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FLAG INVESTORS
[PHOTOGRAPH APPEARS HERE]
FLAG
INVESTORS
REAL ESTATE
SECURITIES
FUND
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE>
REPORT HIGHLIGHTS
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o The total return for the Fund's Class A Shares was 22.0% for the year
versus a return of 19.7% for the Wilshire Real Estate Securities Index.
o Hotel and office/industrial companies were the best performing industry
sectors for the year, with total returns of 30.1% and 27.5%, respectively.
o With new development at reasonable levels, and rents and occupancies at
attractive levels, the outlook for real estate remains favorable.
o Both debt and equity capital are expected to remain available on attractive
terms. This should fuel continued significant asset growth and sector
consolidation.
o REITs are trading at a historically attractive price/earnings ratio
compared to the broad stock market.
FUND PERFORMANCE
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Growth of a $10,000 Investment in Class A Shares*
January 3, 1995-December 31, 1997
$10,000 invested in the Real Estate Securities Fund
Class A Shares at inception on January 3, 1995
was worth $19,136 on December 31, 1997.
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
1/95 10,000
3/95 10,142
6/95 10,638
9/95 11,274
12/95 11,819
3/96 12,021
6/96 12,551
9/96 13,317
12/96 15,684
3/97 16,207
6/97 16,764
9/97 19,044
12/97 19,136
*These figures assume the reinvestment of dividends and capital gains
distributions and exclude the impact of any sales charge. If the maximum 4.50%
sales charge were reflected, the quoted performance would be lower. Since
investment return and principal value will fluctuate, an investor's shares may
be worth more or less than their original cost when redeemed. Past performance
is not an indicator of future results.
1
<PAGE>
LETTER TO SHAREHOLDERS
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Dear Shareholders:
We are pleased to report on the progress of the Flag Investors Real Estate
Securities Fund for 1997. The Fund seeks total return, with a significant income
component, by investing in a diversified portfolio of REITs and real estate
operating companies.
The sub-advisor and portfolio manager--ABKB/LaSalle Securities Limited--has
more than a dozen professionals solely dedicated to investing in public real
estate securities. Its management team brings direct operating experience in
property development, management, investment and finance, as well as more than a
decade of successful REIT portfolio management experience, to its efforts on
behalf of your Fund.
Fund Performance
Since its inception at the beginning of 1995, the Flag Investors Real
Estate Securities Fund has consistently produced competitive returns for its
shareholders (see table below).
Total Return Performance*
Wilshire
Class A Class B Real Estate
For the periods ended 12/31/97 Shares Shares Index
- -------------------------------------------------------------------------------
One Year 22.0% 21.1% 19.7%
...............................................................................
Since Inception (1/3/95)** 24.2% 23.3% 23.0%
...............................................................................
- ----------
Source: ABKB/LaSalle Securities; Wilshire Associates
On December 31, 1997, the net asset value (NAV) was $15.78 per Class
A Share and $15.71 per Class B Share. In addition, 12 monthly dividends and
one capital gains distribution were paid in 1997, totaling $1.07 per Class A
Share and $0.97 per Class B Share.
*These figures assume the reinvestment of dividends and capital gains
distributions and exclude the impact of any sales charge. If the sales charge
were reflected, 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. Since investment return and principal value will fluctuate, an
investor's shares may be worth more or less than their original cost when
redeemed. Past performance is not an indicator of future results. Please
review the Additional Performance Information on page 9.
**Annualized.
2
<PAGE>
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Market Commentary
Public real estate's nearly 20% return in 1997 was ahead of the industry's
long-term average return, but lagged the broad market. Essentially, real estate
did what it should last year: provide a solid total return and significant
current income with less volatility than is likely in the general market. In a
spectacular broad market such as we saw in 1997, real estate companies should
not keep pace, just as the extra 12% total return the REITs produced over the
Standard & Poor's 500 (S&P 500) Index in 1996 is not likely to be repeated soon.
We find it useful to calculate the relationship between the price/earnings
ratios of the real estate companies and the S&P 500 from time to time. The S&P's
price/earnings ratio has been higher than the REITs' since 1990, and this spread
has widened considerably over the past year. By this measure, the REITs are as
well-priced versus the broad market as we have seen in over a decade of REIT
investment.
REIT Forward Funds from Operations Multiple vs. S&P* Earnings Multiple
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
REIT Price/4 Quarters
S&P 500 Forward FFO Multiple
Q1 86 14.61 14
Q2 15.2 14.85
Q3 14.02 15.14
Q4 14.68 14.97
Q1 87 17.26 16.28
Q2 17.52 16.66
Q3 17.26 15.03
Q4 12.61 12.78
Q1 88 12.51 13.51
Q2 12.18 13.53
Q3 11.61 13.52
Q4 11.34 14.14
Q1 89 11.52 13.96
Q2 12.18 14.6
Q3 13.53 14.47
Q4 13.67 14.52
Q1 90 13.54 13.61
Q2 14.32 13.37
Q3 12.24 10.52
Q4 13.34 12.06
Q1 91 15.47 12.8
Q2 15.96 12.32
Q3 17.01 12.98
Q4 18.79 14.64
Q1 92 17.86 12.96
Q2 17.44 12.95
Q3 17.55 13.78
Q4 17.68 13.98
Q1 93 17.89 15.3
Q2 17.33 14.35
Q3 16.9 14.74
Q4 16.37 12.54
Q1 94 15.2 12.28
Q2 14.69 12.08
Q3 14.78 11.43
Q4 13.92 11.3
Q1 95 13.92 10.87
Q2 14.5 11.1
Q3 15.07 11.22
Q4 15.88 11.36
Q1 96 15.36 11.27
Q2 15.62 11.4
Q3 15.5 11.78
Q4 17.4 13.7
Q1 97 16.11 12.55
Q2 18.83 12.91
Q3 20.15 13.65
Q4 20.9 13.11
- --------
Source: Goldman Sachs
*The S&P 500 Composite is an unmanaged index that is a widely recognized
indicator of general market performance.
