(GRAPHIC OMITTED)
(FLAG INVESTORS LOGO)
International
Fund
Annual Report
October 31, 1999
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
At the recent shareholder's meeting, you approved changing the
structure of this portfolio. This step will shift the portfolio management
function of this fund to another well recognized international investing team.
We want to thank The Glenmede Trust Company which has been the sub-advisor for
the past six years. Their disciplined, value approach has served the fund well
as indicated by the Fund's 23.5% return over the past twelve months versus the
23.0% return for the EAFE Index.
We are enthusiastic that the portfolio team headed by Michael Levy at
Bankers Trust will assume portfolio management responsibilities for this fund
about January 18, 2000. This group manages both separate accounts and other
mutual funds with over $5 billion in assets mostly for institutional investors.
We are pleased that we will be bringing this investment expertise to Flag
shareholders shortly.
Sincerely,
/s/ Truman T. Semans
TRUMAN T. SEMANS
Chairman
December 7, 1999
<PAGE>
TEN LARGEST HOLDINGS
Percent of
Company Net Assets
- ------------------------------------------------------------------------------
1. Acom Co., Ltd. 3.09%
One of the largest consumer lending companies in Japan.
2. Repsol SA 2.69%
A holding company which explores for, develops and
produces petroleum products.
3. Kao Corp. 2.65%
Kao Corporation is a manufacturer of household and
chemical products.
4. Endesa SA 2.44%
Endesa S.A. produces, transmits, distributes and
supplies electricity to other major utilities
throughout Spain.
5. Grupo Dragados, SA 2.30%
Grupo Dragados, S.A. is a construction company.
6. Nintendo Co., Ltd. 2.30%
Nintendo Co., Ltd. is a leading manufacturer and
marketer of video games.
7. Assicurazioni Generali 2.24%
Italy's largest insurer, offers life and non-life
insurance and reinsurance in some 40 countries
through 101 insurance companies.
8. East Japan Railway Co. 2.22%
East Japan Railway Company is a railway transportation
company that provides service in the Kanto and Tohoku
regions including Tokyo. In addition, the company also
operates real estate, hotels, and restaurant businesses.
9. Siemens AG 2.20%
Siemens AG is a manufacturer of a wide range of
industrial and consumer products.
10. SCOR 2.02%
SCOR is an insurance company.
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. To
further assist in this evaluation, the Securities and Exchange Commission (SEC)
requires that we include, on an annual basis, a line graph comparing the Fund's
performance to that of an appropriate market index. This graph measures the
growth of a $10,000 hypothetical investment from the Fund's inception date
through the end of the most most recent fiscal year-end. TheSEC also requires
that we report the Fund's total return, according to a standardized formula, for
various time periods through the end of the most recent calendar quarter.
Both the line graph and the SEC standardized total return figures
include the impact of the Fund's maximum initial sales charge. Returns would be
higher for investors who qualified for a lower initial sales charge.
While the graphs and the total return figures are required by SEC
rules, such comparisons are of limited utility since the total return of the
Fund's classes are adjusted for sales charges and expenses while the total
return of the indices are not. In fact, if you wished to replicate the total
return of these indices, you would have to purchase the securities they
represent, an effort that would require a considerable amount of money and would
incur expenses that are not reflected in the index results.
