(GRAPHIC APPEARS HERE)
Equity Partners
Fund
Semi-Annual Report
November 30, 1999
<PAGE>
REPORT HIGHLIGHTS
o The Fund's Class A Shares produced a total return of -9.27% and 8.88% for
the six- and twelve-month periods ended November 30, 1999, respectively.
The six-month results reflect the weakness in the broad market.
o America Online continued to be the largest contributor to the Fund's
performance. It remains our largest holding, though we reduced the position
for valuation and diversification reasons.
o Today's investment environment is unusual because the broad market has
weakened considerably with many stocks down for this year, but the S&P 500
Index is up strongly, driven by the extraordinary performance of many
technology stocks, particularly those related to the Internet.
o We continue to invest for the long term and encourage all shareholders to
maintain this same perspective. We believe there are many unusually good
investment opportunities today in the value sector of the market, and we
are quite optimistic about the Fund's long-term prospects going forward.
<PAGE>
FUND PERFORMANCE
Growth of a $10,000 Investment in Class A Shares(1)
February 13, 1995--November 30, 1999
$10,000 invested in the Equity Partners Fund
Class A Shares at inception on February 13, 1995
was worth $24,645 on November 30, 1999
(GRAPHIC APPEARS HERE)
2/95 10,000
5/95 10,770
11/95 11,993
5/96 13,252
11/96 15,576
5/97 17,383
11/97 19,213
5/98 22,208
11/98 22,636
5/99 27,163
11/99 24,645
Total Return Performance(1)
<TABLE>
<CAPTION>
Class A Class B Class C Institutional
Periods ended 11/30/99 Shares Shares Shares Shares
- -----------------------------------------------------------------------------------------
<S><C>
6 Months (9.27)% (9.61)% (9.58)% (9.16)%
12 Months 8.88% 8.09% 8.09% 9.14%
Since Inception 2/13/95 2/13/95 10/28/98 2/12/96
(Cumulative) 146.45% 138.08% 21.22% 93.80%
</TABLE>
(1) Past performance is not an indicator of future results. These figures
assume the reinvestment of dividends and capital gain 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. Please review the Additional Performance Information on page 6.
1
<PAGE>
LETTER TO SHAREHOLDERS
Fellow Shareholders:
We are pleased to report on the progress of your Fund for the period
ended November 30, 1999.
Performance
The Fund's Class A shares produced a total return of -9.27% and 8.88% for
the six- and twelve-month periods ended November 30, 1999, respectively. The
six-month performance is disappointing. It results from weakness in the broad
market and in several individual investments. The weakness in the broad market
will be addressed in our discussion of the Investment Environment. The
disappointing investments are listed in the following table.
Over the past year, the Class A Shares net asset value grew by $1.90, which
includes capital gain distributions. The largest positive and negative
contributors to this growth are shown in the table below.
Contributions to Net Asset Value Performance
(For the 12 months ended 11/30/99)
<TABLE>
<CAPTION>
Five Best Contributors Gain Per Share Five Worst Contributors Loss Per Share
..............................................................................................................
<S><C>
America Online $2.42 Conseco ($0.52)
Amgen $0.70 Mattel ($0.46)
Harrah's Entertainment $0.37 Philip Morris ($0.44)
Citigroup $0.31 Champion Enterprises ($0.38)
MCI Worldcom $0.23 Xerox ($0.32)
</TABLE>
America Online continued to be the largest contributor to the Fund's
performance. Although we have reduced the holding for valuation and
diversification reasons, we remain very enthusiastic about the company's
exciting growth prospects.
The largest negative contributors all experienced fundamental problems,
some of which should prove to be temporary. Though we have had to reevaluate
their near-term growth prospects, we believe their stocks are unusually
depressed at current prices and their long-term prospects are more promising.
2
<PAGE>
Investment Environment
Today's investment environment is unusual, to say the least. The broad
market has weakened considerably in the last six months, partly in response to
the upward creep in interest rates. Most stocks are now down for this year and
down substantially from six months ago. Yet the S&P 500 Index returned 21.0% in
1999. Almost half of NASDAQ's stocks are negative this year, while the index is
up an astounding 85.6%.
The dichotomy results from the extraordinary performance of many
technology stocks, particularly those related to the Internet. It is compounded
by the heavy weightings many of those companies receive in the
capitalization-weighted performance of the S&P and NASDAQ. In recognition of the
performance disparity, a Wall Street Journal article referred to the present
market as a"stealth bear market," a period in which the very strong performance
of a small number of large stocks has disguised the fact that most stocks are
down. At the end of November, the New York Stock Exchange reported 386 stocks
reaching new lows but only 56 stocks making new highs for the prior twelve
months.
In our view, there is unusually good value in many sectors of the broad
market today, where many well managed companies with favorable business
prospects are being overlooked and are selling at very low price/earnings
ratios. Though companies in the technology and Internet industries clearly have
the greatest growth prospects, their stocks have the greatest price risk today.