1997: A Very Good Year for Real Estate Companies
Long term, the typical REIT seeks to provide an ongoing total return of
roughly 11% to 14%, including internal growth of 2% to 4%, growth through
acquisition or financial structuring of 2% to 5%, plus a dividend of 5% to 7%.
Total returns for most companies exceeded this in 1997 with help from improving
sector and regional fundamentals, rapid asset growth or favorable capital
transactions--and often all three.
3
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
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A look at the real estate industry and its public owners shows a year when
just about everything went right:
o Real estate markets were generally healthy throughout the United States,
with additions to the investment stock largely being made at a prudent
rate and in carefully planned and researched projects.
o Acquisition opportunities remained plentiful, and many of the better
companies were able to dramatically expand their portfolios at favorable
investment spreads.
o More capital flowed into the sector than ever before, with companies able
to add equity quickly and easily, and add debt at historically favorable
rates.
o Strong operating results were produced for most companies and almost
every sector, with many companies soundly beating analysts' estimates.
o The public real estate companies produced well-above historical average
total returns for their investors, returns at least as good as would be
expected from their operating results.
By year-end, it is likely that the total capital of public real estate
companies exceeded the direct real estate holdings of pension funds. With
pension fund real estate securitization expected to be a major new source of
assets for REITs, the ratio should shift rapidly in favor of the public
companies.
Given a continued strong equity market and low interest rates, the public
companies should be able to continue to execute their growth plans at a rapid
clip. If the broad market takes a bath, many of these companies should reassume
their traditional roles of safe havens in troubled times. If external capital is
in short supply, the public real estate companies may well show strong relative
performance, since their ability to effect tax-free exchanges for Operating
Partnership Units lets them buy and grow to a certain extent without coming to
the market to raise additional cash.
1998: Strong Results Should Produce Solid Returns
We believe the factors are in place for another attractive year in asset
growth and earnings:
o The typical public real estate company is expected to produce
double-digit Funds From Operations (FFO) / share growth, well above the
projected long-term growth rate of the industry.
4
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o Office (especially Central Business District) and full service hotels
again have the best fundamental prospects, but all sectors except retail
should do well.
o The real estate markets are moving toward equilibrium, but a dynamic
equilibrium with supply and demand in balance can produce sustained
profit growth. In 1998 to 1999, the greater risk is a major decline in
capitalization rates reducing investment spreads on acquisitions.
o Consolidation and expansion--private to public, small to large,
specialized to diversified--will concentrate a larger share of industry
assets in dynamically run public companies with plentiful sources and low
costs of capital.
o Variations on the REIT theme--paper-clipped shares, public opportunity
funds, offshore or leveraged spin-offs, service providers, co-branding,
new property sectors--will offer more opportunities for sophisticated
analysts to identify investments that should produce extra returns in a
maturing market.
Our preliminary estimates for 1999 call for a moderation in FFO growth
rates in most sectors. The 1999 growth rates for the hotel and diversified
sectors should be more indicative of their long-term prospects than 1998's
numbers, when high profile mergers by the paired-share REITs will likely create
earnings spikes.
While there is no strong argument for pessimism today, this scenario could
be derailed by recession, which most likely would be brought on by external
factors, especially the current Asian problems, the failure of the Euro to take
hold, or serious political or military dislocation in the developing world.
In a negative environment--including deflation--real estate is relatively
well protected, at least over the short to intermediate term. Tenants provide
the first line of defense, and longer-duration assets such as net lease, health
care and some office/industrial properties should hold up better and longer.
This is a time of vigilance, and our strategy increasingly focuses on
companies that may be less affected by, or even benefit from, some of these
possible trends. Only time will tell which will come to pass. Our role as a
prudent investor in real estate securities is to both be prudent and to
invest--always under conditions of uncertainty.
5
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
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Sector Fundamentals
1997 was the year the OFFICE companies came to the forefront of the
traditional real estate sectors. With a number of Initial Public Offerings,
excellent price appreciation and major growth initiatives by many of the
existing companies, the sector more than doubled in asset value and moved from
21% to 32% of the market-weighted Wilshire Real Estate Index, a real estate
benchmark. The past several years have been a historically good time to buy
office properties, and owners are now reaping the benefits of increased demand
from an expanding business community. Downtown properties should show strong
relative returns in the next couple of years.
INDUSTRIAL markets are generally closer to equilibrium, with prices of
existing properties at replacement value and at least some construction in
almost every market. There is a reasonable chance overbuilding will occur in
selected markets, and it becomes increasingly important that portfolio companies
have strong managements and an ability to work effectively within an evolving
corporate leasing environment. Consolidation will continue to be a key factor in
the continued success of companies in this sector.
The defining factor in the HOTEL business in 1997 was the emergence of the
paired-share company. Not only are these the largest and fastest growing REITs
in the sector, but the large percentage of their bottom line generated by
operating businesses creates dynamics not found in any other sector of the REIT
business. Hotels should produce by far the highest per share earnings growth
again in 1998, with the continued outperformance of FULL-SERVICE HOTELS, helped
by increasing room rates and limited additional supply, especially downtown,
dampened somewhat by some potential overbuilding and operating problems among
the LIMITED SERVICE and EXTENDED STAY categories.