The SEC total return figures may differ from total return figures in
the shareholder letter because the time periods may be different and because the
SEC figures include the impact of sales charges while the total return figures
in the shareholder letter do not. Any performance figures shown are for the full
period indicated. 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
Additional Performance Information
Change in Value of a $10,000 Investment(1)
November 18, 1986-October 31, 1999
[Graph omiited, plot points]
Flag Investors International Morgan Stanley Capital
Fund (Cumulative) $27,846 International Europe,
Australia, Far East
[Registration Mark]
(EAFE) Index $32,499
11/86 9,550 10,000
10/87 10,324 12,621
10/88 11,997 15,799
10/89 14,066 17,085
10/90 13,133 14,895
10/91 12,719 15,930
10/92 10,964 13,824
10/93 15,706 19,003
10/94 17,927 20,920
10/95 16,261 20,843
10/96 18,234 23,025
10/97 21,422 24,091
10/98 21,532 26,416
10/99 27,846 32,499
Average Annual Total Return
Periods Ended 10/31/99 1 Year 5 Years 10 Years Since Inception(2)
Class A Shares 17.94% 8.21% 6.58% 8.23%
(1) Past performance is not an indicator of future results. Investment return
and principal value may fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. These
figures assume the reinvestment of dividends and capital gains
distributions and include the Fund's 4.50% maximum sales charge. The
Morgan Stanley Capital International Europe, Australia, Far East(R)
(EAFE) Index is an unmanaged index that is widely recognized as an
indicator of general international equity performance.
(2) 11/18/86.
4
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Statement of Net Assets October 31, 1999
<TABLE>
<CAPTION>
No. of Percent of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------
<S><C>
Common Stock - 90.6%
Japan - 25.1%
3,900 Acom Co., Ltd. $ 426,025 3.1%
5,000 Canon Inc. 141,338 1.1
16,000 Chugai Pharmaceutical Co. 190,111 1.4
50 East Japan Railway Co. 306,152 2.2
3,000 Eisai Co., Ltd. 82,359 0.6
3,600 Familymart Co., Ltd. 250,096 1.8
20,000 Fuji Heavy Industries 169,797 1.2
4,000 Fuji Photo Film Co., Ltd. 128,402 0.9
4,000 Honda Motor Co. 168,647 1.2
12,000 Kao Corp. 365,657 2.7
55,000 Kubota Corp. 218,714 1.6
2,000 Nintendo Co., Ltd. 317,171 2.3
800 Rohm Co. 179,379 1.3
1,600 Sony Corp. 249,291 1.8
2,000 Takefuji Corp. 258,720 1.9
------------- -----
3,451,859 25.1
United Kingdom - 15.1%
27,000 Allied Domecq PLC 151,299 1.1
12,500 Allied Zurich PLC 151,476 1.1
9,300 BOC Group PLC 199,148 1.5
12,500 British American Tobacco 83,378 0.6
25,000 Caradon PLC 59,072 0.4
60,000 Corus Group 113,714 0.8
38,750 Iceland Group PLC 184,078 1.3
19,488 Invensys PLC 95,773 0.7
20,000 Johnson Matthey PLC 184,109 1.3
10,000 Rio Tinto PLC 170,818 1.2
23,000 Scottish Power PLC 212,858 1.6
25,000 Tate & Lyle PLC 163,475 1.2
40,000 Tomkins PLC 134,390 1.0
18,734 Trinity Mirror PLC 172,609 1.3
------------- -----
2,076,197 15.1
</TABLE>
5
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Statement of Net Assets (continued) October 31, 1999
<TABLE>
<CAPTION>
No. of Percent of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------
<S><C>
France - 10.1%
1,000 Alcatel $ 156,081 1.1%
2,356 Lafarge SA 226,579 1.7
3,872 Lagardere Groupe (SCA) 156,682 1.2
2,600 Pernod-Ricard 175,441 1.3
5,600 SCOR 279,579 2.0
1,839 Total Fina 248,323 1.8
2,000 Valeo SA 143,573 1.0
------------- -----
1,386,258 10.1
Spain - 8.2%
1,500 Banco Popular de Espanol 100,901 0.7
17,311 Endesa SA(1) 336,602 2.5
30,000 Grupo Dragados, SA 317,522 2.3
18,000 Repsol SA 370,810 2.7
------------- -----
1,125,835 8.2
Germany - 7.7%
5,500 Bayer 224,872 1.6
480 Celanese(1) 7,492 0.1
1,300 DaimlerChrysler 101,248 0.7
4,800 Hoechst AG 210,126 1.5
3,400 Siemens AG 303,753 2.2
4,000 Veba AG 218,408 1.6
------------- -----
1,065,899 7.7
Italy - 5.7%
9,631 Assicurazioni Generali 308,741 2.2
121,520 Bennetton Group S.P.A 268,219 2.0
23,965 Telecom Italia S.P.A 206,797 1.5
------------- -----
783,757 5.7
Netherlands - 5.1%
4,900 Akzo Nobel 210,847 1.5
9,722 ABN-- Amro Hldgs N.V. 234,919 1.7
12,800 Hagemeyer N.V. 262,208 1.9
------------- -----
707,974 5.1
</TABLE>
6
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
<TABLE>
<CAPTION>
No. of Percent of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------
<S><C>
Australia - 4.5%