Portfolio Strategy
We focus on undervalued companies with strong financial characteristics
and shareholder-oriented managements. At the time of purchase, these stocks are
often down in price or out of favor in the market. Over time we hope and expect
many of them will be more highly valued as a result of catalysts to their
businesses or greater recognition of their value.
Our largest purchase in the past six months was Countrywide Credit
Industries. This mortgage lender has been profitably growing its share of the
mortgage lending business. We believe its has the management, the systems, and
the low cost position to allow it to continue to grow at good rates over
3
<PAGE>
LETTER TO SHAREHOLDERS (CONCLUDED)
the long term. In the near term, rising interest rates have curtailed the
production of new loans and refinancings, causing a cyclical slowdown in its
growth. The resultant drop in its stock price has created good value for
long-term investors.
Our largest sales involved harvesting gains from very successful
investments, specifically America Online and Amgen. Both were bought in past
years when they were out of favor as a result of short-term business problems.
With their businesses now running on all cylinders and their stocks in full
favor with investors, we are reducing our positions while keeping significant
holdings for long-term growth.
On an aggregate basis, we invested approximately $55 million over the
past six months, $29 million of which was net new money flowing into the fund.
The cash percentage was 9.7% at the beginning of the period and 5.1% at the end,
in keeping with our goal of being 90-100% invested in stocks. In the current
market environment, we are having no problem identifying good values.
The five largest holdings are shown in the following table.
Five Largest Equity Holdings
Security Cost Market Value 11/30/99
America Online $ 845,779 $36,779,875
Blyth Industries $24,489,196 $23,018,400
Canadian National Railway $15,280,556 $20,345,525
Ford Motor Co. $13,557,706 $20,200,000
IBM $ 5,915,820 $17,726,750
4
<PAGE>
Closing
The past six months have been trying for us and, we are sure, for many
of you as well. The negative performance resulted from a weak broad market, the
absence of a large amount of popular technology stocks, and some fundamental
disappointments. Those shareholders who have invested in the Fund over the
longer term have been much more amply rewarded.
We are continuing to invest for the long term with the same approach as
always, and encourage all shareholders to maintain this same long-term
perspective. Though we never try to predict the direction of the overall market,
we believe there are many unusually good investment opportunities today in the
value sector of the market in which we are most active. We are quite optimistic
about the Fund's long-term prospects going forward.
We all have significant personal investments in the Fund and are
long-term partners with you.
Sincerely,
/s/ LEE S. OWEN
Lee S. Owen
Portfolio Manager
December 31, 1999
5
<PAGE>
FLAG INVESTORS EQUITY PARTNERS 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.The
Securities and Exchange Commission (SEC) requires that when we report such
figures, we also include the Fund's total return, according to a standardized
formula, for various time periods through the end of the most recent calendar
quarter. The SEC total return figures differ from those we reported because the
time periods may be different and because the SECcalculation includes the impact
of the currently effective 4.50% maximum sales charge for the Fund's Class A
Shares, 4.00% maximum contingent deferred sales charge for the Fund's Class B
Shares and 1.00% maximum contingent deferred sales charge for the Fund's Class C
shares.
The Fund's total return corresponds 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 share may be worth more or less than their original
cost when redeemed. Past performance is not an indicator of future results.
Average Annual Total Return(1)
For the periods ended 11/30/99 1 Year Since Inception(2)
Class A Shares 4.19% 19.58%
Class B Shares 3.76% 19.57%
Class C Shares 7.01% 19.30%
Institutional Shares 9.14% 19.06%
(1) 1 Past performance is not an indication of future results. These figures
assume the reinvestment of dividends and capital gains distributions and
include the Fund's applicable sales charge.
(2) Inception dates: Class A 2/13/95, Class B 2/13/95, Class C 10/28/98,
Institutional 2/12/96.
6
<PAGE>
This page intentionally left blank.
