11,604
15,960 17,520 11,747
6/96 16,442 18,307 11,898
17,290 18,872 12,062
18,975 20,445 12,220
19,136 20,992 12,375
6/97 21,136 24,660 12,544
22,851 26,504 12,712
23,255 27,265 12,871
25,608 31,069 13,039
6/98 25,608 31,069 13,039
25,608 31,069 13,039
25,608 31,069 13,039
29,170 36,804 13,654
6/99 30,647 39,399 13,849
28,110 36,934 14,027
31,370 42,430 14,202
3/00 29,185 43,402 14,400
Benchmark returns are for the period beginning June 30, 1992.
Average Annual Total Return(1)
Periods Ended 3/31/00 1 Year 5 Years Since Inception(2)
----------------------------------------------------------------------
Class A Shares -4.45% 17.61% 14.73%
----------------------------------------------------------------------
----------
(1) Past performance is not an indicator of future results. Investment return
and principal value will fluctuate so that upon redemption an investor's
shares may be worth more or less than their original cost. These figures
assume the reinvestment of dividends and capital gain distributions and
include the Fund's maximum 5.5% sales charge. The indices listed above are
unmanaged and are widely recognized as indicators of the performance in
their respective sectors. The S&P 500 Composite is an indicator of general
market performance and the 91-Day U.S. Treasury Bill is a measure of
short-term market performance.
(2) June 15, 1992.
8
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
Change in Value of a $10,000 Investment in Class B Shares(1)
January 3, 1995-March 31, 2000
Flag Investors Value Builder Fund $24,476
S&P 500 Composite $35,916
91-Day U.S. Treasury Bill $13,158
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Flag S&P Merrill
1/95 10,000 10,000 10,000
10,781 10,696 10,099
6/95 11,686 11,717 10,251
12,645 12,649 10,397
13,160 13,410 10,550
13,788 14,131 10,680
6/96 14,179 14,765 10,817
14,878 15,221 10,967
16,280 16,489 11,110
16,404 16,931 11,251
6/97 18,086 19,889 11,404
19,522 21,377 11,557
19,827 21,990 11,702
21,491 25,058 11,854
6/98 21,491 25,058 11,854
21,491 25,058 11,854
21,491 25,058 11,854
24,438 29,685 12,414
6/99 25,643 32,603 12,654
23,452 30,564 12,817
26,089 35,112 12,977
3/00 24,476 35,916 13,158
Benchmark returns are for the period beginning December 31, 1994.
Average Annual Total Return(1)
Periods Ended 3/31/00 1 Year 5 Years Since Inception(2)
-----------------------------------------------------------------------
Class B Shares -4.66% 17.58% 18.56%
-----------------------------------------------------------------------
----------
(1) Past performance is not an indicator of future results. Investment return
and principal value will fluctuate so that upon redemption an investor's
shares may be worth more or less than their original cost. These figures
assume the reinvestment of dividends and capital gain distributions and
reflect the applicable contingent deferred sales charge, which is 5% in the
first year declining to zero after six years. The indices listed above are
unmanaged and are widely recognized as indicators of the performance in
their respective sectors. The S&P 500 Composite is an indicator of general
market performance and the 91-Day U.S. Treasury Bill is a measure of
short-term market performance.
(2) January 3, 1995.
9
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
Additional Performance Information (continued)
Change in Value of a $10,000 Investment in Class C Shares(1)
April 8, 1998-March 31, 2000
Flag Investors Value Builder Fund $11,188
S&P 500 Composite $13,971
91-Day U.S. Treasury Bill $11,044
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW
Flag S&P Merrill
4/8/98 10,000 10,000 10,000
4/30/98 9,873 10,000 10,000
9/30/98 8,855 9,210 10,205
3/31/99 11,053 11,728 10,428
6/30/99 11,695 12,682 10,621
9/30/99 10,703 11,889 10,758
12/99 11,926 13,658 10,802
3/00 11,188 13,971 11,044
Benchmark returns are for the period beginning March 31, 1998.