27,700 Australian Gas Light Co. $ 152,687 1.1%
100,000 Foster's Brewing Co. 265,603 1.9
17,500 Lend Lease Corp., Ltd. 201,211 1.5
------------ -----
619,501 4.5
Sweden - 3.7%
5,550 AstraZeneca 250,253 1.8
5,000 SKF AB-- B Shares 101,357 0.8
6,000 Volvo AB-- B Shares 154,766 1.1
------------ -----
506,376 3.7
Denmark - 1.4%
2,500 Uni-Danmark A/S 194,429 1.4
------------ -----
Norway - 1.2%
4,300 Norsk Hydro 171,570 1.2
------------ -----
Belgium - 1.2%
500 Electrabel, SA 164,805 1.2
------------ -----
New Zealand - 0.8%
28,000 Telecom Corp. of New Zealand 112,535 0.8
------------ -----
Singapore - 0.8%
10,000 Singapore Airlines Ltd. F 105,779 0.8
------------ -----
Total Common Stock
(Cost $9,244,161) 12,472,774 90.6
------------ -----
</TABLE>
7
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Statement of Net Assets (concluded) October 31, 1999
<TABLE>
<CAPTION>
Percent of
Par (000) Security Value Net Assets
- -----------------------------------------------------------------------------------------------
<S><C>
Repurchase Agreement - 9.7%
$ 1,336 Goldman Sachs & Co., 5.10%
dated 10/29/99 to be
repurchased for $1,336,568
on 11/1/99, collateralized
by U.S. Treasury Bonds
5.625%, due 2/28/01 with
a market value of
$1,363,382.
(Cost $1,336,000) $ 1,336,000 9.7%
------------ -----
Total Investments in Securities
(Cost $10,580,161) 13,808,774 100.3
Liabilities in Excess of Other Assets (38,030) (0.3)
------------ -----
Total Net Assets $ 13,770,744 100.0%
============ =====
Net Asset Value and Redemption Price Per Share
($13,770,744 / 661,033 shares outstanding) $20.83
======
Maximum Offering Price Per Share
($20.83 / 0.955) $21.81
======
</TABLE>
- -----------
(1) Non-income producing security.
See Notes to Financial Statements.
8
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
- -------------------------------------------------------------------------------
Industry Diversification October 31, 1999
- -------------------------------------------------------------------------------
% of Total
Net Asset
Value
--------------
Common Stock
Chemicals...................................... 8.0%
Banking........................................ 4.9
Electronic Equipment........................... 4.7
Utilities-Electric............................. 4.3
Pharmaceutical................................. 3.8
Insurance...................................... 3.5
Industrials.................................... 3.5
Finance........................................ 3.1
Food & Beverages............................... 3.0
Automotive..................................... 3.0
Oil-Foreign.................................... 2.7
Personal Products.............................. 2.7
Financial Services............................. 2.6
Publishing..................................... 2.4
Automobiles & Trucks........................... 2.4
Engineering & Construction..................... 2.3
Toys........................................... 2.3
Life Insurance................................. 2.2
Railroads...................................... 2.2
Housing & Home Furnishings..................... 2.0
Textiles....................................... 2.0
Consumer Products.............................. 1.9
Convenience.................................... 1.8
Tobacco........................................ 1.7
Building Materials............................. 1.6
Computers...................................... 1.6
Telecommunications............................. 1.5
Electronics.................................... 1.3
Retail-Food Chains............................. 1.3
Electronics-Semiconductors..................... 1.3
Beverages...................................... 1.3
Consumer Services.............................. 1.3
Foods.......................................... 1.2
Natural Gas.................................... 1.1
Office Equipment............................... 1.0
Chemicals-Specialty............................ 0.9
Transportation................................. 0.8
Manufacturing.................................. 0.7
Miscellaneous Industries....................... 0.7
------
90.6%
ST Instruments
Repurchase Agreement........................... 9.7%
------
Total Investments as a percentage
of Net Assets............................... 100.3%
======
See Notes to Financial Statements.
