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FLAG INVESTORS
FLAG
INVESTORS
INTERNATIONAL
FUND
SEMI-ANNUAL REPORT
APRIL 30, 1997
<PAGE>
REPORT HIGHLIGHTS
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o The Fund outperformed the Morgan Stanley Capital International Europe,
Australia and Far East (EAFE) Index for the 6 months and 12 months ended April
30, 1997.
o The Fund's performance was a result of an underexposure to Japanese stocks
(about 25% of assets) and a high exposure to the strong European markets
(about 60% of assets).
<PAGE>
LETTER TO SHAREHOLDERS
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Dear Shareholders:
Over the past 6 months, stock market performance across countries differed
significantly. Among the 20 countries in the EAFE Index, 5 markets experienced
negative returns, while 15 produced positive returns. Europe produced the
highest return (11.8%) of any specific region, while the Pacific region declined
10.4%. After a prolonged period of very poor performance (-15.5%) in the first 3
months of the Fund's fiscal year, the Japanese equity market rose 2.6%, adjusted
for currency losses, in the past 3 months. The entire capitalization-weighted
EAFE Index generated a 1.5% total return for the 6-month period.
The Fund produced a 6.7% total return during the 6-month period, which
exceeded the EAFE Index by approximately 5.2%. The primary reason for the
favorable comparison was country selection. The Fund was underexposed to the
Japanese market but had higher exposure than the index to the strong European
markets. Stock selection was also helpful, especially in Japan, where many of
the Fund's holdings reacted favorably to earnings gains resulting from the yen's
weakness.
In the past 12 months, the EAFE Index produced a 0.9% decline in value,
while the Fund generated a 6.0% gain. The Fund's favorable performance over the
past year was also a result of an underweighted exposure to the Japanese equity
market and effective stock selection.
We are excited about the investment outlook for international stocks.
Economic growth is expected to continue into 1998 in virtually every region of
the developed world, while inflation should remain dormant. At the same time, an
increasing number of foreign companies are adopting American profitability
benchmarks, which have successfully improved profit margins in the United
States. Over time, foreign managers should be able to improve their companies'
margins as well. Investors, however, have yet to act on this potential
improvement. On several important valuation measures, the U.S. stock market is
more expensive than international equities. The combination of sales growth,
margin improvement, interest rate stability and attractive relative valuations
should create a favorable market environment for investors. The Fund's portfolio
has approximately 60% of its assets in Europe, 25% in Japan and the balance in
select Pacific and Mexican stocks. We believe this diversified portfolio will
position us well for the future.
Sincerely,
/s/ John W. Church, Jr. /s/ Andrew B. Williams
- ----------------------- ----------------------
John W. Church, Jr. Andrew B. Williams
President Executive Vice President
May 19, 1997
1
<PAGE>
TEN LARGEST HOLDINGS
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Percent of
Company Net Assets
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1. Deutsche Bank AG 3.9%
Largest bank in Germany, providing banking and related
financial services worldwide.
2. Lend Lease Corp., Ltd. 3.8%
One of the leading financial services groups in Australia with
businesses of property services and construction.
3. ABN-AMRO Holding N.V. 3.1%
Netherlands' largest bank and one of the ten largest
banks in Europe.
4. Elf Aquitaine SA 3.1%
International integrated oil and gas company in France.
5. Dragados & Construcciones SA 3.0%
Civil engineering and construction company in Spain.
6. Oy Nokia AB--Series A ADR 2.9%
An international telecommunications company that manufac-
tures mobile phones, networks and systems for cellular and
fixed networks around the world.
7. Honda Motor Co. 2.8%
Developer, manufacturer and distributor of motorcycles, auto-
mobiles and other power products. The company's manufac-
turing facilities are located around the world, and their prod-
ucts are distributed to consumers in about 150 countries.
8. Tomkins PLC 2.6%
U.K.-based conglomerate involved in the manufacture of fluid
controls, industrial products, food, garden and leisure products.
9. Scottish Power PLC 2.5%
An integrated electric utility that generates, transmits and sup-
plies electricity throughout Scotland and parts of England.
10. Telecom Italia SpA 2.3%
Provider of telecommunications services in Italy through the
company's nationwide fixed network facilities.
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2
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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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 SEC calculation includes the impact of the
currently effective 4.50% maximum sales charge for the Fund's Class A Shares.
Average Annual Total Return
Periods Ended 3/31/97 1 Year 5 Years 10 Years Since Inception*
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Class A Shares 5.10% 8.56% 5.02% 6.60%
................................................................................
*11/18/86.