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Statement of Net Assets November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Market Value
- ------------------------------------------------------------------------------------------------------
<S><C>
Common Stock: 95.3%
Banking: 2.0%
195,000 Wells Fargo Company $ 9,067,500
---------------
Basic Industry: 1.2%
216,000 Georgia Gulf Corporation 5,508,000
---------------
Business Services: 2.4%
220,200 Galileo International, Inc. 7,046,400
90,000 First Data Corporation 3,892,500
---------------
10,938,900
---------------
Consumer Durables/Non-Durables: 15.5%
959,100 Blyth Industries, Inc.(1) 23,018,400
240,500 Callaway Golf 3,502,281
917,520 Mattel, Inc. 13,132,005
400,000 Ford Motor Company 20,200,000
357,500 Philip Morris Companies, Inc. 9,406,719
---------------
69,259,405
---------------
Consumer Services: 14.5%
739,000 Allied Waste Industries, Inc. (1) 6,004,375
506,000 America Online, Inc.(1) 36,779,875
853,950 Cendant Corporation(1) 14,143,547
50,000 Gannett Company, Inc. 3,578,125
250,000 Sylvan Learning Systems, Inc.(1) 3,296,875
18,000 Times Mirror Co.--Class A 1,162,125
---------------
64,964,922
---------------
Defense/Aerospace: 0.5%
117,400 Lockheed Martin Corporation 2,333,325
---------------
Financial Services: 10.6%
60,200 American Express Company 9,109,012
131,042 Associates First Capital Corp.--Class A 4,357,146
396,800 Countrywide Credit Industries, Inc. 11,160,000
272,250 Citigroup, Inc. 14,667,469
167,000 Freddie Mac 8,245,625
---------------
47,539,252
---------------
</TABLE>
8
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
<TABLE>
<CAPTION>
Shares Market Value
- ------------------------------------------------------------------------------------------------------
<S><C>
Common Stock (continued)
Health Care Services: 7.7%
218,000 Amgen, Inc.(1) $ 9,932,625
177,000 Cardinal Health, Inc. 9,259,312
220,000 Columbia/HCA Healthcare Corporation 5,995,000
165,000 Wellpoint Health Networks, Inc.(1) 9,497,812
---------------
34,684,749
---------------
Hotels/Gaming: 3.3%
530,000 Harrah's Entertainment, Inc.(1) 14,641,250
---------------
Housing: 2.6%
516,900 Champion Enterprises, Inc.(1) 4,425,956
148,300 USG Corporation 7,359,388
---------------
11,785,344
---------------
Insurance: 6.9%
846,387 Conseco, Inc. 17,139,337
273,908 XL Capital Limited-- Class A 13,969,308
---------------
31,108,645
---------------
Multi-Industry: 6.7%
289,000 American Standard Companies, Inc.(1) 11,252,938
6,800 Berkshire Hathaway-- Class B(1) 12,682,000
57,000 Loews Corp. 3,648,000
35,600 United Technologies Corporation 2,011,400
---------------
29,594,338
---------------
Real Estate: 1.6%
750,000 Host Marriott Corp 6,984,375
---------------
Retail: 0.9%
425,000 Kmart Corporation(1) 4,223,438
---------------
Technology: 9.0%
153,700 Cognex Corporation(1) 4,995,250
172,000 International Business Machines Corporation 17,726,750
490,300 Novell Inc.(1) 9,591,494
289,600 Xerox Corporation 7,837,300
---------------
40,150,794
---------------
</TABLE>
9
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Statement of Net Assets (concluded) November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares/Par (000) Market Value
- ------------------------------------------------------------------------------------------------------
<S><C>
Common Stock (concluded)
Telecommunications: 4.5%
174,146 MCI Worldcom, Inc.(1) $ 14,399,697
170,000 Qwest Communications International, Inc.(1) 5,811,875
---------------
20,211,572
---------------
Transportation: 4.5%
679,600 Canadian National Rail Co. 20,345,525
---------------
Utilities: 0.9%
120,000 MidAmerican Energy Holdings(1) 4,012,500
---------------
Total Common Stock
(Cost $331,143,589) 427,353,834
---------------
Repurchase Agreement: 4.9%
$ 21,810 Goldman Sachs & Co., 5.55%
Dated 11/30/99, to be repurchased on
12/1/99, collateralized by U.S. Treasury
Bonds with a par value of $21,811,000,
coupon rate of 5.75%, due 6/30/01, with
a market value of $22,246,702
(Cost $21,810,000) 21,810,000
---------------
Total Investments
(Cost $352,953,589)(2) 100.2% $ 449,163,834
Liabilities in Excess of Other Assets (0.2) (687,993)
----- --------------
Net Assets 100.0% $ 448,475,841
===== ==============
</TABLE>
10
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Net Asset Value and Redemption Price Per:
Class A Share
($271,736,040 O 11,661,908 shares) $23.30
======
Class B Share
($50,556,021 O 2,211,720 shares) $22.86(3)
======
Class C Share
($7,692,764 O 336,687 shares) $22.85(4)
======
Institutional Share
($118,491,016 O 5,062,652 shares) $23.40
======
Maximum Offering Price Per:
Class A Share
($23.30 O .955) $24.40
======
Class B Share $22.86
======
Class C Share $22.85
======
Institutional Share $23.40
======
- ----------
(1) Non-income producing security.
(2) Also aggregate cost for federal tax purposes.
(3) Redemption value is $21.95 following a 4% maximum contingent deferred sales
charge.
(4) Redemption value is $22.62 following a 1% maximum contingent deferred sales
charge.
See Accompanying Notes to Financial Statements.