9
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Statement of Operations
For the
Year Ended
October 31,
- ------------------------------------------------------------------------------
1999
Investment Income:
Dividends $ 299,732
Interest 23,265
Less: Foreign taxes withheld (39,181)
----------
Total income 283,816
==========
Expenses:
Professional fees 162,826
Investment advisory fee 94,386
Distribution fee 31,462
Accounting fee 27,067
Transfer agent fee 18,644
Printing and Postage 17,338
Registration fees 16,527
Custodian fee 16,013
Directors' fee 1,603
Miscellaneous 4,225
----------
Total expenses 390,091
Less: Fees waived and expenses reimbursed (201,046)
==========
Net expenses 189,045
==========
Net investment income 94,771
----------
Realized and unrealized gain/(loss) on investments:
Net realized gain from security transactions 1,501,791
Net realized loss from foreign currency related
transactions (27,225)
Change in unrealized appreciation/depreciation
of investments 1,077,700
Change in unrealized appreciation/depreciation
on translation of assets and liabilities
denominated in foreign currencies (3,657)
----------
Net gain on investments 2,548,609
----------
Net increase in net assets resulting from operations $2,643,380
==========
See Notes to Financial Statements.
10
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Years Ended October 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
<S><C>
Increase/(decrease) in Net Assets:
Operations:
Net investment income $ 94,771 $ 82,879
Net realized gain from security transactions
and foreign exchange transactions 1,474,566 752,382
Change in unrealized appreciation/depreciation
of investments 1,077,700 (99,666)
Change in unrealized appreciation/depreciation
on translation of assets and liabilities
denominated in foreign currencies (3,657) 2,524
----------- ----------
Net increase in net assets resulting
from operations 2,643,380 738,119
----------- ----------
Dividends to Shareholders from:
Net investment income and short-term gains (48,602) (82,879)
Distributions in excess of net investment
income and short-term gains -- (127,834)
----------- ----------
Total distributions (48,602) (210,713)
----------- ----------
Capital Share Transactions:
Proceeds from sale of 482,274 and
61,500 shares, respectively 9,655,136 1,076,733
Value of 2,257 and 11,538 shares issued in
reinvestment of dividends, respectively 40,630 182,302
Cost of 542,832 and 208,269 shares
repurchased, respectively (10,706,756) (3,581,124)
----------- ----------
Total decrease in net assets derived
from capital share transactions (1,010,990) (2,322,089)
----------- ----------
Total increase/(decrease) in net assets 1,583,788 (1,794,683)
Net Assets:
Beginning of year 12,186,956 13,981,639
----------- ----------
End of year $13,770,744 $12,186,956
=========== ===========
Undistributed (distributions in excess of)
net investment income $ 94,599 $ (192,053)
=========== ===========
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Financial Highlights
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
For the
Year Ended
October 31,
- -----------------------------------------------------------------------------------
1999
<S><C>
Per Share Operating Performance:
Net asset value at beginning of year $ 16.94 $ 16.36 $ 14.20
--------- ------- -------
Income from Investment Operations:
Net investment income 0.48 0.08 0.11
Net realized and unrealized gain/(loss) on investments(1) 3.48 0.76 2.34
--------- ------- -------
Total from Investment Operations 3.96 0.84 2.45
========= ======= =======
Less Distributions:
Distributions from net investment income
and short-term gains (0.07) (0.10) (0.18)
Distributions in excess of net investment income
and short-term gains -- (0.16) (0.11)
--------- ------- -------
Total distributions (0.07) (0.26) (0.29)
--------- ------- -------
Net asset value at end of year $ 20.83 $ 16.94 $ 16.36
========= ======= =======
Total Return(2) 23.5% 5.25% 17.48%
Ratios to Average Daily Net Assets:
Expenses(3) 1.50% 1.50% 1.50%
Net investment income(4) 0.75% 0.62% 0.68%
Supplemental Data:
Net assets at end of year (000) $ 13,771 $ 12,187 $13,982
Portfolio turnover rate 18% 27% 21%
</TABLE>
- ------------
(1) The years ended October 31, 1999, 1998, 1997, 1996 and 1995 include net
realized currency gain/(loss).
