[LOGO OMITTED]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE(R)
REAL ESTATE
SECURITIES FUND
Semi-Annual Report
June 30, 2000
<PAGE>
REPORT HIGHLIGHTS
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o In the first half of 2000 REIT price earnings ratios made some progress in
returning to their traditional relationship with the broad market. The
combination of current yields and expected earnings growth is expected to
produce mid-teens total returns for real estate stocks over the next twelve
months, absent further earnings multiple changes.
o The economy continues to support a robust, healthy real estate market. This
environment should be fertile for the best run, most financially secure
companies. We are increasingly vigilant in anticipating supply imbalances in
sectors and regions.
o Managements' ingenuity and abilities are replacing raw capital as the driver
of growth and returns. Most companies are developing business plans that are
self-financing. Since managements now own a significant share of their
companies' stock, increased value-per-share is becoming a more important
corporate goal.
o Companies that can embrace and use relevant technology in their core
businesses should achieve a faster growth rate and more solid command of their
investment and geographic niches. Companies that look to tech because it is
trendy, or overindulge, do so at the risk of increasing their risk and
diluting their concentration on their core businesses.
o REIT market valuations continue to be cheap compared with the broad market. As
of the end of June, REIT stocks in the Fund's portfolio were trading at a
discount of 5% to 15% to our mid-year NAV estimates. The overall REIT industry
is currently trading at a Funds from Operations (FFO) multiple of less than
nine times 2000 estimates versus a historical average multiple of over twelve
times.
o We believe these factors make this an excellent time to allocate investment
assets to the public real estate sector.
<PAGE>
LETTER TO SHAREHOLDERS
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Dear Shareholder:
The Flag Investors Real Estate Securities Fund seeks total return by
investing in a diversified portfolio of REITs and real-estate operating
companies.
The sub-advisor and portfolio manager, LaSalle Investment Management
(Securities), L.P., has more than a dozen professionals dedicated solely 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 real estate portfolio management
experience to its efforts on behalf of your Fund.
FUND PERFORMANCE
On June 30, 2000, the Net Asset Value (NAV) of the Fund was $12.15 per
Class A share and $12.13 per Class B share. In addition, monthly dividends were
paid in the first six months totaling $0.24 per Class A share and $0.19 per
Class B share.
Average Annual Total Return Performance 1
For the Periods Year Since
Ended June 30, 2000 to Date 1-Year 2 2-Year 2 Inception 3
--------------------------------------------------------------------------------
Real Estate Securities Fund
--------------------------------------------------------------------------------
A Shares 15.63% 4.14% 0.50% 10.17%
--------------------------------------------------------------------------------
B Shares 15.09% 3.30% (0.26)% 9.35%
--------------------------------------------------------------------------------
Institutional Shares 15.92% 4.55% 0.89% 1.97%
--------------------------------------------------------------------------------
Wilshire Real Estate
Securities Index4 11.23% (3.54)% (5.32)% 3.39%5
--------------------------------------------------------------------------------
----------
Source: LaSalle Investment Management (Securities), L.P.; Wilshire Associates.
1 PAST PERFORMANCE IS NOT AN INDICATOR OF FUTURE RESULTS. These figures assume
the reinvestment of dividend and capital gain distributions and exclude the
impact of any sales charge. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than
original cost. If the applicable sales charges were reflected, the quoted
performance would be lower. During the period the Fund waived certain fees and
expenses. Had the fees and expenses not been waived, the Fund's return would
have been lower. See Additional Performance Information on page 8.
2 Returns less than one year are cumulative.
3 Inception dates: Class A 1/3/95, Class B 1/3/95, Institutional 3/31/97.
4 The Wilshire Real Estate Securities Index is an unmanaged market
capitalization weighted index of publicly traded real estate securities, such
as Real Estate Investment Trusts (REITs), Real Estate Operating Companies
(REOCs) and partnerships. The Index is comprised of companies whose charter is
the equity ownership and operation of commercial real estate. The Index is
rebalanced monthly and returns are calculated on a buy and hold basis. The
Index does not reflect expenses which have been deducted from the Fund's
returns.
5 Benchmark return is for the period beginning December 31, 1994.
1
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
The first half of 2000 has been a good one for the economy, for real
estate, and for real estate stocks. The real estate industry's solid operating
performance and asset values have finally begun to be reflected in the
companies' stock prices, and the sector's first-half performance was one of the
best in the financial market.
This relative performance has been the result of the interaction of a
variety of factors. Chief among them, in our view, is the concern of some
investors over the high valuation accorded technology and very large
capitalization companies. Inflation concerns may have also had a role, as well
as the relatively small supply of REIT shares for sale due to company buybacks,
lack of new equity issues, and the completion of selling programs by maturing
unit investment trusts.
The results of the Fund's portfolio were significantly better than the REIT
market as a whole in the first half of 2000, with contributions from our
concentration in apartment, office and industrial companies coupled with
superior performance by our upscale and luxury hotel holdings. The portfolio is
largely made up of high quality, higher growth companies, which we believe will
increase their dominance of their markets and sectors in the years to come.
MARKET COMMENT
Even with this strong performance, the sector today has a valuation that is
very low compared with broad market measures. The National Association of Real
Estate Investment Trust (NAREIT) Equity Index is at 1993 levels, notwithstanding
the fact that Funds From Operations (FFO -- the measure of REIT earnings) are up
70% over the period.