The Fund's total returns correspond to those experienced by individual
shareholders only if their shares were purchased on the first day of each time
period and the maximum sales charge was paid. Any performance figures shown are
for the full period indicated. Since investment return and principal value will
fluctuate, an investor's shares may be worth more or less than their original
cost when redeemed. Past performance is not an indicator of future results.
3
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FLAG INVESTORS INTERNATIONAL FUND
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Statement of Net Assets April 30, 1997
(Unaudited)
No. of Value Percent of
Shares Security (Note 1) Net Assets
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COMMON STOCK -- 96.4%
AUSTRALIA -- 3.8%
26,634 Lend Lease Corp., Ltd. $ 509,807 3.8%
--------- ----
CANADA -- 1.2%
3,000 Magna International Inc. 156,375 1.2
--------- ----
FINLAND -- 2.9%
6,000 Oy Nokia AB - Series A ADR 387,750 2.9
--------- ----
FRANCE -- 6.8%
4,258 Elf Aquitaine SA* 413,632 3.1
4,356 Lafarge SA 286,188 2.1
9,680 Lagardere Groupe,
Warrants Expiring 6/30/97* 10,301 0.1
4,000 Technip ADR 211,432 1.5
--------- ----
921,553 6.8
GERMANY -- 6.8%
10,000 Deutsche Bank AG 528,752 3.9
3,600 Deutsche Telekom AG 78,140 0.6
6,000 Veba AG 311,871 2.3
--------- ----
918,763 6.8
HONG KONG -- 1.9%
125,000 Hong Kong Land Holdings, Ltd. 260,000 1.9
--------- ----
ITALY -- 5.6%
9,631 Assicurazioni Generali* 161,437 1.2
21,300 Benetton Group SpA 277,279 2.1
120,000 Telecom Italia SpA 316,288 2.3
--------- ----
755,004 5.6
JAPAN -- 25.0%
6,600 Acom Co., Ltd. 269,367 2.0
5,000 Amway Japan Ltd. 152,458 1.1
2,000 Aoyama Trading Co., Ltd. 56,413 0.4
10,000 Canon, Inc. 237,157 1.8
10,000 Daiwa House Industry Co., Ltd. 111,882 0.8
50 East Japan Railway Co. 216,278 1.6
25,000 Hitachi Ltd. 226,521 1.7
12,000 Honda Motor Co. 372,518 2.8
4
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FLAG INVESTORS INTERNATIONAL FUND
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No. of Value Percent of
Shares Security (Note 1) Net Assets
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COMMON STOCK -- continued
JAPAN -- concluded
20,000 Kao Corp. $ 233,218 1.7%
1,500 Kyocera Corp. ADR 180,750 1.3
2,000 Nintendo Corp. Ltd. 146,234 1.1
26,000 Nishimatsu Construction Co. 146,470 1.1
4,000 Rohm Co. 310,117 2.3
11,000 Sankyo Co., Ltd. 294,674 2.2
7,000 Sharp Corp. 91,002 0.7
20,000 Toda Construction Co. 107,154 0.8
10,000 Yamanouchi Pharmaceutical Co. 213,520 1.6
---------- ----
3,365,733 25.0
MALAYSIA -- 1.6%
94,666 Malaysian International
Shipping Corp. Berhad `F' 213,152 1.6
---------- ----
MEXICO -- 0.9%
33,750 Cemex. S.A. de C.V. - Series `B'* 124,921 0.9
---------- ----
NETHERLANDS -- 4.9%
6,114 ABN-AMRO Holding N.V. 420,951 3.1
5,000 IHC Caland NV Holdings 247,326 1.8
---------- ----
668,277 4.9
NEW ZEALAND -- 0.7%
5,000 Tranz Rail Holdings ADR 88,750 0.7
---------- ----
NORWAY -- 1.6%
4,300 Kvaerner AS 214,108 1.6
---------- ----
SINGAPORE -- 0.6%
10,000 Singapore Airlines Ltd. `F' 88,489 0.6
---------- ----
SPAIN -- 7.1%
10,000 Banco Central Hispano Americano SA 305,024 2.2
25,000 Dragados & Construcciones SA 404,414 3.0
6,000 Repsol SA 252,108 1.9
---------- ----
961,546 7.1
5
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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Statement of Net Assets (concluded)
(Unaudited)
No. of Value Percent of
Shares Security (Note 1) Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- concluded
SWITZERLAND -- 2.0%
1,260 Schweizerischer Bankverein
(Swiss Bank Corp.),
Registered Shares $ 275,906 2.0%
----------- ----
THAILAND -- 0.4%
10,000 Siam Commercial Bank Ltd. `F' 58,598 0.4
----------- ----
UNITED KINGDOM -- 22.6%
25,000 B.A.T. Industries PLC 211,656 1.6
16,149 The Boots Co. PLC 181,596 1.3
45,000 BTR PLC 184,641 1.4
25,000 Dalgety PLC 127,563 0.9
14,000 De La Rue PLC 125,694 0.9
20,000 Grand Metropolitan PLC 167,700 1.2
70,000 Iceland Group PLC 103,513 0.8
84,000 Mirror Group Newspapers PLC 285,968 2.1
25,000 National Power PLC 216,734 1.6
10,000 RTZ Corp. PLC 159,006 1.2
22,967 Safeway PLC 127,079 0.9
55,100 Scottish Power PLC 333,975 2.5
40,000 Smith (WH) Group PLC - Class A 297,700 2.2
25,000 Tate & Lyle PLC 186,672 1.4
80,000 Tomkins PLC 346,450 2.6
----------- ----
3,055,947 22.6
Total Common Stock
(Cost $10,686,304) 13,024,679 96.4
----------- ----
6
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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No. of
Shares/ Value Percent of
Par (000) Security (Note 1) Net Assets
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PREFERRED STOCK -- 0.1%
HONG KONG -- 0.1%
16 Dairy Farm International
Holdings Ltd., Cvt.