11
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Statement of Operations
For the Six
Months Ended
November 30,
- ------------------------------------------------------------------------------
1999(1))
Investment Income:
Dividends $ 2,067,604
Interest 926,629
Less: Foreign taxes withheld (20,634)
--------------
Total income 2,973,599
--------------
Expenses:
Investment advisory fee 1,799,423
Distribution fees 649,768
Transfer agent fee 68,702
Professional fees 63,851
Accounting fee 55,079
Registration fees 39,615
Custodian fee 33,990
Directors' fees 7,240
Miscellaneous 47,029
--------------
Total expenses 2,764,697
--------------
Net investment income 208,902
--------------
Realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 18,001,847
Change in unrealized appreciation/depreciation
of investments (63,745,945)
--------------
Net loss on investments (45,744,098)
--------------
Net decrease in net assets resulting from operations $ (45,535,196)
==============
- ----------
(1) Unaudited.
See Accompanying Notes to Financial Statements.
12
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
November 30, May 31,
- ----------------------------------------------------------------------------------------------------------------------
1999(1) 1999
<S><C>
Increase in Net Assets:
Operations:
Net investment income/(expenses
in excess of income) $ 208,902 $ (148,441)
Net realized gain from security transactions 18,001,847 14,945,270
Change in unrealized appreciation/
depreciation of investments (63,745,945) 66,359,649
------------ ------------
Net increase/(decrease) in net assets resulting
from operations (45,535,196) 81,156,478
------------ ------------
Distributions to Shareholders from:
Net investment income and net realized
short-term gains:
Class A Shares -- (93,263)
Class B Shares -- --
Class C Shares -- --
Institutional Shares -- (58,366)
Net realized long-term gains:
Class A Shares -- (2,930,694)
Class B Shares -- (498,363)
Class C Shares -- (394)
Institutional Shares -- (1,271,314)
------------ ------------
Total distributions -- (4,852,394)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares 56,565,203 116,694,761
Value of shares issued in
reinvestment of dividends -- 4,540,061
Cost of shares repurchased (27,936,627) (61,943,145)
------------ ------------
Increase in net assets derived from capital
share transactions 28,628,576 59,291,677
------------ ------------
Total increase/(decrease) in net assets (16,906,620) 135,595,761
Net Assets:
Beginning of period 465,382,461 329,786,700
------------ ------------
End of period (including undistributed net
investment income of $191,430 and
distributions in excess of net investment
income of $17,473, respectively) $448,475,841 $465,382,461
============ ============
</TABLE>
- ----------
(1) Unaudited.
See Accompanying Notes to Financial Statements.
13
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
November 30,
- --------------------------------------------------------------------------------
1999(1)
Per Share Operating Performance:
Net asset value at beginning of period $ 25.68
--------
Income from Investment Operations:
Net investment income/(expenses in excess of income) 0.01
Net realized and unrealized gain/loss on investments (2.39)
--------
Total from Investment Operations (2.38)
Less Distributions:
Net investment income and net realized short-term gains --
Net realized long-term gains --
--------
Total distributions --
--------
Net asset value at end of period $ 23.30
========
Total Return(3) (9.27)%
Ratios to Average Daily Net Assets:
Expenses(4) 1.15%(6)
Net investment income/(expenses in excess of income)(5) 0.12%(6)
Supplemental Data:
Net assets at end of period (000) $271,736
Portfolio turnover rate 12.12%
- ----------
(1) Unaudited.
(2) Commencement of operations.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.48%, 1.77% and 3.76% (annualized) for the years
ended May 31, 1997 and 1996 and for the period ended May 31, 1995,
respectively.
(5) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.48%, 1.10% and 1.33% (annualized)
for the years ended May 31, 1997 and 1996 and for the period ended May 31,
1995, respectively.
(6) Annualized.
14
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
For the Period
Feb. 13, 1995(2)
For the Years Ended May 31, through May 31,
- ---------------------------------------------------------------------------
1999 1998 1997 1996 1995
$ 21.29 $ 16.93 $ 13.09 $ 10.77 $ 10.00
-------- -------- -------- ------- -------
(0.01) 0.05 0.08 0.17 0.12
4.70 4.60 3.96 2.29 0.65
-------- -------- -------- ------- -------
4.69 4.65 4.04 2.46 0.77
(0.03) (0.10) (0.13) (0.14) --
(0.27) (0.19) (0.07) -- --
-------- -------- -------- ------- -------
(0.30) (0.29) (0.20) (0.14) --
-------- -------- -------- ------- -------
$ 25.68 $ 21.29 $ 16.93 $ 13.09 $ 10.77
======== ======== ======== ======= =======
22.31% 27.76% 31.17% 23.05% 7.70%
1.20% 1.24% 1.35% 1.35% 1.35%(6)
(0.02)% 0.29% 0.61% 1.52% 3.74%(6)
$283,950 $198,387 $113,030 $64,230 $38,612
21.21% 7.94% 17.60% 0.73% --
See Accompanying Notes to Financial Statements.