REIT EQUITY INDEX
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Jan-92 196.23
Feb-92 190.17
Mar-92 185.91
Apr-92 183.95
May-92 190.78
Jun-92 187.15
Jul-92 194.06
Aug-92 193.48
Sep-92 196.36
Oct-92 194.83
Nov-92 197.69
Dec-92 200.26
Jan-93 211.88
Feb-93 222.09
Mar-93 239.92
Apr-93 228.05
May-93 223.4
Jun-93 229.61
Jul-93 232.36
Aug-93 236.94
Sep-93 247.62
Oct-93 241.61
Nov-93 227.47
Dec-93 226.18
Jan-94 231.33
Feb-94 240.36
Mar-94 230.67
Apr-94 233.02
May-94 236.56
Jun-94 231
Jul-94 228.26
Aug-94 227.5
Sep-94 222.52
Oct-94 213.15
Nov-94 204.14
Dec-94 218.2
Jan-95 211.37
Feb-95 215.24
Mar-95 213.58
Apr-95 211.64
May-95 219.02
Jun-95 221.72
Jul-95 223.49
Aug-95 224.56
Sep-95 227.66
Oct-95 220.9
Nov-95 221.3
Dec-95 232.5
Jan-96 235.52
Feb-96 236.98
Mar-96 234.99
Apr-96 234.05
May-96 238.43
Jun-96 240.81
Jul-96 240.47
Aug-96 248.24
Sep-96 250.07
Oct-96 255.67
Nov-96 265.14
Dec-96 297.57
Jan-97 292.94
Feb-97 290.57
Mar-97 289.13
Apr-97 278.04
May-97 285.87
Jun-97 298.68
Jul-97 306.06
Aug-97 303.63
Sep-97 329.83
Oct-97 318.86
Nov-97 323.96
Dec-97 330.2
Jan-98 326.7
Feb-98 327.7
Mar-98 324.5
Apr-98 311.7
May-98 307.8
Jun-98 305.2
Jul-98 283.6
Aug-98 255.3
Sep-98 268.63
Oct-98 262
Nov-98 266.8
Dec-98 259
Jan-99 255
Feb-99 248
Mar-99 244
Apr-99 264
May-99 270
Jun-99 262
Jul-99 252
Aug-99 248
Sep-99 236
Oct-99 228
Nov-99 223
Dec-99 227
Jan-00 228
Feb-00 224
Mar-00 229
Apr-00 243
May-00 244
Jun-00 248
Source: National Association of Real Estate Investment Trust
2
<PAGE>
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REIT EARNINGS RATIOS: REITS VERSUS S&P 500 INDEX
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
S&P 500 INDEX Price/4 Quarters Forward FFO Multiple
92 17.86 12.96
17.44 12.95
17.55 13.78
17.68 13.98
93 17.9 15.3
17.3 14.35
16.9 14.7
16.4 12.5
94 15.2 12.3
14.7 12.1
14.8 11.4
13.9 11.3
95 14.5 10.9
15.1 11.1
13.7 11.2
14.5 11.4
96 15.4 11.3
15.6 11.4
14.1 11.8
15.8 13.7
97 16.2 12.6
18.9 12.9
20.7 13.6
21.2 13
98 24.1 12.2
24.8 11.3
20 9.6
24.1 9.5
99 25.2 8.6
26.9 8.8
23 8.2
26.2 8.5
2000 26.8 8.2
25.9 8.4
Source: National Association of Real Estate Investment Trust and Bloomburg
Companies' share prices are also attractive relative to the values of their
underlying assets. Discounts average nearly 10%, with discounts of 5% or more
even in many of the best companies. Price discounts to the real estate
companies' Intrinsic Values (their values as going businesses) are even higher,
ranging from 15% to 25% today.
REIT PRICE VERSUS NET ASSET VALUE
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Jun-94 5.3%
Jul-94 3.8%
Aug-94 1.3%
Sep-94 0.2%
Oct-94 -4.7%
Nov-94 -8.1%
Dec-94 4.5%
Jan-95 -0.4%
Feb-95 -0.9%
Mar-95 -1.4%
Apr-95 -3.6%
May-95 0%
Jun-95 0.1%
Jul-95 1.4%
Aug-95 1.6%
Sep-95 4.2%
Oct-95 1.7%
Nov-95 -0.1%
Dec-95 8.2%
Jan-96 7.6%
Feb-96 9.1%
Mar-96 8.8%
Apr-96 6%
May-96 8.4%
Jun-96 11.1%
Jul-96 9.6%
Aug-96 13.3%
Sep-96 13.8%
Oct-96 15.6%
Nov-96 19%
Dec-96 28.2%
Jan-97 29.4%
Feb-97 26.9%
Mar-97 27.5%
Apr-97 18.9%
May-97 21.6%
Jun-97 25.5%
Jul-97 27.6%
Aug-97 25.7%
Sep-97 30.2%
Oct-97 19.5%
Nov-97 22.2%
Dec-97 24%
Jan-98 21.4%
Feb-98 12.7%
Mar-98 14.4%
Apr-98 10.4%
May-98 9.8%
Jun-98 8.1%
Jul-98 1%
Aug-98 -8%
Sep-98 0.5%
Oct-98 -1.5%
Nov-98 -0.9%
Dec-98 -2.2%
Jan-99 -5.2%
Feb-99 -7.1%
Mar-99 -11.7%
Apr-99 -3.6%
May-99 0%
Jun-99 -1.5%
Jul-99 -5.6%
Aug-99 -7.3%
Sep-99 -11.8%
Oct-99 -15%
Nov-99 -17.4%
Dec-99 -16.5%
Mar-00 -16.3%
Apr-00 -11.4%
May-00 -11.8%
Jun-00 -9.1%
Source: National Association of Real Estate Investment Trust
3
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
The economy continues to perform well with limited inflation, although
gasoline prices are of concern this summer, and there are both skilled and
unskilled labor shortages building up in many high-tech centers. Retail sales
continue to be strong, and office vacancies are approaching historically low
levels in some markets. Apartment occupancies are stable to rising, with rent
increases outstripping inflation. Interest rates are increasing somewhat, which
should curtail new commercial building and possibly slow new home sales. Fewer
new buildings should be mild positives for the investment real estate sectors
affected.
