[LOGO APPEARS HERE]
FLAG INVESTORS
[PHOTO APPEARS HERE]
FLAG
INVESTORS
INTERNATIONAL
FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholders:
The international equity markets have generated strong returns over the
past six months. European markets have performed particularly well, due to a
favorable combination of strengthening economic activity, benign inflationary
pressures, falling interest rates, and a rising number of mergers and
acquisitions. Italy and Spain's markets turned especially strong results, as
investors reacted positively to the rising certainty that both countries would
be admitted in the first stage of European Monetary Union later this year. Asian
markets did not fare as well. The combination of declining growth rates, a
rising number of corporate bankruptcies, growing unemployment, and ineffectual
government responses to these issues further depressed investor sentiment and
stock performance. Overall the international equity market benchmark, the EAFE
Index, generated a 15.5% total return during the past six months.
For the same period, the Flag Investors International Fund produced a 23.2%
total return, well ahead of the Index. A full exposure to the attractive
European markets and advantageous stock selection in Europe and Japan were the
primary reasons for the favorable comparisons with EAFE. Over the past year,
your fund's total return of 24.2% is also ahead of the Index return of 18.9%.
Looking into the next twelve months, investors are faced with a difficult
choice. If one considers growth and economic stability to be of paramount
importance, European markets still appear attractive. That said, the region's
strong performance over the past year has eliminated much of the fundamental
undervaluation that had previously existed. The situation in Asia is quite the
opposite. Bad real estate loans, a troubled financial sector, depressed consumer
sentiment, and a weak economy paint a gloomy picture for Japan. However, most of
this news may already be priced into the market. On the basis of book value or
cash flow, Japan and its Asian neighbors have become relatively inexpensive. We
have used this opportunity to modestly build higher Japanese exposure, but are
still avoiding other Pacific Rim markets. Our focus remains on attractively
valued opportunities with strong balance sheets and a favorable earnings
outlook. We believe this approach will continue to reward investors with
superior returns.
Sincerely yours,
/s/ ANDREW B. WILLIAMS
______________________
Andrew B. Williams, CFA
Portfolio Manager
1
<PAGE>
TEN LARGEST HOLDINGS
- --------------------------------------------------------------------------------
Percent of
Company Net Assets
- --------------------------------------------------------------------------------
1. Telecom Italia SpA 3.5%
Provider of telecommunications services in Italy through the
company's nationwide fixed network facilities.
2. Bennetton Group SpA 3.5%
Produces and markets fashion goods made from woolen,
cotton yarn and fabric.
3. Tomkins PLC 3.3%
U.K.-based conglomerate involved in the manufacture of fluid
controls, industrial products, food, garden and leisure products.
4. Lafarge SA 2.9%
Producer of cement, concrete and aggregates, gypsum,
specialty coatings and paints.
5. Veba AG 2.8%
An electrical energy service provider in Germany that also
operates chemical, oil and telecommunications subsidiaries.
6. Lend Lease Corp., Ltd. 2.7%
One of the leading financial services groups on Australia with
businesses of property services and construction.
7. White Smith Class A 2.7%
A worldwide retailer of books, newspapers, music and
hardware.
8. Acom Co., Ltd. 2.5%
One of the largest consumer lending companies in Japan.
9. SCOR SA 2.4%
Provides worldwide treaty and facultative reinsurance to
property-casualty and life insurers.
10. Repsol SA 2.3%
A holding company which explores for, develops and produces
petroleum products.
- --------------------------------------------------------------------------------
2
<PAGE>
FLAG INVESTORS INTERNATIONAL 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 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 3/31/98 1 Year 5 Years 10 Years Since Inception*
- --------------------------------------------------------------------------------
Class A Shares 17.51% 13.01% 6.69% 7.96%
................................................................................