15
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
November 30,
- -----------------------------------------------------------------------------
1999(1)
Per Share Operating Performance:
Net asset value at beginning of period $ 25.29
--------
Income from Investment Operations:
Net investment income/(expenses in excess of income) 0.02
Net realized and unrealized gain/loss on
investments (2.45)
--------
Total from Investment Operations (2.43)
Less Distributions:
Net investment income and net realized short-term gains --
Net realized long-term gains --
--------
Total distributions --
--------
Net asset value end of period $ 22.86
========
Total Return(3) (9.61)%
Ratios to Average Daily Net Assets:
Expenses(4) 1.90%(6)
Net investment income/(expenses in excess of income)(5) (0.62)%(6)
Supplemental Data:
Net assets at end of period (000) $ 50,556
Portfolio turnover rate 12.12%
- ----------
(1) Unaudited.
(2) Commencement of operations.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 2.23%, 2.52% and 4.22% (annualized) for the years
ended May 31, 1997 and 1996 and for the period ended May 31, 1995,
respectively.
(5) Without the waiver of advisory fees , the ratio of net investment
income/(expenses in excess of income) to average daily net assets would have
been (0.28)%, 0.29% and (0.15%) (annualized) for the years ended May 31,
1997 and 1996, and for the period ended May 31, 1995, respectively.
(6) Annualized.
16
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
For the Period
Feb. 13, 1995(2)
For the Years Ended May 31, through May 31,
- -----------------------------------------------------------------------------
1999 1998 1997 1996 1995
$ 21.10 $ 16.84 $ 13.03 $10.75 $10.00
------- ------- ------- ------ ------
(0.14) (0.06) (0.04) 0.07 0.07
4.60 4.54 3.96 2.31 0.68
------- ------- ------- ------ ------
4.46 4.48 3.92 2.38 0.75
-- (0.03) (0.04) (0.10) --
(0.27) (0.19) (0.07) -- --
------- ------- ------- ------ ------
(0.27) (0.22) (0.11) (0.10) --
------- ------- ------- ------ ------
$ 25.29 $ 21.10 $ 16.84 $13.03 $10.75
======= ======= ======= ====== ======
21.39% 26.81% 30.28% 22.17% 7.50%
1.95% 1.98% 2.10% 2.10% 2.10%(6)
(0.77)% (0.47)% (0.16)% 0.71% 1.97%(6)
$52,603 $37,046 $15,670 $5,302 $2,159
21.21% 7.94% 17.60% 0.73% --
See Accompanying Notes to Financial Statements.
17
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period
For the Six Oct. 28, 1998(2)
Months Ended through
November 30, May 31,
- ------------------------------------------------------------------------------------------------
1999(1) 1999
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 25.27 $ 19.09
------- --------
Income from Investment Operations:
Expenses in excess of income 0.02 (0.03)
Net realized and unrealized gain/loss on
investments (2.44) 6.48
------- --------
Total from Investment Operations (2.42) 6.45
Less Distributions:
Net realized long-term gains -- (0.27)
------- --------
Total distributions -- (0.27)
------- --------
Net asset value at end of period $ 22.85 $ 25.27
======= ========
Total Return(3) (9.58)% 34.06%
Ratios to Average Daily Net Assets:
Expenses 1.90%(4) 1.85%(4)
Expenses in excess of income (0.76)%(4) (0.73)%(4)
Supplemental Data:
Net assets at end of period (000) $ 7,693 $ 3,441
Portfolio turnover rate 12.12% 21.21%
</TABLE>
__________
(1) Unaudited.
(2) Commencement of operations.
(3) Total return excludes the effect of sales charge.
(4) Annualized.
See Accompanying Notes to Financial Statements.
18
<PAGE>
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<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Financial Highlights -- Institutional Shares
(For a share outstanding throughout each period)
For the Six
Months Ended
November 30,
- -------------------------------------------------------------------------------
1999(1)
Per Share Operating Performance:
Net asset value at beginning of period $ 25.75
--------
Income from Investment Operations:
Net investment income 0.01
Net realized and unrealized gain on investments (2.36)
--------
Total from Investment Operations (2.35)
Less Distributions:
Net investment income and net realized short-term gains --
--------
Net realized mid-term and long-term gains --
--------
Total Distributions --
========
Net asset value at end of period $ 23.40
Total Return (9.16)%
Ratios to Average Daily Net Assets:
Expenses(3) 0.90%(5)
Net investment income(4) 0.38%(5)
Supplemental Data:
Net assets at end of period (000) $118,491
Portfolio turnover rate 12.12%
- ------------
(1) Unaudited.
(2) Commencement of operations.
(3) Without the waiver of advisory fees, the ratio of expenses to average daily
net assets would have been 1.23% and 1.55% (annualized) for the year ended
May 31, 1997 and the period ended May 31, 1996, respectively.