Average Annual Total Return(1)
Periods Ended 3/31/00 1 Year Since Inception(2)
-----------------------------------------------------------------
Class C Shares -.69% 5.86%
-----------------------------------------------------------------
----------
(1) Past performance is not an indicator of future results. Investment return
and principal value will fluctuate so that upon redemption an investor's
shares may be worth more or less than their original cost. These figures
assume the reinvestment of dividends and capital gain distributions and
reflect the applicable contingent deferred sales charge which is 1% for
redemptions within one year after purchase. The indices listed above are
unmanaged and are widely recognized as indicators of the performance in
their respective sectors. The S&P500 Composite is an indicator of general
market performance and the 91-Day U.S. Treasury Bill is a measure of
short-term market performance.
(2) April 8, 1998.
10
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
Change in Value of a $10,000 Investment in Institutional Shares(1)
November 2, 1995-March 31, 2000
Flag Investors Value Builder Fund $20,290
S&P 500 Composite $27,777
91-Day U.S. Treasury Bill $12,534
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Flag S&P Merrill
11/95 10,000 10,000 10,000
12/95 10,349 10,193 10,055
3/96 10,871 10,740 10,178
6/96 11,205 11,223 10,309
9/96 11,783 11,569 10,452
12/96 12,935 12,533 10,588
3/97 13,071 12,869 10,723
6/97 14,436 15,117 10,869
9/97 15,622 16,248 11,015
12/97 15,904 16,714 11,153
3/98 17,526 19,046 11,298
6/98 17,526 19,046 11,298
9/98 17,526 19,046 11,298
12/98 17,526 19,046 11,298
3/99 20,018 22,562 11,831
6/99 21,040 25,215 12,054
9/99 20,018 23,638 12,209
12/99 21,561 27,155 12,361
3/00 20,290 27,777 12,534
Benchmark returns are for the period beginning October 31, 1995.
Average Annual Total Return(1)
Periods Ended 3/31/00 1 Year Since Inception(2)
--------------------------------------------------------------------
Institutional Shares 1.36% 17.40%
--------------------------------------------------------------------
----------
(1) Past performance is not an indicator of future results. Investment return
and principal value will fluctuate so that upon redemption an investor's
shares may be worth more or less than their original cost. These figures
assume the reinvestment of dividends and capital gain distributions. The
indices listed above are unmanaged and are widely recognized as indicators
of the performance in their respective sectors. The S&P500 Composite is an
indicator of general market performance and the 91-Day U.S. Treasury Bill is
a measure of short-term market performance. 2November 2, 1995.
11
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
Shares Market Value
--------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK - 70.1%
BANKING - 1.4%
152,500 Bank of America Corp. $ 7,996,719
131,000 Wells Fargo & Company 5,362,812
------------
13,359,531
------------
BASIC INDUSTRY - 0.6%
722,600 Airgas, Inc.* 6,006,612
------------
BUSINESS SERVICES - 4.8%
525,900 Concord EFS, Inc.* 12,062,831
294,700 First Data Corp. 13,040,475
176,400 SEI Investment Corp. 20,010,375
------------
45,113,681
------------
CONSUMER DURABLES/NON-DUARABLES - 6.0%
1,007,800 Blyth Industries, Inc. 27,525,537
200,000 Ford Motor Company 9,187,500
50,000 Liz Claiborne, Inc. 2,290,625
671,280 Mattel, Inc. 7,006,485
311,600 Philip Morris Cos., Inc. 6,582,550
414,800 Unifi, Inc.* 3,707,275
------------
56,299,972
------------
CONSUMER SERVICES - 17.0%
2,325,500 Allied Waste Industries, Inc.* 15,261,094
1,340,000 America Online, Inc.* 90,115,000
2,556,536 Cendant Corp. 47,295,916
236,100 Central Parking Corp. 4,722,000