*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
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets April 30, 1998
(Unaudited)
No. of Percent of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- 97.0%
AUSTRALIA -- 4.2%
100,000 Foster's Brewing $ 217,232 1.5%
16,634 Lend Lease Corp., Ltd. 380,822 2.7
---------- ----
598,054 4.2
BELGIUM -- 1.3%
700 Electrabel, SA* 185,757 1.3
---------- ----
DENMARK-- 1.5%
2,500 Uni-Danmark A/S 209,955 1.5
---------- ----
FINLAND -- 1.9%
4,000 Nokia AB - Series A ADR 267,500 1.9
---------- ----
FRANCE -- 8.5%
4,356 Lafarge SA 411,237 2.9
3,872 Lagardere Groupe* 148,019 1.0
5,600 SCOR SA* 345,131 2.4
2,258 Elf Aquitaine SA* 296,113 2.2
---------- ----
1,200,500 8.5
GERMANY -- 7.8%
5,500 Bayer AG* 245,125 1.7
3,000 Deutsche Bank AG* 232,646 1.6
3,600 Deutsche Telecom AG* 91,855 0.6
4,000 Hoechst AG* 161,114 1.1
6,000 Veba AG* 395,433 2.8
---------- ----
1,126,173 7.8
ITALY -- 9.1%
9,631 Assicurazioni Generali 289,854 2.1
22,152 Benetton Group SpA 495,324 3.5
66,665 Telecom Italia SpA 498,765 3.5
---------- ----
1,283,943 9.1
4
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
No. of Percent of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- continued
JAPAN -- 24.4%
6,600 Acom Co., Ltd. $ 347,971 2.5%
5,000 Amway Japan Ltd. 69,392 0.5
6,000 Aoyama Trading Co., Ltd. 138,029 1.0
10,000 Canon, Inc. 236,083 1.7
10,000 Chugai Pharmaceutical Co. 64,866 0.4
50 East Japan Railway Co. 248,906 1.7
4,000 Fuji Photo Film - Ord. 142,102 1.0
25,000 Hitachi Ltd. 178,948 1.2
8,000 Honda Motor Co. 289,636 2.0
20,000 Kao Corp. 293,407 2.1
2,000 Nintendo Corp. Ltd. 183,134 1.3
2,000 Rohm Company 225,373 1.6
25,000 Sekisui Chemicals Corp. 137,087 1.0
7,000 Sharp Corp. 54,910 0.4
1,600 Sony Corp Y50 132,870 0.9
5,000 Takefuji Corp. 262,105 1.9
20,000 Toda Construction Co. 81,460 0.6
28,000 Toshiba Corp. 129,672 0.9
10,000 Yamanouchi Pharmceutical 236,083 1.7
---------- ----
3,452,034 24.4
MEXICO -- 1.1%
8,000 TV Azteca S.A. 149,000 1.1
---------- ----
NETHERLANDS -- 1.6%
9,456 Algemene Bank Nederland* 230,223 1.6
---------- ----
NEW ZEALAND -- 1.3%
28,000 Telecom Corp New Zealand 132,603 0.9
5,000 Tranz Rail Holdings ADR 52,500 0.4
---------- ----
185,103 1.3
NORWAY -- 2.9%
4,300 Kvaerner AS* 190,739 1.4
4,300 Norsk Hydro 214,367 1.5
---------- ----
405,106 2.9
5
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded)
(Unaudited)
No. of Percent of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
COMMON STOCK -- concluded
PORTUGAL -- 0.9%
5,000 Electicidade $ 127,989 0.9%
---------- ----
SINGAPORE -- 0.5%
10,000 Singapore Airlines Ltd. F 65,066 0.5
---------- ----
SPAIN -- 4.6%
10,000 Dragados & Construcciones SA* 324,168 2.3
6,000 Repsol SA 328,762 2.3
---------- ----
652,930 4.6
SWEDEN -- 3.5%
11,000 Astra AB 218,891 1.6
5,000 SKF AB--B shares 100,788 0.7
6,000 Volvo AB--B shares 175,217 1.2
---------- ----