The APARTMENT market is in equilibrium, with moderate levels of supply more
or less balancing increases in demand in most markets. Much of the above trend
line rental rate increases has been achieved. Demographics point to demand for
higher-end properties with house-like amenities, but capital availability and
special types of financing have a particularly strong influence on this sector,
especially when a rent/buy decision is being made. Apartments have offered a
moderate return over the past several periods, and we expect this to continue.
RETAIL has been a difficult sector for several years, with moderate demand
more than offset by continuing supply levels that were not much affected by the
real estate cycle of the early 1990s. This has produced an environment that
6
<PAGE>
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has resulted in sub-par performance by the typical company. LaSalle's economists
expect this environment to continue for the foreseeable future. We in the
securities group are somewhat more optimistic, and have had success in
identifying companies that can prosper in this environment by either developing
attractive new retail formats, or by intelligently consolidating what remains,
at its core, a fragmented business of aging entrepreneurs.
The Portfolio At Year-End
At December 31, the Fund's holdings reflected our favorable outlook for the
strongest companies in the office/industrial and hotel sectors. These groups
were significantly overweighted compared with the sectors' weightings in the
REIT index. The most significant underweightings in our holdings are in the
health care and retail groups, where we see continued slower growth except in
exceptional circumstances.
[PIE CHART APPEARS HERE--SEE PLOT POINTS BELOW]
Factory Outlets 2% Manufactured
Housing 2%
Hotels 20%
Apartments 19%
Retail/Neighborhood
and Community Centers 8% Regional Malls 5%
Self-Storage 5% Office/Industrial 39%
To a considerable extent, though, sectors and regions are becoming less
relevant. Many of the best companies are becoming more opportunistic and
participate in multiple property segments and regions, sometimes outside the
United States. The critical investment focus is shifting to the companies'
abilities to efficiently source and use capital, and the intelligence, energy
and creativity of their managements. We believe there are attractive companies
that will produce above average returns in virtually every market segment today.
Sincerely,
/s/ W. K. Morrill, Jr. /s/ Keith R. Pauley
- ---------------------- -------------------
William K. Morrill, Jr. Keith R. Pauley
President Executive Vice President
January 20, 1998
7
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
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Dividend Declaration
1997 Year-End Dividend
The Board of Directors has declared a year-end per share distribution
payable on December 19, 1997 to shareholders of record on December 12, 1997 .
Class A Class B Institutional
Shares Shares Shares
------- ------- -------------
Long-term capital gains $.290 $.290 $.290
Short-term capital gains .180 .180 .180
----- ----- -----
Total distributions $.470 $.470 $.470
Dividends for Calendar 1997
Total dividends declared for calendar 1997 are as follows:
Class A Class B Institutional
Shares Shares Shares
------- ------- -------------
Income $ .600 $.500 $.424
Long-term capital gains .290 .290 .290
Short-term capital gains .180 .180 .180
------ ----- -----
Total distributions $1.070 $.970 $.894
Shareholders who have elected to participate in the Fund's dividend
reinvestment plan have received their distribution in additional shares of the
Fund. If you are not currently a plan participant but would like to have your
dividends reinvested at net asset value, please contact your investment
representative or the Fund at 1-800-553-8080.
8
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES 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 Fund's
performance to that of an appropriate market index. This graph must measure the
growth of a $10,000 hypothetical investment from the Fund's inception on January
3, 1995 through the most recent fiscal year-end and reflects the impact of the
Fund's total expenses and the currently effective 4.50% maximum initial sales
charge for the Fund's Class A Shares. The graph reflects a 3.00% contingent
deferred sales charge for the Fund's Class B Shares, which is the applicable
sales charge for the represented time period.
While the following charts are required by SEC rules, such comparisons are
of limited utility since the index shown is not adjusted for sales charges and
ongoing management, distribution and operating expenses applicable to the Fund.
An investor who wished to replicate the total return of this index would have
had to own the securities that it represents. Acquiring these securities would
require a considerable amount of money and would incur expenses that are not
reflected in the index results.
The SEC also requires that we report the Fund's total return, according to
a standardized formula, for various time periods through the end of the most
recent calendar quarter. The SEC total return figures differ from those we
reported because the time periods may be different and because the SEC
calculation includes the impact of the currently effective maximum sales charge.
The Class A Shares' total returns reflect the 4.50% maximum initial sales
charge. The Class B Shares' one-year total return reflects the applicable 4.00%
contingent deferred sales charge, while the total return since inception
reflects the applicable 3.00% contingent deferred sales charge. These total
returns correspond to those experienced by individual shareholders only if their
shares were purchased on the first day of each time period and the maximum sales
charge was paid. Any performance figures shown are for the full period
indicated. Since investment return and principal value will fluctuate, an
investor's shares may be worth more or less than their original cost when
redeemed. Past performance is not an indicator of future results.
9
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
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Additional Performance Information (continued)
Change in Value of a $10,000 Investment in Class A Shares*
January 3, 1995-December 31, 1997
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
Flag Investors Wilshire
Real Estate Real Estate
Securities Fund Securities Index
$18,275 $18,907
1/95 9,550 10,000
3/95 9,686 10,210
6/95 10,159 10,649
9/95 10,767 11,150
12/95 11,287 11,551
3/96 11,480 12,036
6/96 11,987 12,602
9/96 12,718 13,345
12/96 14,978 15,801
3/97 15,478 16,085
6/97 16,010 16,825
9/97 18,187 18,945
12/97 18,275 18,907
Average Annual Total Return*
Periods Ended 12/31/97 1 Year 5 Years Since Inception**
- -------------------------------------------------------------------------
Class A Shares 16.52% -- 22.34%
.........................................................................