202,000 Sinclair Broadcasting Group A 1,805,375
------------
159,199,385
------------
DEFENSE/AEROSPACE - 0.6%
156,000 Boeing Co. 5,918,250
------------
</TABLE>
12
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Market Value
--------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK (continued)
ENTERTAINMENT - 4.3%
896,700 Lodgenet Entertainment Corp.*(a) $ 17,990,044
552,000 SFX Entertainment, Inc.* 22,528,500
------------
40,518,544
------------
FINANCIAL SERVICES - 6.2%
83,500 American Express Co. 12,436,281
387,750 Citigroup 22,998,422
306,500 Countrywide Credit Industries, Inc. 8,352,125
172,000 Freddie Mac 7,600,250
265,780 MBNA Corp. 6,777,390
------------
58,164,468
------------
HEALTH CARE - 3.3%
40,000 Baxter International, Inc. 2,507,500
232,500 Cardinal Health, Inc. 10,665,937
114,000 Johnson & Johnson 7,987,125
134,200 Wellpoint Health Networks, Inc.* 9,377,225
------------
30,537,787
------------
HOUSING - 1.4%
900,000 Champion Enterprises, Inc.* 5,175,000
194,000 USG Corp. 8,135,875
------------
13,310,875
------------
INSURANCE - 6.8%
2,056,749 Conseco, Inc. 23,523,977
107,100 MBIA, Inc. 5,575,894
550,000 Mutual Risk Management Ltd. 11,000,000
424,398 XL Capital Limited - Class A 23,501,039
------------
63,600,910
------------
MULTI-INDUSTRY - 4.5%
680,500 Tyco International Ltd. 33,939,938
128,000 United Technologies Corp. 8,088,000
------------
42,027,938
------------
</TABLE>
13
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
Shares Market Value
--------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK (continued)
REAL ESTATE - 0.8%
899,136 Host Marriott Corp. $ 7,979,832
------------
RETAIL - 1.5%
500,000 Kmart Corp.* 4,843,750
180,000 Tandy Corp. 9,135,000
------------
13,978,750
------------
TECHNOLOGY - 5.9%
172,000 International Business Machines Corp. 20,296,000
1,003,000 Novell, Inc.* 28,710,875
170,311 Sabre Group Holdings, Inc. 6,290,863
------------
55,297,738
------------
TELECOMMUNICATIONS - 3.5%
286,033 MCI Worldcom, Inc.* 12,960,870
475,000 SBC Communications, Inc. 19,950,000
------------
32,910,870
------------
TRANSPORTATION - 1.5%
208,000 AMR Corp. 6,630,000
270,000 Canadian National Railway Co. 7,205,625
------------
13,835,625
------------
Total Common Stock
(Cost $436,758,620) 658,060,768
------------
NON-CONVERTIBLE PREFERRED STOCK - 0.5%
200,000 Conseco Financial Trust, 8.70%, 9/30/26 3,300,000
100,000 Conseco Financial Trust, 9.16%, 9/30/28 1,775,000
------------
Total Non-Convertible Preferred Stock
(Cost $7,500,000) 5,075,000
------------
</TABLE>
14
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares
Par (000) Market Value
--------------------------------------------------------------------------------------------
<S> <C>
CONVERTIBLE PREFERRED STOCK - 2.1%
544,000 Central Park Trust, Cvt. Pfd. 5.25% $ 7,072,000
40,000 Fleetwood Capital Trust, Cvt. Pfd. 6.00% 1,185,000
145,000 Sinclair Broadcast Group, Cvt. Pfd. 6.00% 4,241,250
523,600 U.S. Restaurant Properties, Series A, Cvt. Pfd. 7.72% 6,741,350
------------
Total Convertible Preferred Stock
(Cost $28,224,367) 19,239,600
------------
CONVERTIBLE CORPORATE NOTES/BONDS - 1.5%
$ 1,900 Healthcare Realty Trust, Cvt. Deb., 6.55%, 3/14/02 1,626,875
12,220 Integrated Process Equipment, 6.25%, 9/15/04 9,684,350
1,361 Richardson Electronics, Cvt. Deb., 8.25%, 6/15/06 1,136,435
5,250 Rite Aid, 5.25%, 9/15/02 1,916,250
------------
Total Convertible Bonds
(Cost $16,118,272) 14,363,910
------------
CORPORATE NOTES/BONDS - 24.1%
11,000 Allied Waste North America, 10.00%, 8/1/09 8,167,500
9,230 Amazon.com, Inc., 0.00%, 5/1/08 5,457,238
3,000 Avon Products, Inc., 6.55%, 8/1/07 2,857,380
4,500 Blyth Industries, Inc., 7.90%, 10/1/09 4,397,625