494,896 3.5
UNITED KINGDOM -- 21.9%
25,000 B.A.T. Industries PLC 238,506 1.7
60,000 British Steel 159,644 1.1
45,000 BTR PLC 149,996 1.1
25,000 Caradon PLC 80,824 0.6
14,000 De La Rue PLC 67,015 0.5
43,750 Iceland Group PLC* 162,641 1.1
84,000 Mirror Group Newspapers PLC 258,238 1.8
25,000 National Power PLC 242,892 1.7
25,000 Reed International PLC 220,754 1.6
10,000 Rio Tinto PLC-REG 143,521 1.0
35,100 Scottish Power PLC 322,547 2.3
25,000 Tate & Lyle PLC 203,628 1.4
80,000 Tomkins PLC 470,163 3.3
40,000 White Smith Class A 372,608 2.7
---------- ----
3,092,977 21.9
Total Common Stock
(Cost 10,522,438) 13,727,206 97.0
---------- ----
6
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Percent of
Par (000) Security Value Net Assets
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.1%
HONG KONG -- 0.1%
$ 16 Dairy Farm International
Holdings Ltd., Cvt.
(Cost $16,000) $ 14,920 0.1%
----------- -----
REPURCHASE AGREEMENT -- 1.8%
$247 Goldman Sachs & Co., 5.4%
dated 4/30/98 to be repurchased
on 5/1/98, collateralized by U.S.
Treasury Notes with a market value
of $252,424.
(Cost $247,000) 247,000 1.8
----------- -----
Total Investment in Securities
(Cost $10,785,438)** 13,989,126 98.9
Other Assets in Excess of Liabilities, Net 159,228 1.1
----------- -----
Net Assets $14,148,354 100.0%
=========== =====
Net Asset Value and Redemption Price Per Share
($14,148,354 (divided by) 779,115 Shares outstanding) $18.16
======
Maximum Offering Price Per Share
($18.16 (divided by) .955) $19.02
======
- --------------------
* Non-income producing security.
** Also, aggregate cost for federal tax purposes.
See Notes to Financial Statements.
7
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Six
Months Ended
April 30,
- --------------------------------------------------------------------------------
1998(1)
Investment Income:
Dividends (Less withholding tax of $13,634) $ 106,495
Interest 8,813
----------
Total Income 115,308
----------
Expenses:
Investment advisory fee 50,847
Legal 19,034
Distribution fee 16,949
Accounting fee 13,853
Registration fees 12,566
Audit 12,291
Printing and Postage 9,656
Custodian fee 8,801
Transfer agent fee 8,158
Pricing 6,122
Miscellaneous 1,081
Directors' fees 306
----------
Total expenses 159,664
Less:Fees waived (57,384)
----------
Net expenses 102,280
----------
Net investment income 13,028
----------
Net realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 750,959
Net realized foreign exchange loss (53,620)
Change in unrealized appreciation/depreciation
of investments 953,109
Change in unrealized appreciation/depreciation on translation
of assets and liabilities, excluding investments, denominated in
foreign currencies (2,403)
----------
Net gain on investments 1,648,045
----------
Net Increase in net assets resulting from operations $1,661,073
==========
- --------------------
(1) Unaudited.
See Notes to Financial Statements.