As a result, solid increases in the earnings of real estate owners and
developers continue. Although second quarter results have been reported for only
a few companies thus far, earnings growth rates are expected to exceed 10% in
many cases compared with second quarter 1999. For the full year we expect
industry earnings growth in Funds From Operations (FFO) per share in the 8%-9%
range, and expect 2001's average growth will exceed 8% as well. Companies in our
portfolios are growing faster than the average, with earnings growth of 11%-12%
expected in 2000, and more than 10% in 2001.
Technology continues to be a matter of interest in the real estate
business, with many of the public companies participating in several of the
consortia that have been developed in the past few months to take advantage of
the
LaSalle Real Estate Company Universe: Earning and Dividends
Current FFO/Share Growth
Dividend Yield 2000 (estimate) vs. 1999
--------------------------------------------------------------------------------
Apartments 6.7% 10.9%
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Diversified 5.7% 13.3%
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Factory Outlets 14.4% 12.3%
--------------------------------------------------------------------------------
Health Care 13.6% 2.5%
--------------------------------------------------------------------------------
Lodging 5.4% 6.1%
--------------------------------------------------------------------------------
Manufactured Homes 7.0% 9.5%
--------------------------------------------------------------------------------
Net Lease 9.0% 6.3%
--------------------------------------------------------------------------------
Office/Industrial 6.4% 12.0%
--------------------------------------------------------------------------------
Regional Malls 8.6% 10.9%
--------------------------------------------------------------------------------
Self Storage 7.1% 11.0%
--------------------------------------------------------------------------------
Shopping Centers 8.8% 12.0%
--------------------------------------------------------------------------------
Weighted Average 7.1% 10.8%
--------------------------------------------------------------------------------
Source: LaSalle Investment Management (Securities)
4
<PAGE>
buying power of large landlords, or act as incubators for a variety of
technological innovations with applicability to real estate. We do not expect
this to make dramatic differences in companies' earnings over the intermediate
term, and think the best real estate companies will generally also be the ones
that are the most tech-savvy.
Real estate sector performance was solid with most regions and sectors
posting double-digit total returns so far this year. Hospitality has done
particularly well, led by high-quality upscale and luxury hotel owners and
operators. Office/industrial and apartments were also good performers,
reflecting their strong underlying performance and prospects.
More than half of the growth in the United States economy is in less than
two dozen "technology nodes" and strong central business districts. Strong
demand, usually combined with supply and planning constraints, is resulting in
above-average growth and expected stability. The bulk of the investments in the
Fund are located in these regions.
Regional Allocation at June 30, 2000
(percentages are based on market value of total investments in the Portfolio)
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Mountain 5%
Northeast 24%
West North Central 3%
East North Central 11%
Pacific 24%
Mideast 9%
Southeast 14%
Southwest 10%
Source: LaSalle Investment Management (Securities)
PUBLIC MARKET TRENDS
From time to time we find it useful to look at the longer-term trends that
will affect the real estate business and the investors and operators who
participate in it.
o Capital constraints and higher real estate prices are reducing asset growth
among the public real estate companies. The bulk of earnings growth over the
next two years will come from development, existing asset repositioning, and
taxable subsidiary investments. The REIT Modernization Act (RMA) will offer
opportunities for more aggressive companies to differentiate themselves and
increase their profitability.
5
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
--------------------------------------------------------------------------------
o Capital structures are expected to continue to evolve, with more joint
ventures, asset sales, stock buybacks, and partial or complete corporate
liquidations. Mergers and acquisitions should continue, with most profits
being made by the sellers.
o Technology is becoming more important to the real estate industry. Tech-rich
regions of the country are expected to have higher growth, coupled with more
volatility and inflation. This is an investment positive, but requires
continued monitoring.
o Basic technologies, such as wiring and web-site support, are becoming
commodities. Although they offer only moderate potential increases in profits,
companies that do not provide them will be at a significant operating and
marketing disadvantage.
o Major technology initiatives by real estate companies can lead to increased
growth and competitive strength, with the caveat that technology, like any
development initiative, dampens short term results and increases risk and
potential volatility.
o Moderate rates of inflation and higher interest rates should favor those
companies with appropriate leverage and financing in place. It is now more
important to monitor and evaluate companies' capital structures.
o Individual company selection continues to be the primary investment criterion,
but market and valuation imbalances among sectors and regions may build up
over time.
CAPITAL MARKETS
The past six months have been the quietest period for public REIT capital
since prior to 1993. There were no public equity offerings and just over $3
billion of debt was issued, in contrast to total capital of more than $14
billion raised in the peak second quarter of 1998.