(Cost $16,000) $ 12,279 0.1%
----------- -----
REPURCHASE AGREEMENT -- 2.9%
$389 Goldman Sachs & Co., 5.25%
Dated 4/30/97, to be repurchased
on 5/1/97, collateralized by U.S.
Treasury Notes with a market value
of $397,557.
(Cost $389,000) 389,000 2.9
----------- -----
Total Investment in Securities
(Cost $11,091,304)** 13,425,958 99.4
Other Assets in Excess of Liabilities, Net 86,497 0.6
----------- -----
Net Assets $13,512,455 100.0%
=========== =====
Net Asset Value and Redemption Price Per Share
($13,512,455 / 909,197 shares outstanding) $14.86
======
Maximum Offering Price Per Share
($14.86 / .955) $15.56
======
- -------
** Non-income producing security.
** Also, aggregate cost for federal tax purposes.
See Notes to Financial Statements.
7
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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Statement of Operations
For the Six
Months Ended
April 30,
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1997(1)
Investment Income (Note 1):
Dividends $116,782
Interest 7,946
Less: Foreign taxes withheld (14,120)
--------
Total income 110,608
--------
Expenses:
Investment advisory fee (Note 2) 49,701
Distribution fee (Note 2) 16,567
Legal 16,209
Audit 14,132
Accounting fees (Note 2) 13,731
Printing and postage 11,481
Transfer agent fees (Note 2) 8,431
Custodian fees 7,698
Registration fees 5,778
Miscellaneous 2,823
Pricing fee 1,470
Directors' fees 748
--------
Total expenses 148,769
Less: Fees waived (Note 2) (48,815)
--------
Net expenses 99,954
--------
Net investment income 10,654
--------
Net realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 450,505
Net realized foreign exchange loss (16,847)
Change in unrealized appreciation or depreciation
of investments 432,278
Change in unrealized appreciation or depreciation on translation
of assets and liabilities, excluding investments, denominated in
foreign currencies (3,646)
--------
Net gain on investments 862,290
--------
Net increase in net assets resulting from operations $872,944
========
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(1) Unaudited.
See Notes to Financial Statements.
8
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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Statement of Changes in Net Assets
For the Six For the Year
Months Ended Ended
April 30, October 31,
- --------------------------------------------------------------------------------
1997(1) 1996
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 10,654 $ 250,800
Net realized gain from security transactions and
foreign exchange transactions 433,658 571,223
Change in unrealized appreciation or depreciation
of investments 432,278 656,848
Change in unrealized appreciation or depreciation
on translation of other assets and liabilities
denominated in foreign currencies (3,646) (3,773)
----------- -----------
Net increase in net assets resulting
from operations 872,944 1,475,098
----------- -----------
Dividends to Shareholders from:
Net investment income (260,229) (28,072)
----------- -----------
Capital Share Transactions (Note 3):
Proceeds from sale of 69,202 and
107,997 shares, respectively 1,015,231 1,494,406
Value of 5,155 and 1,596 shares issued in
reinvestment of dividends, respectively 223,079 22,601
Cost of 85,731 and 182,530 shares
repurchased, respectively (1,268,826) (2,516,921)
----------- -----------
Total decrease in net assets derived
from capital share transactions (30,516) (999,914)
----------- -----------
Total increase in net assets 582,199 447,112
Net Assets:
Beginning of period 12,930,256 12,483,144
----------- -----------
End of period $13,512,455 $12,930,256
=========== ===========
- -------
(1) Unaudited.