(4) Without the waiver of advisory fees, the ratio of net investment income to
average daily net assets would have been 0.70% and 0.75% (annualized) for
the year ended May 31, 1997, and the period ended May 31, 1996,
respectively.
(5) Annualized.
20
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
For the Period
Feb. 12, 1996(2)
through
For the Years Ended May 31, May 31,
- ------------------------------------------------------------------------------
1999 1998 1997 1996
$ 21.32 $ 16.94 $ 13.10 $12.72
-------- ------- ------- ------
0.04 0.10 0.14 0.04
4.70 4.61 3.95 0.34
-------- ------- ------- ------
4.74 4.71 4.09 0.38
(0.04) (0.14) (0.18) --
-------- ------- ------- ------
(0.27) (0.19) (0.07) --
-------- ------- ------- ------
(0.31) (0.33) (0.25) --
======== ======= ======= ======
$ 25.75 $ 21.32 $ 16.94 $13.10
22.53% 28.14% 31.58% 3.23%
0.95% 0.98% 1.10% 1.10%(5)
0.23% 0.54% 0.81% 1.20%(5)
$125,388 $94,354 $42,115 $4,235
21.21% 7.94% 17.60% 0.73%
See Accompanying Notes to Financial Statements.
21
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Notes to Financial Statements (unaudited)
NOTE 1 -- Significant Accounting Policies
Flag Investors Equity Partners Fund, Inc. (the "Fund"), which was
organized as a Maryland Corporation on May 31, 1994 and began operations
February 13, 1995, is registered under the Investment Company Act of 1940 as a
diversified, open-end investment management company. Its objective is to seek
long-term growth of capital and, secondarily, current income primarily through a
policy of diversified investments in equity securities, including common stocks
and convertible securities.
The Fund consists of four share classes: Class A Shares and Class B
Shares, both of which began operations February 13, 1995, Class C Shares which
began operations October 28, 1998 and Institutional Shares, which began
operations February 12, 1996.
The Class A, Class B, and Class C Shares are subject to different sales
charges. The Class A Shares have a 4.50% maximum front-end sales charge, the
Class B Shares have a 4.00% maximum contingent deferred sales charge and the
Class C Shares have a 1.00% maximum contingent deferred sales charge. In
addition each of the classes has a different distribution fee. The Institutional
Shares do not have a front-end sales charge, a contingent deferred sales charge
or a distribution fee.
When preparing the Fund's financial statements, management makes
estimates and assumptions to comply with generally accepted accounting
principles. These estimates affect 1) the assets and liabilities that we report
at the date of the financial statements; 2) the contingent assets and
liabilities that we disclose at the date of the financial statements; and 3) the
revenues and expenses that we report for the period. Our estimates could be
different from the actual results. The Fund's significant accounting policies
are:
A. Security Valuation -- The Fund values a portfolio security that is
primarily traded on a national exchange by using the last price
reported for the day. If there are no sales or the security is not
traded on an exchange, the Fund values the security at the average
of the last bid and asked prices in the over-the-counter market.
When a market quotation is not readily available, 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.
22
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
NOTE 1 -- concluded
B. Repurchase Agreements -- The Fund may enter into tri-party
repurchase agreements with broker-dealers and domestic banks. A
repurchase agreement is a short-term investment in which the Fund
buys a debt security that the 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 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 Taxes -- The Fund determines its distributions
according to income tax regulations, which may be different from
generally accepted accounting principles. As a result, the Fund
occasionally makes reclassifications within its capital accounts to
reflect income and gains that are available for distribution under
income tax regulations.
The Fund is organized as a regulated investment company. As
long as it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net
realized capital gains, it will be exempt from most, if not all,
federal income and excise taxes. As a result, the Fund has made no
provisions for federal income taxes.
D. Securities Transactions, Investment Income, Distributions and
Other-- The Fund uses the trade date to account for security
transactions and the specific identification method for financial
reporting and income tax purposes to determine the cost of
investments sold or redeemed. Interest income is recorded on an
accrual basis and includes the 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 began
investment activities.
23
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Notes to Financial Statements (continued)#
NOTE 2 -- Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Deutsche
Bank, AG, is the Fund's investment advisor. 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: 1.00% of the first $50 million, 0.85% of the next $50 million, 0.80% of
the next $100 million and 0.70% of the amount over $200 million.
For the six months ended November 30, 1999, ICC's advisory fee was
$1,799,423 of which $290,139 was payable at the end of the period.
Alex. Brown Investment Management ("ABIM") is the Fund's sub-advisor.
As compensation for its subadvisory services, ICC pays ABIM 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: 0.75% of the
first $50 million, 0.60% of the next $150 million and 0.50% of the amount over
$200 million.
ICC also provides accounting services to the Fund for which the Fund
pays ICC an annual fee that is calculated daily and paid monthly based on the
Fund's average daily net assets. For the six months ended November 30, 1999,
ICC's fee was $55,079 of which $8,934 was payable at the end of the period.