Capital Raising Activities
Quarter ended Year to
($ millions) 6/30/00 3/31/00 Date
--------------------------------------------------------------------------------
Initial Public Offering -- -- --
--------------------------------------------------------------------------------
Other Common Equity 15 298 313
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TOTAL EQUITY 15 298 313
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Public Debt,Preferred 1,135 2,286 3,421
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TOTAL PUBLIC CAPITAL 1,150 2,584 3,734
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Source: National Association of Real Estate Investment Trust
6
<PAGE>
--------------------------------------------------------------------------------
There has been considerably more capital provided during this period by the
private sector from asset sales and institutional joint ventures. Merger
activity has picked up as well. While conventional wisdom says that profits in
mergers belong to the sellers, the typical deal today is priced at close to the
selling company's current price; no deals have been priced at a premium to Net
Asset Value.
While debt-to-market capital ratios have recently eased to some extent as
stock prices have recovered, leverage ratios in the sector have increased
somewhat over the past two years. Most of the increase has had its impetus in
the evolving nature of public real estate companies' portfolios, which now
consist of more stabilized or repositioned property and less work-in-process.
Financial coverage remains strong, and most REITs have significantly
reduced their dividend payout ratios. Concern is often voiced that a
disproportionate amount of equity will be raised if prices recover, but most
companies are not counting on additional public capital, focusing instead on
selling or joint venturing assets to raise capital that is then put to a variety
of uses.
INVESTMENT STRATEGY
The Fund's portfolio continues to focus on high quality, market dominant
companies, with appropriate concern for valuation. We believe these firms have
the ability to command their region or sector, and that their financial
flexibility and excellent managements will enable them to compete effectively in
the changing real estate and economic environment.
These investments are supplemented with holdings in selected companies that
have the potential to become market dominant in the future, or where we believe
that an event or other change in a company's condition or environment could
produce attractive returns over the intermediate return. We believe this
continues to be an excellent time to initiate or increase positions in real
estate equities.
Very truly yours,
/S/ SIGNATURE /S/ SIGNATURE /S/ SIGNATURE
WILLIAM K. MORRILL, JR. KEITH R. PAULEY JAMES A. ULMER III
William K. Morrill, Jr. Keith R. Pauley James A. Ulmer III
President Executive Vice President Vice President
July 30, 2000
7
<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 the total return of each of the Fund's classes, according to a
standardized formula, for various time periods through the end of the most
recent calendar quarter.
The SEC standardized total return figures include the impact of the 5.50%
maximum initial sales charge for the Fund's Class A Shares and the contingent
deferred sales charge applicable to the specified time period for Class B
Shares. The contingent deferred sales charge for Class B shares declines from a
maximum of 5.0% to 0% after six years. Returns would be higher for Class A
Shares investors who qualified for a lower initial sales charge or for Class B
Shares investors who continued to hold their shares past the end of the
specified time period.
The SEC total return figures may differ from total return figures in the
shareholder letter because the SEC figures include the impact of sales charges
while the total return figures in the shareholder letter do not. Any performance
figures shown are for the full period indicated.
Average Annual Total Return 1
Periods Ended 6/30/00 1 Year 5 Years Since Inception 2
--------------------------------------------------------------------------------
Class A Shares (1.59)% 8.62% 9.04%
--------------------------------------------------------------------------------
Class B Shares (1.86)% 8.59% 9.15%
--------------------------------------------------------------------------------
Institutional Shares 4.55% --% 1.97%
--------------------------------------------------------------------------------
------------
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 dividend and capital gain distributions and include the Fund's
applicable sales charge.During the period the Fund waived certain fees and
expenses.
2 Inception dates: Class A 1/3/95, Class B 1/3/95, Institutional 3/31/97.
8
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT UNREALIZED
MARKET MARKET OF NET GAIN/
SHARES SECURITY PRICE VALUE ASSETS (LOSS)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK -- 98.1%
APARTMENTS -- 22.6%
33,300 Apartment Investment &
Management Co. $43.25 $ 1,440,225 5.5% $ 316,443
42,485 AvalonBay Communities, Inc. 41.75 1,773,749 6.8 221,215
7,104 Camden Property Trust 29.38 208,680 0.8 (5,436)
26,950 Equity Residential Properties
Trust 46.00 1,239,700 4.7 157,965
28,252 Post Properties, Inc. 44.00 1,243,088 4.8 199,453
----------- ----- ---------
5,905,442 22.6 889,640
DIVERSIFIED/OTHER -- 13.4%
50,000 Beacon Capital Partners 1,2 11.59 579,450 2.3 11,966
78,600 Catellus Development Corp.1 15.00 1,179,000 4.5 (281,096)
22,600 IStar Financial 20.94 473,187 1.8 54,879
36,100 Vornado Realty Trust 34.75 1,254,475 4.8 212,742
----------- ----- ---------
3,486,112 13.4 (1,509)