See Notes to Financial Statements.
9
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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Financial Highlights
(For a share outstanding throughout each period)(1)
For the Six
Months Ended
April 30,
- --------------------------------------------------------------------------------
1997(2)
Per Share Operating Performance:
Net asset value at beginning of period $ 14.20
-------
Income from Investment Operations:
Net investment income 0.02
Net realized and unrealized gain/(loss) on investments(3) 0.93
-------
Total from Investment Operations 0.95
Less Distributions:
Distributions from net investment income
and short-term gains (0.29)
Distributions from net realized long-term gains --
-------
Total distributions (0.29)
-------
Net asset value at end of period $ 14.86
=======
Total Return(4) 6.71%
Ratios to Average Daily Net Assets:
Expenses(5) 1.50%(7)
Net investment income(6) 0.16%(7)
Supplemental Data:
Net assets at end of period (000) $13,512
Portfolio turnover rate 6%(7)
Average commissions per share(8) $ 0.05
- -------
(1) Computed based upon average shares outstanding.
(2) Unaudited.
(3) The six months ended April 30, 1997 and the years ended October 31, 1996,
1995 and 1994 include net realized currency gain/(loss). Realized currency
gain/(loss) is included in net investment income for the years ended October
31, 1993 and 1992.
(4) Total return excludes the effect of sales charge.
(5) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 2.24% (annualized), 2.30%, 2.17%,
1.97%, 2.13% and 1.92% for the six months ended April 30, 1997 and the years
ended October 31, 1996, 1995, 1994, 1993 and 1992, respectively.
(6) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been (0.58)% (annualized),
1.10%, 0.02%, 0.28%, 1.28% and 0.31% for the six months ended April 30, 1997
and the years ended October 31, 1996, 1995, 1994, 1993 and 1992,
respectively.
(7) Annualized.
(8) Disclosure of average commissions per share is effective beginning in fiscal
year 1996.
10
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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<TABLE>
<CAPTION>
For the Year Ended October 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $ 12.69 $ 13.97 $ 13.05 $ 9.11 $ 10.63
------- ------- ------- ------ -------
Income from Investment Operations:
Net investment income 0.26 0.09 0.18 0.49 0.16
Net realized and unrealized gain/(loss) on investments(3) 1.28 (1.37) 1.58 3.45 (1.62)
------- ------- ------- ------ -------
Total from Investment Operations 1.54 (1.28) 1.76 3.94 (1.46)
Less Distributions:
Distributions from net investment income
and short-term gains (0.03) -- (0.84) -- (0.06)
Distributions from net realized long-term gains -- -- -- -- --
------- ------- ------- ------ -------
Total distributions (0.03) -- (0.84) -- (0.06)
------- ------- ------- ------ -------
Net asset value at end of period $ 14.20 $ 12.69 $ 13.97 $ 13.05 $ 9.11
======= ======= ======= ======= =======
Total Return(4) 12.13% (9.16)% 13.98% 43.25% (13.80)%
Ratios to Average Daily Net Assets:
Expenses(5) 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income(6) 1.91% 0.68% 0.75% 1.91% 0.73%
Supplemental Data:
Net assets at end of period (000) $12,930 $12,483 $15,487 $15,008 $19,780
Portfolio turnover rate 13% 35% 43% 48% 63%
Average commissions per share(8) $ 0.02 -- -- -- --
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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Notes to Financial Statements
NOTE 1--Significant Accounting Policies
Flag Investors International Fund, Inc. (the "Fund"), which was organized
as a Massachusetts business trust September 3, 1986 and reorganized as a
Maryland Corporation on August 16, 1993, commenced operations November 18, 1986.
The Fund 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 primarily through investment in a diversified
portfolio of marketable equity securities of issuers domiciled outside of the
United States.
The Fund consists of one share class, Class A Shares, which are subject to
a 4.50% maximum front-end sales charge and a 0.25% 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. When the security is listed on more than one
exchange, the Fund uses the last price on the exchange where the
security is primarily traded. If there are no sales or the security is
not traded on a listed exchange, the Fund values the security at the
last bid price in the over-the-counter market. When a market
quotation is unavailable, the Investment Advisor determines a fair
value using procedures that the Board of Directors establishes and
monitors. The Fund values short-term obligations with maturities of 60
days or less at amortized cost.
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.