*These figures assume the reinvestment of dividends and capital gains
distributions and include the Fund's 4.50% maximum sales charge. Past
performance is not an indicator of future results.
**1/3/95.
10
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
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Change in Value of a $10,000 Investment in Class B Shares*
January 3, 1995-December 31, 1997
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
Flag Investors Wilshire
Real Estate Real Estate
Securities Fund Securities Index
$18,421 $18,907
1/95 10,000 10,000
3/95 10,125 10,210
6/95 10,602 10,649
9/95 11,218 11,150
12/95 11,740 11,551
3/96 11,911 12,036
6/96 12,418 12,602
9/96 13,147 13,345
12/96 15,457 15,801
3/97 15,943 16,085
6/97 16,467 16,825
9/97 18,678 18,945
12/97 18,421 18,907
Average Annual Total Return*
Periods Ended 12/31/97 1 Year 5 Years Since Inception**
- -----------------------------------------------------------------------------
Class B Shares 17.11% -- 24.95%
.............................................................................
*These figures assume the reinvestment of dividends and capital gains
distributions and include the Fund's applicable sales charge. Past performance
is not an indicator of future results.
**1/3/95.
11
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
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Additional Performance Information (concluded)
Change in Value of a $10,000 Investment in Institutional Shares*
March 31, 1997-December 31, 1997
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
Wilshire Flag Investors
Real Estate Real Estate
Securities Index Securities Fund
$11,763 $11,884
3/97 10,000 10,000
9,680 9,584
9,970 9,897
6/97 10,469 10,374
10,814 10,811
10,738 10,656
9/97 11,791 11,820
11,284 11,455
11,510 11,645
12/97 11,763 11,884
Average Annual Total Return*
Periods Ended 12/31/97 1 Year 5 Years Since Inception**
- -------------------------------------------------------------------------------
Institutional Shares -- -- 18.84%
...............................................................................
*These figures assume the reinvestment of dividends and capital gains
distributions. Past performance is not an indicator of future results.
**3/31/97.
12
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
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Statement of Net Assets December 31, 1997
<TABLE>
<CAPTION>
Market Percent Unrealized
Market Value of Net Gain/
Shares Security Price (Note 1) Assets (Loss)
- ------------------------------------------------------------------------------------
<S><C>
COMMON STOCKS: 99.5%
Real Estate Investment Trusts: 89.5%
Apartments: 19.0%
43,000 Apartment Investment &
Management Company $36.75 $ 1,580,250 3.0% $ 178,110
48,400 Avalon Properties, Inc. 30.94 1,497,375 2.9 315,059
42,900 Bay Apartment
Communities, Inc. 39.00 1,673,100 3.2 386,320
9,800 Brandywine Realty Trust 25.13 246,225 0.5 35,840
35,050 Equity Residential
Properties Trust 50.56 1,772,216 3.4 454,325
29,300 Irvine Apartment
Communities, Inc. 31.81 932,106 1.8 277,120
19,900 Oasis Residential, Inc. 22.31 444,019 0.9 (3,833)
42,652 Post Properties, Inc. 40.63 1,732,758 3.3 241,809
---------- ---- ----------
9,878,049 19.0 1,884,750
Factory Outlets: 2.0%
27,200 Chelsea GCA Realty, Inc. 38.19 1,038,700 2.0 181,224
---------- ---- ----------
Hotels: 14.3%
38,300 American General
Hospitality Corp. 26.75 1,024,525 2.0 78,083
35,500 FelCor Suite Hotels, Inc. 35.50 1,260,250 2.4 129,589
83,701 Patriot American Hospitality, Inc. 28.81 2,411,635 4.6 840,465
47,200 Starwood Lodging Trust 57.88 2,731,700 5.3 1,035,079
---------- ---- ----------
7,428,110 14.3 2,083,216
Manufactured Housing: 1.8%
26,200 Sun Communities, Inc. 35.94 941,563 1.8 180,941
---------- ---- ----------
Office/Industrial: 36.5%
46,600 Boston Properties, Inc. 33.06 1,540,712 3.0 84,611
32,900 Commercial Net Lease Realty 17.87 588,087 1.1 89,064
51,600 Crescent Real Estate
Equities Company 39.38 2,031,750 3.9 148,933
97,500 Duke Realty Investments, Inc. 24.25 2,364,375 4.6 625,084
82,479 Equity Office Properties Trust 31.56 2,603,271 5.0 484,630
21,700 First Industrial Realty Trust, Inc. 36.12 783,912 1.5 59,132
11,300 Great Lakes REIT, Inc. 19.44 219,644 0.4 42,959
51,500 Highwoods Properties, Inc. 37.19 1,915,156 3.7 350,874
</TABLE>
13
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Percent Unrealized
Market Value of Net Gain/
Shares Security Price (Note 1) Assets (Loss)
- ------------------------------------------------------------------------------------
<S><C>
COMMON STOCKS (concluded)
Real Estate Investment Trusts (concluded)
Office/Industrial (concluded)
50,300 Mack-Cali Realty Corporation $41.00 $ 2,062,300 4.0% $ 276,824
40,800 Reckson Associates Realty Corp. 25.38 1,035,300 2.0 62,575
60,000 Spieker Properties, Inc. 42.88 2,572,500 5.0 710,410
36,700 Weeks Corporation 32.00 1,174,400 2.3 118,210
----------- ---- ----------
18,891,408 36.5 3,053,307
Regional Malls: 3.7%
18,200 Macerich Company 28.50 518,700 1.0 24,865
31,068 Simon DeBartolo Group, Inc. 32.69 1,015,535 2.0 160,140
15,000 Trammel Crow Company 25.75 386,250 0.7 123,750
----------- ---- ----------
1,920,485 3.7 308,755
Retail/Neighborhood and Community Centers: 7.5%
25,900 Developers Diversified Realty
Corporation 38.25 990,675 1.9 149,956
34,200 Federal Realty Investment Trust 25.75 880,650 1.7 19,591
43,000 Vornado Realty Trust 46.94 2,018,313 3.9 970,030
----------- ---- ----------
3,889,638 7.5 1,139,577
Self-Storage: 4.7%
52,500 Public Storage, Inc. 29.37 1,542,187 3.0 186,256
23,100 Storage USA, Inc. 39.94 922,556 1.7 109,897
----------- ---- ----------
2,464,743 4.7 296,153
Real Estate Operating Companies: 10.0%