FACTORY OUTLETS -- 3.5%
26,700 Chelsea GCA Realty, Inc. 34.56 922,819 3.5 78,443
----------- ----- ---------
922,819 3.5 78,443
HOTELS/MOTELS -- 7.6%
19,283 Host Marriott Corp. 9.37 180,778 0.7 (116,152)
20,848 MeriStar Hospitality Corp.1 21.00 437,808 1.7 (181,329)
14,500 MeriStar Hotels &
Resorts, Inc.1 2.87 41,687 0.1 (48,439)
41,000 Starwood Hotels &Resorts 32.56 1,335,062 5.1 (349,138)
----------- ----- ---------
1,995,335 7.6 (695,058)
MOBILE HOMES -- 0.7%
5,200 Sun Communities, Inc. 33.44 173,875 0.7 (5,672)
----------- ----- ---------
173,875 0.7 (5,672)
OFFICE/INDUSTRIAL -- 36.3%
21,900 Boston Properties, Inc. 38.62 845,887 3.2 102,122
74,776 Duke Realty Investments, Inc. 22.38 1,673,113 6.4 65,362
45,479 Equity Office Properties Trust 27.56 1,253,515 4.8 (98,915)
19,100 General Growth
Properties, Inc. 31.75 606,425 2.3 37,808
19,500 Kilroy Realty Corp. 25.94 505,781 1.9 50,856
38,100 Mack-Cali Realty Corp. 25.69 978,694 3.7 (482,129)
6,300 Mission West Properties 10.50 66,150 0.3 12,748
</TABLE>
9
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED) JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT UNREALIZED
MARKET MARKET OF NET GAIN/
SHARES SECURITY PRICE VALUE ASSETS (LOSS)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK (CONCLUDED)
OFFICE/INDUSTRIAL (CONCLUDED)
19,800 Prologos Trust $21.31 $ 421,988 1.6% $ 37,572
12,000 PS Business Parks, Inc. 24.00 288,000 1.1 (3,405)
52,700 Reckson Associates 23.75 1,251,594 4.8 101,809
13,500 SL Green Realty Corp. 26.75 361,125 1.4 58,507
27,000 Spieker Properties, Inc. 46.00 1,242,000 4.8 260,310
----------- ----- ---------
9,494,272 36.3 142,645
REGIONAL MALLS -- 5.0%
900 Macerich Co. 22.06 19,856 0.1 (3,477)
27,200 Rouse Company 24.75 673,200 2.6 (76,858)
27,700 Simon Property Group, Inc. 22.19 614,594 2.3 (137,941)
----------- ----- ---------
1,307,650 5.0 (218,276)
RETAIL -- 3.0%
22,200 Developers Diversified
Realty Corp. 14.94 331,613 1.3 (74,565)
8,900 Kimco Realty Corp. 41.00 364,900 1.4 17,211
3,900 Pan Pacific Retail
Properties, Inc. 20.13 78,488 0.3 780
----------- ----- ---------
775,001 3.0 (56,574)
SELF STORAGE -- 6.0%
52,000 Public Storage, Inc. 23.44 1,218,750 4.6 (126,282)
12,100 Storage USA, Inc. 29.50 356,950 1.4 (43,693)
----------- ----- ---------
1,575,700 6.0 (169,975)
TOTAL COMMON STOCK
(Cost $25,672,542) 25,636,206 98.1 (36,336)
----------- ----- ---------
TOTAL INVESTMENTS -- 98.1%
(Cost $25,672,542)3 $25,636,206 98.1%
OTHER ASSETS IN EXCESS
OF LIABILITIES -- 1.9% 496,708 1.9
----------- -----
NET ASSETS -- 100.0% $26,132,914 100.0%
=========== =====
</TABLE>
10
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER:
Class A Share
($20,631,791 (DIVIDE) 1,697,818 shares outstanding) $12.15
======
Class B Share
($4,901,569 (DIVIDE) 404,190 shares outstanding) $12.13 4
======
Institutional Share
($599,554 (DIVIDE) 48,803 shares outstanding) $12.29
======
MAXIMUM OFFERING PRICE PER:
Class A Share
($12.15 (DIVIDE) 0.945) $12.86 5
======
Class B Share $12.13
======
Institutional Share $12.29
======
---------
1 Non-income producing security for the last six months.
2 Security is fair valued by management using procedures adopted by the Board of
Directors (see Note 1).
3 Aggregate cost for federal tax purposes was $25,672,542.
4 Redemption value is $11.52 following a maximum 5% contingent deferred sales
charge.
5 Reflects the effect of Class A's applicable 5.5% front-end sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
JUNE 30,
--------------------------------------------------------------------------------
2000
Investment income:
Dividends ................................................. $ 746,053
Interest .................................................. 9,685
-----------
Total income .................................... 755,738
-----------
Expenses:
Investment Advisory Fee ................................... 82,467
Distribution fees:
Class A Shares .......................................... 25,120
Class B Shares .......................................... 23,423
Professional Fees ......................................... 44,755
Registration Fees ......................................... 39,034
Transfer Agent Fee ........................................ 24,628
Accounting Fees ........................................... 13,639
Shareholder Reporting Fee ................................. 11,968
Custodian Fee ............................................. 11,903
Directors' Fee ............................................ 998
Organization Fee .......................................... 233
Miscellaneous ............................................. 1,492
-----------
Total expenses .................................. 279,660
Less:Fees waived .......................................... (105,541)
-----------
Net expenses .................................... 174,119
-----------
Net investment income ..................................... 581,619
-----------
Realized and unrealized gain/(loss) on investments:
Net realized loss from securities transactions ............ (2,915,582)
Change in unrealized appreciation/depreciation
of investments ......................................... 5,961,544
-----------
Net realized and unrealized gain on investments ........... 3,045,962
-----------
Net increase in net assets resulting from operations ......... $ 3,627,581
===========
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
--------------------------------------------------------------------------------
2000 1 1999
Increase/(Decrease) in Net Assets:
Operations:
Net investment income ..................... $ 581,619 $ 1,543,931
Net realized loss from securities
transactions ........................... (2,915,582) (1,583,256)
Change in unrealized appreciation/