(2) Total return excludes the effect of sales charge.
(3) Without the waiver of advisory fees and reimbursement of expense (Note
2),the ratio of expenses to average daily net assets would have been 3.10%,
2.78%, 2.24%, 2.30% and 2.17% for the years ended October 31, 1999, 1998,
1997, 1996 and 1995, respectively.
(4) Without the waiver of advisory fees and reimbursement of expense (Note 2),
the ratio of net investment income to average daily net assets would have
been (0.84)%, (0.67)%, 0.44%, 1.10% and 0.02% for the years ended October
31, 1999, 1998, 1997, 1996, and 1995, respectively.
12
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
For the Years Ended October 31,
1998 1997 1996 1995
--------------------------------------------------------------------
$ 16.36 $ 14.20 $ 12.69 $ 13.97
------- -------- -------- --------
0.08 0.11 0.26 0.09
0.76 2.34 1.28 (1.37)
------- -------- -------- --------
0.84 2.45 1.54 (1.28)
======= ======== ======== ========
(0.10) (0.18) (0.03) --
(0.16) (0.11) -- --
------- -------- -------- --------
(0.26) (0.29) (0.03) --
------- -------- -------- --------
$ 16.94 $ 16.36 $ 14.20 $ 12.69
======= ======== ======== ========
5.25% 17.48% 12.13% (9.16)%
1.50% 1.50% 1.50% 1.50%
0.75% 0.62% 1.18% 1.91%
$ 12,187 $13,982 $12,930 $12,483
27% 21% 13% 35%
See Notes to Financial Statements.
13
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Notes to Financial Statements
NOTE 1--Significant Accounting Policies
Flag Investors International Fund, Inc. (the "Fund"), which began
operations on November 18, 1986, is a Maryland Corporation. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. Its objective is to seek long-term growth of
capital primarily through investment in a diversified portfolio of marketable
equity securities of issuers located outside of the United States.
The Fund consists of one share class, Class A Shares, which is 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 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 which
approximates fair market value.
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 seller agrees to repurchase at a set time and
price. The third party, which is the seller'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 seller
defaults. The Fund's access to the collateral may be delayed or
limited if the seller defaults and the value of the collateral
declines or if the seller enters into an insolvency proceeding.
14
<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 or 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 cost method for
financial reporting and income tax purposes to determine the gain or
loss on investments sold or redeemed. Interest income is recorded on
an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
15
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Notes to Financial Statements (continued)
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of
Deutsche Bank, AG, 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%.
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 also became an indirect
wholly-owned subsidiary of Deutsche Bank AG.
ICC has agreed to waive up to all of its fees and reimburse expenses 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 year ended October 31, 1999, ICC
waived fees of $94,386 and reimbursed expenses of $106,660. At October 31, 1999,
the Fund was owed $21,276 from the advisor for reimbursed expenses. ICC paid
Glenmede $69,173 for subadvisory services for the year ended October 31, 1999.