8
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
(Unaudited)
For the Six For the Year
Months Ended Ended
April 30, October 31,
- --------------------------------------------------------------------------------
1998(1) 1997
Increase/(Decrease) in Net Assets:
Operations:
Net investment income $ 13,028 $ 165,758
Net realized gain from security transactions and
foreign exchange transactions 697,339 1,730,841
Change in unrealized appreciation/depreciation
of investments 953,109 348,203
Change in unrealized appreciation/depreciation
on translation of assets and liabilities
denominated in foreign currencies (2,403) (438)
----------- -----------
Net increase in net assets resulting
from operations 1,661,073 2,244,364
----------- -----------
Dividends to Shareholders from:
Net investment income and short-term gains (210,713) (165,758)
Distributions in excess of net investment income
and short-term gains -- (94,471)
----------- -----------
Total distributions (210,713) (260,229)
Capital Share Transactions (Note 3):
Proceeds from sale of 21,078 and
83,957 shares, respectively 360,216 1,258,732
Value of 11,538 and 15,155 shares issued in
reinvestment of dividends, respectively 182,302 223,079
Cost of 108,065 and 155,119 shares
repurchased, respectively (1,826,163) (2,414,563)
----------- -----------
Total decrease in net assets derived
from capital share transactions (1,283,645) (932,752)
----------- -----------
Total increase in net assets 166,715 1,051,383
Net Assets:
Beginning of period 13,981,639 12,930,256
----------- -----------
End of period (including undistributed net
investment income (loss) of ($197,248)
and $437, respectively) $14,148,354 $13,981,639
=========== ===========
- --------------------
(1) Unaudited.
See Notes to Financial Statements.
9
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
For the Six
Months Ended
April 30,
- --------------------------------------------------------------------------------
1998(1)
Per Share Operating Performance:
Net asset value at beginning of period $ 16.36
-------
Income from Investment Operations:
Net investment income 0.01
Net realized and unrealized gain/(loss) on investments(2) 2.05
-------
Total from Investment Operations 2.06
Less Distributions:
Distributions from net investment income
and short-term gains (0.26)
Distributions in excess of net investment income and
short-term gains --
-------
Total distributions (0.26)
-------
Net asset value at end of period $ 18.16
=======
Total Return(3) 12.83%
Ratios to Average Daily Net Assets:
Expenses(4) 1.50%(6)
Net investment income(5) 0.19%(6)
Supplemental Data:
Net assets at end of period (000) $14,148
Portfolio turnover rate 12%
- --------------------
(1) Unaudited.
(2) The six months ended April 30, 1998 and the years ended October 31, 1997,
1996, 1995, and 1994 include net realized currency gain/(loss). Realized
currency gain/(loss) is included in net investment income for the year ended
October 31, 1993.
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees (Note 2), the ratio of expenses to
average daily net assets would have been 2.33% (annualized), 2.24%, 2.30%,
2.17%, 1.97%, and 2.13% for the six months ended April 30, 1998 and the
years ended October 31, 1997, 1996, 1995, 1994, and 1993, respectively.
(5) Without the waiver of advisory fees (Note 2), the ratio of net investment
income to average daily net assets would have been (0.65)% (annualized),
0.44%, 1.10%, 0.02%, 0.28%, and 1.28%, for the six months ended April 30,
1998 and the years ended October 31, 1997, 1996, 1995, 1994, and 1993,
respectively.
(6) Annualized.
See Notes to Financial Statements.
10
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended October 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
<S><C>
Per Share Operating Performance: $ 14.20 $ 12.69 $ 13.97 $ 13.05 $ 9.11
Net asset value at beginning of period ------- ------- ------- ------- -------
Income from Investment Operations: 0.11 0.26 0.09 0.18 0.49
Net investment income 2.34 1.28 (1.37) 1.58 3.45
Net realized and unrealized gain/(loss) on investments(2) ------- ------- ------- ------- -------
2.45 1.54 (1.28) 1.76 3.94
Total from Investment Operations
Less Distributions: (0.18) (0.03) -- (0.84) --
Distributions from net investment income
and short-term gains (0.11) -- -- -- --
------- ------- ------- ------- -------
Distributions in excess of net investment income and (0.29) (0.03) -- (0.84) --
short-term gains ------- ------- ------- ------- -------
$ 16.36 $ 14.20 $ 12.69 $ 13.97 $ 13.05
Total distributions ======= ======= ======= ======= =======
Net asset value at end of period 17.48% 12.13% (9.16)% 13.98% 43.25%
1.50% 1.50% 1.50% 1.50% 1.50%
Total Return(3) 1.18% 1.91% 0.68% 0.75% 1.91%
Ratios to Average Daily Net Assets:
Expenses(4) $13,982 $12,930 $12,483 $15,487 $15,008
Net investment income(5) 21% 13% 35% 43% 48%
Supplemental Data:
Net assets at end of period (000)
Portfolio turnover rate
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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"), an indirect subsidiary of Bankers
Trust Corporation, is the Fund's investment advisor and The Glenmede Trust
Company ("Glenmede") is the Fund's subadvisor. As compensation for 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 subadvisory services, ICC pays Glenmede an annual fee
based on the Fund's average daily net assets. This fee is calculated monthly and
paid quarterly 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, 1998, ICC waived fees of
$37,743. ICC paid Glenmede $50,847 for subadvisory services for the six months
ended April 30, 1998. Accrued advisory fees at April 30, 1998 amounted to $43
net of waived expenses of $8,757.