Diversified: 0.8%
35,500 Capital Trust - Class A* 11.25 399,375 0.8 9,362
----------- ---- ----------
Hotels: 5.7%
17,000 CapStar Hotel Company* 34.31 583,312 1.1 (5,313)
120,500 Host Marriott Corp.* 19.63 2,364,813 4.6 362,840
----------- ---- ----------
2,948,125 5.7 357,527
Office/Industrial: 2.6%
67,400 Catellus Development Corporation 20.00 1,348,000 2.6 90,082
----------- ---- ----------
Regional Malls: 0.9%
14,000 The Rouse Company 32.75 458,500 0.9 96,188
----------- ---- ----------
Total Common Stocks
(Cost $41,925,613) 51,606,695 99.5 9,681,082
----------- ---- ----------
</TABLE>
14
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) December 31, 1997
Market Percent
Par Value of Net
(000) Security (Note 1) Assets
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT: 2.4%
$1,225 Goldman Sachs & Co., 6.25%
Dated 12/31/97, to be repurchased at
$1,225,425 on 1/2/98, collateralized by
U.S. Treasury Notes with a market
value of $1,249,772.
(Cost $1,225,000) $ 1,225,000 2.4%
----------- -----
Total Investment in Securities-- 101.9%
(Cost $43,150,613)** 52,831,695 101.9
Liabilities in Excess of Other Assets, Net (976,298) (1.9)
----------- -----
Net Assets $51,855,397 100.0%
=========== =====
Net Asset Value and Redemption Price Per:
Class A Share
($41,768,471 / 2,647,320 shares outstanding) $15.78
======
Class B Share
($9,798,616 / 623,533 shares outstanding) $15.71***
======
Institutional Share
($288,310 / 18,119 shares outstanding) $15.91
======
Maximum Offering Price Per:
Class A Share
($15.78 / 0.955) $16.52
======
Class B Share $15.71
======
Institutional Share $15.91
======
- --------
*Non-income producing security.
**Aggregate cost for federal tax purposes was $42,774,543.
***Redemption value is $15.09 following a maximum 4% contingent deferred sales
charge.
See Notes to Financial Statements.
15
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
------------
1997
- -----------------------------------------------------------------------------------
<S><C>
Investment Income (Note 1):
Dividends $1,967,342
Interest 45,132
----------
Total income 2,012,474
----------
Expenses:
Investment advisory fee (Note 2) 255,425
Distribution fee (Note 2) 152,057
Legal 69,887
Accounting fee (Note 2) 36,237
Transfer agent fee (Note 2) 33,405
Registration fees 29,577
Printing and postage 28,799
Organizational expense (Note 1) 27,771
Audit 24,771
Custodian fee (Note 2) 13,846
Directors' fees 1,508
----------
Total expenses 673,283
Less: Fees waived (Note 2) (128,442)
----------
Net expenses 544,841
----------
Net investment income 1,467,633
----------
Realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 1,997,900
Change in unrealized appreciation or depreciation of investments 4,596,911
----------
Net gain on investments 6,594,811
----------
Net increase in net assets resulting from operations $8,062,444
==========
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended December 31,
- -------------------------------------------------------------------------------------
1997 1996
<S><C>
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 1,467,633 $ 832,831
Net realized gain from security transactions 1,997,900 489,391
Change in unrealized appreciation or
depreciation of investments 4,596,911 4,266,134
----------- -----------
Net increase in net assets resulting from operations 8,062,444 5,588,356
----------- -----------
Distributions to Shareholders from:
Net investment income:
Class A Shares (1,271,684) (600,459)
Class B Shares (238,106) (158,265)
Institutional Shares (1,925) --
Net realized capital gains:
Class A Shares (1,205,375) (314,488)
Class B Shares (274,879) (82,650)
Institutional Shares (8,516) --
Return of capital:
Class A Shares -- (21,539)
Class B Shares -- (5,650)
Institutional Shares -- --
----------- -----------
Total distributions (3,000,485) (1,183,051)
----------- -----------
Capital Share Transactions (Note 3):
Proceeds from sale of shares 22,600,633 10,892,733
Value of shares issued in reinvestment of dividends 2,621,448 974,878
Cost of shares repurchased (3,539,713) (1,349,523)
----------- -----------
Increase in net assets derived from
capital share transactions 21,682,368 10,518,088
----------- -----------
Total increase in net assets 26,744,327 14,923,393
Net Assets:
Beginning of year 25,111,070 10,187,677
----------- -----------
End of year $51,855,397 $25,111,070
=========== ===========
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights--Class A Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
For the Year January 3, 1995(1)
Ended through
December 31, December 31,
- -----------------------------------------------------------------------------------
1997 1996 1995
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 13.89 $ 11.20 $10.00
------- ------- ------
Income from Investment Operations:
Net investment income 0.52 0.61 0.56
Net realized and unrealized gain
on investments 2.44 2.90 1.21
------- ------- ------
Total from Investment Operations 2.96 3.51 1.77
------- ------- ------
Less Distributions:
Distributions from net investment
income (0.60) (0.58) (0.49)(2)
Distributions from net realized
capital gains (0.47) (0.22) (0.05)
Return of capital -- (0.02) (0.03)(2)
------- ------- ------
Total distributions (1.07) (0.82) (0.57)
------- ------- ------
Net asset value at end of period $ 15.78 $ 13.89 $11.20
======= ======= ======
Total Return(3) 22.01% 32.70% 18.19%
Ratios to Average Daily Net Assets:
Expenses(4) 1.25% 1.25% 1.25%(6,7)
Net investment income(5) 3.87% 5.29% 6.09%(6,7)
Supplemental Data:
Net assets at end of period (000) $41,773 $19,816 $7,171
Portfolio turnover rate 35% 23% 28%
Average commissions per share(8) $0.0479 $0.0475 --
</TABLE>
- -------
(1) Commencement of operations.