depreciation of investments ............. 5,961,544 (1,018,806)
------------ ------------
Net increase/(decrease) in net assets
resulting from operations ............... 3,627,581 (1,058,131)
------------ ------------
Distributions to Shareholders from:
Net investment income:
Class A Shares .......................... (436,923) (1,094,740)
Class B Shares .......................... (82,466) (204,218)
Institutional Shares .................... (13,657) (24,521)
------------ ------------
Net realized long-term gains:
Class A Shares .......................... -- (278,279)
Class B Shares .......................... -- (58,997)
Institutional Shares .................... -- (6,919)
------------ ------------
Total distributions ....................... (533,046) (1,667,674)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares .............. 1,588,757 3,801,514
Value of shares issued in
reinvestment of dividends ............... 498,234 1,381,079
Cost of shares redeemed ................... (4,807,607) (18,159,727)
------------ ------------
Decrease in net assets derived from
capital share transactions .............. (2,720,616) (12,977,134)
------------ ------------
Total increase/(decrease) in net assets ... 373,919 (15,702,939)
Net Assets:
Beginning of period ....................... 25,758,995 41,461,934
------------ ------------
End of period ............................. $ 26,132,914 $ 25,758,995
============ ============
----------
1 Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JANUARY 3, 1995 1
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, THROUGH DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
2000 5 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ......... $10.74 $11.64 $15.78 $13.89 $11.20 $10.00
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income .......................... 0.26 0.53 0.58 0.52 0.61 0.56
Net realized and unrealized gain/(loss)
on investments ............................... 1.39 (0.85) (3.79) 2.44 2.90 1.21
------ ------ ------ ------ ------ ------
Total from Investment Operations ............... 1.65 (0.32) (3.21) 2.96 3.51 1.77
------ ------ ------ ------ ------ ------
Less Distributions:
Distributions from net investment income ....... (0.24) (0.44) (0.46) (0.60) (0.58) (0.49)
Distributions from net realized capital gains .. -- (0.14) (0.43) (0.47) (0.22) (0.05)
Return of capital .............................. -- -- (0.04) -- (0.02) (0.03)
------ ------ ------ ------ ------ ------
Total distributions ............................ (0.24) (0.58) (0.93) (1.07) (0.82) (0.57)
------ ------ ------ ------ ------ ------
Net asset value at end of period ............... $12.15 $10.74 $11.64 $15.78 $13.89 $11.20
====== ====== ====== ====== ====== ======
Total Return2 .................................. 15.63% (2.85)% (20.82)% 22.01% 32.70% 18.19%
Ratios to Average Daily Net Assets:
Expenses Before Waivers ........................ 1.99%3 1.86% 1.55% 1.58% 2.28% 3.25%3
Expenses After Waivers ......................... 1.25%3 1.25% 1.25% 1.25% 1.25% 1.25%3,4
Net investment income .......................... 4.69%3 4.67% 4.28% 3.87% 5.29% 6.09%3,4
Supplemental Data:
Net assets at end of period (000) .............. $20,632 $20,449 $33,239 $41,773 $19,816 $7,171
Portfolio turnover rate ........................ 11% 7% 24 35% 23% 28%
<FN>
------------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Annualized.
4 Effective January 1, 1996, the Fund's expense and net investment income ratios
have been 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%.
5 Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14 15
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JANUARY 3, 1995 1
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, THROUGH DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
2000 5 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .......... $10.72 $11.60 $15.71 $13.84 $11.18 $10.00
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income ........................... 0.22 0.43 0.47 0.42 0.52 0.50
Net realized and unrealized gain/(loss)
on investments ................................ 1.38 (0.83) (3.77) 2.42 2.89 1.20
------ ------ ------ ------ ------ ------
Total from Investment Operations ................ 1.60 (0.40) (3.30) 2.84 3.41 1.70
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income ............ (0.19) (0.34) (0.34) (0.50) (0.51) (0.42)
Distributions from net realized capital gains ... -- (0.14) (0.43) (0.47) (0.22) (0.05)
Return of capital ............................... -- -- (0.04) -- (0.02) (0.05)
------ ------ ------ ------ ------ ------
Total distributions ............................. (0.19) (0.48) (0.81) (0.97) (0.75) (0.52)
------ ------ ------ ------ ------ ------
Net asset value at end of period ................ $12.13 $10.72 $11.60 $15.71 $13.84 $11.18
====== ====== ====== ====== ====== ======
Total Return2 ...................................... 15.09% (3.50)% (21.39)% 21.11% 31.67% 17.40%
Ratios to Average Daily Net Assets:
Expenses Before Waivers ............................ 3.18%3 2.61% 2.30% 2.33% 3.03% 4.05%3
Expenses After Waivers ............................. 2.00%3 2.00% 2.00% 2.00% 2.00% 2.00%3,4
Net investment income .............................. 3.91%3 3.89% 3.48% 3.12% 4.46% 5.39%3,4
Supplemental Data:
Net assets at end of period (000) ............... $4,902 $4,725 $7,641 $9,799 $5,295 $3,016
Portfolio turnover rate ............................ 11% 7% 24% 35% 23% 28%
<FN>
------------
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Annualized.
4 Effective January 1, 1996, the Fund's expense and net investment income ratios
have been 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%.