2,975 CalEnergy Co., Inc., 7.23%, 9/15/05 2,918,683
5,000 CalEnergy Co., Inc., 7.63%, 10/15/07 4,960,450
3,000 Campbell Soup Co., 6.15%, 12/1/02 2,915,580
1,000 Capstar Hotel Co. Sr. Sub. Notes, 8.75%, 8/15/07 880,000
8,000 Cendant Corp., 7.75%, 12/1/03 7,899,200
2,000 Chattem, 8.875%, 4/1/08 1,700,000
3,000 Circus Circus, 6.75%, 7/15/03 2,700,000
1,000 Citigroup Inc., 6.125%, 6/15/00 999,350
5,100 Conseco Inc., 6.80%, 6/15/05 4,667,163
6,000 Crown Castle Intl. Corp., 9.00%, 5/15/11 5,655,000
5,000 Cytec Industries, 6.50%, 3/15/03 4,643,700
5,000 Cytec Industries, 6.75%, 3/15/08 4,709,950
</TABLE>
15
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
Par (000) Market Value
--------------------------------------------------------------------------------------------
<S> <C>
CORPORATE NOTES/BONDS (continued)
$ 2,150 First Tennessee Bank, 6.40%, 4/1/08 $ 2,012,185
1,500 FMC Corp., 6.75%, 5/5/05 1,425,780
5,000 FMC Corp., 7.00%, 5/15/08 4,643,350
6,150 Ford Motor Credit Co., 6.70%, 7/16/04 5,971,712
5,000 Frontier Corp., 7.25%, 5/15/04 4,642,750
1,000 Fund America Enterprise, 7.75%, 2/1/03 970,210
5,000 GTE Corp., 6.46%, 4/15/08 4,701,850
5,700 HMH Properties, Inc., 7.875%, 8/1/05 5,073,000
1,000 HMH Properties, Inc., 8.45%, 12/1/08 872,500
3,000 Host Marriott Travel, 9.50%, 5/15/05 3,060,000
5,000 ICI, 6.95%, 9/15/04 4,895,500
2,000 ITT Corp., 6.75%, 11/15/03 1,869,960
5,000 J.P. Morgan, 6.875%, 1/15/07 4,848,350
4,000 Jefferies Group, Inc., 7.50%, 8/15/07 3,808,840
2,000 John Q Hammons Hotels, 8.875%, 2/15/04 1,795,000
3,000 Knight-Ridder, Inc., 6.625%, 11/1/07 2,868,480
5,000 Lilly Industries, 7.75%, 12/1/07 4,700,500
2,200 Lockheed Martin Corp., 6.85%, 5/15/01 2,177,208
2,500 Lockheed Martin Corp., 7.25%, 5/15/06 2,399,975
5,000 Lodgenet Entertainment, 10.25%, 12/15/06 5,012,500
1,285 Markel Corp., 7.25%, 11/1/03 1,271,430
10,000 Marriot International, Inc., 6.625%, 11/15/03 9,592,900
5,700 Marriot International, Inc., 7.875%, 9/15/09 5,645,508
1,000 Masco Corp., 6.125%, 9/15/03 960,040
2,000 McDonnell Douglas Corp., 6.875%, 11/1/06 1,941,920
500 MCI Communication Corp., 7.50%, 8/20/04 504,180
9,800 Millipore Corp., 7.20%, 4/01/02 9,545,200
7,100 Millipore Corp., 7.50%, 4/1/07 6,604,633
2,000 Nabisco, Inc., 6.70%, 6/15/02 1,947,900
1,500 Norfolk Southern Corp., 6.95%, 5/1/02 1,486,845
1,500 Norfolk Southern Corp., 7.35%, 5/15/07 1,485,960
5,000 Premier Parks, 9.25%, 4/1/06 4,650,000
3,400 Premier Parks, 9.75%, 6/15/07 3,174,750
4,000 Premier Parks Corp., 9.75%, 1/15/07 3,880,000
3,815 Raychem Corp., Sr. Notes, 7.20%, 10/15/08 3,690,250
5,000 Raytheon Co., 6.50%, 7/15/05 4,677,300
</TABLE>
16
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par (000) Market Value
--------------------------------------------------------------------------------------------
<S> <C>
CORPORATE NOTES/BONDS (concluded)
$ 3,000 Raytheon Co., 6.45%, 8/15/02 $ 2,921,940
5,500 Solutia, Inc., 6.50%, 10/15/02 5,347,100
2,000 Sun Microsystems, 7.00%, 8/15/02 1,983,120
2,000 Sun Microsystems, 7.50%, 8/15/06 1,998,720
1,000 Sun Microsystems, 7.65%, 8/15/09 1,005,150
3,000 Tandy Corp., 6.95%, 9/1/07 2,922,120
1,000 Tektronix, 7.50%, 8/1/03 980,390
7,000 Textron Inc., 6.75%, 9/15/02 6,873,212
5,000 United Defense Inds, Inc., 8.75%, 11/15/07 4,618,750
2,660 USG Corp., 8.50%, 8/1/05 2,736,475
500 Xerox Corp., 7.15%, 8/1/04 493,560
------------
Total Corporate Notes Bonds
(Cost $237,648,233) 226,217,822
------------
REPURCHASE AGREEMENT - 1.6%
14,738 Goldman Sachs & Co., dated 3/31/00, 6.08%
principal and interest in the amount of
$14,745,467 due 4/03/00, collaterlized
by U.S. Treasury Bonds, par value of
14,269,000, coupon rates of 0.00% to 6.25%,
due 4/18/00 to 5/15/00, market value of
$15,032,853 (Cost $14,738,000) 14,738,000