ICC also provides transfer agent services to the Fund for which the
Fund pays ICC a per account fee that is calculated and paid monthly. For the six
24
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
NOTE 2 -- concluded
months ended November 30, 1999, ICC's fee was $68,702 of which $16,647 was
payable at the end of the period.
Bankers Trust Company, an affiliate of ICC, provides custody
services to the Fund for which the Fund pays Bankers Trust an annual fee. For
the six months ended November 30, 1999, Bankers Trust's fee was $33,990 of
which $35,097 was payable at the end of the period.
Certain officers and directors of the Fund are also officers or
directors of ICC.
ICC Distributors, Inc., a member of the Forum Group of companies,
provides distribution services to the Fund for which the Fund pays ICC
Distributors an annual fee that is calculated daily and paid monthly at the
following annual rates; 0.25% of the Class A Shares' average daily net assets
and 1.00% of the Class B and Class C Shares' average daily net assets. The fees
for the Class B and Class C Shares include a 0.25% shareholder servicing fee.
Distribution fees for the six months ended November 30, 1999 amounted to
$355,798, $262,000, and $31,969 for Class A, Class B, and Class C Shares,
respectively, of which $56,843, $42,474 and $6,334 was payable at the end of the
period.
The Fund complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the six months
ended November 30, 1999 was $840, and the accrued liability was $7,324.
25
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Notes to Financial Statements (continued)
NOTE 3 -- Capital Share Transactions
The Fund is authorized to issue up to 90 million shares of $.001 par
value capital stock (40 million Class A, 15 million Class B, 15 million Class C,
15 million Institutional and 5 million undesignated). Transactions in
shares of the Fund as follows:
<TABLE>
<CAPTION>
Class A Shares
---------------------------
For the Six For the
Months Ended Year Ended
Nov. 30, 1999(1) May 31, 1999
----------- ------------
<S><C>
Shares sold 1,354,453 3,166,847
Shares issued to shareholders on
reinvestment of dividends -- 132,532
Shares redeemed (751,899) (1,557,812)
----------- -----------
Net increase in shares outstanding 602,554 1,741,567
----------- -----------
Proceeds from sale of shares $33,728,092 $67,677,756
Value of reinvested dividends -- 2,838,498
Cost of shares redeemed (18,274,395) (33,714,414)
Net increase from capital share
transactions $15,453,697 $36,801,840
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
---------------------------
For the Six For the
Months Ended Year Ended
Nov. 30, 1999(1) May 31, 1999
----------- ------------
<S><C>
Shares sold 235,123 563,765
Shares issued to shareholders on
reinvestment of dividends -- 22,835
Shares redeemed (103,806) (261,968)
----------- -----------
Net increase in shares outstanding 131,317 324,632
=========== ===========
Proceeds from sale of shares $ 5,735,885 $12,547,072
Value of reinvested dividends -- 482,952
Cost of shares redeemed (2,460 582) (5,608,819)
----------- -----------
Net increase from capital share
transactions $ 3,275,303 $ 7,421,205
=========== ===========
</TABLE>
- ----------
(1) Unaudited.
26
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
NOTE 3 -- continued
<TABLE>
<CAPTION>
Class C Shares
-----------------------------------
For the Period
For the Six Oct. 28, 1998(1)
Months Ended through
Nov. 30, 1999(2) Nov. 30,1998(2)
---------------- ---------------
<S><C>
Shares sold 206,400 137,892
Shares issued to shareholders on
reinvestment of dividends -- 16
Shares redeemed (5,857) (1,763)
----------- -----------
Net increase in shares
outstanding 200,543 136,145
=========== ===========
Proceeds from sale of shares $ 5,103,509 $ 3,342,768
Value of reinvested dividends -- 336
Cost of shares redeemed (137,211) (39,485)
----------- -----------
Net increase from capital share
transactions $ 4,966,298 $ 3,303,619
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Institutional Shares
--------------------------------
For the Six For the
Months Ended Year Ended
Nov. 30, 1999(2) May 31, 1999
---------------- --------------
<S><C>
Shares sold 497,171 1,542,660
Shares issued to shareholders on
reinvestment of dividends -- 56,796
Shares redeemed (303,029) (1,157,545)
----------- -----------
Net increase in shares outstanding 194,142 441,911
=========== ===========
Proceeds from sale of shares $11,997,718 $33,127,165
Value of reinvested dividends -- 1,218,275
Cost of shares redeemed (7,064,440) (22,580,427)
----------- -----------
Net increase from capital
share transactions $ 4,933,278 $11,765,013
=========== ===========
</TABLE>
- ------------
(1) Commencement of operations.
(2) Unaudited.