(2) Distributions per share have been reclassified to reflect the actual return
of capital amounts for 1995.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of expenses to average daily net assets would have been 1.58%,
2.28% and 3.25% (annualized) for the years ended December 31, 1997 and 1996
and the period ended December 31, 1995, respectively.
(5) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of net investment income to average daily net assets would have
been 3.54%, 4.26% and 3.89% (annualized) for the years ended December 31,
1997 and 1996 and the period ended December 31, 1995, respectively.
(6) Annualized.
(7) Effective January 1, 1996, the Fund's expense and net investment income
ratios are based on average daily net assets. Prior to that date they were
based on average monthly net assets. Under the prior method, the ratio of
expenses to average net assets was 1.19% and the ratio of net investment
income to average net assets was 5.95% for the period ended December 31,
1995.
(8) Disclosure is required for fiscal years beginning on or after September 1,
1995. Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
See Notes to Financial Statements.
18
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights--Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
For the Year January 3, 1995(1)
Ended through
December 31, December 31,
- -----------------------------------------------------------------------------------
1997 1996 1995
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 13.84 $ 11.18 $10.00
------- ------- ------
Income from Investment Operations:
Net investment income 0.42 0.52 0.50
Net realized and unrealized gain
on investments 2.42 2.89 1.20
------- ------- ------
Total from Investment Operations 2.84 3.41 1.70
------- ------- ------
Less Distributions:
Distributions from net investment
income (0.50) (0.51) (0.42)(2)
Distributions from net realized
capital gains (0.47) (0.22) (0.05)
Return of capital -- (0.02) (0.05)(2)
------- ------- ------
Total distributions (0.97) (0.75) (0.52)
------- ------- ------
Net asset value at end of period $ 15.71 $ 13.84 $11.18
======= ======= ======
Total Return(3) 21.11% 31.67% 17.40%
Ratios to Average Daily Net Assets:
Expenses(4) 2.00% 2.00% 2.00%(6,7)
Net investment income(5) 3.12% 4.46% 5.39%(6,7)
Supplemental Data:
Net assets at end of period (000) $ 9,799 $ 5,295 $3,016
Portfolio turnover rate 35% 23% 28%
Average commissions per share(8) $0.0479 $0.0475 --
</TABLE>
- -------
(1) Commencement of operations.
(2) Distributions per share have been reclassified to reflect the actual return
of capital amounts for 1995.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 2.33%, 3.03% and 4.05% (annualized)
for the years ended December 31, 1997 and 1996 and the period ended December
31, 1995, respectively.
(5) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 2.79%, 3.43% and 3.09%
(annualized) for the years ended December 31, 1997 and 1996 and the period
ended December 31, 1995, respectively.
(6) Annualized.
(7) Effective January 1, 1996, the Fund's expense and net investment income
ratios are based on average daily net assets. Prior to that date they were
based on average monthly net assets. Under the prior method, the ratio of
expenses to average net assets was 1.90% and the ratio of net investment
income to average net assets was 5.25% for the period ended December 31,
1995.
(8) Disclosure is required for fiscal years beginning on or after September 1,
1995. Represents average commission rate per share charged to the Fund on
purchases and sales of investments during the period.
See Notes to Financial Statements.
19
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights--Institutional Shares
(For a share outstanding throughout the period)
For the Period
March 31, 1997(1)
through December 31,
- --------------------------------------------------------------------------------
1997
Per Share Operating Performance:
Net asset value at beginning of period $14.19
------
Income from Investment Operations:
Net investment income 0.47
Net realized and unrealized gain
on investments 2.14
------
Total from Investment Operations 2.61
------
Less Distributions:
Distributions from net investment income (0.42)
Distributions from net realized
capital gains (0.47)
------
Total distributions (0.89)
------
Net asset value at end of period $15.91
======
Total Return 18.84%
Ratios to Average Daily Net Assets:
Expenses(2) 1.00%(4)
Net investment income(3) 4.30%(4)
Supplemental Data:
Net assets at end of period (000) $ 288
Portfolio turnover rate 35%(4)
Average commissions per share $ 0.0479
- -------
(1) Commencement of operations.
(2) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 1.39% (annualized) for the period
ended December 31, 1997.
(3) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been 3.91% (annualized) for
the period ended December 31, 1997.
(4) Annualized.
See Notes to Financial Statements.