Certain officers and directors of the Fund are also officers or
directors of the Fund's investment advisor or subadvisor.
ICC also provides accounting services to the Fund for which the Fund
pays ICC an annual fee that is calculated daily and paid monthly from the Fund's
average daily net assets. For the year ended October 31, 1999, ICC's fee was
$27,067 of which $2,352 was payable at the end of the year.
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
year ended October 31, 1999, ICC's fee was $18,644 of which $8,313 was payable
at the end of the year.
Bankers Trust Co. an affiliate of the advisor is the Fund's custodian.
For the year ended October 31, 1999, Bankers Trust's fee was $16,013 of which
$5,998 was payable at the end of the year.
ICC Distributors, Inc., a member of the Forum Group of Companies, ("ICC
Distributors"), provides distribution services to the Fund for which ICC
Distributors is paid 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. For the
year
16
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
NOTE 2 -- concluded
ended October 31, 1999, ICC distributor's fee was $31,462 of which $2,837 was
payable at the end of the year.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
October 31, 1999 was $559, and the accrued liability was $776.
NOTE 3--Capital Share Transactions
The Fund is authorized to issue up to 28 million shares of $.001 par
value capital stock (10 million Flag Investors Class A , 2 million Flag
Investors Class B, 15 million Flag Investors Class C and 1 million
undesignated).
NOTE 4--Investment Transactions
Excluding short-term and U.S. government obligations, purchases of
investment securities aggregated $2,174,432 and sales of investment securities
aggregated $3,929,918 for the year ended October 31, 1999.
On October 31, 1999 the tax basis of investments held was $11,077,133.
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost was $3,408,509 and aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value was $676,868.
NOTE 5--Foreign Investment Risk
Foreign investments involve substantial and different risks than
investments in companies in the United States. In general, less information is
publicly available about foreign companies than is available about companies in
the United States. Most foreign companies are not subject to uniform audit and
financial reporting standards, practices and requirements comparable to those in
the United States.
Foreign stock markets are generally not as developed or efficient as
those in the United States. In most foreign markets volume and liquidity are
less than in the United States and, at times, volatility of price can be greater
than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges. There is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. The settlement periods for
foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity.
17
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Notes to Financial Statements (concluded)
NOTE 5 -- concluded
Although the Fund intends to invest in securities of companies and
governments of developed, stable nations, there is also the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets,
political or social instability, or diplomatic developments which could
adversely affect investments, assets or securities transactions of the Fund in
some foreign countries.
NOTE 6--Federal Income Tax Information
The Fund may periodically make reclassifications among certain of its
capital accounts as a result of differences in the characterization and
allocation of certain income and capital gain distributions determined annually
in accordance with federal tax regulations which may differ from generally
accepted accounting principles.
On October 31, 1999, there was a tax capital loss carryforward
available for the current period of approximately $540,036 which expires in
2001. This carryforward can be used to offset future net capital gains.
NOTE 7--Net Assets
On October 31, 1999, net assets consisted of:
Paid-in capital $10,987,941
Undistributed net investment income 94,599
Accumulated net realized loss from security and
foreign exchange transactions (540,036)
Unrealized appreciation of investments 3,228,613
Unrealized translation loss (373)
------------
$13,770,744
============
NOTE 8--Personal Income Tax Information for the Shareholder (unaudited)
The following information summarizes all distributions paid by the Fund
during the taxable period ended October 31, 1999.
Domestic Ordinary Income $ 548
Foreign Source Income 48,054
============
Total Ordinary Income 48,602
============
Long-Term Capital Gains --
Total Distributions 48,602
============
Foreign Tax Paid or Withheld $ 33,349
============
18
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
NOTE 8 -- concluded
The foreign taxes paid or withheld represent taxes incurred by the Fund
on interest and dividends received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included in taxable income with an offsetting
deduction from gross income or as a credit for taxes paid to foreign
governments. You should consult your tax advisor regarding the appropriate
treatment of foreign taxes paid.