27
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Notes to Financial Statements (concluded)
NOTE 3 -- concluded
On November 30, 1999, the amounts payable for fund shares redeemed
amounted to $2,084,784, of which $274,312 were attributable to the Class A
Shares, $346,342 were attributable to the Class B Shares $25,135 were
attributable to the Class C Shares and $1,438,995 were attributable to the
Institutional Shares.
NOTE 4 -- Investment Transactions
Excluding short-term obligations, purchases of investment securities
aggregated $104,995,275 and sales of investment securities aggregated
$51,975,710 for the six months ended November 30, 1999.
On November 30, 1999, aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost was
$132,611,049 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value was $36,400,804.
NOTE 5 -- Net Assets
On November 30, 1999, net assets consisted of:
Paid-in capital:
Class A Shares $184,061,530
Class B Shares 38,724,153
Class C Shares 8,268,326
Institutional Shares 88,415,437
Accumulated net realized gain from security transactions 32,604,720
Unrealized appreciation of investments 96,210,245
Undistributed net investment income 191,430
------------
$448,475,841
============
28
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Shareholder Meeting (unaudited)
On June 4, 1999, Bankers Trust Corporation, the parent company of
Investment Company Capital Corp ("ICC"), the investment advisor to the
Fund was acquired by Deutsche Bank AG. As a result, ICC became an indirect
wholly-owned subsidiary of Deutsche Bank AG.
A Special Meeting of Shareholders of the Flag Investors Equity Partners
Fund, Inc. (the "Special Meeting") was held on October 7, 1999, at which time
shareholders voted to approve a new investment advisory agreement (the "Advisory
Agreement") with ICC. Shareholders also approved a new sub-advisory agreement
with Alex. Brown Investment Management (the "Sub-Advisory Agreement").
Shareholders also elected the Board of Directors. The Special Meeting was
adjourned and reconvened on November 19, 1999, at which time, Shareholders voted
to eliminate, modify or reclassify certain fundamental restrictions of the Fund.
29
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
The results of the shareholder voting at the Special Meeting are as
follows:
<TABLE>
<CAPTION>
Withheld/ Broker
Proposal For Against Abstain Non-Votes
- -------------------------------------------------------------------------------------------------------------------
<S><C>
Elect Truman T. Semans 9,662,172 47,564
Elect Richard R. Burt 9,672,170 37,566
Elect Richard T. Hale 9,670,941 38,795
Elect Joseph R. Hardiman 9,672,359 37,377
Elect Louis E. Levy 9,665,440 44,296
Elect Eugene J. McDonald 9,667,024 42,712
Elect Rebecca W. Rimel 9,669,929 39,807
Elect Robert H. Wadsworth 9,670,811 38,925
Investment Advisory Agreement
with ICC 8,970,396 29,195 710,145
Sub-Advisory Agreement with
ICC and Alex. Brown
Investment Management 8,966,367 28,605 714,764
Eliminate policy regarding
short sales 6,749,483 182,431 733,183 2,044,639
Eliminate policy regarding
purchasing securities on margin 6,559,930 367,785 737,381 2,044,640
Eliminate policy regarding oil,
gas and mineral leases 6,579,601 344,808 740,687 2,044,640
Modify policy regarding
commodities 6,734,420 195,589 735,087 2,044,640
Modify policy regarding borrowing 6,557,280 380,785 727,031 2,044,640
Modify policy regarding loans 6,594,493 342,024 728,579 2,044,640
Modify and reclassify as non-
fundamental the policy regarding
illiquid and restricted securities 6,765,683 165,836 733,578 2,044,639
</TABLE>
30
<PAGE>
FLAG INVESTORS EQUITY PARTNERS FUND
Directors and Officers
TRUMAN T. SEMANS
Chairman
RICHARD R. BURT REBECCA W. RIMEL
Director Director
RICHARD T. HALE ROBERT H. WADSWORTH
Director Director
JOSEPH R. HARDIMAN CARL W. VOGT, ESQ.
Director President
LOUIS E. LEVY AMY M. OLMERT
Director Secretary
EUGENE J. MCDONALD CHARLES A. RIZZO
Director Treasurer
Investment Objective
A mutual fund designed to seek long-term growth of capital and, secondarily,
current income primarily through a policy of diversified investments in equity
securities, including common stocks and convertible securities.
31
<PAGE>
This page intentionally left blank.
<PAGE>
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>
(GRAPHIC APPEARS HERE)
Balanced
Value Builder Fund
Growth
Equity Partners Fund
Emerging Growth Fund
Specialty Funds
Communications Fund
Real Estate Securities Fund
International Funds
International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund
Top 50 Strategy Funds
Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 U.S.
Fixed Income
Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund
Tax-Free Income
Managed Municipal Fund Shares
Money Market
Cash Reserve Prime Shares
P.O. Box 515 Baltimore,
Maryland 21203
800-767-FLAG
www.flaginvestors.com
ICC Distributors, Inc.
EPSA(1/00)