20
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--Significant Accounting Policies
Flag Investors Real Estate Securities Fund, Inc. (the "Fund"), which was
organized as a Maryland Corporation on May 2, 1994 and commenced operations
January 3, 1995, is registered under the Investment Company Act of 1940 as a
non-diversified open-end investment management company. Its objective is to seek
total return primarily through investments in equity securities of companies
that are principally engaged in the real estate industry.
The Fund consists of three share classes: Class A Shares and Class B
Shares, which both commenced January 3, 1995, and Institutional Shares, which
commenced March 31, 1997.
The Class A and Class B Shares are subject to different sales charges. The
Class A Shares have a 4.50% maximum front-end sales charge and the Class B
Shares have a 4.00% maximum contingent deferred sales charge. In addition, each
class has a different distribution fee. The Institutional Shares do not have a
sales charge or a distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. The Fund's significant accounting policies are:
A. SECURITY VALUATION--The Fund values a portfolio security that is
primarily traded on a national exchange by using the last price reported
for the day. If there are no sales or the security is not traded on a
listed exchange, the Fund values the security at its last bid price in
the over-the-counter market. When a market quotation is unavailable, the
Investment Advisor determines a fair value using procedures that the
Board of Directors establishes and monitors. The Fund values short-term
obligations with maturities of 60 days or less at amortized cost. As of
December 31, 1997, there were no Board valued securities.
B. REPURCHASE AGREEMENTS-- The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase
agreement is a short-term investment in which the Fund buys a debt
security that the broker agrees to repurchase at a set time and price.
The third party, which is the broker's custodial bank, holds the
collateral in a
21
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 1--concluded
separate account until the repurchase agreement matures. The agreement
ensures that the collateral's market value, including any accrued
interest, is sufficient if the broker defaults. The Fund's access to the
collateral may be delayed or limited if the broker defaults and the
value of the collateral declines or if the broker enters into an
insolvency proceeding.
C. FEDERAL INCOME TAX -- The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and
gains that are available for distribution under income tax regulations.
The Fund is organized as a regulated investment company. As long as it
maintains this status and distributes to its shareholders substantially
all of its taxable net investment income and net realized capital gains,
it will be exempt from most, if not all, federal income and excise
taxes. As a result, the Fund has made no provisions for federal income
taxes.
D. SECURITIES TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND OTHER --
The Fund uses the trade date to account for security transactions and
the specific identification method for financial reporting and income
tax purposes to determine the cost of investments sold or redeemed.
Interest income is recorded on an accrual basis and includes the pro
rata amortization of premiums and accretion of discounts when
appropriate. Income and common expenses are allocated to each class
based on its respective average net assets. Class specific expenses are
charged directly to each class. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. The Fund has deferred
the costs incurred by its organization and the initial public offering
of shares. These costs are being amortized on the straight-line method
over a five-year period, which began when the Fund commenced operations.
Real Estate Investment Trusts ("REITs") provide the majority of the
dividend income that the Fund records. For income tax purposes, a
portion of these dividends consists of capital gains and return of
capital. For financial reporting purposes, the Fund records these
dividends as dividend income and records the investment in the REIT at
market value.
22
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust New
York Corporation, is the Fund's investment advisor and ABKB/LaSalle Securities
Limited Partnership ("ABKB/LaSalle") is the Fund's subadvisor. As compensation
for its advisory services, the Fund pays ICC an annual 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 $100 million, 0.55% of the next $100
million, 0.50% of the next $100 million and 0.45% of the amount over $300
million.
As compensation for its subadvisory services, ICC pays ABKB/LaSalle a fee
from its advisory fee based on the Fund's average daily net assets. This fee is
calculated daily and paid monthly at the following annual rates: 0.40% of the
first $100 million, 0.35% of the next $100 million, 0.30% of the next $100
million and 0.25% of the amount over $300 million.
ICC has voluntarily agreed to waive its aggregate fees so that ordinary
Fund expenses for any fiscal year do not exceed 1.25% of the Class A Shares'
average daily net assets, 2.00% of the Class B Shares' average daily net assets
and 1.00% of the Institutional Shares' average daily net assets. For the year
ended December 31, 1997, ICC waived fees of $128,442.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisor or subadvisor.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $36,237 for accounting services for the year ended
December 31, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $33,405 for
transfer agent services for the year ended December 31, 1997.
Effective September 22, 1997, Bankers Trust Company became the Fund's
custodian. Prior to September 22, 1997, PNC Bank served as the Fund's custodian.
From September 22, 1997 to December 31, 1997, the Fund accrued $4,040 in custody
expenses.
As compensation for providing distribution services, the Fund pays ICC
Distributors, Inc. ("ICC Distributors"), which is not related to ICC, an annual
23
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2--concluded
fee that is calculated daily and paid monthly. This fee is paid at an annual
rate equal to 0.25% of the Class A Shares' average daily net assets and 1.00%
(including a 0.25% shareholder servicing fee) of the Class B Shares' average
daily net assets. For the year ended December 31, 1997, distribution fees
aggregated $152,057, of which $80,482 was attributable to the Class A Shares and
$71,575 was attributable to the Class B Shares. Prior to September 1, 1997,
Alex. Brown & Sons Incorporated served as the Fund's distributor for the same
compensation and on substantially the same terms as ICC Distributors and earned
$32,382 for Class A Shares and $29,256 for Class B Shares.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
December 31, 1997 was $609, and the accrued liability was $1,090.