------------
TOTAL INVESTMENTS (Cost $740,987,492)** 99.9% $937,695,100
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1 981,997
------ ------------
NET ASSETS 100.0% $938,677,097
====== ============
</TABLE>
17
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED) MARCH 31, 2000
NET ASSET VALUE AND REDEMPTION PRICE PER:
Class A Share ($622,579,637 / 26,756,326 shares) $23.27
======
Class B Share ($121,116,697 / 5,216,415 shares) $23.22 ***
======
Class C Share ($33,989,346 / 1,463,637 shares) $23.22 ****
======
Institutional Share ($160,991,417 / 6,864,336 shares) $23.45
======
MAXIMUM OFFERING PRICE PER:
Class A Share ($23.27 / 0.945) $24.62
======
Class B Share $23.22
======
Class C Share $23.22
======
Institutional Share $23.45
======
--------
* Non-income producing security.
** Aggregate cost for federal tax purposes is $740,987,499.
*** Redemption value is $22.06 following a 5% maximum contingent deferred
sales charge.
**** Redemption value is $22.99 following a 1% maximum contingent deferred
sales charge.
(a) Affiliated holding.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the
Year Ended
March 31,
2000
-----------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends $ 8,640,564
Interest 21,691,457
Less: Foreign taxes withheld (20,358)
------------
Total income 30,311,663
------------
Expenses:
Investment advisory fee 7,107,396
Distribution fees:
Class A 1,666,691
Class B 1,239,069
Class C 293,148
Transfer agent fee 439,923
Accounting fees 138,553
Registration fees 88,735
Custody fees 84,889
Directors' fees 47,638
Miscellaneous 145,893
------------
Total expenses 11,251,935
------------
Net investment income 19,059,728
------------
Realized and unrealized gain on investments:
Net realized gain from security transactions 79,177,235
Change in unrealized appreciation/(depreciation) of investments (91,414,939)
------------
Net loss on investments (12,237,704)
------------
Net increase in net assets resulting from operations $ 6,822,024
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended March 31,
2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income $ 19,059,728 $ 19,520,631
Net realized gain from security
transactions 79,177,235 13,846,863
Change in unrealized appreciation/(depreciation)
of investments (91,414,939) 76,741,086
------------- -------------
Net increase in net assets
resulting from operations 6,822,024 110,108,580
------------- -------------
Distributions to Shareholders from:
Net investment income and short-term gains:
Class A Shares (20,460,182) (13,804,511)
Class B Shares (2,925,870) (1,569,776)
Class C Shares (709,061) (128,906)
Class D Shares -- (257,548)
Institutional Shares (4,990,684) (3,045,076)
Net realized long-term gains:
Class A Shares (12,231,556) (8,542,386)
Class B Shares (2,305,977) (1,338,049)
Class C Shares (591,874) (156,874)
Class D Shares -- --
Institutional Shares (2,697,818) (1,772,147)
------------- -------------
Total distributions (46,913,022) (30,615,273)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares 198,166,745 273,356,523
Value of shares issued in reinvestment
of dividends 42,631,746 27,465,074
Cost of shares repurchased (184,819,312) (135,894,760)
------------- -------------
Increase in net assets derived from
capital share transactions 55,979,179 164,926,837
------------- -------------
Total increase in net assets 15,888,181 244,420,144
Net Assets:
Beginning of period 922,788,916 678,368,772
------------- -------------
End of period (including undistributed net
investment income of $2,798,786 and
$4,505,377, for the periods ended
respectively) $ 938,677,097 $ 922,788,916
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
This page intentionally left blank.