12
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
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NOTE 1--concluded
C. Foreign Currency Translation--The Fund's books and records are
maintained in U.S. dollars. Transactions denominated in foreign
currencies are recorded in the Fund's records at the effective
exchange rate when earned or incurred. Asset and liability
accounts that are denominated in foreign currencies are adjusted
to reflect the current exchange rate. Transaction gains or losses that
are a result of changes in the exchange rate during the reporting
period or upon settlement of the foreign currency transactions are
reported in realized and unrealized gain/(loss) on investments for the
current period.
The Fund is authorized to enter into forward foreign exchange
contracts as a hedge against either specific transactions or portfolio
positions. These contracts are not reflected in the Fund's financial
statements. However, the net income or loss from these contracts is
recorded from the contract's inception date. Premiums or discounts are
amortized over the life of the contracts.
D. 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.
E. Security 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
scientific method for amortization of premiums and accretion of
discounts when appropriate. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
13
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown
Financial Corp., is the Fund's investment advisor and The Glenmede Trust Company
("Glenmede") is the Fund's subadvisor. As compensation for its advisory
services, the Fund pays ICC an annual fee based on the Fund's average daily net
assets. This fee is calculated daily and paid monthly at the annual rate of
0.75%. As compensation for its subadvisory services, the Fund pays Glenmede an
annual fee based on the Fund's average daily net assets. This fee is calculated
daily and paid monthly at the annual rate of 0.55%.
ICC has agreed to waive up to all of its fees if necessary so that the
Fund's total operating expenses are no more than 1.50% of the Fund's average
daily net assets. For the six months ended April 30, 1997, ICC waived fees of
$48,815.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $13,731 for accounting services for the six months
ended April 30, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $8,431 for
transfer agent services for the six months ended April 30, 1997.
As compensation for providing distribution services, the Fund pays Alex.
Brown & Sons Incorporated an annual fee that is calculated daily and paid
monthly at an annual rate equal to 0.25% of the Fund's average daily net assets.
The Fund paid Alex. Brown $16,567 for distribution services for the six months
ended April 30, 1997.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the period
November 1, 1996 through April 30, 1997 was $210, and the accrued liability was
$1,897.
NOTE 3--Capital Share Transactions
The Fund is authorized to issue up to 10 million shares of $.001 par value
capital stock.
14
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTE 4--Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $391,802 and sales of investment securities
aggregated $1,017,067 for the six months ended April 30, 1997.
On April 30, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $2,954,935 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $620,281.
NOTE 5--Net Assets
On April 30, 1997, net assets consisted of:
Paid-in capital $15,223,256
Undistributed net investment income 375,684
Accumulated net realized loss from security and
foreign exchange transactions (4,418,691)
Unrealized appreciation of investments 2,334,654
Unrealized translation loss (2,448)
-----------
$13,512,455
===========
NOTE 6--Merger Agreement
On April 6, 1997, Bankers Trust New York Corporation and Alex. Brown
Incorporated announced that they had signed a definitive agreement to merge. The
merger, which is expected to be completed by the fourth quarter of 1997, is
subject to customary closing conditions, including certain regulatory and
shareholder approvals.
15
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Directors and Officers
TRUMAN T. SEMANS
Chairman
JAMES J. CUNNANE JOHN W. CHURCH, JR.
Director President
RICHARD T. HALE ANDREW B. WILLIAMS
Director Executive Vice President
JOHN F. KROEGER GARY V. FEARNOW
Director Vice President
LOUIS E. LEVY EDWARD J. VEILLEUX
Director Vice President
EUGENE J. MCDONALD SCOTT J. LIOTTA
Director Vice President and Secretary
CARL W. VOGT, ESQ. JOSEPH A. FINELLI
Director Treasurer
LAURIE D. COLLIDGE
Assistant Secretary
Investment Objective
A mutual fund seeking long-term growth of capital primarily through investment
in a diversified portfolio of marketable equity securities of issuers domiciled
outside of the United States.
16
<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>
[LOGO]
FLAG INVESTORS
Growth
Flag Investors Emerging Growth Fund
Flag Investors Equity Partners Fund
Flag Investors International Fund
Equity Income
Flag Investors Real Estate Securities Fund
Flag Investors Telephone Income Fund
Balanced
Flag Investors Value Builder Fund
Income
Flag Investors Short-Intermediate Income Fund
Flag Investors Total Return U.S. Treasury Fund Shares
Tax-Free Income
Flag Investors Managed Municipal Fund Shares
Flag Investors Maryland Intermediate Tax-Free Income Fund
Current Income
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
Distributed by:
ALEX. BROWN & SONS
INCORPORATED