Certain officers and directors of the Fund are also officers or directors
of the Fund's investment advisor or subadvisor.
As compensation for its accounting services, the Fund pays ICC an annual
fee that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $13,853 for accounting services for the six months
ended April 30, 1998. Accrued accounting fees at April 30, 1998 amounted to
$2,336.
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 $8,158 for
transfer agent services for the six months ended April 30, 1998. Accrued
transfer agency fees at April 30, 1998 amounted to $5,324.
As compensation for providing distribution services, the Fund pays ICC
Distributors, Inc. ("ICC Distributors"), a member of the Forum Financial Group
of companies, 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. Prior to
September 1, 1997, Alex. Brown & Sons Incorporated served as the Fund's
distributor for the same compensation and on substantially the same terms as ICC
Distributors. The Fund paid $16,949 for distribution services for the six months
ended April 30, 1998. Accrued distribution fees at April 30, 1998 amounted to
$2,933.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the six months
ended April 30, 1998 was $487, and the accrued liability was $2,130.
14
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTE 3--Capital Share Transactions
The Fund is authorized to issue up to 10 million shares of $.001 par value
capital stock.
NOTE 4--Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $1,624,818 and sales of investment securities
aggregated $3,179,582 for the six months ended April 30, 1998.
On April 30, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $4,040,615 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $836,927.
NOTE 5--Federal Income Tax Information
Generally accepted accounting principles require that certain components of
net assets be reclassified to reflect permanent differences between financial
reporting and tax purposes. These reclassifications have no effect on net assets
or net asset values per share.
On April 30, 1998, there was a tax capital loss carryforward of
approximately $2,588,000, of which $1,999,000 expires in 2000 and $589,000 in
2001. This carryforward will be used to offset future net capital gains.
NOTE 6--Net Assets
On April 30, 1998, net assets consisted of:
Paid-in capital $13,037,375
Undistributed net investment income (197,248)
Accumulated net realized loss from security and
foreign exchange transactions (1,893,818)
Unrealized appreciation of investments 3,203,688
Unrealized translation loss (1,643)
-----------
$14,148,354
===========
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 AMY M. OLMERT
Director Secretary
LOUIS E. LEVY JOSEPH A. FINELLI
Director Treasurer
EUGENE J. MCDONALD SCOTT J. LIOTTA
Director Assistant Secretary
CARL W. VOGT, ESQ.
Director
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 APPEARS HERE]
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 Communications Fund
(formerly Flag Investors Telephone Income Fund)
Balanced
Flag Investors Value Builder Fund
Income
Flag Investors Short-Intermediate Income Fund
Flag Investors Total Return U.S. Treasury Fund Shares
Tax-Free Income
Flag Investors Managed Municipal Fund Shares
Flag Investors Maryland Intermediate Tax-Free Income Fund
Current Income
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
Distributed by:
ICC DISTRIBUTORS, INC.