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the
Year Ended
March 31,
-----------------------------------------------------------------------------
2000
Per Share Operating Performance:
Net asset value at beginning of period $ 24.15
-------
Income from Investment Operations:
Net investment income 0.49
Net realized and unrealized gain/(loss) on investments (0.20)
-------
Total from Investment Operations 0.29
-------
Less Distributions:
Net investment income and short-term capital gains (0.73)
Net realized long-term capital gains (0.44)
-------
Total distributions (1.17)
-------
Net asset value at end of period $ 23.27
=======
Total Return(1) 1.11%
Ratios to Average Net Assets:
Expenses 1.09%
Net investment income 2.06%
Supplemental Data:
Net assets at end of period (000) $622,580
Portfolio turnover rate 26%
----------
(1) Total Return excludes the effect of sales charge.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996
$ 22.09 $ 17.14 $ 14.68 $ 12.02
------- ------- ------- -------
0.56 0.47 0.39 0.36
2.40 5.21 2.49 3.03
------- ------- ------- -------
2.96 5.68 2.88 3.39
------- ------- ------- -------
(0.57) (0.47) (0.36) (0.41)
(0.33) (0.26) (0.06) (0.32)
------- ------- ------- -------
(0.90) (0.73) (0.42) (0.73)
------- ------- ------- -------
$ 24.15 $ 22.09 $ 17.14 $ 14.68
======= ======= ======= =======
13.91% 33.82% 19.90% 28.86%
1.12% 1.14% 1.27% 1.31%
2.64% 2.49% 2.51% 2.72%
$649,664 $491,575 $278,130 $200,020
10% 7% 13% 15%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the
Year Ended
March 31,
-------------------------------------------------------------------------------
2000
Per Share Operating Performance:
Net asset value at beginning of period $ 24.11
-------
Income from Investment Operations:
Net investment income 0.31
Net realized and unrealized gain/(loss) on investments (0.20)
-------
Total from Investment Operations 0.11
-------
Less Distributions:
Net investment income and short-term capital gains (0.56)
Net realized long-term capital gains (0.44)
-------
Total distributions (1.00)
-------
Net asset value at end of period $ 23.22
=======
Total Return(1) 0.36%
Ratios to Average Net Assets:
Expenses 1.84%
Net investment income 1.30%
Supplemental Data:
Net assets at end of period (000) $121,117
Portfolio turnover rate 26%
----------
(1) Total Return excludes the effect of sales charge.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
For the Years Ended March 31,
----------------------------------------------------------------------------
1999 1998 1997 1996
$ 22.08 $ 17.16 $ 14.71 $12.01
------- ------- ------- ------
0.41 0.34 0.26 0.21
2.38 5.20 2.51 3.05
------- ------- ------- ------
2.79 5.54 2.77 3.26
------- ------- ------- ------
(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
======= ======= ======= ======
13.10% 32.84% 19.00% 27.89%
1.87% 1.89% 2.02% 2.06%
1.90% 1.75% 1.84% 1.97%
$110,680 $64,498 $17,311 $4,178
10% 7% 13% 15%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the
Year Ended
March 31,
------------------------------------------------------------------------------
2000
Per Share Operating Performance:
Net asset value at beginning of period $ 24.12
-------
Income from Investment Operations:
Net investment income 0.31
Net realized and unrealized gain/(loss) on investments (0.21)
-------
Total from Investment Operations 0.10
-------
Less Distributions:
Net investment income and short-term gains (0.56)
Net realized long-term capital gains (0.44)
-------
Total distributions (1.00)
-------
Net asset value at end of period $ 23.22
=======
Total Return(3) 0.31%
Ratios to Average Net Assets:
Expenses 1.85%
Net investment income 1.34%
Supplemental Data:
Net assets at end of period (000) $33,989
Portfolio turnover rate 26%
----------
(1) Commencement of operations.
(2) Annualized.
(3) Total Return excludes the effect of sales charge.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<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)
(0.33)
-------
(0.68)
-------
$ 24.12
=======
11.50%
1.91%2
2.05%2
$17,450
10%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<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.