5 Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16 17
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 31, 1997 1
MONTHS ENDED THROUGH
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------------------------------------------------------------------------------------
2000 3 1999 1998 1997
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .............. $10.84 $11.74 $15.91 $14.19
------ ------ ------ ------
Income from Investment Operations:
Net investment income ............................... 0.28 0.58 0.58 0.47
Net realized and unrealized gain/(loss)
on investments .................................... 1.42 (0.87) (3.78) 2.14
------ ------ ------ ------
Total from Investment Operations .................... 1.70 (0.29) (3.20) 2.61
------ ------ ------ ------
Less Distributions:
Dividends from net investment income ................ (0.25) (0.47) (0.50) (0.42)
Distributions from net realized capital gains ....... -- (0.14) (0.43) (0.47)
Return of capital ................................... -- -- (0.04) --
------ ------ ------ ------
Total distributions ................................. (0.25) (0.61) (0.97) (0.89)
------ ------ ------ ------
Net asset value at end of period .................... $12.29 $10.84 $11.74 $15.91
====== ====== ====== ======
Total Return ........................................... 15.92% (2.56)% (20.64)% 18.84%
Ratios to Average Daily Net Assets:
Expenses Before Waivers ............................. 1.70%2 1.61% 1.28% 1.39%2
Expenses After Waivers .............................. 1.00%2 1.00% 1.00% 1.00%2
Net investment income ............................... 5.04%2 5.18% 4.73% 4.30%2
Supplemental Data:
Net assets at end of period (000) ................... $ 600 $ 585 $ 582 $ 288
Portfolio turnover rate ............................. 11% 7% 24% 35%
<FN>
----------
1 Commencement of operations.
2 Annualized.
3 Unaudited.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18 19
<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 began operations January
3, 1995, is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. Its objective is to
seek total return primarily through investments in common stocks of companies
that are principally engaged in the real estate industry.
The Fund consists of three active share classes: Class A Shares and Class B
Shares, which both began operations January 3, 1995, and Institutional Shares,
which began operations March 31, 1997.
The Class A and Class B Shares are subject to different sales charges. The
Class A Shares have a 5.50% maximum front-end sales charge and the Class B
Shares have a 5.00% maximum contingent deferred sales charge. In addition, each
class has a different distribution fee. The Institutional Shares have neither a
sales charge nor a distribution fee.
When preparing the Fund's financial statements in accordance with
accounting principles generally accepted in the United States, management makes
estimates and assumptions. These estimates affect 1) the assets and liabilities
that we report at the date of the financial statements; 2) the contingent assets
and liabilities that we disclose at the date of the financial statements; and 3)
the revenues and expenses that we report for the period. Our estimates could be
different from the actual results. The Fund's significant accounting policies
are:
A. VALUATION OF SECURITIES -- The Fund values a portfolio security that is
primarily traded on a national exchange by using the last price reported
for the day. If there are no sales or the security is not traded on a
listed exchange, the Fund values the security at the average of the last
bid and asked prices in the over-the-counter market. The Fund values
short-term obligations with maturities of 60 days or less at amortized
cost. When a market quotation is unavailable, the Investment Advisor
determines a fair value using procedures that the Board of Directors
establishes and monitors. In determining fair value, management
considers all relevant qualitative and quantitative information
available. These factors are subject to change over time and are
reviewed periodically. The values assigned to fair value investments are
based on available information and do not necessarily represent amounts
that might
20
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NOTE 1 -- CONTINUED
ultimately be realized, since such amounts depend on future developments
inherent in long-term investments. Furthermore, because of the inherent
uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready
market of the investments existed, and the differences could be
material. At June 30, 2000, there was one Board valued security valued
at $529,500 representing 2.03% of net assets of the Fund.
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 separate account until the repurchase agreement matures.
The agreement requires that the collateral's market value, including any
accrued interest, exceed the broker's repurchase obligation. 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 securities transactions and
the specific identification method for financial reporting and income
tax purposes to determine the cost of investments sold or redeemed.
Interest income is recorded on an accrual basis and includes
amortization of premiums and accretion of discounts when appropriate.
Income, gains and common expenses are allocated
21
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- CONCLUDED
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
began 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 may consist 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.
NOTE 2 -- INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES
Investment Company Capital Corp. ("ICCC"), an indirect subsidiary of
Deutsche Bank AG, is the Fund's investment advisor. As compensation for its
advisory services, the Fund pays ICCC an annual fee 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. For
the six months ended June 30, 2000, ICCC's advisory fee was $82,467 of which,
$14,001 was payable at the end of the period.
ICCC has agreed to waive a portion of its fee and reimburse expenses so
that the Fund's total operating expenses for any fiscal year do not exceed 1.25%
of the Class AShares' 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. ICCCwaived fees of $105,541 for the six months ended June 30, 2000.
LaSalle Investment Management (Securities), L.P. ("LaSalle") is the Fund's
sub-advisor. As compensation for its sub-advisory services, ICCCpaysLaSalle a
fee based on the Fund's average daily net assets. This fee is calculated daily
and paid monthly at the following annual rates:0.40% 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.
22
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NOTE 2 -- CONCLUDED
ICCC also provides accounting services to the Fund for which the Fund pays
ICCC an annual fee that is calculated daily and paid monthly based on the Fund's
average daily net assets. For the six months ended June 30, 2000, ICCC's fee was
$13,639 of which, $2,298 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 six
months ended June 30, 2000, ICCC's fee was $24,628 of which, $17,358 was payable
at the end of the period.
Certain officers and directors of the Fund are also officers or directors
of ICCC and LaSalle.