19
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Independent Auditors' Report
The Board of Directors and Shareholders
Flag Investors International Fund, Inc.:
We have audited the accompanying statements of net assets of Flag
Investors International Fund, Inc. as of October 31, 1999, and the related
statements of operations for the year then ended, and changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Flag Investors International Fund, Inc. as of October 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE llp
Princeton, New Jersey
December 3, 1999
20
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Shareholder Meeting (unaudited)
A Special Meeting of Shareholders of the Flag Investors International
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 The Glenmede Trust Company (the "Sub-Advisory Agreement"). Shareholders
also elected the Board of Directors. Shareholders also voted to eliminate,
modify or reclassify certain fundamental restrictions of the Fund.
Additionally shareholders approved the reorganization of the Fund's
structure into a master-feeder structure under which the Fund would invest all
of its assets in the International Equity Portfolio (the "master fund').
This reorganization is expected to occur on or about January 15, 2000.
When the reorganization occurs, the investment advisory services will be
provided to the Fund at the master fund level. The effect of the reorganization
is that shareholders of the Fund will have their investments managed by Banker
Trust, the investment advisor of the master fund, rather than Investment Company
Capital Corp. ("ICC") and The Glenmede Trust Company ("Glenmede").
21
<PAGE>
FLAG INVESTORS INTERNATIONAL 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 374,722 2,882
- --------------------------------------------------------------------------------------------------------------------
Elect Richard R. Burt 375,469 2,135
Elect Joseph R. Hardiman 375,469 2,135
Elect Louis E. Levy 374,722 2,882
Elect Eugene J. McDonald 374,722 2,882
Elect Robert H. Wadsworth 375,469 2,135
Reorganization of Fund's
Structure with modifications
to investment objective 336,387 7,252 5,325 28,640
Investment Advisory Agreement
with ICC 366,565 5,554 5,485
Sub-Advisory Agreement with
ICC and The Glenmede Trust Co. 363,997 7,655 5,952
Eliminate policy regarding
short sales 325,961 19,271 3,732 28,640
Eliminate policy regarding
purchasing securities on margin 326,708 18,524 3,732 28,640
Eliminate policy regarding oil,
gas and mineral leases 326,663 14,307 7,993 28,641
Eliminate policy regarding
restricted securities 327,514 14,440 7,010 28,640
Modify policy regarding
commodities 323,172 21,841 3,951 28,640
Modify policy regarding
borrowing 322,809 19,248 6,907 28,640
Modify policy regarding
loans 322,911 18,781 7,272 28,640
Modify and reclassify as non-
fundamental the policy regarding
illiquid and restricted securities 329,261 13,840 5,863 28,640
</TABLE>
22
<PAGE>
FLAG INVESTORS INTERNATIONAL FUND
Directors and Officers
TRUMAN T. SEMANS
Chairman
RICHARD R. BURT CARL W. VOGT, ESQ.
Director President
JOSEPH R. HARDIMAN CHARLES A. RIZZO
Director Treasurer
LOUIS E. LEVY AMY M. OLMERT
Director Secretary
EUGENE J. MCDONALD DANIEL O. HIRSCH
Director Assistant Secretary
ROBERT H. WADSWORTH
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 located
outside of the United States.
23
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<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 omitted)
FLAG INVESTORS
Investing With A Difference
Growth
Flag Investors Emerging Growth Fund
Flag Investors Equity Partners Fund
Flag Investors International Fund
Specialty
Flag Investors Communications Fund
Flag Investors Real Estate Securities Fund
Balanced
Flag Investors Value Builder Fund
Fixed 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
Money Market
Flag Investors Cash Reserve Prime Shares
P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG
www.flaginvestors.com
Distributed by:
ICC Distributors, Inc.
INTLANN(12/99)