29
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
For the
Year Ended
March 31,
------------------------------------------------------------------------------
2000
Per Share Operating Performance:
Net asset value at beginning of period $ 24.36
-------
Income from Investment Operations:
Net investment income 0.55
Net realized and unrealized gain/(loss) on investments (0.21)
-------
Total from Investment Operations 0.34
-------
Less Distributions:
Net investment income and short-term capital gains (0.81)
Net realized long-term capital gains (0.44)
-------
Total distributions (1.25)
-------
Net asset value at end of period $ 23.45
=======
Total Return 1.36%
Ratios to Average Net Assets:
Expenses 0.84%
Net investment income 2.32%
Supplemental Data:
Net assets at end of period (000) $160,991
Portfolio turnover rate 26%
----------
(1) Commencement of operations.
(2) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
For the Period
Nov. 2, 1995(1)
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%(2)
2.88% 2.75% 2.83% 2.89%(2)
$144,995 $103,817 $34,771 $11,768
10% 7% 13% 15%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- Significant Accounting Policies
Flag Investors Value Builder Fund, Inc. ("the Fund"), which was
organized as a Maryland Corporation on March 5, 1992, began operations June 15,
1992. The Fund is registered under the Investment Company Act of 1940 (the "40
Act") 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 began
operations June 15, 1992; Class B Shares, which began operations January 3,
1995; Institutional Shares, which began operations November 2, 1995; and Class C
Shares, which began operations April 8, 1998. The Fund previously offered Class
DShares which were converted to Class A Shares on November 20, 1998.
The Class A, Class B, and Class C Shares are subject to different sales
charges. The Class A Shares have a front-end sales charge and the Class B and C
Shares have a contingent deferred sales charge. In addition each of the classes
has a different distribution fee. The Institutional Shares do not have a
front-end sales charge, a contingent deferred sales charge or a distribution
fee.
When preparing the Fund's financial statements, management makes
estimates and assumptions 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. SECURITY VALUATION -- 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 March 31, 2000 there were no Board Valued
Securities. The Fund values short-term obligations with maturities
of 60 days or less at amortized cost.
32
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTE 1 -- concluded
B. REPURCHASE AGREEMENTS--The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the seller agrees to repurchase at a set time and
price. The third party, which is the seller's custodial bank, holds
the collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the seller
defaults. The Fund's access to the collateral may be delayed or
limited if the seller defaults and the value of the collateral
declines or if the seller enters into an insolvency proceeding.
C. FEDERAL INCOME TAXES-- Fund determines its distributions according
to income tax regulations, which may be different from 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 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. 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.
E. AFFILIATED COMPANY--Under the 40 Act, a company in which there is a
direct or indirect ownership, control of or voting power over 5
percent or more of the outstanding voting shares or control of or
by, or common control under, another company or persons.
33
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICCC"), an indirect subsidiary
of Deutsche Bank A.G., is the Fund's investment advisor. On June 4, 1999
Bankers Trust Corporation, then the parent company of ICCC, was acquired by
DeutscheBankA.G. As a result, ICCC became an indirect wholly owned subsidiary of
Deutsche Bank A.G.
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. For the year ended March 31, 2000, ICCC's
advisory fee was $7,107,396 of which $567,535 was payable at the end of the
period.
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: 0.75% 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. For the year ended March 31, 2000, ICCC's fee
was $138,553 of which $11,501 was payable at the end of the period.
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. For
the year ended March 31, 2000, ICCC's fee was $439,923 of which $16,831 was
payable at the end of the period.
Certain officers and directors of the Fund are also officers or
directors of ICCC.
ICC Distributors, Inc. 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
include a 0.25% shareholder servicing fee. For the year ended March 31, 2000,
the distribution fee was $3,198,908 of which $256,837 was payable at the end of
the period.
34
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTE 2--concluded
Bankers Trust Company, an affiliate of the advisor, is the Fund's
custodian. For the year ended March 31, 2000, custody fees amounted to $84,889,
of which $17,983 was payable at the end of the period.
The Fund participates along with other Flag Investors Funds in a
retirement plan for eligible Directors. The actuarially computed pension
expense allocated to the Fund for the year ended March 31, 2000 was $21,568 and
the accrued liability was $51,055.