ICC Distributors, Inc. provides distribution services to the Fund for which
the Fund pays ICCDistributors an annual fee pursuant to Rule 12b-1, that is
calculated daily and paid monthly at the annual rate of: 0.25%, of the Class A
Shares' average daily net assets and 0.75% of the Class B Shares average daily
net assets. Class B Shares also are subject to a 0.25% shareholder servicing
fee. For the six months ended June 30, 2000, ICC Distributor's fee was $48,543
of which, $8,271 was payable at the end of the period.
Bankers Trust Company, an affiliate of the advisor, is the Fund's
custodian. For the six months ended June 30, 2000, custody fees amounted to
$11,903 of which, $29,843 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 six months ended June 30, 2000 was $324 and the accrued
liability was $1,939.
23
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 30 million shares of $.001 par value
capital stock (7 million Class A, 2 million Class B, 15 million Class C, 5
million Institutional Class and 1 million undesignated). Transactions in shares
of the Fund were as follows:
CLASS A SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold ............................. 87,649 234,138
Shares issued to shareholders on
reinvestment of dividends ............ 33,989 102,913
Shares redeemed ......................... (327,777) (1,289,617)
------------ ------------
Net decrease in shares outstanding ...... (206,139) (952,566)
============ ============
Proceeds from sale of shares ............ $ 962,111 $ 2,736,131
Value of reinvested dividends ........... 372,021 1,159,479
Cost of shares redeemed ................. (3,600,744) (14,527,139)
------------ ------------
Net decrease from capital share
transactions .......................... $ (2,266,612) $(10,631,529)
============ ============
CLASS B SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold ............................. 55,810 92,453
Shares issued to shareholders on
reinvestment of dividends ............. 10,083 17,489
Shares redeemed ......................... (102,597) (327,505)
----------- -----------
Net decrease in shares outstanding ...... (36,704) (217,563)
=========== ===========
Proceeds from sale of shares ............ $ 623,341 $ 1,042,883
Value of reinvested dividends ........... 114,494 193,940
Cost of shares redeemed ................. (1,129,319) (3,632,588)
----------- -----------
Net decrease from capital share
transactions ......................... $ (391,484) $(2,395,765)
=========== ===========
------------
1 Unaudited.
24
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NOTE 3 -- (CONCLUDED)
INSTITUTIONAL SHARES
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 1 DEC. 31, 1999
--------------- --------------
Shares sold ............................ 297 1,926
Shares issued to shareholders on
reinvestment of dividends ............ 1,058 2,446
Shares redeemed ........................ (6,489) --
-------- --------
Net increase/(decrease) in shares
outstanding ......................... (5,134) 4,372
======== ========
Proceeds from sale of shares ........... $ 3,305 $ 22,500
Value of reinvested dividends .......... 11,719 27,660
Cost of shares redeemed ................ (77,544) --
-------- --------
Net increase/(decrease) from
capital share transactions ........... $(62,520) $ 50,160
======== ========
--------
1 Unaudited.
NOTE 4 -- INVESTMENT TRANSACTIONS
Excluding short-term obligations, purchases of investment securities
aggregated $2,731,354 and sales of investment securities aggregated $4,575,269
for the six months ended June 30, 2000.
For Federal income tax purposes, the tax cost of investments held at June
30, 2000 was $25,672,542. At June 30, 2000, aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax
cost was $1,998,190, and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over value was $2,034,526.
25
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5 -- NET ASSETS
At June 30, 2000, net assets consisted of:
Paid-in Capital:
Class A Shares .................................... $ 23,794,901
Class BShares ..................................... 5,448,105
Institutional Shares .............................. 810,986
Undistributed net investment income ................... 48,573
Accumulated net realized loss from security
transactions ........................................ (3,933,315)
Net unrealized depreciation of investments ............ (36,336)
------------
$ 26,132,914
============
NOTE 6 -- FEDERAL INCOME TAX INFORMATION
The Fund has deferred post October capital losses of $1,559,306 to next
year.
26
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FLAG INVESTORS REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Richard T. Hale
CHAIRMAN
RICHARD R. BURT
DIRECTOR
JOSEPH R. HARDIMAN
DIRECTOR
LOUIS E. LEVY
DIRECTOR
EUGENE J. MCDONALD
DIRECTOR
REBECCA W. RIMEL
DIRECTOR
TRUMAN T. SEMANS
DIRECTOR
ROBERT H. WADSWORTH
DIRECTOR
WILLIAM K. MORRILL, JR.
PRESIDENT
KEITH R. PAULEY
EXECUTIVE VICE PRESIDENT
JAMES A. ULMER III
VICE PRESIDENT
CHARLES A. RIZZO
TREASURER
AMY M. OLMERT
SECRETARY
DANIEL O. HIRSCH
ASSISTANT SECRETARY
INVESTMENT OBJECTIVE
A mutual fund that seeks total return primarily through investments in
common stocks 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 other Flag Investors Funds,
including charges and expenses, obtain a prospectus from your investment
representative or directly from the Fund at 1-800-767-FLAG. Read it carefully
before you invest.
<PAGE>
[LOGO OMITTED]
FLAG INVESTORS
INVESTING WITH A DIFFERENCE(R)
[GRAPHIC OMITTED]
DOMESTIC EQUITY
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund
INTERNATIONAL EQUITY
European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World
FIXED INCOME
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return U.S. Treasury Fund Shares
MONEY MARKET
Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
WWW.FLAGINVESTORS.COM
Distributed by:
ICC DISTRIBUTORS, INC.
RESA (8/00)