NOTE 3--Capital Share Transactions
The Fund is authorized to issue up to 15 million shares of $.001 par
value capital stock (7 million Class A, 2 million Class B, 5 million
Institutional and 1 million undesignated). Transactions in shares of the Fund
were as follows:
Class A Shares
----------------------------
For the For the
Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996
------------- -------------
Shares sold 1,256,866 807,325
Shares issued to shareholders on
reinvestment of dividends 146,244 63,818
Shares redeemed (182,922) (84,104)
----------- -----------
Net increase in shares outstanding 1,220,188 787,039
=========== ===========
Proceeds from sale of shares $18,297,796 $ 9,428,874
Value of reinvested dividends 2,192,511 787,477
Cost of shares redeemed (2,675,100) (1,047,300)
----------- -----------
Net increase from capital share transactions $17,815,207 $ 9,169,051
=========== ===========
24
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
NOTE 3--concluded
Class B Shares
----------------------------
For the For the
Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996
------------- -------------
Shares sold 272,248 124,181
Shares issued to shareholders on
reinvestment of dividends 28,690 15,254
Shares redeemed (60,099) (26,509)
---------- ----------
Net increase in shares outstanding 240,839 112,926
========== ==========
Proceeds from sale of shares $4,002,637 $1,463,859
Value of reinvested dividends 428,928 187,401
Cost of shares redeemed (864,613) (302,223)
---------- ----------
Net increase from capital share transactions $3,566,952 $1,349,037
========== ==========
Institutional Shares
For the Period
March 31, 1997(1)
to Dec. 31, 1997
--------------------
Shares sold 18,118
Shares issued to shareholders on
reinvestment of dividends 1
Shares redeemed 0
--------
Net increase in shares outstanding 18,119
========
Proceeds from sale of shares $300,200
Value of reinvested dividends 9
Cost of shares redeemed 0
--------
Net increase from capital share transactions $300,209
========
- -------
(1) Commencement of operations.
On December 31, 1997, one shareholder held 6% of the Fund's shares
outstanding.
25
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 4--Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $33,724,551 and sales of investment securities aggregated $13,379,969
for the year ended December 31, 1997.
On December 31, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $10,066,289,
and aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over value was $9,146.
NOTE 5--Net Assets
On December 31, 1997, net assets consisted of:
Paid-in capital:
Class A Shares $33,508,319
Class B Shares 7,625,255
Institutional Shares 300,209
Undistributed net investment income 376,070
Accumulated net realized gain from security transactions 364,462
Unrealized appreciation of investments 9,681,082
-----------
$51,855,397
===========
NOTE 6--Shareholder Meeting
Alex. Brown Incorporated, which was the parent corporation of the Fund's
investment advisor, merged into a subsidiary of Bankers Trust New York
Corporation on September 1, 1997. Due to the change in control of Alex. Brown
Incorporated, the Flag Investors Real Estate Securities Fund held a special
meeting for its shareholders on August 14, 1997. During the meeting,
shareholders approved a new Investment Advisory Agreement between the Fund and
ICC and a new Sub-Advisory Agreement among the Fund, ICC and ABKB/LaSalle. The
new agreements are substantially the same as the former agreements. In addition,
shareholders elected the following Directors: James J. Cunnane, Richard T. Hale,
John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel, Truman T.
Semans and Carl W. Vogt.
26
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Shareholders and Board of Directors of
Flag Investors Real Estate Securities Fund, Inc.:
We have audited the accompanying statement of net assets of Flag Investors Real
Estate Securities Fund, Inc., (the "Fund"), as of December 31, 1997 and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and
financial highlights for each of the respective periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Flag
Investors Real Estate Securities Fund, Inc. as of December 31, 1997 and the
results of its operations for the year then ended, the changes in its net assets
and its financial highlights for each of the respective periods presented in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Philadelphia, Pennsylvania
January 29, 1998
27
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Tax Information (Unaudited)
For the Year Ended December 31, 1997
The amount of long-term capital gain paid for the fiscal year ended
December 31, 1997 was $1,016,704.
28
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Directors and Officers
RICHARD T. HALE
Chairman
JAMES J. CUNNANE CARL W. VOGT, ESQ.
Director Director
JOHN F. KROEGER WILLIAM K. MORRILL, JR.
Director President
LOUIS E. LEVY Keith R. Pauley
Director Executive Vice President
EUGENE J. MCDONALD JOSEPH A. FINELLI
Director Treasurer
REBECCA W. RIMEL AMY M. OLMERT
Director Secretary
TRUMAN T. SEMANS SCOTT J. LIOTTA
Director Assistant Secretary
Investment Objective
A mutual fund designed to seek total return primarily through investments in
equity securities of companies that are principally engaged in the real estate
industry.
- ----------------------------------------------------
This report is prepared for the general
information of shareholders. It is authorized for
distribution to prospective investors only when
preceded or accompanied by an effective prospectus.
For more complete information regarding
any of the Flag Investors Funds, including
charges and expenses, obtain a prospectus from
your investment representative or directly from
the Fund at 1-800-767-FLAG. Read it carefully
before you invest.
- ----------------------------------------------------
<PAGE>
[FLAG INVESTORS LOGO]
FLAG INVESTORS
Growth
Flag Investors Emerging Growth Fund
Flag Investors Equity Partners Fund
Flag Investors International Fund
Equity Income
Flag Investors Real Estate Securities Fund
Flag Investors Telephone Income Fund
Balanced
Flag Investors Value Builder Fund
Income
Flag Investors Short-Intermediate Income Fund
Flag Investors Total Return U.S. Treasury Fund Shares
Tax-Free Income
Flag Investors Managed Municipal Fund Shares
Flag Investors Maryland Intermediate Tax-Free Income Fund
Current Income
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
Distributed by:
ICC DISTRIBUTORS, INC.