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:
Class A Shares
------------------------------
For the For the
Year Ended Year Ended
March 31, 2000 March 31, 1999
--------------- --------------
Shares sold 4,644,618 8,412,079
Shares issued to shareholders on
reinvestment of dividends 1,246,224 927,793
Shares redeemed (6,032,319) (4,698,072)
------------ -------------
Net increase/(decrease) in shares outstanding (141,477) 4,641,800
============ =============
Proceeds from sale of shares $111,848,190 $ 184,153,452
Value of reinvested dividends 29,878,743 20,162,879
Cost of shares redeemed (141,026,400) (102,312,507)
------------ -------------
Net increase from capital share transactions $ 700,533 $ 102,003,824
============ =============
35
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 continued
Class B Shares
-------------------------------
For the For the
Year Ended Year Ended
March 31, 2000 March 31, 1999
--------------- ---------------
Shares sold 1,418,819 1,963,448
Shares issued to shareholders on
reinvestment of dividends 202,275 119,699
Shares redeemed (994,920) (414,281)
----------- -----------
Net increase in shares outstanding 626,174 1,668,866
=========== ===========
Proceeds from sale of shares $34,087,833 $42,732,188
Value of reinvested dividends 4,844,150 2,606,348
Cost of shares redeemed (23,119,651) (8,899,431)
----------- -----------
Net increase from capital share transactions $15,812,332 $36,439,105
=========== ===========
Class C Shares
-------------------------------
For the Period
For the April 8, 1998(1)
Year Ended through
March 31, 2000 March 31, 1999
--------------- ---------------
Shares sold 876,029 735,840
Shares issued to shareholders on
reinvestment of dividends 49,343 12,033
Shares redeemed (185,256) (24,353)
----------- -----------
Net increase in shares outstanding 740,116 723,520
=========== ===========
Proceeds from sale of shares $21,144,728 $16,181,630
Value of reinvested dividends 1,179,480 261,764
Cost of shares redeemed (4,293,788) (544,762)
----------- -----------
Net increase from capital share transactions $18,030,420 $15,898,632
=========== ===========
----------
(1) Commencement of operations.
36
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
NOTE 3 -- concluded
Institutional Shares
--------------------------------
For the For the
Year Ended Year Ended
March 31, 2000 March 31, 1999
--------------- ---------------
Shares sold 1,334,488 2,172,982
Shares issued to shareholders on
reinvestment of dividends 278,818 192,473
Shares redeemed (702,190) (1,076,590)
------------ ------------
Net increase in shares outstanding 911,116 1,288,865
============ ============
Proceeds from sale of shares $ 31,085,994 $ 46,655,765
Value of reinvested dividends 6,729,373 4,221,557
Cost of shares redeemed (16,379,473) (22,007,214)
------------ ------------
Net increase from capital share transactions $ 21,435,894 $ 28,870,108
============ ============
NOTE4 -- Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $341,501,398 and sales of investment securities
aggregated $243,341,685 for the year ended March 31, 2000.
On March 31, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $279,341,620
and aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over value was $82,634,019.
Note 5 -- Net Assets
On March 31, 2000, net assets consisted of:
Paid-in capital:
Class A Shares $407,844,542
Class B Shares 105,887,737
Class C Shares 33,929,051
Institutional Shares 135,494,651
Undistributed net realized gain from security transactions 56,014,722
Unrealized appreciation of investments 196,707,608
Undistributed net investment income 2,798,786
-------------
$938,677,097
=============
37
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Flag Investors Value Builder Fund, Inc.
In our opinion, the accompanying statement of net assets and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Value Builder Fund, Inc. (the "Fund") at March 31, 2000, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
May 9, 2000
38
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
FOR THETAX YEAR ENDED MARCH 31, 2000
The amounts shown may differ from those elsewhere in this report
because of differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $17,827,225 from
long-term capital gains, all of which is taxable at the 20% capital gains rate.
Of ordinary distributions made during the fiscal year ended March 31,
2000, 22.59% qualifies for the dividends received deduction available to
corporate shareholders.
Of the net investment income distributions made during the year ended
March 31, 2000, 1.27% has been derived from investments inU.S. Government and
Agency Obligations.
39
<PAGE>
This page intentionally left blank.
<PAGE>
FLAG INVESTORS VALUE BUILDER FUND
--------------------------------------------------------------------------------
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
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.
